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FDI in the Service Sector – Propagator of Growth for India?

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  • Sen, Chitrakalpa

Abstract

The last two decades have witnessed an unprecedented growth of the Indian service sector. This paper aims to analyze the growth dynamics. This study intends to see whether the growth in FDI has any significant impact on the service sector growth and also investigates whether a growth in this sector causes the GDP to grow. The results suggest that there has been a significant positive impact of the FDI on services sector and this service sector growth has in turn a significant effect on the GDP. The study also looks into the sub-sectoral dynamics and indicates towards the fact that the trade, hotels and restaurants, transport, storage and communications sub-sector contributes the most in the growth of Indian service sector. Therefore FDI can be truly be used as a propagator of economic growth, via its favourable effect on the growth in the services sector. Finally, the study addresses the long running sustainability debate regarding the Indian service sector.

Suggested Citation

  • Sen, Chitrakalpa, 2011. "FDI in the Service Sector – Propagator of Growth for India?," MPRA Paper 30574, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30574
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    References listed on IDEAS

    as
    1. Bosworth, Barry & Collins, Susan M. & Virmani, Arvind, 2007. "Sources of Growth in the Indian Economy," India Policy Forum, National Council of Applied Economic Research, vol. 3(1), pages 1-69.
    2. Rashmi Banga & B.N.Goldar, 2004. "Contribution of services to output growth and productivity in Indian manufacturing: Pre and post reforms," Indian Council for Research on International Economic Relations, New Delhi Working Papers 139, Indian Council for Research on International Economic Relations, New Delhi, India.
    3. Barry Eichengreen & Poonam Gupta, 2013. "The two waves of service-sector growth," Oxford Economic Papers, Oxford University Press, vol. 65(1), pages 96-123, January.
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    Cited by:

    1. Mrutyunjaya SAHOO & Praveen SAHU, 2023. "Does the effectiveness of money supply and foreign direct investment determine the industrial growth performance in India?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(635), S), pages 83-102, Summer.
    2. Ashok Babubudjnauth & Boopen Seetanah, 2021. "An empirical analysis of the impacts of real exchange rate on GDP, manufacturing output and services sector in Mauritius," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1657-1669, April.
    3. Muhammad Salam & Javed Iqbal & Anwar Hussain & Hamid Iqbal, 2018. "The Determinants of Services Sector Growth: A Comparative Analysis of Selected Developed and Developing Economies," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 57(1), pages 27-44.

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    More about this item

    Keywords

    Service sector; FDI; Economic growth;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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