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Service-led growth and the balance of payments constraint in India: An unsustainable strategy

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  • Suranjana Nabar-Bhaduri
  • Matías Vernengo

Abstract

India has been an exemplary case of economic growth, lionized in the international press as one of the emerging market economies that will take over the world economy in the current century. The Indian services revolution is often cited as an example of an alternative development strategy under which the process of growth is services-led, as against the traditional manufacturing-led paradigm that has historically been the case. This paper suggests that the Indian development strategy actually looks eerily similar to the Central American and Mexican patterns of integration into the world economy, which are highly dependent on the exports of people, directly through migration, and indirectly through low wages in particular sectors (‘maquilas’ in the Americas, the call centers in India), even if the growth rates in India have been considerably higher than in those Latin American regions.

Suggested Citation

  • Suranjana Nabar-Bhaduri & Matías Vernengo, 2012. "Service-led growth and the balance of payments constraint in India: An unsustainable strategy," Working Paper Series, Department of Economics, University of Utah 2012_06, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2012_06
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    References listed on IDEAS

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    1. Jesus Felipe & Rana Hasan (ed.), 2006. "Labor Markets in Asia," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-62738-3, September.
    2. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
    3. Mazumdar, Surajit, 2008. "Investment and growth in India under liberalization: Asymmetries and Instabilities," MPRA Paper 19629, University Library of Munich, Germany.
    4. Suranjana Nabar-Bhaduri, 2011. "What Lies Beneath," International Journal of Political Economy, Taylor & Francis Journals, vol. 40(1), pages 69-85.
    5. Esteban Pérez Caldentey & Matías Vernengo, 2010. "Back to the future: Latin America's current development strategy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 623-644, July.
    6. J. S. L. McCombie & A. P. Thirlwall, 1994. "Economic Growth and the Balance-of-Payments Constraint," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-23121-8, September.
    7. T. C. A. Anant & R. Hasan & P. Mohapatra & R. Nagaraj & S. K. Sasikumar, 2006. "Labor Markets in India: Issues and Perspectives," Palgrave Macmillan Books, in: Jesus Felipe & Rana Hasan (ed.), Labor Markets in Asia, chapter 0, pages 205-300, Palgrave Macmillan.
    8. Eatwell, John & Taylor, Lance (ed.), 2002. "International Capital Markets: Systems in Transition," OUP Catalogue, Oxford University Press, number 9780195154986.
    9. Alcino F. Câmara Neto & Matias Vernengo, 2002. "Globalization, a Dangerous Obsession : Latin America in the Post-Washington Consensus Era," International Journal of Political Economy, Taylor & Francis Journals, vol. 32(4), pages 4-21.
    10. Khundrakpam, J. K. & Ranjan, Rajiv, 2008. "Can an Inter-temporal Model Explain India's Current Account Balance?," MPRA Paper 50928, University Library of Munich, Germany.
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    Cited by:

    1. Gozgor, Giray, 2018. "Does the structure of employment affect the external imbalances? Theory and evidence," Structural Change and Economic Dynamics, Elsevier, vol. 45(C), pages 77-83.
    2. Manuel Gonzalo, 2023. "The Indian Growth Acceleration: A Brazilian Demand-led Insight," Millennial Asia, , vol. 14(4), pages 509-534, December.
    3. B. R. Neeraj & Ivan D. Trofimov, 2025. "India’s Service Trade and Asymmetry in J-curve: The Evidence from Linear and Nonlinear Models," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 26(1), pages 32-53, March.

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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