Looking into the Black Box of India's Services

In recent years, the service sector has come into focus in both academic and policy circles. This is understandable given the growing role of services in output in advanced as well as leading developing economies, and their increasing importance in global trade and investment flows. Services are increasingly being recognised for their critical role in facilitating production processes and business activities and in enhancing economy-wide competitiveness.

India’s service sector has exhibited dynamic growth in output and exports over the past two decades. Its contribution to gross domestic product (GDP) has risen from around 40% in the early 1990s to nearly 60% by the close of the last decade. India’s services exports have registered the highest growth among all countries in the past decade. Thus, services have helped drive India’s overall growth rate and have also helped to contain its current account deficit. They have also been central to the country’s liberalisation and reform process. Hence, services are increasingly being viewed as an engine of growth in India and their performance is featured as an integral part of the larger debate on sustainable and inclusive growth.