Discuss the significance and growth of the service sector in the modern economic development.

The significance and growth of the service sector in the modern economic development is discussed below:

(i) Services are usually defined as ‘activities’ which are relatively detached from material production and hence are not directly involved in the processing of physical materials. Thus they stand in contrast to manufacturing, the product of which can be seen in the form of goods.

(ii) Services are an important constituent of modern economic development, which include retailing and sale of goods to the people, education, health and welfare, leisure, recreation and business services. Business services include advertising, recruitment and personal training. Service sector was not given as much attention as was given to the production of goods. But in advanced countries service based development has been very rapid.

(iii) During the development process, a normal course of events take place in most countries over a period of time. There is a transition from dominance of primary sector, to the secondary sector, and in the later stage to the tertiary and quaternary sectors. But Japan and Germany are still able to manufacture successfully for world markets from a home base. Even in such countries the role of manufacturing, employment and also as a proportion of GNP, declines eventually. It is balanced by concomitant rise of the service sector.

(iv) The growing importance of services has now given it an independent status as a productive sector in the economy. Instead of being an accessary to manufacturing or to the people at large it is an exporter. The competitive advantage of some countries such as Switzerland and the U.K., and of some regions or cities is in service provisions.