In its latest report titled “India’s Services Sector: Insights from Employment Trends and State-Level Dynamics”, NITI Aayog said the services sector employed nearly 188 million workers in 2023–24, securing its position as the second-largest employer after agriculture.
India’s Services Sector: A Dual-Track Engine of Employment and Growth
The report highlights that the Indian services sector has added almost 40 million jobs in the past six years, which goes on to make the sector a labour shock absorber and a dominant engine of employment growth.
After the pandemic, the services sector showed strong resilience with job growth becoming more responsive to economic growth—its employment elasticity rose to 0.63. This means the sector played a key role in creating jobs and helping the economy recover.
With manufacturing sector lagging with weaker job responsiveness to output gains, the report said that the construction and services sectors are knights in the shining armours, standing out as consistent job creating sectors.
Now that we have understood these facts as per reports, let’s go beyond scratching the surface and take a deep dive into services economy.
The services economy reflects a striking “dual divergence”. On one hand, you have high-value, productivity-rich sectors like Information Technology, finance, and professional services driving innovation and growth. On the other hand, there are traditional sub-sectors such as trade and transport that employ the bulk of the workforce but remain burdened by informality and sluggish wage growth, highlighting deep structural contrasts within the sector.
City Lights, Village Shadows
The analysis further reveals that the benefits of services expansion are highly unequal, defined by striking disparities across location and gender.
The growth in services employment can be attributed to urban India. Over 60 percent of all urban workers were employed in the services sector in 2023–24. The sector has consolidated its position as the single largest source of employment in urban labour markets.
On the contrary, less than 20% of the rural workforce is absorbed in services. Notably, between the years 2017–18 and 2023–24, there has been a marginal decline as well from 19.9% to 18.9% respectively.
In the world of service sector, rural women whisper and urban women roar!
Only 10.5% of rural women are employed in the services sector, on the contrary, 60% of their urban counterparts are engaged in the sector. Notably, the rural women who do work are mostly engaged in low-value activities.
The gap in earnings not only exists but also highlights deep disparity. While rural men earn an average of Rs 451 per day, the females only earn Rs 213 per day. In percent, women make 47% of what rural men make when it comes to average daily earnings.
Notably, this disparity in rural services is far sharper than in agriculture (75%) or manufacturing (65%).
The same wage ratio percent in urban scenario is an 84%, where urban men make Rs 480 per day while females make Rs 403 per day.
This highlights that the more formal and diverse nature of urban services, which offer better-paying opportunities in sectors like healthcare and education.
Targeted policy interventions and inclusive strategies are therefore essential to ensure that the growth of the services sector translates into sustainable, equitable, and high-quality employment for all segments of the population.
Summary
With 188 million workers in 2023–24 and strong post-pandemic resilience, NITI Aayog’s report highlights India’s services sector as a major employment engine in India. The report highlights that the growth is concentrated in urban areas, with stark gender and rural-urban disparities. High-value sectors drive innovation, while traditional sub-sectors remain informal and low-paying. Inclusive policies are needed to ensure equitable, sustainable, and quality employment.
Source – https://trak.in/stories/4-crore-new-jobs-created-by-indias-services-sector-in-6-years/