The service sector is also called the tertiary sector.
The basic characteristic of this sector is the production
of services instead of end products.
Service sector produces the products which are know
“ A service is an act of performance that one party can
offer to another that is essentially intangible and does
not result in the ownership of anything. Its production
may or may not be tied to a physical product.”
In simple words, Service is an economic activity that
is tangible, cannot be stored and does not result in
ownership. Services are consumed at the point of
Intangible - It cannot be touched.
Inseparability - Services cannot be separated from the
Heterogeneity – A service is one-time generated,
rendered and consumed and can never be exactly
Perish ability – Once a service is consumed then it
cannot be consumed again.
Wholesale and Trade
•Economic growth is the increase in the market value of
the goods and services produced by an economy over
time. It is conventionally measured as the percent rate of
increase in real gross domestic product.
•GDP refers to Gross domestic product , it is the market
value of all officially recognized final goods and services
produced within a country in a given period of time,
generally a year. GDP per capita is often considered as an
indicator of country’s standard of living.
•Services sector in future providing about 70 per cent of the new job
opportunities in the economy
•New employment possibilities in the services sector are
construction, trade, transport, storage, financial services,
communication and personal services
•Employment in manufacturing would also expand, but its
contribution to the total increase in employment would only be
around 17 per cent.
The services sector has played a vital role in the acceleration
of economic growth.
Growth in services picked up in the 1980’s and accelerated in
the 1990’s. Since then, it has become a dominant contributor to
The share of services in India’s GDP increased from 33.5 per
cent in 1950-1 to 56.5 per cent in 2011-12.
India is among the top 15 countries with highest
overall GDP in 2011, India ranked 9th in overall GDP
and 10th in services GDP.
Service sector has a share of 57 per cent in the gross
domestic product (GDP) in 2011-2012.
Services sector has been increased by 9.1 per cent.
• If construction is also included, the service sector’s
share increases to 64.4 per cent in 2011-12.
• Trade, hotels, and restaurants is the largest
contributor to GDP with an 18 per cent share.
• Followed by financing, insurance, real estate, and
business services with a 16.6 per cent share.
• Community, social, and personal services (including
salons, spa) with a share of 14.0 per cent is in third
The three groups of services are :
Group I - Traditional services – retail and wholesale trade,
transport and storage, public administration and defense –
which tend to be slow growing in the sense that their share in
GDP has fallen in more advanced countries.
Group II is a hybrid of traditional and modern services
consumed mainly by households – education, health and social
work, hotels and restaurants, and other community, social and
personal services – whose share in GDP has risen in step with
per capita income.
Group III is made up of modern services – financial
intermediation, computer services, business services,
communications, and legal and technical services.
Productivity growth has been highest in Group III.
REASONS FOR GROWTH OF SERVICE
•Both demand and supply factors have led to the growth of service sector.
•On the demand side, the high growth of services output was mostly attributed to
factors such as increasing input usage of services by other sectors, mainly
manufacturing sector (i.e. higher domestic demand); higher foreign demand due
to trade demand); liberalization; and high income elasticity for services.
•On the supply side, the increased trade in services following trade liberalization
policies and other reforms in 1990s induced this growth.
•Changing role of women
•Conservation of natural resources
•Development of markets
•Increased consciousness of health care.
Finally to conclude that, the service sector is very
important for India, as it is contributing half of the GDP
growth in the Indian economy. Employment is increasing
due to development of service sector. There is a very good
scope to improve further in the services provided by the
companies and government. As India is developing very
fastly there is a need for change in the quality and also the
speediness of the services