India’s services sector remains the strongest engine of growth for the economy, contributing 55% of the country’s Gross Value Added and employing nearly 188 million people, which is about 30% of the entire workforce. This is according to a new report released by NITI Aayog that examines trends in both economic output and employment across states.
The study covers the period from 2011 to 2012 through 2023 to 2024 and highlights both impressive gains and serious gaps.
The report notes that the services sector has created 40 million new jobs in the last six years, and that the pace of job creation has increased. The responsiveness of job growth to economic growth, also known as employment elasticity, has risen from 0.35 before the pandemic to 0.63 after it, indicating that services growth is now translating more directly into jobs.
However, the quality of employment remains a major concern. A large share of workers in the services sector still work in informal conditions. This means limited job security, unpredictable earnings and little or no access to social protection.
The report draws attention to a growing divide within the sector. Modern services such as information technology, financial services and professional consulting offer better pay and stronger links to global markets, but they employ only about 25 million workers. Traditional services such as retail, repair and hospitality provide work to over 155 million people, yet often with lower productivity and lower wages.
The report also highlights sharp regional and gender inequalities. Southern and western states continue to lead in high value services sectors, while smaller states advance more slowly and usually through education, health and public services. Women remain underrepresented and underpaid. Rural women earn less than half of what men earn, and even in urban areas, women earn about 84% of male incomes.
To address these gaps, NITI Aayog recommends a focused strategy for each state based on its strengths. The report calls for steps to increase formal employment, including extending social protection to those working in gig and informal roles. It also stresses the need to skill women and rural youth for jobs in healthcare, digital services, tourism and environmentally sustainable sectors.
Another key recommendation is to build service clusters outside large metropolitan areas by improving infrastructure and connectivity. The report also urges closer integration of services with manufacturing to raise productivity and expand job opportunities.
As India looks toward the goal of becoming a developed nation by 2047, the report emphasizes that the next phase of services sector growth must focus on better work conditions, fairer wages and broader inclusion.
