This article originally appeared on Livemint.

Countries around the world have followed two paths to economic progress: services-led or manufacturing-led. Unlike China and Vietnam, whose economies were propelled by manufacturing for export, India’s growth since liberalization has largely been services-led, driven by increasing domestic consumption and exports. Moving ahead, India needs to find unique solutions to turbocharge its manufacturing and agricultural sectors in order to realize its double-digit growth aspirations.

The journey till date

Since 1991, India’s services sector has outgrown GDP by nearly 1.25 times, accounting today for almost 60% of GDP (at constant 2004-05 prices). Interestingly, this has put India on par with high-income economies, as disaggregated trends reveal that modern services such as finance, communications and IT have grown faster than their conventional counterparts, including transport, retail, public administration, defence and hospitality.

Rapid export growth is due to higher-quality services, especially IT and ITeS. At approximately 32%, the share of services in total exports is unique among emerging markets. Simultaneously though, agriculture’s share of the GDP has fallen, while manufacturing’s has stagnated.

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Madhur Singhal, partner with Bain & Company, is a leader in its Private Equity practice and a member of the Technology, Media and Telecommunications practice in India. Sambit Patra is a principal and a member of the Performance Improvement and Industrial Goods and Services practices.