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India's Services-Led Growth Outpaces China's Manufacturing Model in Resilience

India's services-led economic model, centered on technology, finance, and digital infrastructure, demonstrates greater resilience compared to China's manufacturing-heavy approach, which faces vulnerabilities from global trade disruptions. The services sector now accounts for approximately 55% of India's Gross Value Added, with strong growth in IT, professional services, and fintech exports. India's digital public infrastructure, exemplified by the Unified Payments Interface, has revolutionized transactions and fostered financial inclusion, contrasting with China's more closed private ecosystems. While China's manufacturing remains a core export engine, its exposure to protectionism and external demand cycles presents risks that India's adaptable, knowledge-driven services economy is better positioned to navigate in a digital era.

Key Points: India's Services Economy More Resilient Than China's Manufacturing

  • Services drive 55% of India's GVA
  • Tech & finance sectors fuel export growth
  • UPI digital infrastructure enables low-cost transactions
  • China's manufacturing faces cyclical trade risks
3 min read

'India's services-led growth more resilient than China's'

Analysis shows India's tech and services-led growth model offers greater resilience against global shocks compared to China's manufacturing-heavy approach.

"India's services-led model, powered by technology, finance, digital infrastructure, and professional services, offers notable resilience - One World Outlook"

New Delhi, Feb 9

India has emerged as the world's fastest-growing major economy, with robust growth projections indicating that it will outpace several peers in the coming decades, a media report said.

India's services-led model, powered by technology, finance, digital infrastructure, and professional services, offers notable resilience compared to China's manufacturing-heavy approach, which faces cyclical vulnerabilities from global trade disruptions and domestic imbalances, according to an article in One World Outlook.

The article states that China's manufacturing sector drove much of the country's rise, with its share in GDP hovering around 36-40 per cent in earlier decades before a gradual decline to about 25 per cent in 2025, according to national statistics. This reflects a deliberate shift toward higher-value activities and services (now over 50-57 per cent of GDP), but manufacturing continues as the core engine of exports, employment for over 100 million people, and geopolitical leverage.

China's export-oriented factories have weathered challenges like US tariffs through diversification to emerging markets, yielding record trade surpluses in 2025. However, this model exposes vulnerabilities: overcapacity, reliance on external demand, property sector slumps, and weak domestic consumption amplify cyclical risks. Industrial output grew solidly in 2025, but investment in manufacturing slowed sharply in the latter half amid trade uncertainties, the article pointed out.

In contrast, India's services sector has solidified as the dominant driver. In 2024-25, services accounted for approximately 55 per cent of GVA (up from around 51 per cent a decade earlier), with subsectors like financial, real estate, and professional services contributing nearly 23 per cent, and trade, hotels, transport, and communications around 18 per cent.

This services tilt stems from India's early investments in human capital, English proficiency, enabling explosive growth in IT and business process outsourcing.

The tech industry exemplifies India's edge. India's IT-BPM sector generated substantial export revenues, with software services leading growth at around 13-14 per cent annually in recent years. Services exports surged, doubling pre-pandemic growth rates to 14 per cent in FY23-FY25, making India the world's seventh-largest services exporter (share rising from 2 per cent in 2005 to 4.3 per cent in 2024). Professional consulting and management services grew even faster, at nearly 26 per cent. This export strength provides a stable foreign exchange inflow, cushioning against merchandise trade deficits, the article stated.

Finance and fintech further bolster this resilience. India's digital infrastructure, particularly the Unified Payments Interface (UPI), has revolutionised transactions. UPI processes billions of transactions monthly, often exceeding 20 billion, with near-zero costs, interoperability, and widespread adoption (over 500 million users). This public-led, open platform contrasts with China's closed ecosystems dominated by private giants like Alipay and WeChat Pay. UPI's growth has fueled fintech innovation, financial inclusion, and low-volatility economic activity, enabling seamless digital commerce and reducing informality.

Professional services, including consulting, legal, and advisory, add high-value, tradable components less susceptible to physical supply chain shocks. Unlike manufacturing, which requires massive capital and faces tariff barriers or geopolitical tensions, these services scale via digital delivery, leveraging India's skilled workforce.

China's manufacturing model, while powerful for scale and jobs, carries risks: vulnerability to protectionism (e.g., US tariffs), overreliance on investment (leading to imbalances), and slower adaptation to services transitions. India's approach, though employment-absorptive challenges persist (services create fewer mass jobs than manufacturing), offers adaptability in a digital, knowledge-driven era.

Looking ahead, India's services dominance positions it well for future growth amid AI, digital transformation, and global demand for tech-enabled solutions. Sustained reforms could further amplify this edge, while China navigates its rebalancing, the article added.

- IANS

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Reader Comments

A
Arjun K
Finally, our model is getting the recognition it deserves. While China built physical goods, we built digital and intellectual infrastructure. Our engineers and consultants are solving global problems from here. The resilience comes from not being tied to global supply chain whims. Jai Hind!
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Rohit P
Good article, but it glosses over the big issue - jobs! Services sector growth is fantastic for skilled graduates, but what about the millions who need factory jobs? China employed over 100 million in manufacturing. We need to balance this growth, not just celebrate one model over another.
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Sarah B
As someone working in the tech sector in Bangalore, I see this firsthand. The demand for Indian IT and professional services is only growing. The digital public infrastructure like UPI is something even developed nations are studying. It's a unique, inclusive model of growth.
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Vikram M
The comparison is valid. Our economy is less exposed to global trade wars and shipping crises. When the world slowed down during the pandemic, our IT and BPO sectors kept running from home. That's real resilience. Proud of our techies and the digital India mission! 💪
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Karthik V
True that services are less volatile, but let's be real, we are still a developing economy. We need to build our manufacturing muscle too for long-term security and self-reliance. Being a services powerhouse is great, but being a balanced economic superpower should be the goal.

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