India’s service sector powers ahead in USD 5 trillion economy push

India’s service sector has become the backbone of the nation’s economic growth, contributing 55 per cent to GVA in FY25. A new report highlights massive growth across IT, BFSI, healthcare, telecom, and e-commerce

New Delhi: India’s service sector is demonstrating a significant role in the country’s journey towards becoming a USD 5 trillion economy, a report said on Monday.

For decades, the sector has not only been contributing massively to India’s gross domestic product (GDP) but has also become the key driving force to the nation’s economy, rising from 40 per cent contribution in GDP in the 1990s to accounting for 55 per cent gross value added (GVA) in FY25, according to the Axis Mutual Fund’s Service Sector Report.

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From contributing approximately 40 per cent of India’s GDP in the early 1990s, the service sector surged to account for 50.6 per cent of India’s gross value added (GVA) in FY14. This dominance has only amplified, reaching an estimated 55 per cent in FY25,” the report stated.

All verticals of the service sectors, including information technology (IT) services, finance and banking, healthcare, telecommunications, and e-commerce, have shown immense growth in the last two decades. IT services grew from USD 8 billion in 2000 to USD 245 billion in FY24, with further expansion to USD 300 billion expected by FY26.

The digital revolution gave a magic shift to the Banking Financial Services and Insurance (BFSI) sector, with mutual fund AUM growing at over 20 per cent CAGR over the past decade to reach Rs 72.19 lakh crore in May 2025, the Axis Mutual Fund report said.

The healthcare market size is projected to reach USD 370 billion by 2027, with 62 per cent year-on-year growth reported in March 2025 alone.

The telecom sector has seen data consumption per user soar 450 times since 2014, reaching 28 GB per month in 2025, and the e-commerce market is expected to triple from USD 103 billion in 2024 to USD 325 billion by 2030, it added.

India’s nominal GDP doubled in in last decade (2015-2025). In FY25, it reached to nearly USD 3.97 trillion and is estimated to surge to around USD 4.19 trillion by the end of the calendar year, providing a formidable foundation for the service sector’s expansion.

Rapid digitisation under the ‘Digital India‘ initiative, proactive government policies including ease of doing business policies, liberalisation in foreign Direct Investment (FDI) norms, and sector-specific incentives have been creating a fertile ground for the upscale of the service sector, the report said.