What are the major factors responsible for the high growth of the service sector - Economics - Unit II- Liberalisation Privatisation and Globalisation An Appraisal

Question

What are the major factors responsible for the high growth of
the service sector?

Bhawna Madaan · Accepted Answer

The major factors that led to the growth of service sectors in
India are as follows;
1 High demand for services as final
product: India was a virgin market for service sector
So, when service sector started booming due to business outsourcing
from the developed countries to India, there was very high demand
for these services especially for banking, computer service,
advertisement and communication This high demand in turn led to a
high growth rate of service sector
2 Liberalisation and economic reforms:
The growth of Indian service sector is also attributable to the
liberalisation and various economic reforms that were initiated in
1991 Due to these reforms, various restrictions on the movement of
international finance were minimised This led to huge inflow of
foreign capital, foreign direct investments and outsourcing to
India This encouraged the service sector growth
3 Structural transformation: Indian
economy is experiencing structural transformation that implies
shift of economic dependence from primary to tertiary sector Due to
this transformation, there was increased demand of services by
other sectors which y boosted the service sector
4 Advanced technology and growth of
IT: The advancements and innovations in the IT sector
enabled the use of internet, telecommunication, mobile phone and
electronic transactions across different countries All these
contributed to the growth of the service sector in India
5 Increased volume of trade: Low
tariff and non-tariff barriers on imports by India are also
responsible for high growth rate of service sector The foreign
trade reforms enabled the domestic products to interact and compete
in the international markets
6 Cheap labour and reasonable degree of skill in
India: Due to the availability of cheap labour and
reasonable degree of skilled man power in India, developed
countries found outsourcing to India feasible and profitable The
business outsourcing in itself provides substantial encouragements
(like development of human capital that requires services like good
coaching centers and reputed institutions, etc ) to the growth of
service sector

What are the major factors responsible for the high growth of the service sector?