On the nexus between services export and service sector growth in Indian context

The rise of services sector as the most dynamic sector of the Indian Economy has in many ways been a revolution. While the share of services in India’s GDP has risen over the post-independence period a marked acceleration was observed during the last decade. The paper attempts to undertake a detailed analysis of the service sector growth and how services export play a crucial role in it. The study aims to investigate the possible cointegration and direction of causality between services export and service sector growth in India for the period 2004-05 to 2012-13. The results reveal that both software and non-software miscellaneous services (business, financial and communication) have led to the services sector growth. Bidirectional causality is observed between software services export and growth of the services sector and between non software services export and growth of the services sector while unidirectional causality is observed from software services export to nonsoftware services export.