Analytics and Implications of Services Sector Growth in Indian Economy

Deba Prasad Rath and Rajesh Raj

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Services; Industry; Tax; Employment; Inflation (search for similar items in EconPapers)
JEL-codes: E23 E24 E31 O14 (search for similar items in EconPapers)
Date: 2006, Revised 2007
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Published in The Journal of Income and Wealth No.1; January-June 2006.Volume(2007): pp. 47-62

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