Service Sector and India’s Economic Development – Opportunities, Challenges and Policy Issues

25 Pages Posted: 22 Jun 2017 Last revised: 3 Oct 2023

Date Written: June 21, 2017

Abstract

While economic growth has historically been associated with rise in national incomes of the economies, economic development is related to the structural changes that either precede or accompany or succeed the ‘rise’. The most common structural changes that have been observed and documented is a sequence of shift in occupational and production structures, essentially from agriculture to industry and then to services. The theory of development progression by Clark, Fisher, and Kuznets is along these lines. In India too sectoral changes are clearly visible. But there is an apparent deviation from the general trend: the share of agriculture and allied sectors in national income and employment have slowly and steadily declined but the absorption of the surplus/migrant labour force of the primary sector is taking place in the tertiary (service) sector. Historically, for economic take-off, manufacturing sector was relied upon. But for a labour- surplus economy the pace and solace was soon found in the services sector – trading, transportation and communication, financial, real estate and business services, community, social and personal services. In alignment with the global trends, Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times: (more than 55% share in GDP and 10% annual growth). Post-liberalisation, our economy has moved from agriculture-based economy to a knowledge-based thanks to the IT industry and ITES industry in the service sector. Media and entertainment have also seen tremendous growth in the past few years. Despite the visible dynamism of the invisibles, the sector has problems of disorganisation. It faces challenges of ‘balance’ vis-à-vis industry and agriculture and ‘sustainability’.

In this background, the present paper – based on secondary data – focuses on the growth and problems of India’s service sector. It examines the major policy issues like domestic policy issues, domestic regulations and market access issues. A modest attempt is also made to find out the prospects/potential for growth in this sector, and the areas to be explored for further academic analysis.

Keywords: Employment, Growth, GNP, India, Service Sector, Sustainability

Suggested Citation

Hans, V. Basil, Service Sector and India’s Economic Development – Opportunities, Challenges and Policy Issues (June 21, 2017). Available at SSRN: https://ssrn.com/abstract=2990434

V. Basil Hans (Contact Author)

Srinivas University ( email )

Mangalore
India

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