India’s services sector has firmly established itself as the primary engine of economic growth, resilience, and structural transformation, according to the Economic Survey 2025-26 tabled in Parliament by Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman. Against a backdrop of global uncertainty and subdued industrial activity, services have emerged as a stabilising force, contributing more than half of India’s Gross Value Added (GVA) and driving exports and employment.
India is the world’s seventh-largest exporter of services, with its share in global services trade more than doubling from 2 per cent in 2005 to 4.3 per cent in 2024. The Survey characterises the services sector as a high-growth, low-volatility anchor, recording 7-8 per cent annual growth over long periods, significantly smoother than the cyclical fluctuations seen in agriculture and industry.
Broad-Based Expansion in FY 2025-26
The Survey notes that FY 2025-26 witnessed an across-the-board expansion in services, with sectoral growth of 9.1 per cent, making it the largest contributor to GVA growth in the First Advance Estimates. All major sub-sectors recorded growth in the range of 8.0 to 9.9 per cent, highlighting the breadth and resilience of the expansion.
Global Trends and India’s Alignment
Globally, the COVID-19 pandemic accelerated the expansion of digitally delivered services such as IT, finance, and professional services, even as contact-intensive segments like tourism and transport faced disruptions. By 2024, services trade had regained and surpassed pre-pandemic levels, indicating a gradual rebalancing of global trade towards services.
Capital flows have mirrored this shift. Services accounted for an average 53.5 per cent of global FDI during 2022-2024, up from 50.9 per cent in the pre-pandemic period. In India, services-sector FDI rose to 80.2 per cent of total FDI during FY 2022-23 to FY 2024-25, compared with 77.7 per cent in FY 2015-16 to FY 2019-20.
Key recipient segments included information and communication services, professional services, finance and insurance, energy and gas, and trading, together accounting for nearly 89 per cent of services FDI, underscoring India’s strength in digital, skill-intensive, and infrastructure-linked services.
Services Exports: Accelerating Momentum
Average services export growth more than doubled from 7.6 per cent during FY 2015-16 ~ 2019-20 to 14 per cent in FY 2022-23 ~ 2024-25, reflecting strong global demand. Despite heightened global uncertainty, exports remained resilient in FY 2025-26, growing 8 per cent during April-November.
- Software services, accounting for over 40 per cent of services exports, grew at an average 13.5 per cent in FY 2022-23 ~ 2024-25, compared with 4.7 per cent pre-pandemic.
- Professional and management consulting emerged as the second-largest contributor, growing 25.9 per cent and increasing its share from 10.5 per cent to 18.3 per cent.
Services exports as a share of GDP rose from 7.4 per cent pre-pandemic to 9.7 per cent during FY 2022-23 ~ 2024-25, further increasing to 10 per cent in H1 FY 2025-26, providing a crucial buffer amid weak global goods trade.
Employment and Regional Dynamics
PLFS data show that services accounted for 61.9 per cent of urban employment in the first two quarters of FY 2025-26. EPFO data indicate that services contributed 51.7 per cent of net formal job additions during April-July 2026, led by expert services, trade, and commercial establishments.
Over 2011~2024, employment elasticity in services stood at 0.43, rising to 0.63 in the post-COVID recovery phase, highlighting the sector’s role as a labour shock absorber.
Regionally, Karnataka, Maharashtra, Tamil Nadu, and Telangana together account for nearly 40 per cent of services output, driven by high-productivity activities. However, contrasts persist, with some states relying heavily on low-value services and others witnessing a decline in services’ share of GVA.
New Growth Frontiers in Services
The Survey highlights emerging frontiers that will shape the next phase of services-led growth:
- Tourism and wellness services, contributing 5.22 per cent of GDP and supporting 8.46 crore jobs
- IT and Global Capability Centres (GCCs), employing nearly 19 lakh professionals
- Data centres, with capacity projected to rise from 1.4 GW in 2025 to 8 GW by 2030
- Start-ups and Generative AI, with active GenAI start-ups tripling within a year
- Space services, with India launching 393 foreign satellites between 2015~2024
- Media, entertainment and the concert economy, positioning the “Orange Economy” as a fast-growing segment
Way Forward
The Economic Survey concludes that sustaining services-led growth will require:
- Continuous re-skilling and diffusion of digital technologies
- Development of niche tourism and marine infrastructure to unlock the blue economy
- Commercialisation and public-private partnerships in space and ocean services
- Addressing energy and infrastructure constraints for data centres
With these enablers, services, including media, entertainment, space technologies, data centres, and ocean-based services, are expected to remain a powerful and durable engine of India’s growth in the years ahead. (Source: PIB PR ID 2219981)
Economic Survey of India 2025-26 dated 29/01/2026