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Services trade and economic growth in India: an analysis in the post-reform period

Author

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  • Ranjan Kumar Dash
  • Purna Chandra Parida

Abstract

Services sector in India contributes more than 60% of the overall gross domestic product (GDP) and more than 40% of total trade. This sector also absorbs a chunk of manpower, especially in export-oriented industries and reduces the employment burden on other non-services sectors. In this context, this paper examines the role of services trade (exports and imports) in economic growth of India using autoregressive distributed lag and vector error correction model (VECM) methodology for the period Q1:1996–1997 to Q1:2010–2011. This paper also uses impulse response function analysis to supplement the long-run equilibrium relationship and causality analysis and also to understand the dynamic relationship among variables. The study finds a long-run equilibrium relationship among GDP, services exports, imports and real effective exchange rate. The VECM and impulse response analysis suggest causality runs from services exports to GDP emphasising the services export-led growth in India during the post-reform period.

Suggested Citation

  • Ranjan Kumar Dash & Purna Chandra Parida, 2012. "Services trade and economic growth in India: an analysis in the post-reform period," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(3), pages 326-345.
    • Handle: RePEc:ids:ijecbr:v:4:y:2012:i:3:p:326-345
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    Citations

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    Cited by:

    1. Nath, Hiranya K. & Liu, Lirong & Tochkov, Kiril, 2015. "Comparative advantages in U.S. bilateral services trade with China and India," Journal of Asian Economics, Elsevier, vol. 38(C), pages 79-92.
    2. Mini P. Thomas, 2016. "Impact of services trade on India’s economic growth and current account balance: evidence from post-reform period," Working Papers 2016/11, Maastricht School of Management.
    3. Hiranya K. Nath & Binoy Goswami, 2018. "India’s comparative advantages in services trade," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 323-342, August.
    4. Sahoo, Pravakar & Dash, Ranjan Kumar, 2014. "India's surge in modern services exports: Empirics for policy," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1082-1100.
    5. Thomas, P Mini, 2015. "Relationship between services trade, economic growth and external stabilisation in India: An empirical investigation," Working Papers 340, Institute for Social and Economic Change, Bangalore.

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