NITI Aayog released two inaugural reports under its Services Thematic Series, offering a comprehensive assessment of India’s services sector from the perspective of both output and employment.

• The two landmark reports under its Services Thematic Series titled:
  1. India’s Services Sector: Insights from GVA Trends and State-Level Dynamics
  2. India’s Services Sector: Insights from Employment Trends and State-Level Dynamics.
• These reports represent one of the first detailed assessments of India’s services sector, going beyond aggregate numbers to present disaggregated, state-level insights.
  • First Report: It examines national and regional trends to understand how services-led growth is unfolding across states and whether less-developed states are catching up with those that already have a strong services base (a key indicator of balanced regional development)
  • Second Report: It analyses employment dynamics within the services sector, presenting a detailed profile across sub-sectors, gender, education, and occupations. 
• These reports underscores the sector’s pivotal role in achieving the vision of Viksit Bharat @2047.

Key Insights & Concerns Raised In NITI Aayog’s Reports 

• Regional Convergence: The reports highlight that while disparities in service sector shares across states have modestly widened, structurally lagging states are beginning to catch up, showing signs of convergence and balanced regional growth.
• Dominant Role of Services: The services sector contributes nearly 55% of India’s GVA in 2024–25, solidifying its position as the cornerstone of India’s economic growth.
• Uneven Employment Growth: Employment generation remains uneven across sub-sectors
  • High-value modern services (IT, finance, healthcare, professional services) are productivity-rich but limited in employment intensity, while traditional segments like trade, transport, and hospitality dominate workforce engagement but are low-paying and informal.
  • Structural Paradox: Despite contributing over half of national output, services provide less than one-third of all jobs, revealing a disconnect between growth and employment intensity.
• Informality Challenge: The sector remains overwhelmingly informal, with about 56% of workers are self-employed, 29% are regular wage earners without social protection, and 15% are casual or unpaid helpers.
  • Even among salaried workers, two in five lack basic social security, revealing “hidden informality
• Low-Wage Trap Warning: NITI Aayog cautioned that “without formalisation, services risk becoming a low-wage trap despite being the fastest-growing part of the economy.” Persistent informality limits consumption, weakens demand, and constrains inclusive transformation.
• Gender Disparities: The employment report highlights gender gaps calling for a targeted approach to inclusion and digital empowerment.
  • Female participation in services declined from 25.2% in 2017–18 to 20.1% in 2023–24.
  • Women’s employment is concentrated in education, health, and retail, with minimal representation in higher-value digital and financial services.
  • Rural women form just 10.5% of the services workforce, less than half the share of rural men (24%).
  • Wage Gaps: Rural women earn below 50% of male wages which is the lowest parity across sectors, while urban women earn 84% of male wages on average.
• Rural–Urban Divide: Services employ 61% of urban workers but only 19% of rural workers. 
  • Between 2017–18 and 2023–24, the rural share of services employment declined from 19.9% to 18.9%, even as urban participation increased.
• Regional Imbalances: States such as Chandigarh (77.9%), Delhi (71%), Goa (59.1%), and Puducherry (59.6%) are the most service-oriented economies. 
  • In contrast, Uttar Pradesh despite employing 22.1 million service workers has a low services share of 22.7%, reflecting geographic unevenness.
• Youth Exclusion: The 15–29 age cohort is underrepresented in regular wage jobs, facing barriers such as insufficient skilling, weak school-to-work transitions, and limited job readiness.
• • Older workers’ participation declines steeply beyond age 55, reflecting limited opportunities for retention or reskilling.
• Skill Deficit: Persistent skill mismatches between formal education and industry needs hinder employability, especially in emerging sectors like digital services and green technologies.
• Uneven Job Creation: Employment generation is uneven across sub-sectors, with modern services growing fast in value but not in workforce absorption capacity.

