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NITI Aayog points slower structural transition of India's services sector
Oct-29-2025

The NITI Aayog in its report titled 'India's Services Sector: Insights from Employment Trends and State-Level Dynamics' has pointed slower structural transition of India's services sector as it employs nearly 30% of the country's workforce, which is lower than the global average of 50%. It noted that the sector has created 40 million jobs in last six year (from 2011-12 to 2023-24). It has emphasized that services remain the mainstay of India's employment growth and post-pandemic recovery, but challenges persist. It also noted that while services contribute over half of national output, they provide less than a third of jobs, most of which are informal and low-paying. This disconnect between growth and employment defines the central challenge for India's services-led development.

It highlighted that the country faces a growing mismatch as education levels are rising faster than the quality-of-service jobs, which underscores the urgency of aligning skilling with sector needs. It also pointed that the retail trade and transport dominate services jobs in large states, sustaining employment but at low productivity levels, while modern services (IT, finance, professional services) are booming in southern and western hubs, driving growth but absorbing fewer workers. It added that while states such as Maharashtra, Tamil Nadu, Karnataka, and Telangana have built vibrant service hubs with high productivity, Bihar, Madhya Pradesh, and others remain concentrated in low-value, traditional segments.

To bridge these gaps, the NITI Aayog has outlined a four-part policy roadmap focusing on formalisation and social protection for gig, self-employed, and MSME workers; targeted skilling and digital access to expand opportunities for women and rural youth; investment in emerging and green economy skills; and balanced regional development through service hubs in Tier-II and Tier-III cities. Moreover, in a separate report it has recommended prioritizing digital infrastructure, logistics, innovation, finance and skilling to accelerate diversification and competitiveness. At the state level, it has called for developing tailored service strategies based on local strengths, improving institutional capacity, integrating services with industrial ecosystems, and scaling up urban and regional service clusters.
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