IT is in the headlines but still ranks third in Indian services sector

The services sector's contribution to India's economy more than doubled over the last decade, with IT services GVA growing nearly fourfold despite current industry headwinds

Information technology (IT) companies are sailing choppy waters but a recent report by Niti Aayog called the sector one of the “structural drivers” of India’s services economy, characterised by strong growth and demand.

 

The share of IT in the services sector’s gross value added (GVA) adjusted for inflation has doubled over the past decade, from 6 per cent in FY12 to 12.2 per cent in FY24. In absolute terms, IT services GVA expanded nearly fourfold from Rs 2.4 trillion in FY12 to Rs 10.8 trillion in FY24.

 

It will be interesting to see if the sector will be able to employ a high number of people compared with other service industries as uncertainty looms.

 

Total GVA by the services sector more than doubled from Rs 39.7 trillion in FY12 to Rs 88.08 trillion in FY24. In FY24, the services sector comprised almost 55 per cent of India’s economy, much higher than the primary and secondary sectors. However, in terms of jobs, the primary sector employed the largest share of people (46.1 per cent), followed by the services and secondary sectors. The primary sector comprises agriculture, hunting, forestry, and fishing, whereas the secondary sector covers manufacturing, construction, and the supply of electricity, gas, water, and other utility services.

 

Besides IT, other sectors in services include trade and repair, finance, government, transport, education, and health.

 

IT was the third-largest contributor to India’s services GVA in FY24. Trade and repair was the leader by contributing around 20 per cent to services GVA at constant prices (2011-12) and 34 per cent to employment. The professional, scientific, and other business constituted the second-largest share. The share of government services fell to 2.8 and 1.4 percentage points in services GVA and employment, respectively.

 

Karnataka ranks first in IT employment, with its share in total services employment rising from 8 per cent in FY12 to 12.7 per cent in FY24. However, the state ranks fifth in terms of IT industry’s share in services GVA.

 

Maharashtra leads in IT GVA but that declined from 12.6 per cent in FY12 to 11.1 per cent in FY24. Uttar Pradesh showed a remarkable improvement, with its share rising from 6.9 per cent to 9.5 per cent.

 

Telangana, which became a state in 2014, has quickly emerged as another IT powerhouse, reaching 12 per cent of services employment by FY24 to rank second by that metric.

 

India’s IT services sector consistently contributed over 45 per cent of total services exports during the four years up to FY25.

 

The Niti Aayog report said rising exports reinforce India’s global leadership in software exports, digital platforms, cloud computing, and IT-enabled services.