Economies as per Service Sector Value Added – 2023 (Refer Image)

Action-Oriented Recommendations

• Four-Part Policy Roadmap for Employment Transformation: To bridge persistent gaps in employment quality, inclusion, and productivity, the report outlines a four-part policy roadmap:
  • Formalisation and Social Protection: Extend social security and labour protections to gig, platform, MSME, and self-employed workers. Create frameworks for portable benefits and pension coverage.
  • Targeted Skilling and Digital Access: Expand access to digital skills and employment platforms, especially for women and rural youth. Promote hybrid and remote work opportunities.
  • Investment in Emerging and Green Economy Skills: Build training pipelines for sustainability-linked jobs like renewable energy, circular economy, waste management, and green logistics.
  • Balanced Regional Development: Develop service hubs in Tier-2 and Tier-3 cities, integrating skill centres, innovation zones, and logistics infrastructure to promote regional balance and job creation.
• State-Level Tailoring: The report strongly recommends that each state design a customised service sector strategy aligned with its comparative advantages.
  • States should map service sub-sectors (like tourism, finance, healthcare, IT, logistics, education) where they have existing strengths or growth potential.
  • Encourage regional specialisation e.g., logistics in Gujarat, tourism in Kerala, education in Tamil Nadu, and financial services in Maharashtra.
  • Integrate state-level service policies into broader economic planning and industrial ecosystem development.
• Financing and Investment Facilitation: Strengthen state investment promotion agencies to attract FDI and domestic investment in services.
  • Simplify regulatory frameworks for startups and MSMEs in the services domain.
  • Enhance credit access through financial inclusion and digital lending tools.
  • Foster PPP-based infrastructure models in logistics, education, and digital service delivery.
• Regional Service Hubs: Develop state-level service clusters linked to local industrial strengths — especially logistics, tourism, and digital trade.
• Institutional Strengthening: Establish dedicated Service Sector Cells in state governments to coordinate policies, monitor outcomes, and engage with industry associations.
  • Improve data systems and dashboards for state-level service GVA and employment metrics.
  • Strengthen coordination between Central and State governments, ensuring policy coherence across sectors like IT, education, tourism, and finance.
• Infrastructure & Logistics: To sustain competitiveness, the reports recommend investment in digital infrastructure, logistics networks, and innovation ecosystems.
• Data & Monitoring: Create a National Services Sector Data Framework to regularly track State-wise GVA performance, Employment formality and quality & Productivity and wage trends.
  • Institutionalise evidence-based policymaking using real-time labour and enterprise data to guide interventions.

Initiatives taken by India to Promote Service Sector Growth

• Champion Services Sector Initiative (CSSI): To give focused attention to 12 identified “Champion” service sectors 
• National Skill Development Mission (NSDM) & PM Kaushal Vikas Yojana (PMKVY): It aims to align skilling with service sector demands (IT, healthcare, logistics, tourism, retail).
• • Skill India Mission enhances employability and supports school-to-work transitions highlighted in NITI Aayog’s Employment Trends report.
• Mahatma Gandhi National Fellowship (MGNF): In October 2021, the government launched phase II of MGNF to empower students and boost skill development.
• National Education Policy (NEP 2020): Modernises education delivery systems, promoting edtech services, skill-based learning, and digital universities.
  • Encourages private and global participation in education services exports.
• PM Ayushman Bharat Health Infrastructure Mission: It was launched in October 2021 to strengthen the critical healthcare network across India in the next four to five years.
• Foreign Direct Investment (FDI) Liberalisation: The FDI limit for insurance companies has been raised from 49% to 74% and 100% for insurance intermediaries.
  • 100% FDI permitted in key service sectors like telecom, e-commerce, insurance intermediaries, and IT services.
• National Digital Health Mission (NDHM): It was launched in 2020 to provide a unique health ID to every Indian and revolutionize the healthcare industry by making it easily accessible to everyone in the country. 
  • Over the next 10 years, the National Digital Health Blueprint can unlock the incremental economic value of over US$ 200 billion for the healthcare industry in India.
• National Broadband Mission: The government of India has launched the National Broadband Mission to provide Broadband access to all villages by 2022.

Conclusion

• India’s services sector stands at the forefront of the country’s economic transformation, driving growth, innovation, and employment. With focused reforms in digital infrastructure, formalisation, and skill ecosystems, the sector can anchor India’s journey toward Viksit Bharat @2047.

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