Service Sector Growth Perspective: Recapitulations and Reflections

The service sector has contributed to the overall growth and the aggregate TFPG in India but such growth configurations are not independent of certain developmental and inequality implications. It may have contributed to poverty reduction but the contribution of the industrial sector to poverty reduction could have been much faster had the industrial sector witnessed a steady growth with significant possibilities for employment generation. In fact, within the service sector the bimodal distribution in terms of income/expenditure is a popularly observed phenomenon. The vast size of the informal sector with meagre incomes and a high productivity segment with a significant rise in income over time are remarkable features of the post globalisation era. Rising wage inequality and the vast size of the informal sector are inter-connected issues. Thus, the rapid spread of the services sector, emerging much before the industrialisation process could be completed, poses concerns in relation to decent livelihood creation and poverty reduction. The high productivity segment within the services sector is relatively small in terms of employment share and is not geared to the absorption of the unskilled and semi-skilled work force. While service-led-growth (and the rapid TFP growth in market services) could result in prosperity and development of one section of the society and thus, could elevate the Indian image of being stuck in a phase of stagnation or sluggish progress, the larger issues of growing inequality have indeed become persistent and the mounting concerns of deprivation relating to land, housing, education and health have turned out to be assiduous for a vast section of the population.