India’s service sector is expected to grow to $6 trillion by 2035, contributing 60 per cent to the country’s GDP, says an OmniScience Capital report.
As per the report, India’s economy is expected to touch $10 trillion by 2035. The report highlights that, apart from the service sector, the industry sector is also likely to grow to $3 trillion by 2035, accounting for 30 per cent of GDP, higher than the current 27 per cent.
The service sector, which currently accounts for 55 per cent of GDP and stands at $2.2 trillion, is expected to grow at a compound annual growth rate (CAGR) of 10.6 per cent over the next 10 years, according to OmniScience Capital.
However, OmniScience Capital projections estimate that the agriculture sector, on the other hand, is likely to see a drop in its contribution to GDP. The agriculture and allied sector’s share in GDP is expected to come down to 10 per cent by 2035, from the current 18 per cent.
Service sector growth path
The service sector’s growth in the coming decade is likely to be driven by the IT, financial services, healthcare, modern business services, digital public infrastructure, and a fast-growing domestic consumption base.
The service sector’s growth over the last half-decade is evident in the PMI data. The Services PMI has increased from a range of 50 to 55 during 2015 to 2022 to a range of 55 to 60 between 2022 and 2026. At the same time, India’s share in service exports has seen strong growth. In 2005, India’s share in global service export was 1.9 per cent, which has grown significantly to 4.3 per cent in 2023. In 2023, India’s service exports registered 13.6 per cent YoY growth, totaling $388 billion.
Top growing sub-sectors
As per the report, within the service sector, the financial sector, real estate sector, and defence sector are likely to see the fastest growth rate in the next decade, growing at 11.3 per cent CAGR. In the last three years, these sectors have seen a compound annual growth rate of 13.6 to 14 per cent.