The natural economic progression of a nation goes from agrarian economy, to industrial economy to a

service economy. India leap-frogged from an agrarian to service sector.

india didn't actually skipped manufacturing intentionally, It just didn’t work

out that well for us.

India has immense human resources, that are well-educated and fluent in English, and labour is also
cheap, thus propelling the service sector. The license Raj, restrictions on foreign investment, lack of
measures to promote private industry, import of cheap manufactured goods all contributed to the lack of
substantial growth in the manufacturing sector.

The very first initiatives of Independent India were towards building large public sector
manufacturing companies Early Indian leaders (read Nehru) strongly believed in the
importance of manufacturing and its importance to drive economic growth to a common,
less educated Indian worker who was till date either a farmer or a daily wage worker.

there are two kinds of reasons adduced to explain why India is experiencing this
unusual (and supposedly virtuous) growth in service.
The first is that it is modern services like financial services, software and
information technology enabled services, communications services, business
services, education services and health services and productive services like
transport, storage and communications that account for the bulk of the services
sector.

This is seen as rendering the privileging of manufacturing over services

unwarranted in India’s case.

Second, India’s success in software and IT-enables serviced (ITeS) exports, has
made it a significant services exporter with its share in world services exports
. Since this India’s services growth has been led by software and IT-enabled
services, seen as knowledge and technology intensive services, some have argued
that services growth is expanding the knowledge economy, and reflects a new
kind of dynamism.

Is services-led growth sustainable?

Drivers of structural transformation and growth, either services-led growth or
manufacturing-led growth, are similar but also changing. These include trade policy,
urbanization, and investments in physical and human infrastructure, and are country-
specific. But some global trends have started to change. Global trade in goods has never
fully recovered since the global financial crisis of 2007-08. But this is not the case with
global trade in services, which has exploded. These are structural and not cyclical
changes. Globalization of services is the tip of the iceberg. Services, which account for
more than 70% of global output, are still in their infancy. The long-held view that
services are non-transportable, non-tradable, and non-scalable no longer holds for a host
of services that can be digitized.
The globalization of services provides new opportunities for India to find niches beyond
manufacturing, where it can specialize, scale up, and achieve explosive growth. As the
services produced and traded across the world expand with globalization, the possibilities
to develop based on services will continue to expand. This pace of change will be rapid in
line with the digital revolution. Global internet usage has grown globally. But this growth
is much faster in developing countries. India alone adds one million new users every
month to a booming mobile phone market

But can service-led growth be sustained?

Service-led growth is sustainable because the globalisation of services is just the tip of the
iceberg (Blinder 2006). Services are the largest sector in the world, accounting for more
than 70% of global output. The service revolution has altered the characteristics of services.
Services can now be produced and exported at low cost (Bhagwati 1984). The old idea of
services being non-transportable, non-tradable, and non-scalable no longer holds for a
range of modern impersonal services. Developing countries can sustain service-led growth
as there is a huge room for catch up and convergence.

The Services Revolution could upset three long-held tenets of economic development. First,
services have long been thought to be driven by domestic demand. They could not by
themselves drive growth, but instead followed growth. In the classical treatment of services,
any attempt to expand the volume of services production beyond the limits of domestic
demand would quickly lead to deterioration in the price of services, hence a reduction in
profitability, and hence the impulse towards expanded production would be choked off.

Second, services in developing countries were considered to have lower productivity and
lower productivity growth than industry. As economies became more service oriented, their
growth would slow. For rich countries, with high demand for various services, the slowdown
in growth was an acceptable consequence of the higher welfare that could be achieved by a
switch towards services. But for developing countries such a trade off was thought to be
inappropriate.

Third, services jobs in developing countries were thought of as menial, and for the most part
poorly paid, especially for low skilled workers. As such, service jobs could not be an
effective pathway out of poverty.
India’s development experience offers hope to late-comers to development in Africa. The
marginalisation of Africa during a period when China and other East Asian countries grew
rapidly has led some to wonder if late-comers to development like Africa are doomed to
failure. Many considered the “bottom billion” to be trapped in poverty (Collier 2007). The
process of globalisation in the late 20th century led to a strong divergence of incomes
between those who industrialised and broke into global markets and a bottom billion” of
people in some 60 countries where incomes stagnated for twenty years. It seemed as if the
bottom billion would have to wait their turn for development, until the giant industrialisers
like China became rich and uncompetitive in labour-intensive manufacturing.

The promise of the service revolution is that countries do not need to wait to get started with
rapid development. There is a new boat that development late-comers can take. The
globalisation of service provides alternative opportunities for developing countries to find
niches, beyond manufacturing, where they can specialise, scale up and achieve explosive
growth, just like the industrialisers.

The core of the argument is that as the services produced and traded across the world
expand with globalisation, the possibilities for all countries to develop based on their
comparative advantage expand. That comparative advantage can just as easily be in
services as in manufacturing or indeed agriculture.

Advantage and disadvantage of service based economy

I want to discuss some of the advantage and disadvantage of service based economy and whether it is
good for an economy to be fully based on service sector?

Later I shall introduce the service based economy USA and at last, like to conclude this discussion.

ADVANTAGE OF SERVICE BASED ECONOMY

It can give faster and more flexible adjustment in times of economic crisis or downturns.
It minimizes environmental degradation from heavy industry
It allows for faster economic development than that which follows the traditional pattern
Reduce the material & energy consumption.
Enhancement of Knowledge.
More customer oriented product for their satisfaction.

DISADVANTAGE OF SERVICE BASED ECONOMY

More dependability on other country for goods.

Trade deficit is increased because of more import and less export of goods.
manufacturing jobs have been lost to outsourcing of products
More skilled employees & workers are required.

Conclusion
An economy cannot be totally reliant on services alone. However a service-economy is a sign of
economic growth and development of the country and it shows the strength of the economy.

A service-based economy will be reliant on other countries for manufacturing products and import goods
to fulfill the demand of primary and secondary sectors