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

By meenakshi|Updated : September 5th, 2022

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 an increase in demand for the manufacturing industries after the initiation of the economic reforms in 1991. Also, the service sector significantly contributes to the country’s GDP.

Major Factors Responsible for the High Growth of the Service Sector 

The major factors responsible for the high growth of the service sector are explained as under-

  • High demand for service as the final product- The service sector started to bloom when businesses were outsourced from foreign countries (especially the developed countries) to India for communication, advertisement, computer service, and banking. Because of this high demand, there was high growth in the service sector. 
  • Technical and structural changes- Indian economy has been through many technical and structural changes. It includes the shift from primary to tertiary sectors regarding economic dependency. Also, the technical changes have resulted in the change in outsourcing and thus, ultimately resulting in the growth of the service sector. 
  • Growth of Information Technology- With the growth and advancements in the IT sectors, there has been a significant rise in the use of mobile phones, telecommunication, and the internet, because of which electronic transactions have increased among countries. 
  • Economic Reforms in 1991- WIth the initiation of the Economic reforms in 1991, the demand for the manufacturing industry increased. Along with this, the liberalization of the financial sector and reforms in segments of infrastructures are also responsible for the high growth of the service sector. 

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FAQs

  • High demand for service as the final product, technical and structural changes, better use of information technology, economic reforms in 1991, liberalization of the financial sector, and reforms in segments of infrastructures are the major factors responsible for the high growth of the service sector.

  • Because of the low tariff and no barriers to the tariff on Indian imports, the foreign trade reforms enabled the interaction of the domestic products in the international market along with the allowance to compete with others.  

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