IDEAS home Printed from
   My bibliography  Save this paper

The Service Sector Revolution in India: A Quantitative Analysis


  • Verma, Rubina


Following the economic liberalization in India, the service sector has gained prominence in the economy as it accounts for the largest share of GDP and, also that the share of this sector in GDP has been growing very rapidly. Empirical data reveal two significant trends in the service sector following liberalization in 1991: growth in service sector productivity and growth in services' trade. The objective of this paper is to build a simple three sector quantitative model which can capture the increase in the share of service sector in GDP after liberalization. Within the context of the model, there are two exogenous changes that occur across the two steady states years, 1980 and 1999: growth in sectoral total factor productivity (TFP) and increase in the level of trade in industrial and service sectors. The results from a counterfactual experiment reveal that shutting down sectoral TFP affects the ability of the model to capture the data trends whereas the absence of sectoral trade negligibly affects the results. Hence I conclude that services' productivity growth versus the increase in services' trade can better explain the value added growth observed in the Indian service sector across the two steady states.

Suggested Citation

  • Verma, Rubina, 2008. "The Service Sector Revolution in India: A Quantitative Analysis," WIDER Working Paper Series 072, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2008-72

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Dekle, Robert & Vandenbroucke, Guillaume, 2012. "A quantitative analysis of China's structural transformation," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 119-135.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Rupa Chanda, 2011. "Impact of Services Trade Liberalization on Employment and People Movement in South Asia," Trade Working Papers 23197, East Asian Bureau of Economic Research.
    2. Ghate, Chetan & Pandey, Radhika & Patnaik, Ila, 2013. "Has India emerged? Business cycle stylized facts from a transitioning economy," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 157-172.
    3. Bhattacharya, Rudrani & Patnaik, Ila & Pundit, Madhavi, 2013. "Emerging economy business cycles: Financial integration and terms of trade shocks," Working Papers 13/120, National Institute of Public Finance and Policy.

    More about this item


    growth; trade; total factor productivity; services; India;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:rp2008-72. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mauricio Roa Grisales). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.