Abstract
sector leading the way. The share of service value added in gross domestic product (GDP) increased from 44 percent in 1990 to 55 percent in 2009. Service exports grew even faster, and their share in service value added increased from 3.6 percent in 1990 to 17.0 percent in 2009 (their share in GDP increased from 1.4 percent to 8.6 percent). India’s experience differs from the typical development of other countries because services, rather than manufacturing, are playing the leading role. This chapter first examines the evolution of the service sector in India. It then focuses on India’s service exports and the reasons for the country’s dynamism. The chapter addresses, in particular, the anomaly of a country exporting skillintensive services although its comparative advantage is in low-skilled products. Technology has played a critical role in the growth of India’s service exports. Advances in information and communication technology not only have made it possible to trade services that were historically regarded as nontradable, but also have made distance and delivery costs virtually irrelevant for some services. Therefore, a country such as India, which is thousands of miles away from North America, is still able to deliver services to the United States as efficiently as a U.S. border country. In fact, the distance between India and the United States may even encourage greater service trade because the time difference allows for round-the-clock service provision.
Published Version
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