What are the Major Factors Responsible for the High Growth of the Service Sector?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The major factors responsible for the high growth of the service sector include high-income elasticity of demand, structural and technological changes in the Indian economy, the revolution of information technology, and growth in demand for manufacturing industries after the economic start. Also, the service sector contributes significantly to the country’s GDP.

Factors for the High Growth of the Service Sector

The following list outlines the primary causes for the service sector’s rapid growth:

  • High demand for service as an end product: When businesses for communications, advertising, computer service, and banking were outsourced to India from abroad (especially developed countries), the services sector began to blossom. This high demand led to high growth in the service sector.
  • Technological and Structural Changes: Indian economy has gone through many technological and structural changes. It involves a shift from primary to tertiary sectors with respect to economic dependence. Furthermore, technological changes have resulted in a change in outsourcing and thus ultimately the growth of the service sector.
  • Development of Information Technology: With the growth and advancement in the IT sectors, there has been a significant increase in the use of mobile phones, telecommunications, and the Internet, which has led to an increase in electronic transactions in the countries.
  • Economic Reforms in 1991: With the introduction of economic reforms in 1991, the demand for the manufacturing industry increased. Along with this, liberalization of the financial sector and reforms in the infrastructure sectors are also responsible for the high growth of the services sector

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