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Analytics and Implications of Services Sector Growth in Indian Economy

Author

Listed:
  • Rath, Deba Prasad
  • Raj, Rajesh

Abstract

Given the magnitude of services growth and its inter-linkages with other sectors of the economy, it is important to understand the impact of services sector on other macro-economic variables. The present paper attempts to identify some of the critical issues in India’s services-led growth and tests certain hypotheses that are currently in debate. These relate to: (a) whether the robust growth of the services sector has added a dimension of stability to India's GDP growth; (b) whether there has been a growing complementarity between services and industrial sectors of the economy; (c) whether like other commodity-producing sectors, the services sector also experienced 'jobless' growth; (d) whether the imposition of services tax has boosted the Indian Government’s efforts at mobilising more resources; and (e) whether high growth of services sector in India had an inflationary impact on the economy. Our analysis found the first four hypotheses to hold true. In respect of the last hypothesis, in contrast to the expectations that high services sector growth has an inflationary impact on the economy, we found that the rising share of services sector in GDP has not contributed to inflation in the Indian economy.

Suggested Citation

  • Rath, Deba Prasad & Raj, Rajesh, 2006. "Analytics and Implications of Services Sector Growth in Indian Economy," MPRA Paper 10034, University Library of Munich, Germany, revised 2007.
  • Handle: RePEc:pra:mprapa:10034
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    References listed on IDEAS

    as
    1. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    2. Mr. Sergio Rebelo & Ms. Piyabha Kongsamut & Danyang Xie, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    3. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
    4. Ajit Singh & Sukti Dasgupta, 2005. "Will services be the new engine of economic growth in India?," Working Papers wp310, Centre for Business Research, University of Cambridge.
    5. Mrs. Poonam Gupta & Mr. James P. F. Gordon, 2004. "Understanding India’s Services Revolution," IMF Working Papers 2004/171, International Monetary Fund.
    6. International Monetary Fund, 2006. "India: Selected Issues," IMF Staff Country Reports 2006/056, International Monetary Fund.
    7. Rosalie McLachlan & Colin Clark & Ian Monday, 2002. "Australia's service sector: a study in diversity," Development and Comp Systems 0203002, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Services; Industry; Tax; Employment; Inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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