NITI Aayog Releases Reports on India’s Services Sector

Syllabus: GS3/ Economy

Context

• NITI Aayog released two reports titled India’s Service Sector: Insights from GVA trends and state-level dynamics and India’s Service Sector: Insights from employment trends and state-level dynamics.

Key Findings of GVA Trends

• The services sector contributes around 55% of India’s GVA.
• India is evolving from a “services-exporter nation” to a “services-driven economy” with strong domestic linkages.
  • High-growth subsectors include IT-BPM, finance, real estate, logistics, healthcare, and education.
• Regional Trends: Southern and Western states (Karnataka, Maharashtra, Tamil Nadu, Telangana, Gujarat) remain leaders, accounting for over 60% of India’s total services GVA.
  • Delhi and Karnataka have the highest per-capita services GVA, reflecting strong tertiary diversification.
• The sector displays a dual character:
  • Modern, high-productivity segments that are globally competitive but limited in employment generation.
  • Traditional, low-productivity segments that employ large numbers but remain informal and low-paying.

Key Findings of Employment Trends

• The services sector accounts for only about one-third of total employment, reflecting a disconnect between output and job creation.
• Services added ~40 million jobs in six years, with employment elasticity at 0.63, second only to construction.
• Gender and Employment: 
  • Female participation in services declined from 25.2%  in 2017–18 to 20.1% 2023–24.
  • Rural gender gap: women earn less than 50% of men’s wages.
  • Urban services: women earn 84% of men’s wages; better parity in ICT, health, and education.

Key Challenges in India’s Services Sector

• Regional Imbalance: High-value modern services concentrated in southern and western states; lagging states remain dependent on low-value activities.
• Infrastructure Gaps: Weak logistics, urban infrastructure, and digital connectivity in smaller cities.
• Skill and Technology Mismatch: Shortage of industry-ready and digital skills.
• High Informality: Majority of workers lack contracts, social protection, and job security.
• Gender Gaps: Falling female participation and persistent wage inequality.
• Rural–Urban Divide: Urban areas dominate high-value jobs; rural services remain low-value.

Policy Roadmap Proposed

• Formalisation and Social Protection: Extend coverage to gig workers, self-employed individuals, and MSME workers.
• Targeted Skilling and Digital Access: Expand opportunities for women and rural youth, leveraging digital tools.
• Investment in Emerging and Green Economy Skills: Develop new skill sets in sustainability, digital transformation, and clean technologies.
• Balanced Regional Development: Foster service hubs in Tier-2 and Tier-3 cities to ensure spatially inclusive growth.

Concluding remarks

• The reports collectively position the services sector as central to India’s Viksit Bharat @ 2047 vision, emphasizing its potential to generate productive, high-quality, and inclusive jobs.
• By deepening digital infrastructure, expanding skilled human capital, and fostering innovation ecosystems, India can strengthen its position as a trusted global services hub.

Source: AIR