What are the major factors responsible for the high growth of the service sector?
What are the major factors responsible for the high growth of the service sector?
The major contribution to GDP in India comes from the service sector which has grown largely since liberalisation. The major factors responsible for the high growth of the service sector are as follows:
(i) High Income Elasticity of Demand: It has been noticed that income elasticity of demand for services is more than one. Hence, the demand for services increases at a faster rate than demand for commodities, with the increase in income.
(ii) Technical and Structural Changes: The technical and structural changes in the economy have made it an attractive destination for outsourcing, thus contributing towards the growth of service sector.
(iii) Information Technology Revolution: With the advent of the information technology revolution, it has become possible to deliver services over a long distance at a reasonable cost. Thus, trading in services has increased worldwide, also benefitting India.
(iv) Economic Reforms In 1991: Economic reforms initiated in 1991, increased demand for manufacturing industry, thereby benefitting the service sector also. Liberalisation of financial sector boosted the growth of financial services. Reforms in certain segments of infrastructure also contributed to the growth of services.
The major contribution to GDP in India comes from the service sector which has grown largely since liberalisation. The major factors responsible for the high growth of the service sector are as follows:
(i) High Income Elasticity of Demand: It has been noticed that income elasticity of demand for services is more than one. Hence, the demand for services increases at a faster rate than demand for commodities, with the increase in income.
(ii) Technical and Structural Changes: The technical and structural changes in the economy have made it an attractive destination for outsourcing, thus contributing towards the growth of service sector.
(iii) Information Technology Revolution: With the advent of the information technology revolution, it has become possible to deliver services over a long distance at a reasonable cost. Thus, trading in services has increased worldwide, also benefitting India.
(iv) Economic Reforms In 1991: Economic reforms initiated in 1991, increased demand for manufacturing industry, thereby benefitting the service sector also. Liberalisation of financial sector boosted the growth of financial services. Reforms in certain segments of infrastructure also contributed to the growth of services.
