Services Sector Employs 30% of Workforce, Says NITI Aayog
India’s services sector, according to a new report by NITI Aayog, continues to underperform in terms of employment generation.
The report titled India’s Services Sector: Insights from Employment Trends and State-Level Dynamics, the sector employs only 29.7% of the national workforce as of 2023–24.
This figure is significantly lower than the global average of 50%, highlighting a slower structural transition in India’s labour market.
Employment Growth Without Proportional Job Creation
The report notes that although the services sector has added 40 million jobs over the past six years—up from 26.9% in 2011–12 to 29.7% in 2023–24—the pace of employment growth has not kept up with the sector’s contribution to GDP.
Services now account for more than half of India’s national output, yet they provide less than a third of total jobs.
Most of these jobs are informal and low-paying, underscoring the challenge of achieving inclusive growth through a services-led development model.
NITI Aayog Report: Urban-Rural and Gender Disparities
The report highlights stark disparities in employment distribution across geographies and demographics.
Over 60% of urban workers are employed in the services sector, compared to fewer than 20% in rural areas.
This urban-rural divide points to unequal access to service sector opportunities and infrastructure.
Gender disparities are also pronounced.
Only 10.5% of rural women are employed in services, compared to significantly higher participation rates among men and urban women.
These figures reflect broader structural barriers, including limited access to education, mobility constraints, and social norms that restrict women’s participation in formal employment.
NITI Aayog Report: Need for Structural Reforms and Formalisation
NITI Aayog emphasizes the need for targeted policy interventions to address these gaps.
The report calls for structural reforms that promote formalisation, enhance social protection, and improve productivity across the services sector.
It also recommends digitising informal worker registries and expanding skilling initiatives to prepare the workforce for emerging service-oriented roles.
The report suggests that India’s services sector has the potential to absorb a larger share of the workforce, provided there is a concerted push toward inclusive and sustainable employment strategies.
This includes investing in digital infrastructure, improving access to finance for small service enterprises, and fostering entrepreneurship in underrepresented regions.
Post-Pandemic Recovery and Future Outlook
The services sector played a critical role in India’s post-pandemic recovery, particularly in areas such as healthcare, education, digital services, and logistics.
However, the report cautions that without deeper reforms, the sector’s ability to generate quality jobs at scale will remain limited.
Looking ahead, NITI Aayog urges policymakers to align employment strategies with the evolving nature of services, especially in light of technological advancements and global shifts in demand.
The goal is to ensure that the sector not only drives GDP growth but also delivers equitable employment outcomes across regions and demographics.
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