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Mains Test Series

Tertiary and Quaternary Activities

Q. Discuss the potential of tertiary sector industries to drive economic growth in India.

The tertiary sector is also known as the service sector, defined as a wide range of activities of the economy that involves the provision of service to businesses as well as final consumers. Tertiary sectors cover commerce, administration, transport, finance, real estate, business and personal service, etc.  

The function of the tertiary sector is to help in the development of the primary and secondary sectors. It is heavily dependent upon scientific research and innovative development to increase productivity.   Present scenario of tertiary sector

  1. Contribution to GDP India has the fastest-growing service sector, which contributes over 54% to the country’s GDP. The IT and IT-enabled services (ITeS) industry is one of the most significant contributors to the service sector in India.
  2. Contribution to exportIndia’s service export market share is about 4% in 2021
  3. FDI inflow The tertiary sector is the largest recipient of FDI inflow.
  4. India holds the 7th position globally in the highest output from tertiary industries.

Potential of Tertiary Sector Economic Growth in India

  1. The growing aspirational living standardTertiary sector uplifts people’s living standards and allows them to spend comfort and leisure-based activities, tourism, sports and restaurants.
  2. Higher Margins than the primary and the secondary sectors, generating more profits.
  3. Less capital intensive than the primary and manufacturing sector in most cases.
  4. Improves labour productivity Education, Health, technology, innovation, banking, and insurance play a significant role in the upliftment of the population in terms of skilling, better health, financial inclusion, etc.
  5. Generate tax revenue – The service sector is the major contributor to revenue for the government in India.
  6. Increasing the purchasing power Increasing labour productivity brings higher wages, thus increasing their purchasing capacity.
  7. Future orientation – Rise in demand for service to generate employment. Skilled IT human resources has made it a global outsourcing hub.
  8. Supports other Industries – Application of IT solutions and financial innovation brings efficiency to production and supply chains.  
  9. Generates Foreign exchange – India heavily relies on service exports for foreign exchange. It is the only sector that remains in a trade surplus. For example, India’s healthcare sector is cost-competitive compared to developed nations, attracting medical tourism.  

Constraints of the tertiary sector

  1. Lack of government incentives The government has not provided adequate incentives on the same line as the manufacturing sector.
  2. Lack of infrastructure Infrastructure like transportation communication limits the potential service to hospitality and tourism, etc.
  3. Lack of skill manpower-skill manpower is confined to mainly IT sectors only. Shortage of skilled manpower in the tourism and hospitality sector, etc.
  4. Trade restriction Service distortion on restriction imposed by foreign governments like restriction of movement of professionals, domestic certification for foreign service provider tax on offshore income of Indian service farm, etc.

Measures taken by the government

  1. Under the GST regime, the government promotes zero tax for the education and health sectors.
  2. Centre has formulated an action plan for the champion sector in services to give focused attention12 identified champion service sector.
  3. Production-linked incentive scheme to boost manufacturing of telecom and networking products.
  4. A credit incentive programme to boost healthcare infrastructure in the country.

The tertiary sector in India has the highest employment generation and GDP contribution. It has the potential to grow and the capability to provide highly productive jobs, thus resulting in revenue generation. The tertiary sector will play a significant role in shaping the country’s future in the coming years.

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