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Testing for Structural Breaks in the Growth of the Services Sector in India: A Reassessment

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  • Amrita Shergill

Abstract

There has been an ongoing debate amongst economists about whether or not the economic reforms of the early 1990s induced a spurt in the growth of the Services sector in India. The focus of this paper is thus to analytically re-examine the nature and magnitude of the structural breaks in the growth of the share of the Services sector in the gross domestic product over 1950-1951 to 2013-2014 with an intention to further probe this issue. The results of this exercise show that the structural break in the growth of the share of the Services sector in gross domestic product occurred in the early 1980s, much before the economic reforms set in, coinciding with the hypothesis that the early 80s marked the structural break in India’s economic growth. The increases in per capita incomes over 30 years since independence seemed to have led to the structural break in this sector in the early 1980s, plausibly because the demand for services is highly income elastic. There is no denying though that economic reforms in the 1990s helped in maintaining and propagating the growth of the Services sector triggered in the early 1980s. The sub-period analysis has also hinted at the slowdown in the growth of the Services sector, which could have serious economic implications in coming times.

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  • Amrita Shergill, 2022. "Testing for Structural Breaks in the Growth of the Services Sector in India: A Reassessment," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 71-85.
    • Handle: RePEc:bas:econst:y:2022:i:5:p:71-85
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    References listed on IDEAS

    as
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    3. Dani Rodrik & Arvind Subramanian, 2005. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 193-228, September.
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    More about this item

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H00 - Public Economics - - General - - - General
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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