International Peer-Reviewed Journal  
Dr. Nilima Chintamani Bhagwat  
Since post reform period Indian economy has changed. Indian economy shifted from agricultural  
sector to industrial sector and then to service sector. For economic growth of country service  
sector became boom. The performance of this sector is increasing in recent years. Due to service  
sector, foreign investment flow raised. Variety of sectors are included in this service sector. Through  
the sub segment of this sector their contribution to national income and employment raised.  
Although this sector’s contribution is raising but it is facing challenges. These challenges affect  
the country. These challenges also provided opportunities to this service industry. So, this industry  
provided global trend to Indian services. With challenges and opportunities service sector has  
significant role in Indian economy.  
Key Words : Service sector, foreign investment, challenges and opportunities.  
Indian economy has observed structural changes. It shifted from agriculture sector to industrial sector  
and then to service sector. And in recent years’ service sector became important in economic  
development. The performance of economic development relates with performance of service sector.  
After post reform period agriculture-based economy moved to knowledge-based economy. And service  
sector became major contributor to employment and national income in recent years.This sector also  
attracted significant foreign investment flow. It covers variety of activities such as trade, hotel and  
restaurant, transport, trade and communication, finance, insurance, banking, real estate, social and  
personal services, business services and community etc. Service sector is key to India’s economic  
growth. Contribution of this sector is raising day by day.  
Objectives of the study  
Objectives of this study are as  
. To analyse contribution to GDP of service industry.  
. To know opportunities to service industry.  
Significance of the study  
Service sector industry plays an important role in the development of an economy. The performance  
of an economy depends on performance of service sector. After liberalisation an importance of service  
sector has been increasing steadily. So, it is important principle in country’s economic development.This  
industry improves knowledge, productivity, performance, potentiality and sustainability in the economy.  
It focuses on interaction among producer and consumer. This industry’s contribution raises India’s  
integration with world market through trade and foreign direct investment flows. Since last few years  
India’s growth in export of services has increased.  
Service sector’s contribution to country’s net national product has increased. It also provided  
employment to youth. It helps to industrial development. Industries depend on transport, trade,  
communication and electricity etc. These various services help industry to develop in remote areas  
also.These services connect various roads, communities’ people through communication.Well  
organised transport and communication service, helped to reduce regional imbalance and disparities  
among country. For various products sell point of view markets are grown. It also improved life style  
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of citizens. Due to better services in various areas quality of life and standard of living improved  
among the country.It helps to expand international trade. It also helps to increase the foreign exchange  
reserve among country.  
Service sector in India  
Service sector plays an important role in structural changes of economy. It is largest sector which  
accounts for gross domestic product (GDP) of all countries. This sector gave large contribution to  
GDP. This sector emerged as major sector of economy in terms of growth rate and share to GDP  
since 1990s.  
This sector comprises of Trade, Transport, Communication, Banking, Insurance, Education and  
Research, Hotel and restaurants, Medical and health, Real estate and business services etc. In 2017  
18, this sector contribution in economic growth is almost 72.5% of Gross Value Added (GVA) growth.  
Since last two decades India is making progress in service sector. This sector includes following  
important services due to which their contribution raised day to day  
. Travel and Tourism Sector  
It is important sub sector. It is a significant source of earning and employment generation. This sector  
creates directly and indirectly large-scale employment opportunities. It also helps other sector to  
expand such as agriculture, handicrafts, horticulture, construction etc. It is also important source of  
foreign exchange earnings. In India number of foreign tourists are increased. India became a major  
global destination. Tourism Ministry played important role in changing the image of India. In our  
country various types’ tourism facility are available. These various types attract global tourists.  
These types are  
Medical Tourism – It is fastest growing segment. In India high skilled doctors, cost effective  
treatment, improved quality health centres are available. Many foreign tourists came to India.  
Government of India has taken initiative to promote medical tourism.  
ii) Eco Tourism – This new segment involves visit to natural areas without disturbing ecosystem. It  
generates revenue to local people. Natural diversity of India attracts foreign tourists.  
iii) Heritage Tourism – It is important revenue generating segment. It includes forts, monuments,  
palaces and worships places etc.  
iv) Adventure Tourism – In recent years adventure tourism is increasing. It gives opportunity to  
adventure sports. It includes river rafting, rock climbing, mountaineering, trekking, skiing, snow  
climbing and scuba diving etc.  
