Unit-2-25-years-of-agriculture-ashok-gulati-and-shweta

THINK LIKE AN ECONOMIST................................PMG.............................................. SAMEER 9810836285 I N D I A N E C O N O M I C D E V E L O P M E N T C L A S S E S B Y S A M E E R C H A U D H A R Y Page 1 SERVICES LED GROWTH Rupa Chandra 1. Services have been the fastest growing sector of the Indian economy in recent years and have helped accelerate the overall growth rate of the economy. 2. S ervices have also facilitated India's integration with the world economythrough trade and capital flows. The phenomenal growth and export performance witnessed in services like information technology (IT) and business process outsourcing (BPO) has placed India on the global map. GROWTH TRENDS IN INDIA'S SERVICES SECTOR 1. The service sector has exhibited phenomenal growth rates since 1990s. Its average annual growth rate rose from 7% during the 1988 - 8 period to 9.2% during the 2002 - 2009 period, exceeding overall GDP growth of 7.5% during this period. The average growth rates in agriculture and industry were lower at 2.2% and 7.7%, respectively, 2. Growth performance withinthe service sector has, however, been uneven. The driving segments have been growing at a rate of over 7% in CAGR terms during the 2000 - 9 period. These leading sector are - a. communication,

THINK LIKE AN ECONOMIST................................PMG.............................................. SAMEER 9810836285 I N D I A N E C O N O M I C D E V E L O P M E N T C L A S S E S B Y S A M E E R C H A U D H A R Y Page 2 b. banking and insurance, c. construction, d. and trade and distribution services, 3. While services which were laggards grew at less than 4% such as a. Railways and b. Publicadministration services. 4. These sub-sectoral trends reflect differences inpolicy and regulatory trends across different servicesand the role of rising incomes and domestic demandin driving growth in some services. 5. Communicationservices have been the fastest growing service segment,reflecting the significant liberalization and deregulationin this sector since the 1990s.The high growth rate of services has contributedto its rising share in the overall economy. 6. In 2009, services constituted around 64% of GDP, up from around 48%of GDP in 1990. Services and Employment 1. The service sector's contribution to overall employment has risen, though this has not been commensurate to the growth in services output. 2. According to the 2001 Indian Census statistics, services sharein employment rose from 20.8% to 25.1% i.e. by less than 5%between 1991 and 2001, while during the same period,its share in GDP increased by over 10%, implyinglow employment elasticity. 3. Most of this employment is concentrated in - a. trade and distribution, b. construction, c. hotel and restaurants, and d. Community and personal services segments. Trade in India's Service Sector 1. The contribution of,; services to India's trade and FDI flows has also been growing s ince the year 2000, facilitating India's integration with the world economy. a. India's services exports have grown from a mere $2.9 billion in 1980 to $16.7 billion in 2000 and further to $116.3 billion in 2010.

THINK LIKE AN ECONOMIST................................PMG.............................................. SAMEER 9810836285 I N D I A N E C O N O M I C D E V E L O P M E N T C L A S S E S B Y S A M E E R C H A U D H A R Y Page 3 b. Services imports have also risen significantly, from $2.9 billion in 1980 to $19.2 billion in 2000, and further to $108.6 billion in 2010. c. Consequently, India has moved to a slight services trade surplus over the years. 2. The average annual growth rate of India' s services exports has accelerated significantly in the 2000s, rising from 19.5% in the 1995 - 9 period to 25.2% in the 2000 - 9 period. a. The CAGR for services exports stood at 18.4% during the 2000 - 9 period, far exceeding the CAGR for services output (8.95%) during the same period. b. As a result, the share of services in India's total exports has risen from 18.1% in 1995 to over 34.9% in 2010. 3. India has also outperformed other economies, including China, in the case of services exports. India's share in world s ervices exports has risen from less than 1% in the 1980s and 1990s to 3.1% in 2010. 4. Its share in world services imports has similarly increased from 0.7% in 1990 to 3.1% in 2010. 5. It is worth noting that India's services exports havein general grown much m ore rapidly than its merchandise exports.