Reasons for the Rapid Growth of the Tertiary Sector in India

Several forces working together explain why services have grown faster than the other two sectors in India over recent decades.

Rising incomes are perhaps the most basic reason: once a household's basic food and material needs are reasonably met, additional income is increasingly spent on services — better education, healthcare, entertainment, travel and financial products — rather than on more food grain. Urbanisation reinforces this: a growing urban population demands more organised retail, public transport, housing and real estate services, and municipal administration.

Globalisation and trade liberalisation opened India's economy to the rest of the world, allowing Indian firms to export services — most visibly software and business-process services — on a scale that was not possible when the economy was more closed. This was made possible by the information technology (IT) revolution: the sharp and continuing fall in the cost of computing and telecommunications allowed many services to be delivered instantly across long distances, something that was simply not technically feasible a few decades earlier. …