Services: New Challenges for the Old War Horse (2024-25) | Indian Economy for UPSC CSE PDF Download

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08
CHAPTER
219
SERVICES: NEW 
CHALLENGES FOR 
THE OLD WAR HORSE
The service sector has been fuelling growth both domestically and globally. 
In FY25 so far, services propped up GDP growth when manufacturing has 
been affected by dampening global merchandise trade. The critical role of 
services exports in strengthening India’s external balance and the increasing 
‘servicification’ of the industrial sector adds to its importance to the Indian 
economy. Logistics services have regained their pre-pandemic momentum and 
are enhancing the user experience through digitisation. India continues to be 
an important partner in the changing global technology landscape through the 
adoption of digital technologies in business processes. Initiatives such as Open 
Network for Digital Commerce (ONDC) are making these transformations 
more inclusive. Equipping the labour force with requisite skills and creating an 
enabling environment through simple and transparent processes of grassroots 
level governance will go a long way in realising the full potential of commercial 
services and building resilience to global headwinds. 
INTRODUCTION
8.1 Services value added accounts for about 62 per cent of the global GDP
1
. Services 
have been the growth engine for middle-income countries like China, Thailand, and 
India in the last decade. Presently, the Euro area is reeling under a slowdown but is 
expected to improve in 2025 on the back of improving services activity. However, 
higher nominal wage growth compared to pre-pandemic wage growth has kept 
service inflation high. This has caused the current cycle of global disinflation to slow 
down
2
.
8.2 The Global Services PMI Business Activity Index rose to a four month high of 53.8 
in December 2024. This signals expansion for the twenty-third consecutive month. 
Growth of new order intakes and employment also strengthened, while business 
sentiment edged higher
3
. However, global supply chains continue to face significant 
disruptions due to geo-political uncertainty, i.e., the rise of protectionism, wars, and 
1 World development indicators - World Bank
2 The IMF World Economic Outlook, October 2024
3 S&P Global. (2025, January 6). JP Morgan Global Composite PMI. Retrieved from https://www.pmi.spglobal.
com/Public/Home/PressRelease/f94e193ddf214de5bdfa79062611f26c