Role of Services Sector in Indian Economy: An Input-Output Approach

Services sector plays an important role in the Indian economy. It is observed that the share of services sector in Gross Domestic Product (GDP) of the Indian economy shows an increasing trend. It was 28.49 per cent in the year 1950-51 then it rose to 31.88 per cent in the year 1970-71 and subsequently 42.80 per cent in the year 1996-97. The objective of this paper is to study the role of services sector by identifying the services intensive industries and its relation with the rest of the economy. To build a relation of the services sector with the rest of the economy, the economy is divided into two separate blocks of industries - services and non services. An index is constructed to show the expansionary potential of the services sector on non-services sector. Empirical work is carried out with the input-output data of India for the year 1991-92.