India’s Services Sector Employs 188 Million: NITI Aayog Flags Urban Bias, Gender Gaps and Job Informality

India’s services sector employs 188 million workers, says NITI Aayog 2025 report, but warns of gender inequality, job informality, and regional divides.

India’s services sector now employs 188 million people, making it the largest driver of post-pandemic job growth, according to a new NITI Aayog 2025 report.
Yet the study warns that this growth is urban-heavy, gender-unequal, and largely informal, with deep regional disparities.
Experts say that without urgent reforms in formalisation, skilling, and inclusion, India risks a service economy that grows fast but leaves millions behind.

A Sector That Powers Growth but Not Inclusion

India’s services sector stands at a decisive crossroads. It powers more than half of the country’s GDP, employs 188 million workers, and has become the defining engine of post-pandemic recovery. Yet, beneath this impressive scale lies a troubling reality—most of its workers remain informal, underpaid, and excluded from social protection.

The latest NITI Aayog report, “India’s Services Sector: Insights from Employment Trends and State-Level Dynamics (October 2025)”, paints the most comprehensive picture yet of this paradox. Drawing on data from the National Sample Survey (2011–12) and the Periodic Labour Force Survey (PLFS 2017–18 to 2023–24), it reveals that while services have added 40 million new jobs in the last six years, the sector’s ability to create quality jobs remains limited.

“India’s services sector shows great dynamism in output but limited inclusiveness in employment,” the report concludes.

Source: NITI Aayog’s 2025 Report — “India’s Services Sector: Insights from Employment Trends and State-Level Dynamics.”

Services: The Backbone of the New Indian Economy

In 2023–24, India’s total workforce was around 634 million, of which 188 million (30%) were engaged in services. Agriculture still dominates with about 292 million workers, while industry—including manufacturing and construction—employs around 153 million.

However, services have clearly become the fastest-growing employment segment, absorbing a rising share of workers displaced from agriculture and construction. The NITI Aayog study finds that employment elasticity—a measure of how job creation responds to economic growth—rose to 0.63 in the post-COVID years, up from 0.35 pre-COVID. This makes services the second-most responsive sector after construction.

The report identifies information technology, healthcare, education, finance, and logistics as emerging “high-elasticity” subsectors capable of generating jobs with upward mobility and stability.

Yet, the distribution is highly uneven. The top three subsectors—trade, transport, and education—account for over two-thirds of total service jobs, while high-value modern services like IT, finance, and consulting remain small employers despite their strong contribution to GDP.

Must Read: Gender Equality: A Pillar for Sustainable Development and Social Justice

NITI Aayog’s 2025 India’s Services Sector Report: Urban Dominance and Rural Exclusion

One of the starkest findings in the report is the spatial divide between India’s urban and rural labour markets.

Over 60 percent of urban workers are employed in services, compared to just 19 percent in rural areas. In towns and cities, sectors such as ICT, healthcare, finance, and hospitality drive job growth and skill development. Meanwhile, rural India’s service employment is confined largely to retail trade, transportation, and teaching, offering low wages and limited mobility.

“Urban India has become the nucleus of service-sector dynamism,” the report notes, “but this growth has not yet extended to rural labour markets.”

NITI Aayog warns that the lack of rural diversification could hinder balanced growth. It calls for investments in digital infrastructure, rural logistics, and decentralised service hubs to connect smaller towns with national and global value chains.

Experts agree. Economist Dr. Sonia Pant, who led the study, told The Interview Times,

“Services are no longer confined to cities—they can thrive in smaller towns if we build the right infrastructure. Healthcare, digital finance, logistics, and online education could transform rural labour markets.”

Gender Divide: Women’s Work, Unequal Pay

Despite growing female participation in urban jobs, the services sector continues to reflect deep gender asymmetry.

In rural India, only 10.5 percent of women are employed in services, compared to 24 percent of rural men. Most rural women remain confined to agriculture. In urban areas, the story improves—60 percent of working women are engaged in services, primarily in education, health, retail, and household work.

But even in formal roles, gender inequality persists. The average urban woman earns 84 percent of a man’s wage, while in rural services, the gap widens dramatically—women earn less than half of men’s earnings.

Sectors like IT, finance, and professional consulting remain heavily male-dominated. Education and healthcare employ the highest number of women, but even these roles often lack parity in pay and promotion.

The NITI Aayog’s 2025 India’s Services Sector Report calls for gender-sensitive labour reforms, equal pay enforcement, and the creation of safe, accessible workplaces—particularly in emerging service clusters beyond metro cities.

“Women’s entry into services must be matched with pay equity and access to leadership,” the NITI Aayog’s 2025 India’s Services Sector Report asserts, urging targeted skilling programs for women in digital and care-economy roles.

Must Read: NITI Aayog Report: India’s Services Sector Drives 55% of GVA, Sets Path to Viksit Bharat 2047

Employment Type: Between Stability and Vulnerability

The structure of employment in services reveals a dual character—half the workforce enjoys regular wage jobs, but the other half remains in self-employment or unpaid family work.

