Importance of the Tertiary Sector in Economic Development

The tertiary sector's importance to economic development can be summarised under a few broad heads, a structure useful for essay-type answers in the AP Intermediate public examination:

1. Largest contributor to GDP — as seen above, services now account for the single largest share of India's national income, making the sector's performance a major determinant of the country's overall growth rate.
2. Support to other sectors — banking, insurance, transport and communication provide the essential inputs (credit, risk cover, logistics, information flow) without which the primary and secondary sectors could not function efficiently; the tertiary sector is, in this sense, the connective tissue of the economy.
3. Employment absorption — although its employment share is below its income share, services still absorb a very large and growing number of workers moving out of low-productivity agriculture, and offer a wide employment spectrum from highly skilled IT/finance jobs to more accessible trade, transport and hospitality jobs.
4. Foreign exchange earnings — IT/ITeS exports, tourism receipts and financial services together bring in substantial foreign exchange, helping finance India's imports and supporting the balance of payments. …