Services sector drives performance of high-growth States in FY25

Tamil Nadu’s services sector was aided by outperformance of ‘trade, hotels and restaurants’ business (14.8 per cent growth) and ‘real estate and professional services’ sub-segment (13.6 per cent)
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JOTHI RAMALINGAM B

The services sector was responsible for driving growth for FY25 in the larger States, shows data on Gross State Domestic Product (GSDP) estimates from MoSPI. 

businessline analysis of the data shows that Tamil Nadu (9.7 per cent), Andhra Pradesh (8.2), Rajasthan (7.8), Karnataka (7.4) and Maharashtra (7.3) recorded the highest real GSDP growth rate in FY25 among the large States. These States also recorded high-growth rates in the services gross State value added (GSVA). The growth in services was higher than the national average of 7.3 per cent in these States.

Top States

The top 10 largest States in terms of GSDP were considered for the analysis. Gujarat and UP’s data were not updated for FY25. 

The share of services in the total GSVA of the States stands in the range of 42-66 per cent in FY25. These States also recorded growth in the share of services from FY24 to FY25 except for Andhra Pradesh, where services share remained flat.

Tamil Nadu clocked 12.7 per cent growth in services GSVA in FY25. It is the highest among the large states and also a 13-year high for the State. TN also grew its services GSVA faster than the two biggest service economies of India – Maharashtra (7.8 per cent) and Karnataka (8.9 per cent).

“Tamil Nadu’s services growth in FY25 is the highest for the State’s historical data since FY12. The reason is phenomenal growth in the real estate sector and other services sector. Government capex also has been instrumental in lifting up growth,” Paras Jasrai, Senior Economic Analyst at India Ratings & Research, said.

Growth drivers

A closer look at the services economy of high-growth States in FY25 shows that Tamil Nadu’s services sector was aided by outperformance of ‘trade, hotels and restaurants’ business (14.8 per cent growth) and ‘real estate and professional services’ sub-segment (13.6 per cent). Financial services and transport services were Andhra Pradesh’s growth levers at 14.3 per cent and 10.4 per cent.

In case of other sectors, Maharashtra and AP clocked highest growth rates in agriculture. Tamil Nadu and West Bengal were States with maximum growth in manufacturing GSVA.

(Avantika Soupramanien is an intern with businessline)

Published on April 10, 2025

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