New Delhi: The services sector continues to be dominated by informal employment, with most workers lacking job stability and social benefits, according to the NITI Aayog’s latest report released on Tuesday (October 28). The think tank warned that the sector risks turning into a “low-wage trap,” even as it remains the country’s fastest-growing segment.

In its report titled “India’s Services Sector: Insights from Employment Trends,” the NITI Aayog highlighted that 188 million people were employed in services in 2023–24, marking an addition of nearly 40 million jobs over the past six years. The sector’s share in overall employment has climbed from 26.9% in 2011–12 to 29.7% in 2023–24. However, while services generate more than half of India’s national output, they provide less than one-third of total jobs, most of which are informal and low-paying.

“Despite the centrality of services in India’s economic structure, the sector continues to be marked by high levels of informality, as the majority of workers lack access to job security or social protection. Services risk becoming a low-wage trap despite being the fastest-growing part of the economy,” Business Standard reported quoting the NITI Aayog report.

A deeper breakdown of the services sector revealed a sharp divide between high-value and traditional services. Modern, globally competitive segments such as information technology, finance, healthcare, and professional services contribute significantly to productivity but employ relatively few workers. In contrast, traditional areas like trade and transport continue to absorb the majority of the workforce, but are characterised by high informality and low wage growth, making them “hotspots of informal work.”

In the services sector, self-employed own-account workers represent the largest segment of informal employment, accounting for 55.7% of all informal workers. They are followed by regular wage or salaried employees without social protection at 29%, helpers in household enterprises at 9.2%, and casual labourers at 6.1%, the report shows.

Further, the report points out that  two in five regular service employees lack basic social security coverage, underscoring the prevalence of “hidden informality” even among those in stable-looking jobs.

A separate NITI Aayog report “India’s Services Sector: Insights from GVA Trends and State-level Dynamics” (October 2025) paints a concerning picture for India’s industrial sector, suggesting that manufacturing and related industries have stagnated for over a decade, even as services surge ahead.

The study found that the industrial sector’s share in Gross Value Added (GVA) has stayed virtually flat, between 28% and 29% since 2011–12, standing at 28.8% in 2023–24. In contrast, the services sector now commands a dominant 54.5% share of GVA, The New Indian Express reported.

The report attributes the sector’s stagnation primarily to the lacklustre performance of manufacturing, which contributes the largest portion of industrial output. From 2011–12 to 2023–24, manufacturing’s share of GVA hovered narrowly between 17% and 18.5%, ending at 17.5% in 2023–24 – barely above its level twelve years earlier. Although it rose briefly to 18.5% in 2021–22, it slipped again to 16.9% the next year.

Other industrial sub-sectors also showed limited momentum. Construction’s share declined from 9.6% in 2011–12 to 8.9% in 2023–24, while electricity, gas, water supply, and utilities edged up only slightly from 2.3% to 2.4% over the same period.

The NITI Aayog describes this imbalance, where services outperform while industry underperforms, as a case of “dual divergence.” The pattern raises concerns about inclusive and broad-based growth, since high-productivity service industries mainly employ skilled, urban workforce, whereas manufacturing traditionally provides jobs for semi-skilled and rural labour.

The report also warns of “premature deindustrialisation”, a condition in which economies shift away from manufacturing at lower income levels than those achieved by industrialised nations during their growth phases. To sustain long-term economic dynamism, the report suggests that there's a need for stronger linkages between the booming services sector and more robust manufacturing and industrial base.

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