Growing Services in India – An Inter-Sectoral Analysis Based on State-Level Data

Deepita Chakravarty
Working Paper No. 64 October, 2005

This study is an inter-sectoral analysis of state domestic product data to
understand the determinants of the services sector growth in India during the
recent years. It is a demand side analysis where the services sector output of
a specific state is not only a function of the outputs of a state’s own agriculture
and industry but also the output of the commodity-producing sector of the
rest of the Indian economy. The findings suggest that while a state’s own
industry turns out to be the most important determinant of the services sector
growth, the commodity-producing sector of the country outside the state does
play a significant role as well in determining the services sector performance
under certain conditions that basically relate to the supply side. The study
essentially is an explorative analysis and has not attempted at making any
precise econometric estimation.