India Economy

Services drive trillion-dollar economy

Arvind Jayaram | Updated on March 12, 2018 Published on October 06, 2012

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The economy’s trillion-dollar status largely hinges on the continued performance of its services sector. The services sector contributes over half of the country’s gross domestic product (GDP) and its share has grown by almost 5 per cent in the past five years.

The higher growth in the services sector has helped the economy grow at a fast pace. Between 2007-08 and 2011-12, the services sector output rose by 42.5 per cent. In comparison, industrial output grew by just 24.3 per cent. Agriculture and allied activities, on the other hand, registered disappointing growth of just 11.2 per cent during the 11th Plan. This was despite a 43 per cent rise in Government final consumption expenditure.

Role of services sector

An analysis of individual States highlights the role played by services in bolstering the economy.

For example, trade and hotels accounts for a larger chunk of Maharashtra’s net state domestic product than industrial output.

The output of the services sector, which includes banking and insurance services, real estate and construction services, is nearly three times higher than that of industry in the country’s most industrialised state.

One of the interesting facets of the data was that quarrying and mining activity does not play a large role in the economy of the top 5 States contributing to the GDP, though agriculture remains a key sector.

State domestic product

The data also reveals the stark difference in the output of States such as Maharashtra, Uttar Pradesh and Gujarat compared with the north-eastern States such as Manipur, Mizoram and Arunachal Pradesh.

Gujarat’s state domestic product is 2,100 times higher than the combined output of these poor north-eastern States.

Nevertheless, it is interesting to note that the per capita state domestic product of Sikkim is higher than that of Andhra Pradesh and Uttar Pradesh, thanks to its lower population.

New Delhi ruled the roost in terms of per capita state domestic product, followed by Goa and Chandigarh.

> arvind.jayaram@thehindu.co.in

Published on October 06, 2012
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