Service sector | Definition, Importance, Interdependence

Meaning of Service Sector

The service sector includes activities that help in the development of the primary and secondary sectors. These activities do not produce good on their own but serve as an aid for the production process.

Service Sector
  • Transport, banking, communication, storage, and trade are a few examples of service sector activities. It also includes essential services which may not directly help in the production of goods. Examples: Teachers, doctors, lawyers
  • Services can be broadly divided into productive services and consumer services.
  • Productive service refers to the activities which serve as an aid in production processes. Examples: Trading, transport, communication, financial, and banking services.
  • Consumer services are essential services that may not directly help in the production of goods. Examples: Education and health services, domestic servant services
  • It can also be divided into economic services and social services.
  • Economic services directly contribute to the system of production and distribution of goods. These services help the economic system internally. Examples: Trade, transport, communication, banking, and power.
  • Social services indirectly support the economic system. These services help the economic system externally. Examples: Health and education

Interdependence among Various Sectors

Interdependence between Agricultural and Service Sectors

  • The agricultural sector supplies food products to the urban people working in the various service sector activities. Similarly, the service sector provides various services such as trading, banking and other financial services to the agricultural sector.
  • The agricultural sector depends on the service sector for education, health and social services. The service sector depends on the agricultural sector for the supply of unskilled and skilled workers to work in trading activities.

Interdependence between Industrial and Service Sectors

  • The industrial sector performs manufacturing activities with the help of the service sector. It requires transportation services for the movement of raw materials from the agricultural sector to the places of production. It also depends on the service sector for educational and health services to improve the skills and efficiency of the person working in a factory.
  • The service sector depends on the industrial sector for manufactured products such as computers, printers and electricity. Also, people in the service sector purchase consumer products such as television for entertainment and cloth for stitching dresses which are produced in the industrial sector.

Importance of the Service Sector

  • In a developing country like India, the government has to undertake the provision of various services such as health facilities, providing education, credit at cheap rates, police stations and municipal corporations, which are essential for the overall growth of the people and the country.
  • In the last few decades, the development of the primary and secondary sectors has resulted in the rise of several services which are required for the smooth functioning of these sectors such as banking, transport and insurance.
  • As many countries witnessed economic development in the last few decades, there has been a rise in the income of the people. Rise in income has resulted in the demand for various services such as private hospitals, schools and professional training institutes.
  • In India, The information technology and communication sector has seen a tremendous growth in the last twenty years. This has resulted in the growing importance of the service sector in India.
  • It directly supports the primary and secondary sectors of the economy because the adequate infrastructural service is a precondition of rapid economic development.
  • Rural development essentially focuses on action for the development of areas that are lagging in the overall development of the village economy. Key areas in rural development through this sector:
    • Development of human resources such as education, health, and skill development
    • Development of the productive resources with technology
    • Infrastructural development such as transport facilities, electricity, marketing, and research
  • Hence, rural development is impossible without this sector in rural areas.

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