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Tertiary Sector – Meaning, Examples & Potential

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The Indian economy is divided into three sectors i.e. Primary, Secondary and Tertiary. A good performance in all these sectors is essential for India’s economic growth. The primary sector basically acts as the raw material supplier while the secondary sector also known as the processing or the manufacturing sector turns the material into finished goods. The tertiary sector provides services to both the primary and secondary sectors of the Economy. The tertiary sector is quite important for the Indian economy as the majority of people in India are employed in this sector.

Tertiary Sector and its Potential
Tertiary Sector and its Potential

What is a Tertiary Sector?

The tertiary sector of the economy or also referred to as the service sector is a sector that includes tons of small business which acts as a service to the primary and the secondary sectors of the economy. The tertiary sector includes but is not limited to schools, financial institutions, insurance companies, banking institutions, restaurants, hotels, and many more. Many economists believe that the economy of a nation escalates when the government shits its focus on the development of the tertiary sector. The tertiary sector can also be further divided into different sectors like profit and non-profit. 

As per the world bank report India holds 7th position globally in highest output from the tertiary industries with an output of more than 1.3 billion USD.

Tertiary Sector Examples

Here are some of the examples of tertiary sector:

  • Commercial banks, investment banks, credit unions, and other financial institutions that offer services such as loans, investments, and financial advice.
  • Schools, colleges, universities, and other educational institutions that provide formal education and training services.
  • Hospitals, clinics, nursing homes, and healthcare providers that offer medical services, treatment, and healthcare support.:
  • Hotels, restaurants, travel agencies, tour operators, and other businesses involved in providing accommodations, food services, and travel-related services.
  • Airlines, railways, road transport companies, shipping companies, and other entities involved in the movement of people and goods.
  • Telecom companies that provide services such as mobile and landline communication, internet, and data services.

What Kind of Industries Comes under the Tertiary Sector?

The tertiary sector can provide direct service, a framework for setting up a business, as well as can carry out business operations. A majority of the tertiary sector comprises institutions involved in shipping services that can be via roadways, railways, seaways, or airways. And almost every person involved in the shipping industry from a taxi/truck driver to the supply chain manager operating from head office comes under the tertiary sector. 

Other major industries that come under the tertiary sector are the hospitality industries like hotels, restaurants, and resorts. As the hospitality industry provides food and comfort services which are the basic necessity for the primary and secondary sectors. While on the other hand, many economists believe that financial institutions such as banks and other insurance companies are arguably the most important tertiary sector industries as they finance and safeguard many industries with loans and insurance. 

Potential of the Tertiary Sector

In the last few decades, it has been observed that many economies shifted their focus from the manufacturing sector to the tertiary sector, thus escalating their economic growth.

  • Advanced technology and innovation played a major role in the upliftment of the tertiary sector in the Indian economy and which also resulted in increased labor productivity.
  • The tertiary sector is responsible for the movement of all kinds of goods and services.
  • Growth in the tertiary sector uplifts the living standards of the people and allows them to spend on their comfort and leisure.
  • The increase in labor productivity results in higher wages thus increasing their purchasing capacity and benefiting other tertiary sector industries.
  • Development needs money and thus the need for the tertiary sector is increasing as it includes all the financial institutions such as banks, which provides loans to individuals and organization. 

The Present Condition of the Tertiary Sector in India

The tertiary sector in India is a boon and thus providing employment to millions of people and also escalating the economic growth of the country. The shifting of interest towards the tertiary sector has benefited the Indian economy quite a lot. The contribution of the tertiary sector to the GDP of India was 28.09% in 1960 which rose to 51% in the year 2021. Similarly, employment has also shifted from the primary manufacturing sector to the tertiary sector during these years, and at present, a majority of the Indian population is employed in the tertiary sector. 

A shift in the government policies can also be observed which primarily focused on the manufacturing industry but currently shifting towards the tertiary sector. In the last 3-4 decades the GOI has launched many policies and schemes for the growth of the tertiary sector in India, thus leading to make India one of the largest tertiary sector economies in the world.

FAQs on Tertiary Sector

1. What is the significance of the tertiary sector in the Indian economy?

The tertiary sector, also known as the service sector, is crucial for India’s economic growth as it provides services to both the primary and secondary sectors. It includes industries such as education, finance, hospitality, and transportation. The majority of people in India are employed in the tertiary sector, contributing significantly to the country’s GDP and enhancing overall living standards.

2. How has technology contributed to the growth of the tertiary sector in India?

Advanced technology and innovation have played a significant role in uplifting the tertiary sector in India. The use of technology has increased labor productivity, facilitated the movement of goods and services, and allowed for the development of various service-oriented industries, such as online banking, e-commerce, and digital education.

3. What are the major industries under the tertiary sector, and why are they important?

Major industries under the tertiary sector include financial institutions, hospitality (hotels and restaurants), transportation, and education. These industries are essential as they provide crucial services such as financing, accommodation, food, transportation, and education, supporting the functioning of the primary and secondary sectors and contributing to overall economic growth.

4. How has the contribution of the tertiary sector to India’s GDP changed over the years?

The contribution of the tertiary sector to India’s GDP has significantly increased over the years. In 1960, it was 28.09%, and by 2021, it had risen to 51%. This shift reflects a transition from a focus on manufacturing to an emphasis on services, indicating the growing importance of the tertiary sector in India’s economic landscape.

5. What government policies have influenced the growth of the tertiary sector in India?

Over the last few decades, the Government of India has launched policies and schemes to promote the growth of the tertiary sector. This shift in focus is evident in policies that support education, healthcare, financial services, and infrastructure development. These initiatives aim to make India one of the largest tertiary sector economies globally and have contributed to the sector’s significant role in employment and economic development.

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Last Updated : 14 Nov, 2023
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