India’s services sector reshapes economy as digital-first habits fuel record growth

The sector now contributes 55% to GDP, led by consumer demand for convenience, premium experiences, and tech-enabled services, says the Axis Services Sector Report

July 9, 2025

Nearly 40% of Indian consumers are willing to pay more for services that simplify their lives

Quick commerce, hyperlocal delivery, and premium digital platforms are fast becoming essential services

India’s convenience food market is projected to grow at 15% annually, reaching $37.9 billion by 2033

Healthcare is experiencing a digital surge, growing 62% year-on-year, with substantial investment in tech-driven models

India’s economic engine is increasingly being powered by the services sector, which now contributes 55% to the nation’s GDP, according to the Axis Services Sector Report. This shift is mainly being driven by a consumer base that prioritises speed, ease, and digital-first experiences in their everyday lives.

A significant factor propelling this growth is the rise of the convenience economy, with companies like Zepto, Blinkit, and Swiggy becoming indispensable to urban lifestyles. These platforms are not just changing consumption habits—they are also drawing substantial foreign investments into the sector.

Consumer behaviour is evolving rapidly. The report notes that nearly 40% of Indian consumers are now willing to spend more on services and products that streamline their lives. This willingness reflects a deeper behavioural shift, accelerated by urbanisation, increased digital access, and an expectation of instant gratification, all supported by efficient logistics and advanced technology.

The ripple effects of this change are visible across sectors. For instance, the convenience food market in India is projected to rise from $10.1 billion in 2024 to $37.9 billion by 2033, marking a CAGR of 15.01%. This surge is symbolic of a wider consumer preference for services that offer speed and comfort.

Healthcare is undergoing a similar transformation. As the report highlights, the sector witnessed a 62% year-on-year growth in March 2025, powered by innovations in AI, telemedicine, data analytics, and health informatics. With services ranging from app-based diagnostics to robotic surgeries, healthcare is rapidly evolving into a technology-led, service-oriented industry. The sector’s value is expected to reach $370 billion by 2027, up from just $17 billion in 2000.

Meanwhile, the online retail market is also gaining momentum. Premium offerings now account for more than half of e-commerce sales, reflecting consumer willingness to pay for quality. From opting for Urban Company over local salons to choosing streaming platforms like Netflix over cable television, the report shows a decisive tilt toward high-quality digital services. This trend is fuelling the growth of the online retail sector, expected to rise from $103 billion in 2024 to $325 billion by 2030.

These behavioural shifts are translating into massive investment opportunities. In FY25, India’s services sector received $9.35 billion in foreign direct investment, a 40.77% jump from the previous year, making it the top recipient of FDI. Private equity and venture capital players are also increasing their stakes, particularly in fintech, digital platforms, healthcare, and consumer services, recognising the sector’s long-term growth potential.

From how people shop and eat to how they manage health, finances, and daily chores, services are now deeply embedded in modern Indian life. As the Axis report concludes, the sector is no longer just a growth engine, it is reshaping the very structure of India’s economy and offering one of the most inclusive investment avenues for everyday investors.

Source: Fortune India

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