Services are the most significant element of different economic activities of a society. The economic model, shown in the figure given below was formulated by Dorothy Riddle while writing about the significances of the service sector in the development of the entire world.
This economy model reflects the movement of different economic activities among the three vital sectors of the economy: manufacturing, extractive (mining and farming), and services, which are further divided into five sub-groups. The consumer is the final destination of all these activities.
The below-stated points can be used to have complete knowledge about the role of the service sector in an economy:
1) Infrastructure Services: Infrastructure services are an essential part of the economy. These services include transportation and communication, which helps in connecting all sectors. They also help in creating links with the customers. Infrastructure and trade services act as intermediaries between the manufacturing, mining, and distribution sectors. These services are essential for industrialization, and in the absence of these services, society cannot progress.
2) Business Services: Services related to banking, finance, advertising, consulting, and other business functions are involved in business services. These services are provided by specialized firms to the manufacturing firms at convenient costs. Manufacturing firms can avail these services on their own, but it may cost them high prices. Hence, they avail banking, advertising, consulting, etc., services from firms that are specialized providers of such services.
3) Trade Services: Trade services are composed of activities such as retailing, repair, and maintenance. For the proper functioning of society and improving the quality of life, service activities are unavoidable. For example, the importance of transportation for moving foods to different locations, banking services for fund transfers cannot be neglected.
4) Social/Personal Services: Healthcare, restaurants, and so on are parts of social or personal services. The household activities have moved into the economy like lodging, cleaning, child care, restaurants, and many more.
5) Public Administration: It involves various services related to the well-being of people and societal progression, such as services related to education, environment, electricity, water supply, health, defense, law, public transportation, town planning, social services, waste management, etc. A stable investment environment and economic growth are ensured by the public administration.
Thus it is quite evident that services are the most important aspect of any economy rather than just being supporting activities. They are important elements for creating a strong economy. The service sector not only assists the manufacturing and mining sectors but also supports them in the production of outputs. Services play a vital role in creating a global economy.