Title: Services trade and economic growth in India: an analysis in the post-reform period

Authors: Ranjan Kumar Dash; Purna Chandra Parida

Addresses: Indian Council for Research on International Economic Relations (ICRIER), Core 6A, 4th Floor, India Habitat Centre, Lodhi Road, New Delhi 110 003, India ' National Council of Applied Economic Research (NCAER), Parisila Bhawan, 11 I.P. Estate, New Delhi 110 002, India

Abstract: Services sector in India contributes more than 60% of the overall gross domestic product (GDP) and more than 40% of total trade. This sector also absorbs a chunk of manpower, especially in export-oriented industries and reduces the employment burden on other non-services sectors. In this context, this paper examines the role of services trade (exports and imports) in economic growth of India using autoregressive distributed lag and vector error correction model (VECM) methodology for the period Q1:1996–1997 to Q1:2010–2011. This paper also uses impulse response function analysis to supplement the long-run equilibrium relationship and causality analysis and also to understand the dynamic relationship among variables. The study finds a long-run equilibrium relationship among GDP, services exports, imports and real effective exchange rate. The VECM and impulse response analysis suggest causality runs from services exports to GDP emphasising the services export-led growth in India during the post-reform period.

Keywords: services trade; economic growth; cointegration; impulse response; India; service industry; gross domestic product; GDP; manpower; export-oriented industries; employment burdens; non-services sector; exports; imports; VECM; vector error correction models; autoregressive distributed lag models; ARDL; function analysis; long-run relationships; equilibrium relationships; causality analysis; dynamic relationships; variables; exchange rates; export-led growth; post-reform period; economics; business research.

DOI: 10.1504/IJEBR.2012.046824

International Journal of Economics and Business Research, 2012 Vol.4 No.3, pp.326 - 345

Published online: 25 Nov 2014 *

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