Growth of Service Sector in India (1983–84 to 2011–12): An Input–Output Analysis

Abstract

It is now a well-documented fact that the Indian economy has undergone a significant structural change in the last couple of decades. If one looks at the share of GDP contributed by agriculture, industry, and services sectors, it can be argued that in the early 1950–51, the Indian economy was basically an agro-based economy which has now emerged as predominant in the services sector activities. This change is likely to cause significant changes not only in the sphere of production and demand but also in the linkages among various sectors. This development has various ramifications for the overall growth and the process of development in the Indian economy. This paper seeks to analyze the reasons for this growth of services sector of India and consequent structural change in the economy for the period 1983–84 to 2011–12 and try to highlight its implication for the future economic development of India using input–output structural decomposition analysis (I-O SDA). It has been found that the major reasons for the growth of services sector are due to change in demand rather than change in technology and again it is the domestic demand which dominates over the foreign demand.