Is India's Service Sector Paving the Way to a $5 Trillion Economy?
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Synopsis
Discover how India's service sector is transforming the economy and paving the way to a $5 trillion target. With significant growth across IT, healthcare, and e-commerce, this sector's evolution is a key driver of national prosperity.
Key Takeaways
- The service sector is crucial for India's economic growth.
- It is projected to contribute 55% to GDP by FY25.
- IT services are expected to reach $300 billion by FY26.
- The healthcare market is projected to grow to $370 billion by 2027.
- Digital initiatives are driving significant changes in the BFSI and telecom sectors.
New Delhi, July 7 (NationPress) The service sector in India is playing a pivotal role in the nation's quest to reach a $5 trillion economy, according to a report released on Monday. Over the years, this sector has significantly contributed to the country's Gross Domestic Product (GDP), evolving from a 40% share in the 1990s to an impressive 55% in gross value added (GVA) by FY25, as noted in the Axis Mutual Fund’s ‘Service Sector Report’.
“From a mere 40% of India's GDP in the early 1990s, the service sector has surged to account for 50.6% of the GVA in FY14, with projections estimating a remarkable 55% in FY25,” the report highlights.
Every segment of the service sector, including information technology (IT), finance, banking, healthcare, telecommunications, and e-commerce, has experienced substantial growth over the last two decades.
The IT services sector expanded from $8 billion in 2000 to $245 billion in FY24, with forecasts suggesting a rise to $300 billion by FY26.
The digital transformation has radically transformed the Banking, Financial Services, and Insurance (BFSI) sector, where mutual fund assets under management (AUM) have increased at a CAGR of over 20% over the past decade, reaching ₹72.19 lakh crore by May 2025, according to the report.
The healthcare market is anticipated to grow to $370 billion by 2027, with a staggering 62% year-on-year growth reported just in March 2025.
In the telecom sector, data usage per user has skyrocketed 450 times since 2014, now averaging 28 GB per month in 2025, while the e-commerce market is set to triple from $103 billion in 2024 to $325 billion by 2030.
India's nominal GDP has doubled over the last decade (2015-2025), reaching nearly $3.97 trillion in FY25 and is projected to rise to around $4.19 trillion by the end of this calendar year, providing a robust foundation for the service sector's growth.
Rapid digitization through the 'Digital India' initiative, along with proactive government strategies such as business-friendly policies, relaxation in Foreign Direct Investment (FDI) regulations, and sector-specific incentives, have created a conducive environment for the expansion of the service sector, the report concludes.
Point of View
I see the incredible potential within India's service sector. Its robust growth presents a promising future for the nation's economy. With government initiatives and technological advancements paving the way, the service sector is set to play an even larger role in the upcoming years. We must continue to support and invest in this vital sector.
NationPress
20/07/2025
Frequently Asked Questions
What is the current contribution of the service sector to India's GDP?
As of FY25, the service sector is expected to account for approximately 55% of India's gross value added (GVA).
What are the key sectors driving growth in India's service industry?
Key sectors include information technology, finance, healthcare, telecommunications, and e-commerce, all of which have shown significant growth in recent years.
How has digital transformation impacted the BFSI sector?
The BFSI sector has experienced a digital revolution, with mutual fund AUM growing at over 20% CAGR, reaching ₹72.19 lakh crore by May 2025.
What is the projected growth of the healthcare market in India?
The healthcare market is projected to reach $370 billion by 2027, showcasing a remarkable growth trajectory.
How has the telecom sector evolved in terms of data consumption?
Data consumption per user has increased by 450 times since 2014, averaging 28 GB per month in 2025.
