Journal of Economics and Development Studies

India’s Services Sector and Its Determinants: An Empirical Investigation
Mandeep Singh, Dr. Kuldip Kaur

Abstract
The present study is an attempt to examine in detail the role of services sector in the growth of Indian Economy. To explain this, trends and growth of services sector have been very well explained in the study. Structure of production for Indian economy since independence has also been presented by using Holub’s methodology. Moreover, VAR methodology has been applied to evaluate the determinants of growth of services sector in India by using time-series data from 2000-01 to 2012-13. The overall picture one can portray from the whole study is that the share of services sector in total GDP is increasing over the years. One of the reasons might be of increasing GNP Per-Capita. The main services sectors attracting FDI in India are Telecommunications, Construction and Hotels and Restaurants. The results of VAR analysis shows that the growth of per-capita GNP is major factor of increasing share of services sector in Indian economy. Domestic investment and openness also effect positively to the share of services sector in GDP. Further, the effect of net FDI inflows is negative and insignificant. The reason of this negative effect might be the increasing share of FDI inflows in manufacturing sector, which in turn reduce the share of services in total proportion.

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