Cheat Sheet: Service Sector in India | Indian Economy for UPSC CSE PDF Download

Introduction

The service sector (tertiary sector) includes trade, transport, communication, financial services, real estate, health, education, tourism, and IT-BPM. It is the largest contributor to India’s GDP, accounting for ~53% of GDP in 2024–25 (as per MoSPI advance estimates). Major driver of urban employment, exports, and FDI. Has enabled structural transformation without a commensurate shift in employment from agriculture.

Growth and Contribution

• Finance, real estate, professional services, public administration, education and health are key growth areas.
• Urban-centric but rapidly expanding in Tier-2 and Tier-3 cities due to digital penetration.

IT and ITES Sector

• A global leader in Information Technology (IT), IT-enabled Services (ITES), Business Process Outsourcing (BPO), and software services.
• Accounts for over 8% of India’s GDP, with exports worth $250+ billion (NASSCOM 2024).
• Employs over 5 million people directly and many more indirectly.
• Major hubs: Bengaluru, Hyderabad, Pune, Chennai, Gurugram, Noida.
• Recent trends:
  • Focus on cloud computing, AI, data analytics, cybersecurity, fintech.
  • Rise in startups and unicorns in tech-enabled platforms.
  • Government initiatives: Digital India, India AI Mission, Semicon India Programme.

Tourism Industry

• One of India’s largest foreign exchange earners and employment generators.
• Contributed ~$250 billion to GDP (2024 estimate), with employment to ~12% of workforce.
• India ranked among top 10 in natural and cultural heritage (UNWTO).
• Types:
  • Heritage tourism (e.g., Rajasthan, Varanasi)
  • Eco-tourism (e.g., Sikkim, Kerala)
  • Spiritual tourism (e.g., Bodh Gaya, Amritsar)
  • Medical tourism (India is among global top 5; value ~$9 billion)
• Government Initiatives:
  • Dekho Apna Desh, Swadesh Darshan, PRASHAD scheme, Incredible India 2.0

Offshore Fund Management

• Offshore fund management is permitted in India under SEBI and FEMA regulations, with recent liberalizations allowing India-based managers to handle foreign funds.
• Supported by:
  • IFSC (International Financial Services Centre) in GIFT City, Gujarat.
  • Tax incentives for fund managers.
• India's aspiration to become a global financial hub through policy and infrastructure reforms.

WTO Negotiations and Global Trade Engagement

• India plays an active but cautious role in WTO negotiations.
• Key Issues:
  • Agriculture subsidies (food security concerns)
  • TRIPS waiver for public health (e.g., COVID-19 vaccines)
  • E-commerce moratorium debate
• India supports a multilateral trading system but resists unequal obligations.

Bilateral & Multilateral Trade Agreements

• India has signed several Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs) to boost services exports:
  • India-UAE CEPA (2022) – Services chapter included.
  • India-Australia ECTA (2022)
  • Ongoing negotiations: India-EU FTA, India-UK FTA
• Focus areas:
  • Market access for professionals
  • Mutual recognition of qualifications
  • Data flow regulation and digital trade frameworks

Additional Inputs

• Education & Health Services: Significant contributors to GDP and human development.
  • India is a major destination for English-medium education and medical procedures.
  • Growth of edtech, telemedicine, and digital health platforms post-pandemic.
• Financial Services:
  • Expansion of digital banking, UPI, fintech, and NBFCs.
  • Rise in insurance, mutual funds, and retail investors.
• Logistics & E-Commerce Support Services:
  • Massive growth post-2020 due to digitization and e-retail.
  • Backed by PM Gati Shakti, National Logistics Policy (2022).