Advantages of Service Sectors in Economy

Advantages of Service Sectors in Economy

The service sector (or the tertiary sector) produces services and provides intangible products. It is a major contributor to India's GDP and provides employment to millions.

Any economy has three sectors – the primary sector (related to agriculture), the secondary sector (the industrial sector which is concerned with manufacturing goods), and the tertiary sector (the service sector). The service sector has developed so much in India only in the past few decades. At the time of independence, the Indian economy heavily depended on the primary sector, but now it is the service sector that drives the economic growth. The contribution of the service sector to the Indian economy is enormous. It accounts for over 50% of the Indian GDP (more than the primary and secondary sectors combined). Besides, it has the highest labour productivity. This article will cover the importance of the service sector in India.

What is the Service Sector?

In recent years, there has been a significant rise in IT-related services. All those services come under the tertiary sector. In fact, any intangible product, i.e. all the products that cannot be touched but can only be felt by value, fall under the service sector. This sector involves healthcare, tourism, financial services, broadcasting, IT-enabled services, etc. The service sector is a highly organised sector requiring a high level of education and skills.

It helps in the development of the primary and secondary sectors as well. For example, these days, technology is used to make agriculture more efficient and better. Similarly, any industry cannot operate without banking and healthcare facilities. This is how the tertiary sector aids the other two sectors. 

Importance of the Service Sector

As mentioned earlier, the contribution of the service sector to the Indian economy is unparalleled. It accounts for over 50% of the GVA (Gross Value Added). Also, the share of the tertiary sector in India’s net national product is the highest. Some of the points that explain the importance of the service sector are:

Promotion of industrialisation – The industrial sector depends heavily on the tertiary sector. For example, to operate an industry, raw materials must be transported from one place to another. Transportation comes under the tertiary sector. Similarly, the finished products need to be distributed to marketplaces which also requires transportation. Moreover, the health of industry workers is kept in check by the healthcare industry. The industry’s finances are handled by some financial institution, which again comes under the service sector

Increase in productivity – Both education and healthcare come under the service sector. When an individual gets a good education and proper access to healthcare, their productivity is more likely to increase than someone with low levels of education and poor health. Hence, the service sector improves the overall health of the economy by increasing workers’ productivity

Good Quality of Life – The employees working in the tertiary sector generally have a better quality of life. They earn more money and work in less hazardous conditions. They can afford several luxuries, which improve their quality of life 

Market Growth – The tertiary sector improves the quality of the finished goods produced in industries. The process of making the products is also improved, thanks to the service sector. This, in turn, enables the growth of the market

Advantages of the Service Sector

The service sector has certain other advantages also. These are listed as follows:

No requirement of an inventory: This is one of the most significant advantages from the business owner’s perspective. Since the service sector relies on offering intangible products, there is no need for extra space to store goods and raw materials. Here, skills and expertise are sold, which do not require an inventory. This reduces the cost of production

Easy to start: It is easier to start a business in the tertiary sector because there is no compulsory need to set up a manufacturing plant or procure raw materials. For example, any company offering IT-enabled services only needs the internet and laptops to operate. The work can be done from home too, so the need for a large office is also not there. This is why most start-ups in India come under the purview of the service sector

Working flexibility: Unlike in primary and secondary sector jobs, the jobs in the tertiary sector provide flexibility to work. A worker can work from anywhere based on his convenience and preference. It was easiest for the service sector employees to work from home during the COVID-19 pandemic

High adaptability: Service sector companies are more dynamic, i.e. they adjust better to changes 


The service sector has a huge role to play in the country’s economic development. It provides employment to the educated and skilled youth of the nation and contributes a significant proportion to the country’s GDP and GVA. Besides, the service sector employs people even during economic crises because the need for skilled workers remains the same when the economy struggles.