Q.Explain the contribution of the tertiary sector to employment generation in India. Why does its employment share lag behind its share of GDP?

The tertiary sector's share of India's workforce has risen for decades, though more slowly than its share of output.

Activities such as software and finance add a great deal to national output but do not employ very large numbers of workers relative to that contribution, while agriculture continues to employ a comparatively large share of the workforce relative to what it produces. Employment-heavy parts of services, such as small retail trade, remain of relatively lo …

The tertiary sector has been an important, and increasingly significant, source of employment in India, with its share of the total workforce rising steadily over recent decades as workers move out of agriculture into trade, transport, construction-adjacent services, and — for a smaller but visible share of the workforce — into higher-skill services such as banking, IT and professional services.

Even so, the sector's share of total employment remains noticeably below its share of Gross Value Added, and this gap is worth explaining rather than simply noting. The explanation lies in the very different labour requirements of different parts of the services sector. Some of the fastest-growing and highest-value branches of services — software development, financial services, professional consulting — are relatively skill- and capital-intensive: they generate a great deal of output and export earnings per worker employed, but they do not, by their nature, absorb very large numbers of workers directly. By contrast, the parts of the tertiary sector that do employ very large numbers of people — small-scale retail trade, personal services, much of urban transport — tend to be of comparatively low productivity, often informal, and contribute less to GVA per worker than their numbers might suggest. …

Students often state that services 'employ most people in India' without qualification, which is inaccurate — agriculture still employs a large share of the workforce; the more precise and creditable poi …