Role of Industry and Services in Developing Indian Economy

There are various factors that contribute to the growth of an economy. From an individual’s purchasing decision to a firm’s production rate, each aspect determines how an economic system functions, and this has been the case for centuries. Although the economic systems have existed for a very long time, the world only started to see major growth in the economy with the industrial revolution, therefore, the role of industries and services are very important within an economy, especially in developing nations like India.

Industries and Service Sector in the Indian Economy

India is one of the fastest-growing economies in the world, and this is because of the service sector and the industries. Interestingly, India is also one of the largest exporters of goods and services. The service sector contributed nearly 55.3 percent to the economy of India in 2020. Although all services are available in India, services like information technology, telecommunications, finances, and insurance are its primary income generators. As for the industries, India used to be known for six major industries; metal, textiles, sugar, cement, and paper industries. In present times, more industries have become a driving force for the Indian economy, such as the automobile and banking.

Role of Industry and Services in Developing Indian Economy

1. Contribution to the GDP

This is hardly a surprise, as mentioned previously, both the industries and services are crucial for economic development. Although the GDP of India used to be USD 463 billion in 2000, presently, it is at USD 2.66 trillion, and this rise in GDP is in large part due to the industrialization of India and a growing number of people with technical skills. India is currently among the largest producer of jute and cotton, it accounts for nearly 33 percent of the entire export earnings. Therefore, international trade also relies on these industries, and other firms produce complex machines to make the production of textiles efficient, enabling other industries to thrive.

2. Employment Opportunities

Role of Services and Industries in India Job Opportunities

With the population numbers crossing the billion mark, it is also essential that there are enough job opportunities in the country. From the hotel industry to the manufacturing industry, the creation of job opportunities is one of the primary factors that enable such industries to thrive. A large number of the workforce comprises non-skilled workers, resulting in employment opportunities for people with minimum education as well. As for the services, it enables individuals to offer their skills in different industries. Organizations also offer essential services like insurance, creating opportunities for jobs. Interestingly, before the 1990s, the agriculture sector and the construction sectors were the primary job creators in India, whereas, in present times, the information technology and financial sector have become the main source of employment.

3. Contributing to India’s Service Trade

Role of Services and Industries in India Service

This strictly applies to the service sector; however, the contributions made by services in the service trade of India are significant. The export of intangible products, i.e., services, is responsible for strengthening the country’s economy. India is renowned to export services like software services, management services, and even recreational services. It is estimated that the annual income generated from such services is roughly USD 64.75 Billion. India’s service trade saw a growth of 2 percent from 22.2 percent to 25.3 percent in 2004 and 2008, respectively, according to the data published by the Balance of Payment.

4. Government Revenue

Government Tax Agriculture Economy

Interestingly, revenue generated by taxes on the service sector and industries is one of the main sources of income for the Indian government. It should be noted that only the indirect tax is accounted for GDP, and in India, the Goods and Service Tax (GST), a type of indirect tax is levied on the entire nation. While it may seem that this hinders the production value of the industries, the revenue generated from these taxes is utilized to improve the economy of the nation. The service sector is also not free of taxes in India, for instance, freelancers are required to pay 18 percent tax on the income earned by their services. The GST was nearly 57 percent of the entire tax collection in 2021.

5. Technology and Innovation

Role of Services and Industries in India innovation

Since the advent of industrialization, simultaneous advancement in technology has been observed. This is true not only for India but for the entire world because as the production rates increase, advanced technology is required to carry out the process efficiently. As mentioned in the point of GDP, the need to manufacture superior quality products in a timely manner requires advanced machines, resulting in a boom of production in other sectors as well. Moreover, as India is one of the leading countries in telecommunication and IT services, the requirement for the most up-to-date technology is not just a want but a necessity. This is also reflected in the statistics, as the sales of computing devices grew by 44 percent in 2021 with 14.8 million units. Undoubtedly, this is a huge contributing factor to the economy.

6. Improving Infrastructure

Role of Services and Industries in India infrastructure

All the economically strong nations have a well-designed infrastructure, and India is no different. Before the 2000s, the condition of infrastructure in India was poor, to say the least; however, to attract multinational corporations, the infrastructure of India was changed drastically. This started a chain reaction of improving the infrastructure, while more companies were established in India. Presently, there are over 40,000 MNCs in India, whereas there used to be in the double digits in the 1990s. Moreover, the digital infrastructure of India is equally strong. In fact, it ranks first in South Asian digital infrastructure rankings.

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