Measurement of Investment Contribution of Service Sector in India’s Economic Growth

This paper aims to measure the investment contribution of service sector in India’s economic growth. This study brings in a novel approach by using the national income accounting framework and Harrod Domar Model to quantify services investment contribution. The study makes a distinction between public and private investment within service sector, and identifies the sub-sectors which are major contributors. The services contribution to Foreign Direct Investment into the Indian economy is also measured. This study finds that private investment started exceeding public investment within service sector from 1994-95 onwards. Public administration and defence is found to be the major sub-sector contributing to public investment during the pre-reform phase. Real estate and business services is found to be the major sub-sector contributing to private investment during the post-reform phase. Actual growth rate of service sector is found to be higher than the predicted growth rate during most of the study period