The Growth Structure of Indian Economy – An Empirical Dissection
Please cite the paper as:
“Guha, Atulan, (2013), The Growth Structure of Indian Economy – An Empirical Dissection, World Economics Association (WEA) Conferences, No. 3 2013, Conference on the Inequalities in Asia, 27th May to 12th July 2013”
Abstract
The GDP growth structure of India is dominated by the growth in service sector. The Baumolian theories argue that the higher productivity in services is primary mover behind this growth pattern. On the other hand, Kaldorian theories argue that service sector or IT sector with its strong linkages with the rest of the economy is driving the growth. This paper argues that none of these two theories explain the Indian growth structure. The demand pattern, which is independent of production structure, is the main factor responsible for this growth pattern. This demand pattern has primarily arisen out of external demand and increasing income inequality.
This paper has a very novel approach to breaking down the reasons behind India’s service sector success. i do agree with this paper that demand factors played a crucial role in service sector led growth in India in the last two decades. However, I would like the author to address other components of demand and their connection to the service sector growth.
1) What is the role of government consumption in creating demand for services? Especially given that the size of government consumption has increased significantly post 2003.
2) What is the role of investments in creating demand for services? The growth and contribution of investment to overall GDP growth was even higher than exports post 2003.