Chapter 2 · Question 3
Why has the tertiary sector become important in India?
Answer
Direct Answer
The tertiary sector has grown because agriculture and industry need more services, incomes have risen, and demand has increased for education, health, transport, communication, banking, insurance, and information technology. Many new services also support modern production.
Simple Explanation
As farming and industry grew, they needed more transport, banking, and communication. Rising incomes also increased demand for education, healthcare, and IT services. These forces drove the rapid expansion of the service sector.
Exam-Ready Structure
The tertiary (service) sector has become the largest contributor to India's GDP. The reasons for its growth are:
• Growing demand for services from primary and secondary sectors: Modern agriculture and industry are impossible without supporting services — transport of goods, banking (loans and payments), insurance, warehousing, and communication networks. As farming and manufacturing became more complex and nationally integrated, demand for these services exploded.
• Rising incomes and changing lifestyle: As average incomes rise, households spend a greater proportion of their income on services — education for children, better healthcare, travel and tourism, entertainment, eating out, and domestic services. This is a pattern seen in all growing economies.
• Information technology revolution: India's IT and IT-enabled services (software, call centres, business process outsourcing) have grown rapidly. This is a high-skill, high-value service sector that also earns significant foreign exchange.
• Government services: The government is a major provider of services — public schools, hospitals, transport, postal services, police, defence, and administration. As the state expands its welfare functions, service employment grows.
• Urbanisation: Cities require a wide range of services — public transport, municipal services, communication, trade, finance, real estate — that are larger and more complex than in rural areas.
• New types of services: Over time, entirely new services have emerged — mobile telephony, internet services, e-commerce delivery, app-based transport (Ola, Uber), and online education — creating new employment and economic value.
Important note: The tertiary sector's large share in GDP does not mean that most workers are in services. In India, the primary sector still employs the largest share of the workforce, but most of these workers are under-employed and contribute a small share of GDP.
Key Points
- The tertiary sector has grown because agriculture and industry need more services, incomes have risen, and demand has increased for education, health, transport, communication, banking, insurance, and information technology.
- Many new services also support modern production.