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FDI in the Service Sector – Propagator of Growth for India?

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  • Sen, Chitrakalpa
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    Abstract

    The last two decades have witnessed an unprecedented growth of the Indian service sector. This paper aims to analyze the growth dynamics. This study intends to see whether the growth in FDI has any significant impact on the service sector growth and also investigates whether a growth in this sector causes the GDP to grow. The results suggest that there has been a significant positive impact of the FDI on services sector and this service sector growth has in turn a significant effect on the GDP. The study also looks into the sub-sectoral dynamics and indicates towards the fact that the trade, hotels and restaurants, transport, storage and communications sub-sector contributes the most in the growth of Indian service sector. Therefore FDI can be truly be used as a propagator of economic growth, via its favourable effect on the growth in the services sector. Finally, the study addresses the long running sustainability debate regarding the Indian service sector.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30574.

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    Date of creation: 18 Apr 2011
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    Handle: RePEc:pra:mprapa:30574

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    Keywords: Service sector; FDI; Economic growth;

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    1. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2007. "Sources of Growth in the Indian Economy," NBER Working Papers 12901, National Bureau of Economic Research, Inc.
    2. Barry Eichengreen & Poonam Gupta, 2009. "The Two Waves of Service Sector Growth," NBER Working Papers 14968, National Bureau of Economic Research, Inc.
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