Which Sector in India has benefitted the most from Globalization ?

Question

UnlockIAS · Accepted Answer

Correct — D, Services. Since the liberalisation of 1991 India's gains from opening to the world economy have been concentrated in services to a degree that shows up in every measure. In output, services accounted for 54.7 per cent of India's GDP in 2023-24, against 27.6 per cent for industry as a whole and 17.7 per cent for agriculture — a share that no comparable economy reached at India's income level, and the reason India's growth is described as services-led rather than factory-led. In trade, the shift is sharper still: the Economic Survey 2024-25 records that India's share of world services exports has more than doubled, from 1.9 per cent in 2005 to about 4.3 per cent in 2023, and that in Telecommunications, Computer and Information Services India is now the world's second largest exporter with 10.2 per cent of global exports, and third in Other Business Services with 7.2 per cent. Those two categories are software, IT-enabled services and business process outsourcing — precisely the activities that could not have existed before undersea cable, satellite links and an open capital account, which is what makes them the clearest dividend of globalisation rather than of domestic demand. The mechanism matters as much as the numbers. Services of this kind are weightless: they cross borders without ports, customs or freight, they need skilled English-speaking labour rather than land and power, and they were never bound by the industrial licensing that held manufacturing back before 1991. So when the economy opened, services were the sector best placed to sell into world markets immediately. Every other option describes a sector that either stayed roughly where it was or lost ground, which is why (d) is the answer.

Why the other options are wrong — (a) The intuitive answer, because globalisation is popularly pictured as factories and exports, and it is exactly the answer India's experience does not support. Industry as a whole was 27.6 per cent of GDP in 2023-24 — half the services share — and manufacturing within it did not undergo any transformation comparable to software's. Opening also cut both ways here: Indian producers gained imported machinery and components, but small-scale industries in several lines faced cheaper imports for the first time.  (b) The sector that benefited least, and on some readings was hurt. Agriculture was 17.7 per cent of India's GDP in 2023-24 while still supporting the largest share of the country's workforce, so output per worker there is the lowest in the economy. Exposure to world markets brought volatile international prices and import competition to a sector of very small holdings, and the standard economics teaching on liberalisation treats agriculture as the case where globalisation's gains were thinnest.  (c) Directly contradicted by the numbers, and it is the option that would make the question meaningless. The whole textbook point about globalisation in India is that its benefits have been unevenly distributed — across sectors, across regions and across skill levels. A sector at 54.7 per cent of GDP and second in the world in software exports has not gained equally with one whose share of output has been falling for three decades.

Concept: Globalisation, in the Indian policy sense, dates from the reforms of July 1991 — usually summarised as liberalisation, privatisation and globalisation. Industrial licensing was abolished for most industries, tariffs and quantitative restrictions on imports were cut, the rupee was devalued and moved towards convertibility on the current account, foreign direct and portfolio investment were allowed in on a widening list of sectors, and public-sector monopolies were opened up. The immediate trigger was a balance-of-payments crisis in which India's reserves had fallen to roughly a fortnight's imports. The structural consequence was that the economy stopped being organised around import substitution. Because different sectors were exposed to world markets in different ways and at different speeds, they gained very differently — and the sector that could sell abroad without needing ports, land acquisition or reliable power gained most.

State PCS 2025 Q6 — Economy PYQ with Answer

State PCS 2025 Q6 — Economy PYQ with Answer