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Global Economic Crisis: Impact and Restructuring of the Services Sector in India

Abhijit Das, Rashmi Banga () and Dinesh Kumar
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Abhijit Das: Asian Development Bank Institute (ADBI)

Microeconomics Working Papers from East Asian Bureau of Economic Research

Abstract: The Indian economy has shown considerable resilience to the global economic crisis by maintaining one of the highest growth rates in the world. The services sector accounted for around 88% of the growth rate in real gross domestic product in 2008–09. To demystify the relatively resilient growth of the services sector in India, this study examines both the demand-side and the supply-side factors that have contributed to its growth To assess the role of external demand, income elasticity of export demand for the aggregated services and some of the disaggregated services of India were estimated. It was found that the main driver of growth in India’s services sector is growth in the domestic demand for services and not growth in the export of services. The contribution of the growth of the export of services to the growth of the overall services sector was only 22%. In order to examine the role of supply-side factors, total factor productivity growth was estimated in the services sectors that have contributed substantially to overall growth, which are the software and banking services. Using Data Envelopment Analysis at the firm level, it was found that both these sectors experienced productivity growth above 10% after 2000. High domestic demand and high productivity growth largely explain the resilience of India’s services growth.

Keywords: Global Economic Crisis; services sector; India; Productivity growth; Data Envelopment Analysis (search for similar items in EconPapers)
JEL-codes: F14 L86 O47 (search for similar items in EconPapers)
Date: 2011-09
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Working Paper: Global Economic Crisis: Impact and Restructuring of the Services Sector in India (2011) Downloads
Working Paper: Global Economic Crisis: Impact and Restructuring of the Services Sector in India (2011) Downloads
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