Service Sector In The Indian Economy

CHAPTER 1

India had been crippled and left to be a agriculture based economy after it’s Independence and continued to be that for several decades all through 1950s . 60s , 70s and 1980s. It was only in the late 1980s when the service sector saw a little growth in the Indian economy. The growth of service sector in the Indian economy can be said to be linked to the liberalisation and reforms of the 1990s. During the first thirty years (1950s to 1970s) post independence after 1947, GDP grew at an a nominal growth rate of 4 percent. India was largely an agrarian economy. The share of services sector was small and most of the services were monopolies owned by the government. Services sector started to grow in the mid-1980s but growth accelerated

Business services (including IT), communications and trade have grown faster than the overall services sector growth in India. The other services like, legal, transport, storage and personal administration and defence services have grown at the same rate as the overall services sectorhas grown. Existing literature shows that services such as IT, telecommunications and financing services have contributed to the high growth of the services

The share of financing, trade and transport sectors in total services sector has increased while that of community, social and personal services has declined.In the 1950s and 1960s, transport, storage and communication services and trade, hotels and restaurant services grew faster than the overall services sector growth in India. In the 1970s and 1980s, financing and business services begun growing at a faster pace. In fact, in the 1980s, financing and business services surpassed the growth of services such as transport, storage and communication and trade, hotels and restaurant. In the decade of 2000-2010, transport, storage and communication services are the fastest growing services sub-sector, followed by financing and business services.

Even though the service sector grows rapidly and contributes most part of the gross domestic product, is it’s growth sustainable? Can our economy depend on this sector for a sustainable growth and development as is needed by India?

These questions arise when we see that the service sector contributes the most to the GDP , however the employment generation in service sector is not at pace and basic services like Health care and Education are still not reaching every Indian as it should be. Therefore there stands a need to analyze the viability of service sector in the near future and if it would provide the needed boost in our economy or