Abstract
The rise of services sector as the most dynamic sector of the Indian Economy has in many ways been a revolution. While the share of services in India’s GDP has risen over the post-independence period a marked acceleration was observed during the last decade. The paper attempts to undertake a detailed analysis of the service sector growth and how services export play a crucial role in it. The study aims to investigate the possible cointegration and direction of causality between services export and service sector growth in India for the period 2004-05 to 2012-13. The results reveal that both software and non-software miscellaneous services (business, financial and communication) have led to the services sector growth. Bidirectional causality is observed between software services export and growth of the services sector and between non software services export and growth of the services sector while unidirectional causality is observed from software services export to nonsoftware services export.
Highlights
The services sector in the last few years has investment, trade flows, employment, national emerged as the largest and fastest growing and state incomes
Stationarity Test: The null hypothesis of unit root is not rejected for all the level series of the variables
When Augmented Dickey Fuller (ADF) and PP tests are applied to the first differences of the series the null hypothesis cannot be accepted indicating that the variables are stationary
Summary
The services sector in the last few years has investment, trade flows, employment, national emerged as the largest and fastest growing and state incomes. On the Nexus between Services Export and Service Sector Growth in Indian Context since 1990s. India has the second fastest growing services sector with its CAGR at 9 percent, just below China’s 10.9 percent during the last 11 year period from 2001 to 2012. Among the leading exporters of services in the world, India with a CAGR of 20.2 percent had the fastest growth followed by China at 16.6 percent (Table 1). During the period 2000-2010, growth rate of Indian economy was about 7.2% and around 63% of this growth came from the growth of the services This has led people to belief that India has inherent strength in services and the rapid service led growth resulted from India’s success in exporting skill intensive services. The growth of services export contributed to accelerate growth of the services sector
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