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The Service Sector as India’s Road to Economic Growth?

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  • Barry Eichengreen

    ()

  • Poonam Gupta

    ()

Abstract

Among fast growing developing countries, India is distinctive for the role of the service sector. However, sceptics have raised doubts about both the quality and sustainability of the increase in service sector activity and its implications for economic development. Using National Accounts Statistics and cross-county data, we show that the growth of services has been broad-based. We show that the growth of service sector employment is not simply disguised manufacturing activity. We also find that the skilled-unskilled mix of labour in the two sectors is becoming increasingly similar. Hence, it is no longer obvious that manufacturing is the main destination for the vast majority of Indian labour moving into the modern sector and that modern services are only a viable destination for the highly skilled few. To the extent that the expansion of both modern manufacturing and modern services is constrained by the availability of skilled labour, this just underscores the importance for India of continuing to invest in labour skills. We conclude that sustaining economic growth and raising living standards will require shifting labour out of agriculture into both manufacturing and services and not just into one or the other.[Working Paper No. 249]

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Paper provided by eSocialSciences in its series Working Papers with number id:2604.

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Date of creation: Jun 2010
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Handle: RePEc:ess:wpaper:id:2604

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Keywords: The Service Sector as India’s Road to Economic Growth?;

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References

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  1. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers, National Bureau of Economic Research, Inc 12023, National Bureau of Economic Research, Inc.
  2. Poonam Gupta & James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers, International Monetary Fund 04/171, International Monetary Fund.
  3. Ingo Borchert & Aaditya Mattoo, 2009. "The Crisis Resilience of Services Trade," World Bank Other Operational Studies, The World Bank 11123, The World Bank.
  4. Arvind Subramanian & Raghuram Rajan & Ioannis Tokatlidis & Kalpana Kochhar & Utsav Kumar, 2006. "India's Pattern of Development," IMF Working Papers, International Monetary Fund 06/22, International Monetary Fund.
  5. Rashmi Banga & B.N.Goldar, 2004. "Contribution of services to output growth and productivity in Indian manufacturing: Pre and post reforms," Indian Council for Research on International Economic Relations, New Delhi Working Papers, Indian Council for Research on International Economic Relations, New Delhi, India 139, Indian Council for Research on International Economic Relations, New Delhi, India.
  6. J. Bradford Jensen & Lori G. Kletzer, 2005. "Tradable Services: Understanding the Scope and Impact of Services Outsourcing," Working Paper Series, Peterson Institute for International Economics WP05-9, Peterson Institute for International Economics.
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Citations

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Cited by:
  1. Shepherd, Ben & Pasadilla, Gloria, 2012. "Services as a New Engine of Growth for ASEAN, the People’s Republic of China, and India," ADBI Working Papers, Asian Development Bank Institute 349, Asian Development Bank Institute.
  2. Felipe, Jesus & Kumar, Utsav & Abdon, Arnelyn, 2013. "Exports, capabilities, and industrial policy in India," Journal of Comparative Economics, Elsevier, Elsevier, vol. 41(3), pages 939-956.
  3. K.V. Ramaswamy & Tushar Agrawal, 2012. "Services-led growth, employment and job quality: A Study of manufacturing and service-sector in urban India," Indira Gandhi Institute of Development Research, Mumbai Working Papers, Indira Gandhi Institute of Development Research, Mumbai, India 2012-007, Indira Gandhi Institute of Development Research, Mumbai, India.
  4. Mark Weisbrot & Rebecca Ray, 2011. "The Scorecard on Development, 1960-2010: Closing the Gap?," CEPR Reports and Issue Briefs, Center for Economic and Policy Research (CEPR) 2011-09, Center for Economic and Policy Research (CEPR).
  5. Nobuaki Yamashita, 2012. "Can India become an export platform for global operations of Japanese and American multinational corporations affiliates?," Working Papers, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada. 11112, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  6. Kolavalli, Shashi & Robinson, Elizabeth J. Z. & Diao, Xinshen & Alpuerto, Vida & Folledo, Renato & Slavova, Mira & Ngeleza, Guyslain K. & Asante, Felix Ankomah, 2012. "Economic transformation in Ghana: Where will the path lead?," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1161, International Food Policy Research Institute (IFPRI).
  7. Lee, Chien-Chiang & Chen, Mei-Ping & Chang, Chi-Hung, 2013. "Dynamic relationships between industry returns and stock market returns," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 119-144.

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