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Global Economic Crisis : Impact and Restructuring of the Services Sector in India

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  • Abhijit Das

    (Asian Development Bank Institute (ADBI))

  • Rashmi Banga
  • Dinesh Kumar

Abstract

The Indian economy has shown considerable resilience to the global economic crisis by maintaining one of the highest growth rates in the world. The services sector accounted for around 88% of the growth rate in real gross domestic product in 2008–09. To demystify the relatively resilient growth of the services sector in India, this study examines both the demand-side and the supply-side factors that have contributed to its growth To assess the role of external demand, income elasticity of export demand for the aggregated services and some of the disaggregated services of India were estimated. It was found that the main driver of growth in India’s services sector is growth in the domestic demand for services and not growth in the export of services. The contribution of the growth of the export of services to the growth of the overall services sector was only 22%. In order to examine the role of supply-side factors, total factor productivity growth was estimated in the services sectors that have contributed substantially to overall growth, which are the software and banking services. Using Data Envelopment Analysis at the firm level, it was found that both these sectors experienced productivity growth above 10% after 2000. High domestic demand and high productivity growth largely explain the resilience of India’s services growth.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 23225.

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Date of creation: Sep 2011
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Handle: RePEc:eab:microe:23225

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Keywords: Global Economic Crisis; services sector; India; Productivity growth; Data Envelopment Analysis;

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  1. Alan V. Deardorff & Saul H. Hymans & Robert M Stern & Chong Xiang, 2000. "Forecasting U.S. Trade in Services," Working Papers 467, Research Seminar in International Economics, University of Michigan.
  2. Dino Rizzi & Vincenzo Rebba, 2006. "Measuring Hospital Efficiency through Data Envelopment Analysis when Policy-makers’ Preferences Matter. An Application to a sample of Italian NHS hospitals," Working Papers 2006_13, Department of Economics, University of Venice "Ca' Foscari".
  3. Abdelhak S. Senhadji & Claudio E. Montenegro, 1999. "Time Series Analysis of Export Demand Equations: A Cross-Country Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 2.
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  6. Simon Wren-Lewis & Rebecca Driver, 1998. "Real Exchange Rates for the Year 2000," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa54.
  7. Alam, Ila M Semenick, 2001. "A Nonparametric Approach for Assessing Productivity Dynamics of Large U.S. Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 121-39, February.
  8. Catherine L. Mann, 2004. "The US Current Account, New Economy Services, and Implications for Sustainability," Review of International Economics, Wiley Blackwell, vol. 12(2), pages 262-276, 05.
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Cited by:
  1. Rajesh, Raj & Bordoloi, Sanjib, 2012. "Investigating the impact of global financial crisis on indian economy in an aggregate demand framework," MPRA Paper 40416, University Library of Munich, Germany.

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