The role of services in India's post-reform economic growth

Bishwanath Goldar, Pilu Chandra Das and Samiran Dutta

Structural Change and Economic Dynamics, 2024, vol. 68, issue C, 355-370

Abstract: The services have been the driver of India's overall growth since the onset of economic reforms in the 1990s. The value-added share of services increased from 41 percent in 1990 to 53 percent in 2018. On average, the sector grew at 7.5 percent annually during 1993–2018, contributing to about half of the aggregate economic growth. Using the India KLEMS data, we examine the trends in total factor productivity (TFP) in individual industries within services and their contribution to aggregate TFP growth in the sector during 1993–2018. We find that transport and storage was the highest contributor among various market services industries followed by financial services, while public administration made a relatively high contribution to aggregate non-market services TFP growth. Moreover, we investigate the factors driving TFP growth in the services sector, particularly the role of manufacturing TFP – looking into spillover effect from manufacturing to market services and non-market services. Our results suggest that TFP growth in manufacturing had a significant positive impact on TFP growth in the services sector. Also, we find evidence of significant productivity spillover effect to India's services sector from other countries, particularly the developed countries.

Keywords: India, Service sector; Total factor productivity; Domar aggregation; Determinants of productivity growth; ARDL model (search for similar items in EconPapers)
JEL-codes: D24 L8 O14 O40 O47 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:68:y:2024:i:c:p:355-370

DOI: 10.1016/j.strueco.2023.10.016

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