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If China is considered the world’s factory, India is known as the global services powerhouse. The services sector contributes over half of the country’s economic output, leaving behind primary and secondary sectors.However, the devil in detail. Niti Aayog’s latest report on India’s services sector lays bare the paradox of the service sector — an economy that is expanding robustly in output, yet only moderately in employment. Though the sector contributed over half of the economy in 2023-24, it employed nearly 18.8 crore people, accounting for just under one-third of the total workforce.The report shows that services have added almost four crore jobs in the past six years, which is second only to construction. Yet this statistic conceals a deeper structural divide. High paying jobs in information technology, finance and healthcare sectors remain small employers despite their higher productivity and global reach. But the vast majority of India’s service workers are employed in low-wage sectors like trade, transport and personal services.The urban-rural divide is also too stark. Over 60 per cent of urban workers are employed in services, while less than 20 per cent in rural areas, confirming the sector’s urban bias. Only 10.5 per cent of rural women are engaged in services compared to 60 per cent of urban women. Even within cities, most women are mostly employed in low-paying sub-sectors like education and health. Despite the sector’s modern image, 87 per cent of service-sector workers lack access to social security, and nearly half are self-employed such as drivers, vendors, beauticians or small traders, operating without contracts or benefits.The divergence between states is also equally sharp. Maharashtra, Tamil Nadu, Karnataka and Telangana have built diversified service hubs spanning IT, finance, logistics and education, while Bihar, Madhya Pradesh and Odisha remain locked into traditional, low-value services. It also attests the general perception prevalent among experts about the strong corelation between services and urbanisation and shows that India has become a microcosm of the global economy, having regions with sub-Saharan depravity and Scandinavian prosperity. This kind of asymmetries mirror unequal levels of social development and industrialisation in the country, which need to be addressed urgently.The report’s empirical depth — linking the NSS 2011-12 with PLFS 2023-24 data — offers policymakers a blueprint to correct the course of jobless growth. One of major interventions should be on education and skilling. The government should reorient people's approach towards education. Instead of pursuing education for score and certificates, people should look at it as an avenue to develop skillsets. The government should also extend basic social benefits that people working in the organised sector enjoy to the service workers in the unorganised sector. It should encourage companies to look at building service clusters in tier 2-3 cities.Without these reforms in education, labour policy, social protection and regional investment, the benefits of the services economy will remain unevenly shared. Therefore, it is the time to act, before the backbone of India’s growth turns into its Achilles’ heel. The challenge, however, is whether the government at all levels have the political will to deliver.