In 2023–24, about 96 million workers held salaried positions in services—the highest share among all sectors. Yet, the PLFS data show that 40 percent of these workers lack written contracts, and over 50 percent do not receive paid leave or social-security benefits.

Meanwhile, 85 million workers (45%) are self-employed, running small shops, delivery businesses, or household enterprises. Only 4 percent of service workers are in casual labour—reflecting the sector’s relative stability but also its hidden informality.

Dr. Deepak Kumar, co-author of the NITI Aayog’s 2025 India’s Services Sector Report, noted:

“The services sector gives the impression of formal employment, but our data reveal widespread informality even among salaried workers. Formalisation is the next big frontier.”

Regional Snapshot: South and West India Lead the Way

At the state level, the NITI Aayog’s 2025 India’s Services Sector Report finds stark regional contrasts in service-sector employment and productivity.

States like Maharashtra, Tamil Nadu, Karnataka, and Telangana have emerged as India’s “service powerhouses,” boasting diversified economies that combine IT, finance, education, and healthcare. These states show both high productivity and high wage averages.

On the other hand, Bihar, Madhya Pradesh, and Uttar Pradesh remain concentrated in low-value traditional services like retail and transport. Their challenge lies in translating demographic advantage into skilled employment.

The NITI Aayog’s 2025 India’s Services Sector Report’s Annexure IV provides detailed state-level recommendations. For example:

• Karnataka: Strengthen IT and health-tech exports through startup incubation.
• Tamil Nadu: Expand logistics and tourism infrastructure to leverage coastal trade.
• Bihar and UP: Focus on digital skilling, micro-entrepreneurship, and service clusters around educational hubs.
• Odisha: Boost financial and healthcare services linked to mining and ports.

The NITI Aayog’s 2025 India’s Services Sector Report urges Tier 2 and Tier 3 cities to be developed as regional service hubs—Mysuru, Coimbatore, Nagpur, and Indore are cited as examples where digital and educational ecosystems can scale employment.

Technology and the AI Transition

The NITI Aayog’s 2025 India’s Services Sector Report highlights a major inflection point: artificial intelligence (AI) and digital automation.

Drawing from the World Economic Forum’s Future of Jobs Report 2025, NITI Aayog projects that AI could automate 40–50 percent of white-collar jobs in India by 2030. However, it could also create millions of new roles in data management, digital security, healthcare analytics, and green services.

Between 2024 and 2030, demand for AI specialists, fintech professionals, and green engineers is expected to rise by over 60 percent.

To prepare, the NITI Aayog’s 2025 India’s Services Sector Report advocates for a “Services Skills 2047 Mission”—a national platform combining academia, industry, and digital tools to train youth in emerging fields.
It also promotes Apprenticeship-Embedded Degree Programs (AEDPC) to integrate hands-on experience into higher education, ensuring that India’s young workforce remains globally competitive.

“AI will reshape work, not eliminate it,” the report stresses. “Jobs will evolve—those who adapt will thrive.”

Persistent Challenges: Informality, Inequality, and Job Quality

Despite its potential, the services sector faces three interconnected challenges:

1. High Informality: Nearly 87 percent of service workers lack access to social security or benefits.
2. Gender and Spatial Divides: Women and rural workers remain underrepresented in high-value services.
3. Regional Disparities: Growth remains concentrated in southern and western states, leaving the north and east lagging.

The NITI Aayog’s 2025 India’s Services Sector Report calls for comprehensive reforms that link output growth with employment quality. Formalisation, digital skilling, and gender equity emerge as recurring themes.

Four Strategic Policy “Unlocks”

To transform services into a true engine of inclusive growth, NITI Aayog outlines a four-pillar roadmap:

1. Formalisation and Social Protection
   Extend labour codes and social-security benefits to self-employed, gig, and MSME workers. Promote micro-insurance and pension portability.
2. Bridging Gender and Rural Gaps
   Launch women-focused digital and care-economy skilling programs. Develop rural service hubs in smaller towns with better transport and childcare infrastructure.
3. Investing in Technology and Skills
   Establish a National Services Skill Mission linked to AI, climate action, and digital trade. Expand partnerships with IITs, NITs, and private universities for emerging skill clusters.
4. Regional Balance and Urban Planning
   Promote service-sector corridors and knowledge parks in Tier 2 cities; align state policies with national industrial corridors to create distributed hubs of employment.

A Blueprint for Viksit Bharat @2047

Ultimately, the NITI Aayog’s 2025 India’s Services Sector Report frames the services sector as India’s “springboard for opportunity, equity, and resilience.”
To achieve Viksit Bharat @2047, India must not only grow but ensure that growth generates broad-based, high-quality jobs.

The report’s message is clear: services must evolve from a safety net for informal workers into a platform for sustainable prosperity. With the right policies—formalisation, gender inclusion, regional diversification, and digital skilling—India’s services sector could anchor its transformation into a developed, equitable economy.

“The services sector will define the future of work in India,” the report concludes. “Our challenge is to make that future inclusive.”

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