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Informist, Tuesday, Oct. 28, 2025

 

NEW DELHI – India's services sector employed 188 million workers in 2023-24 (Apr-Mar), 10% higher than the previous year, a report from the NITI Aayog said. The services sector was the second-largest employer in FY24, after agriculture, with its share in the total workforce at 30%. However, it was still lower than the global average of 50%, reflecting a slower structural transition, the report said. 

 

"While services contribute over half of national output, they provide less than a third of jobs, most of which are informal and low-paying. This disconnect between growth and employment defines the central challenge for India's services-led development," the NITI Aayog said in the report released Tuesday. The sector contributes around 55% of the gross value added.

 

The Indian government in recent years has focused on developing the manufacturing sector in the country through initiatives such as "Make in India" and production-linked incentive schemes, even as the services sector has continued to drive economic growth and employment. In the six years to FY24, the services sector added 40 million jobs, "underlining the sector's ability to generate employment at scale", the report said. 

 

"Within the economy, only construction and services stand out as consistent job creators; manufacturing lags with weaker responsiveness," the report said. "Despite fluctuations, services remain the backbone of non-farm employment growth."

 

While the services sector has been resilient during crises such as the COVID-19 pandemic, its employment footprint reveals a striking paradox, the NITI Aayog said. Most jobs in the sector are concentrated in traditional and low-productivity segments such as trade and transport, where informality and vulnerability dominate, the report said. High-value services like information technology, finance, healthcare, and professional services create disproportionate economic value, but employ relatively few workers.

 

"This dual character of India's services economy highlights the core challenge for the next two decades: to convert the sector's dynamism into broad-based, high-quality employment. The evidence shows that services have the capacity to deliver with employment elasticity rising to 0.63 post-COVID, making the sector a key shock absorber," the report said. "However, without structural reforms, these potential risks being squandered in a cycle of low-quality job expansion."

 

Urbanised states and union territories such as Chandigarh, Delhi, Goa, and Puducherry remain the most service-oriented economies. However, due to lower population, absolute employment is limited, the report said. Uttar Pradesh employed the most workers in the services sector in FY24 at 22.1 million, but made up for just 23% of the total workforce in the state.

 

Bihar, Madhya Pradesh, Chhattisgarh, and Odisha recorded services shares below the national average of 29.7% in FY24. In these states, agriculture and industry continue to provide a larger share of employment, moderating the shift towards services, the report said.

 

The report said that over 60% of urban workers were employed in services compared with less than 20% in rural areas. Gender divide was also stark in this sector with only 10.5% of rural women engaged in services compared with 60% of their urban counterparts, the report said. "Earnings too display sharp inequalities, with women in rural services earning less than half of men's wages, even as a few high-value sub-sectors such as ICT (Information and Communication Technology) and healthcare demonstrate pathways towards parity," the report said.  End

 

Reported by Shubham Rana

Edited by Tanima Banerjee

 

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