Indian service sector grew at 8.3 percent from FY 23 to FY 25: Economic Survey

"The service sector has been fuelling growth both domestically and globally. In FY25 so far, services propped up GDP growth when manufacturing has been affected by dampening global merchandise trade. The critical role of services exports in strengthening India’s external balance and the increasing ‘servicification’ of the industrial sector adds to its importance to the Indian Economy," highlights the Economic Survey 2024-25.

India’s services sector has been the steadiest contributor to the Gross Value Added (GVA) in the economy.

Its contribution to the total GVA at current prices has increased from 50.6% in FY14 to about 55% in FY25. The growth in the service sector, as measured by YoY change in the real GVA by services, has been above 6% in each year in the last decade, except for the Covid-19 pandemic that affected FY21.

The average services growth rate before the pre-pandemic year was 8%. The average services growth in the post-pandemic Year, i.e. FY23 to FY25 has risen to 8.3%.

The service sector also provides employment to approximately 30% of the workforce. Services also contribute indirectly to the GDP through the ‘servicification’ of manufacturing, i.e., increasing utilization of services in manufacturing production and post-production value addition.

India’s share in global services exports has been steadily rising for the last two decades. This has helped compensate the impact of oscillation in the share of merchandise exports in global merchandise exports to some extent.

India ranks seventh globally, representing a 4.3% share in the global services export.

Referring to the HSBC’s India services PMI, the Economic Survey 2024-25 highlighted that the service sector remained in the expansionary zone for continuous 41 months since August 2021.

The index remained above the 60 mark for the first five months of FY25. However, in September, the index witnessed a ten-month low, but it quickly rebounded in October.

The recent data indicates demand buoyancy continued to drive new business inflows higher, which in turn supported output growth and prompted firms to recruit additional workers.