Deciphering Indias Services Sector Growth

This book addresses a range of issues relating to the nature and implications of growth of India’s services sector, including factors contributing to the rise of services, output measurement and heterogeneity, growth of services exports, and employment in services sectors. From service tax, exchange rate and services exports, policy interest, employment potential and diversity of the sector to challenges in financial inclusion, trajectories of ICT services and contribution of education to GDP, it brings together diverse themes to highlight major concerns in the wake of the prominent role that services have played in placing India among the fast-growing economies in the world in recent years. The services sector in India accounts for more than 60 per cent of the GDP of the country and 28.6 per cent of its employed across government, private or state corporations and non-government organisations. The volume explores whether the services sector (beyond agriculture and industry) holds the promise of fulfilling the benefits from India’s demographic dividend for its economic transformation through sustainable growth. With key empirical analyses of household, enterprise and macroeconomic data for India within both formal and informal sectors, this topical book will be useful to scholars and researchers of economics, Indian economy, political economy, development economics, development studies, public policy and South Asian studies and also to development professionals, policy makers and industry specialists.

The services sector has emerged as the most dynamic and important sector in India in the post-liberalization era. It has increased its contribution to the Indian economy not only in terms of GDP, but also in exports. However, one area where the services sector has not yet contributed significantly is employment creation. This has raised questions regarding the inclusivity of India’s services sector-led growth story. This book is a collection of papers devoted to understanding and analysing the role of the services sector in GDP, trade and inclusive growth in the Indian economy. These contributions examine specific issues related to the services sector in India, such as employment, trade cycles, foreign direct investment, and migration, and also analyse sector specific issues in selected services like retail, insurance, IT-BPO and aviation.

This paper analyzes the factors behind the recent growth of India's services sector. The high growth of services output in the 1990s was mostly due to the rapid expansion of communication, banking, business services (including the IT sector) and community services. While factors such as a high income elasticity of demand for services, increasing input usage of services by other sectors, and rising exports, were important in boosting services growth in the 1990s, supply side factors including reforms and technological advances also played significant roles. Going forward, the growth potential of Indian services exports is well known, but the paper also finds considerable scope for growth in the Indian service economy provided that deregulation continues. In addition, the paper shows that employment growth in the Indian services sector has been quite modest, thus underscoring the need for industry and agriculture to also grow rapidly.

This paper analyzes the factors behind the recent growth of India`s services sector. The high growth of services output in the 1990s was mostly due to the rapid expansion of communication, banking, business services (including the IT sector) and community services. While factors such as a high income elasticity of demand for services, increasing input usage of services by other sectors, and rising exports, were important in boosting services growth in the 1990s, supply side factors including reforms and technological advances also played significant roles. Going forward, the growth potential of Indian services exports is well known, but the paper also finds considerable scope for growth in the Indian service economy provided that deregulation continues. In addition, the paper shows that employment growth in the Indian services sector has been quite modest, thus underscoring the need for industry and agriculture to also grow rapidly.

ABOUT THE BOOK Since the early 1990s, the growth process in India has been marked by a remarkable performance of services sector. The experience of developed countries suggests that growth of services sector followed the growth of industrial sector. However, India?s experience in this regard is somewhat different. The sectoral shift in favour of services sector over the last two decades has taken place in the face of an almost stagnant share of industry and a reduced share of agriculture in GDP. In fact, it was the growth performance of the services sector during the 1990s which sustained the overall growth of the Indian economy, particularly in times of adverse agricultural shocks and industrial slowdown. While software exports are a well-known success story, India is now an important venue for many tasks in services such as financial accounting, call centres, processing insurance claims, and medical transcription. The future potential of growth in these areas appears to be considerable. This book explains recent policy measures by the Government of India to make India?s services sector internationally competitive. The book focuses on the following services: financial services, IT and IT-enabled services, retail trading services, healthcare services, insurance services, educational services, transport and communication services, and tourism. It also includes a chapter on taxation of services in India.

This paper analyzes the factors behind the recent growth of India's services sector. The high growth of services output in the 1990s was mostly due to the rapid expansion of communication, banking, business services (including the IT sector) and community services. While factors such as a high income elasticity of demand for services, increasing input usage of services by other sectors, and rising exports, were important in boosting services growth in the 1990s, supply side factors including reforms and technological advances also played significant roles. Going forward, the growth potential of Indian services exports is well known, but the paper also finds considerable scope for growth in the Indian service economy provided that deregulation continues. In addition, the paper shows that employment growth in the Indian services sector has been quite modest, thus underscoring the need for industry and agriculture to also grow rapidly.

A striking aspect of India's recent growth has been the dynamism of its services sector. In 2010, it accounted for 57 percent of the country's GDP and 25 percent of its total employment. The results do not conform to the growth experience of currently industrialized countries or other developing economies. Is the increasing share of the service sector in India's total output simply notional, as several activities that were earlier classified in the industrial sector are now subsumed in services' value added, or because the relative price of services has increased over time? No. The sector's growth is real, Ai it is linked to household final demand, policy reforms and increased service exports. Is this service-led growth process sustainable? That remains an open question because the service sector is highly heterogeneous, ranging from software services and business process outsourcing to wholesale and retail trade and personal services. These subsectors vary considerably in the context of different economic characteristics that are important for development.

This collection looks at processes of change and reform in public service delivery in a range of states and sectors, and over time spans. The first three essays examine reforms that have improved prospects for economic growth and poverty alleviation in Bihar; improved the functioning of public sector enterprises and the power sector, and initiated improvements in education in West Bengal; and the efficient delivery of economic services in Gujarat in order to pursue a high-growth agenda. The next two essays focus on regulation in infrastructure as well as the delivery of urban services. The question of balancing greater autonomy with accountability to improve public service delivery through the use of executive agencies is also analysed. The final essay discusses how India might absorb lessons for the effective implementation of the Right to Information Act (2005) from countries such as Mexico, South Africa, and Canada. The volume shows how reform is an ongoing process that depends critically on contextual factors. These include the history of reform ideas, the capacity of the state to execute reform, and the nature of the state itself and its relationships with key actors, such as the private sector and unions.

This book examines the service sector growth of both India and Malaysia. India's service sector has grown rapidly since the 1990s. Domestic demand for services has increased as incomes have risen, triggering the expansion of industries such as banking, education and telecommunications. Exports have also increased rapidly, led by information technology and business process outsourcing (IT-BPO). India's ability to offer low-cost, high quality IT-BPO services has made it a world leader in this industry. The growing global competitiveness of Malaysia's service sector is reflected in steady growth in trade volumes. Malaysia's cross-border trade in services increased at an average annual rate of 15 percent to $60.6 billion from 2004 through 2008, accounting for 13 percent of total Malaysian cross-border trade and about 1 percent of global services trade in 2008.