. Health Industry  
In India health care industry plays an important role. Since last few years health infrastructural facilities  
are raised. In India public and private sector provides health services. In this sector investment are  
raising day by day. Health care insurance is available for better quality health care to citizens. In this  
sector private and public company’s health insurance is available. It improves quality of health care.  
3. Education Industry  
Education is an important stage in development of country. In India importance is given to education.  
For development of education government has taken various efforts through policies and financial  
outlays. Free education facility is available to girl students. Scholarship facility is available to  
economically backward class students. Education helps to improve quality of life, standard of living  
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4. Trade  
It is an important segment of service sector. It helps to create opportunities for countries to expand  
their outputs of services. It creates employment opportunities and generates foreign exchange revenue  
also. This segment gives their important contribution to GDP.  
Service sector has vast segments. But important segments are included in this paper. But all service  
sector segments improved performance with greater competition, best skills and technologies as  
well as investment capital. In revenue generation of country this sectors segments performance is  
improving day to day.  
Problems of service sector  
Service sector has various segments. And these segments played an important role in development  
of country. But then also this sector faces various problems. These problems are as below  
In our country infrastructural facilities are inadequate. These inadequate facilities affects on  
service sector’s quality.  
Service sector s fastest growing sector. Its contribution to GDP is also increasing. But it does not  
provide maximum employment opportunities. Because employment opportunities are available  
to only skilled and trained labourers. So unskilled labourers may remain unchanged.  
In India tourism sector is vast. Due to geographical variations various tourist places are available.  
But there is need to set up these places as attractive to tourists. As well as many times tourists  
are cheated hand in hand. It affects this sector.  
Good behaviour, hospitality are the symbols of service sector. Indian service providers many  
times neglects customers. So, they required proper training of public dealing.  
Public places as airports and railways in India are not clear and well organised. These places  
need to be revamped and reorganised.  
Service trade also faces various problems. It includes lack of set up as export promotion councils,  
visa restrictions, sector restrictions and preferential market access.  
Challenges to service sector  
Service industry is an important industry in development of country. This sector faces following  
challenges such as  
For various segments permit approval required. It includes stamp duty. And in India there is  
delay in approval as well as registration costs are also high. Even industry has to pay high  
stamp duty. To run industry owner has to pay high cost.  
For government projects there is delay in payments. So, funds availability is inadequate to  
All products GST is charged. It raises price of product. It affects on demand for product. Consumers  
are not ready to purchase at high cost. So, it is challenge to product to satisfy customers.  
This sector gives contribution to primary and secondary sector also. It is necessary to expand  
secondary sector. As well as affordability also improve. When affordability improves it gives  
good result to product.  
Opportunities to service sector  
Service sector is challenging sector. With challenges it has opportunity to develop and improve  
performance. These opportunities are such as  
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In hotel and restaurant industry there is an opportunity to provide variety types of Indian food.  
This industry can satisfy customers by providing customers’ choice food. It also gives opportunity  
to employment.  
In all sectors products are used in India. These electronic products required maintenance and  
after sales services. If these service chains are provided to customer then it gives satisfaction to  
Service sector is interlinked with primary and secondary sector. This sector helps to give business  
opportunities to primary and secondary sector.  
Service sector brings strong competition. This sector is key driver to economy. These competitions  
are opportunity to develop business.  
Service sector gets opportunity to extend business at global level. It helps to communicate and  
contact with foreign countries customers.  
This sector gets opportunity to develop various products which are demanded by customers.  
And customers also get variety of products.  
The share of service sector in total GDP increased after post reform period. It also raised foreign  
direct investment flow in the economy. In GDP raising service sector have positive effect. This sector  
definitely led economy to better prospectus in near future. The sector has given contribution in different  
aspects of economy. In modern world service sector performs important role.  
This sector helps to provide opportunities to strengthen employment and productivity. It helps to  
adjust the economic globalisation and growing importance of services to its future growth.  
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Tiwari, S. (2011). Service Sector in India: Performance and Reforms.International Journal of  
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www.servicesectorin India  
Ph.D., M. Phil, M.A., NET in Economics, VIVA College of Arts, Sc. & Commerce, Virar (W)  
E – mail id: [email protected]