Understanding Sectoral Economic Growth in India: The Potential for Services

This study reveals that India’s sectoral growth pattern differs from the conventional Petty-Clark’s law in the sense that states with comparative disadvantage in agriculture appear to grow faster in manufacturing for survival and the services sector has been dominating even before sustaining the growth of the industrial sector in India. Therefore, India’s growth strategies need to be based on its own specific characteristics and comparative advantage rather than simply following the ‘flying geese’ type of models. The global financial crisis has created an opportunity for India to move toward different ways of sustaining the services sector growth. Among other subsectors in services, retail ‘service-led’ growth, IT-Business Product Outsourcing, and trade in environmental goods and services (EGS) provide avenues to achieve the objective of sustained inclusive growth. Nevertheless, in order to provide sustained employment to several million people, India needs to maintain at least the existing momentum in labour intensive manufacturing, which is also causally linked with the services sector.