Here’s Why The Indian Economy Is Fast Becoming A “One Pony Trick”, Powered Largely By The Services Sector

Rammohan Susarla
4 min readAug 3, 2022
Photo by Vizag Explore on Unsplash

The Indian Economy is fast becoming a “One Pony Trick”! India’s GDP (Gross Domestic Product) growth is powered by the services sector, which accounts for more than 50% of the total GDP. It has generated a tad more than a quarter of all jobs in the formal economy, in addition to indirectly creating another 10% of employment or the so-called “multiplier” effect. While India’s services sector has suffered a significant setback due to the pandemic, what with its’ GVA (Gross Value Added) sinking to 30% in 2020-’21, the rebound in the last year or so has been spectacular. Indeed, it can be said that the Indian Economy’s fortunes rest on the shoulders of its Software, Call Center, Banking, and Financial Services professionals.

Why India Cannot Become Another China Without A Manufacturing Revolution

While the much celebrated “Indian Rennaisance” owes a lot to the Indian Services Sector, a situation where it has had a disproportionate weight in the overall growth indices is undesirable for many reasons. First, the Indian Services Sector employs only a quarter of all Indians of eligible working age, which, when contrasted with its share in the overall GDP, does little to solve India’s chronic “unemployment crisis”. Indeed, India cannot become an economic powerhouse without a parallel manufacturing revolution. Job creation needs labour-intensive firms, especially those in the formal and informal sectors of MSME (Micro, Small, and Medium Enterprises).

How India’s Much Vaunted Demographic Dividend Is Becoming A Disaster

This is when the nation is at risk of failing its youth, as the much vaunted Demographic Dividend threatens to become a nightmare, fueling social unrest. Moreover, the services sector employs skilled professionals, thereby “excluding” those with little formal education or specialized skills. Indeed, it is not as though India does not have a large talent pool of graduates with Engineering and Management Degrees. Just that the “employability” of the Crores of them is a problem, with only a few (about 20%) being “fit” for services jobs.

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Rammohan Susarla

Writer seeking metaphysical fulfillment by publishing meditations and ruminations about the world.