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Understanding India’s Services Revolution

Author

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  • Poonam Gupta
  • James P. F. Gordon

Abstract

This paper analyzes the factors behind the recent growth of India's services sector. The high growth of services output in the 1990s was mostly due to the rapid expansion of communication, banking, business services (including the IT sector) and community services. While factors such as a high income elasticity of demand for services, increasing input usage of services by other sectors, and rising exports, were important in boosting services growth in the 1990s, supply side factors including reforms and technological advances also played significant roles. Going forward, the growth potential of Indian services exports is well known, but the paper also finds considerable scope for growth in the Indian service economy provided that deregulation continues. In addition, the paper shows that employment growth in the Indian services sector has been quite modest, thus underscoring the need for industry and agriculture to also grow rapidly.

Suggested Citation

  • Poonam Gupta & James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers 04/171, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/171
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=17573
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    References listed on IDEAS

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    1. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
    2. Francois, Joseph & Reinert, Kenneth A, 1995. "The Role of Services in the Structure of Production and Trade: Stylized Facts from a Cross-Country Analysis," CEPR Discussion Papers 1228, C.E.P.R. Discussion Papers.
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