Context:
India’s services sector has emerged as the backbone of the economy and significantly contributes to the overall gross value added (GVA). The Economic Survey 2024-25 spells out strategies for boosting the sector.
Contribution to Economic Output
- Share of Services in GVA rose from 50.6% in FY14 to around 55% in FY25.
- Workforce Employment
- About 30 percent of the workforce is employed in services.
- Servicification of Manufacture
- There has been more and more blurring of services with the process of manufacture. Especially, it is happening primarily during the production to post-production cycle.
Sectoral Trends and Challenges
- Global Trends
- Economic transformations across the world are also changing the service demand pattern. Geopolitics brings in new challenges to IT and professional services across the globe.
- Geoeconomic Fragmentation
- It is altering global supply chains and, in that sense, is posing a threat to India’s staying power of moving on the path of structural reforms and deregulation to maintain its global competitiveness.
- Service Categories for Concentration
- The Survey classifies four service sectors with plans for each sector : Defend: IT and business services. Accelerate: Transport, trade, education, and financial services.
- Transform
- Travel, health, cultural services, and personal services. – Untapped: Insurance, telecommunications and postal services.
Value-added by Skilled Manpower
- AI Integration
- As AI penetration into all kinds of sectors grows deeper, demand for a strong digital and technical workforce is increasing manifold.
- Skill Development
- This Survey identifies that there exists an imperative necessity for Government, Private sector, and the skilling ecosystem to partner each other more strongly to expedite talent in new sectors.
Regulatory Reforms
- Process Simplification
- The Survey had suggested more streamlined rules in the grassroots sectors to also foster growth both in manufacturing as well as service sectors.
- Facilitating innovation
- Improvement of bureaucracy could therefore be viewed in terms of aspects that help support innovation in main industries, particularly to promote quicker overall economic development.
Growing role of Global Capability Centres (GCCs)
- GCCs Growth in GCCs
- India experienced tremendous growth in the setting up of GCCs. The figure has risen from 1,430 in FY19 to more than 1,700 in FY24 .The growth is because of a highly skilled workforce in markets such as banking, healthcare, and automotive.
Share of India in Global Services Exports
- Growth has also been steady and continuous in terms of India’s share in the global services exports and has helped overcome the volatility seen in merchandise exports.
- Global Rank
- India currently ranks 7th globally, accounting for a 4.3% share of global services exports.
