What is Service Sector of an Economy?

Services sector of the economy covers a wide gamut of activities like trading, banking and finance, real estate, transportation, security, management and technical consultancy among several others. The various sectors that combine together to constitute service industry in India are:

  • Trade
  • Hotels and Restaurants
  • Railways
  • Other Transport and Storage
  • Communication (Post, Telecom)
  • Banking
  • Insurance
  • Dwellings, Real Estate
  • Business Services
  • Public Administration
  • Defense
  • Personal Services
  • Community Services
  • Other Services

There was marked acceleration in services sector growth in the eighties and nineties, especially in the nineties. While the share of services in India’s GDP increased by 21 per cent points in the 50 years between 1950 and 2000. One of the reasons for the sudden’ growth in the service sector in India in the nineties was the liberalization in the regulatory framework that gave rise to innovation and higher exports from- the service sector.

The boom in the service sector has been relatively “jobless”. The rise in services share in GDP has not accompanied by proportionate increase in the sector’s share of national employment. Some economists have also cautioned that service sector growth must be supported by proportionate growth of the industrial sector; otherwise the service sector grown will not be sustainable. Many sectors have a significant dependency on the domestic market and have-been positively impacted by lower interest rates, lower inflation and improved liquidity.

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