New Delhi, Oct 28 : The services-led growth in India's economy is becoming more regionally balanced as states with lower initial shares in services are catching up with more advanced ones, according to a NITI Aayog report released on Tuesday.

'There is clear evidence that structurally lagging States are beginning to catch up with advanced ones. This emerging pattern of convergence suggests that India's services-led transformation is gradually becoming more broad-based and spatially inclusive,' the report states.

The services sector has become the cornerstone of India's economic growth, contributing nearly 55 per cent of national GVA (Gross Value Added) in 2024-25.

To guide policy, the report introduces a quadrant-based framework that classifies 15 major service sub-sectors into four categories-Engines of Growth, Emerging Stars, Mature Giants, and Struggling Segments-to support differentiated strategies across States.

The report recommends prioritising digital infrastructure, logistics, innovation, finance, and skilling to accelerate diversification and competitiveness at the sectoral level.

It also recommends that at the state level there is a need for developing tailored service strategies based on local strengths, improving institutional capacity, integrating services with industrial ecosystems, and scaling up urban and regional service clusters.

Together, these findings offer a forward-looking policy road map for positioning the services sector as a key growth engine across India, reinforcing its central role in the Viksit Bharat @2047 vision.

A companion report titled India's Services Sector: Insights from Employment Trends and State-Level Dynamics, focusses on employment within the services sector, drawing on data from the NSS (2011-12) and PLFS (2017-18 to 2023-24).

It offers a long-run and multi-dimensional view of India's services workforce across sub-sectors, gender, regions, education, and occupations. The report goes beyond aggregate trends to reveal the sector's dual character: modern, high-productivity segments that are globally competitive yet limited in employment intensity, and traditional segments that absorb large numbers of workers but remain predominantly informal and low-paying.

By linking historical and contemporary data, it situates these patterns within a broader framework of structural transformation, offering an integrated understanding of the opportunities and divides that shape India's services-led employment transition.

Findings show that while services remain the mainstay of India's employment growth and post-pandemic recovery, challenges persist. Employment generation is uneven across sub-sectors, informality remains widespread, and job quality continues to lag behind output growth. Gender gaps, rural-urban divides, and regional disparities underline the need for an employment strategy that integrates formalisation, inclusion, and productivity enhancement at its core.

To bridge these gaps, the report outlines a four-part policy road map focussing on formalisation and social protection for gig, self-employed, and MSME workers; targeted skilling and digital access to expand opportunities for women and rural youth; investment in emerging and green economy skills; and balanced regional development through service hubs in Tier-2 and Tier-3 cities.

By positioning the services sector as a purposeful driver of productive, high-quality, and inclusive jobs, the report underscores its centrality to India's employment transition and its pivotal role in realising the vision of 'Viksit Bharat @2047'.

The reports emphasise the need to deepen digital infrastructure, expand skilled human capital, foster innovation ecosystems, and integrate services across value chains, positioning India as a trusted global leader in digital, professional, and knowledge-based services.

/IANS