Services: Fuelling Growth Opportunities | Indian Economy for UPSC CSE PDF Download

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CHAPTER
11
SERVICES: FUELLING 
GROWTH OPPORTUNITIES
Through the vicissitudes of the last three decades, the services sector stood as the bulwark 
of India's economic growth. Its post-pandemic dynamics, particularly the trends and 
patterns that emerged and solidified during FY24, indicate an ongoing transformation 
in domestic service delivery systems and their demands. Aided by the focus on policy 
and procedural reforms, physical infrastructure and logistics, all significant business, 
personal, financial and infrastructure-based services have emerged strongly from the 
pandemic. However, the transformation lies in the fast-paced shift towards digital 
services like online payments, e-commerce, and entertainment platforms, as well as the 
increase in the demand for high-tech services as inputs in other productive activities. 
India's young and tech-savvy population offers an opportunity to enhance the country's 
vocational and educational ecosystem further. This will equip the labour force with the 
required digital and high-tech skills in a time-bound manner, helping India reap the 
full dividends of these opportunities.
INTRODUCTION
11.1 India's services sector encompasses a wide array of economic activities, which can be 
broadly classified into two categories: contact-intensive and non-contact-intensive services. 
The former includes trade, hospitality, transport, real estate, social, community and personal 
services. The latter comprises financial, information technology, professional, communication, 
broadcasting, and storage services. The sector also incorporates public administration and 
defence services. 
11.2 The services sector continues to be a significant contributor to India's growth, accounting 
for about 55 per cent of the total size of the economy in FY24. Several demand and supply side 
factors determine the performance of the services sector. The significant domestic demand 
for services such as education, healthcare, finance, tourism, hospitality, and entertainment is 
underpinned by a large and young population. Rapid urbanisation supports transportation, 
housing, sanitation, and utility services. The expansion of e-commerce platforms has generated 
heightened requirements for logistics, digital payments, and related services. Information 
technology and business services will likely retain their prominent international presence in 
the medium term. However, studies suggest that the application of Artificial Intelligence (AI) 
is likely to restrain the growth opportunities for business services progressively and, therefore, 
poses a challenge to long-term sustainability and job creation. Thus, focusing on human capital