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Analytics and Implications of Services Sector Growth in Indian Economy

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  • Rath, Deba Prasad
  • Raj, Rajesh
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    Abstract

    Given the magnitude of services growth and its inter-linkages with other sectors of the economy, it is important to understand the impact of services sector on other macro-economic variables. The present paper attempts to identify some of the critical issues in India’s services-led growth and tests certain hypotheses that are currently in debate. These relate to: (a) whether the robust growth of the services sector has added a dimension of stability to India's GDP growth; (b) whether there has been a growing complementarity between services and industrial sectors of the economy; (c) whether like other commodity-producing sectors, the services sector also experienced 'jobless' growth; (d) whether the imposition of services tax has boosted the Indian Government’s efforts at mobilising more resources; and (e) whether high growth of services sector in India had an inflationary impact on the economy. Our analysis found the first four hypotheses to hold true. In respect of the last hypothesis, in contrast to the expectations that high services sector growth has an inflationary impact on the economy, we found that the rising share of services sector in GDP has not contributed to inflation in the Indian economy.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10034.

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    Date of creation: 2006
    Date of revision: 2007
    Publication status: Published in The Journal of Income and Wealth No.1; January-June 2006.Volume(2007): pp. 47-62
    Handle: RePEc:pra:mprapa:10034

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    Related research

    Keywords: Services; Industry; Tax; Employment; Inflation;

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    1. Kongsamut, Piyabha & Rebelo, Sergio & Xie, Danyang, 2001. "Beyond Balanced Growth," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 869-82, October.
    2. Poonam Gupta & James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers 04/171, International Monetary Fund.
    3. Ajit Singh & Sukti Dasgupta, 2005. "Will services be the new engine of economic growth in India?," ESRC Centre for Business Research - Working Papers wp310, ESRC Centre for Business Research.
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