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

Author

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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.

Suggested Citation

  • Abhijit Das & Rashmi Banga & Dinesh Kumar, 2011. "Global Economic Crisis : Impact and Restructuring of the Services Sector in India," Microeconomics Working Papers 23225, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:microe:23225
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    Cited by:

    1. Sugata Marjit, "undated". "Virtual Trade and Growth," Economics Working Papers 02-01/2015, School of Business Administration, American University of Sharjah.
    2. Sugata Marjit & Biswajit Mandal, 2017. "Virtual trade between separated time zones and growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(2), pages 171-183, June.
    3. 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.
    4. Thomas, P Mini, 2015. "Tax contribution of service sector: An empirical study of service taxation in India," Working Papers 344, Institute for Social and Economic Change, Bangalore.
    5. Inoue Takeshi, 2014. "An Empirical Analysis of the Aggregate Export Demand Function in Post-Liberalization India," Global Economy Journal, De Gruyter, vol. 14(1), pages 1-10, June.
    6. repec:spr:jsecdv:v:19:y:2017:i:1:d:10.1007_s40847-017-0036-0 is not listed on IDEAS
    7. Thomas, P Mini, 2015. "Estimation of the Key Economic Determinants of Services Trade: Evidence from India," Working Papers 348, Institute for Social and Economic Change, Bangalore.
    8. 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.
    9. Ashish Malik, 2013. "Post-GFC people management challenges: a study of India's information technology sector," Asia Pacific Business Review, Taylor & Francis Journals, vol. 19(2), pages 230-246, April.

    More about this item

    Keywords

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

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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