Contribution of the Tertiary Sector to Employment

While the tertiary sector generates the largest share of national income, its share of total employment in India is noticeably smaller than its share of GDP — a gap that is itself an important topic in this chapter. Periodic Labour Force Survey (PLFS) data over recent years has generally shown the services sector employing somewhere around one-third of India's workforce (approximately 30–34 per cent), compared with agriculture, which — despite contributing under a fifth of GVA — still employs a much larger share of the workforce, well above 40 per cent in many recent survey rounds. Industry accounts for the remainder.

This mismatch between the income share and the employment share of a sector is measured through the idea of output per worker (or sectoral productivity): a sector whose share of GDP is much higher than its share of employment has, on average, higher output per worker than a sector where the reverse is true. Services (and to a lesser extent industry) tend to show higher output per worker than agriculture in India, which is one reason policymakers encourage the gradual movement of the workforce out of low-productivity agricultural employment towards industry and services — provided this movement is accompanied by adequate skill development, since services jobs increasingly demand higher, more specialised skills than casual agricultural labour. …