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3. Trend, Composition and Determinants of Services Sector

3.2 Magnitude of Services Sector

3.2.2 Trend in Growth Rate

the country.

where,lnY is the log value of GVA of the entire services sector, their different sub- sectors and segments within these sub-sectors. β0 and β1 are the constant and coefficients term to be estimated. µt is the random error and T is trend variable. Ordinary Least Square estimation technique was used to determine the value of the respective coefficients. Using coefficientβ1, Compound Annual Growth Rate (CAGR) can be estimated as follows,

CAGR= (eβ1−1)×100 (3.2)

The estimated CAGR is reported in Table 3.4. The table shows that overall services sector registered growth rate of 7.6 percent during the entire study period. In can be observed that the growth rates of the overall services sector has increased in the successive sub periods.

In the first sub-period i.e. during 1980-81 to 1989-90, the overall services sector grew at an average annual rate of 6.35 percent while the growth rate was 7.42 percent and 9.22 percent during 1990-91to 1999-00 and 2000-01to 2012-13 respectively. It can be seen from the table that the overall services sector grew more rapidly during the last sub-period under consideration (i.e. 2000-01 to 2012-13) compared to the previous periods. Change in growth rate of overall services sector during the 2000s over 1990s is also higher than that of 1990s over 1980s.

In line with the overall services sector, all sub-sectors and their segments also regis- tered rapid growth during the study period. Among the sub-sectors, transport, storage and communication services has recorded the highest compound annual growth rate of 9.03 percent during the study period. It grew at a rate of about 6 percent in the decade of 1980s. However, the sub-sector has experienced considerable increase in its compound annual growth rate during the decade of 2000-01 to 2012-13. Among the segments within transport, storage and communication, compound annual growth rate of railways declined during 1990s as compared to 1980s while its growth rate has improved in the subsequent decade. CAGR of transport by other means shows moderate improvement over the period.

It is to be mentioned that communication attained a growth rate of more than 15 percent for the entire period which is the highest among all other segments. During the first sub- period i.e. 1980-81 to 1989-90, the compound annual growth rate of communication was 5.50 which significantly increased to 22.87 percent in 2000-01 to 2012-13.

The second important sub-sector in the economy in terms of growth is the financing, insurance, real estate and business services (FIRE) which grew by 8.73 percent during the study period. In the first sub period, FIRE grew at a rate of 9.26 percent. During

Table3.4:CompoundAnnualGrowthRateofServices,Sub-sectorsandtheirSegments Sl.noSub-Sectors/Segments1980-81to2012-131980-81to1989-901990-91to1999-002000-01to2012-13 1Construction6.653.734.849.45 2Trade,Hotel&Restaurant7.605.898.518.68 2.1Trade7.505.888.328.71 2.2Hotels&Restaurant8.705.9710.738.35 3Transport,Storage&Communication9.035.998.4511.93 3.1Railways4.854.582.897.65 3.2Transportbyothermeans7.636.747.778.68 3.3Storage3.373.451.637.55 3.4Communication15.685.5015.2222.87 4Fire,InsuranceandRealEstate8.739.268.1510.33 4.1Banking&Insurance10.4511.1910.4712.96 4.2Realestate&ownershipofdwellings7.598.256.588.37 5Community,Social&PersonalServices6.306.236.526.68 5.1PublicServices6.057.596.236.66 5.2OtherServices6.525.266.736.70 TotalServices7.606.357.429.22 Source:CentralStatisticalOffice

the subsequent decade, it registered a decline in its growth rate as compared to 1980s.

However, the CAGR is found to have increased considerably during the decade of 2000 and registered more than 10 percent growth rate. It can be seen that CAGR for both segments under FIRE has declined during the decade of 1990s as compared to the previous decade.

However, CAGR of both the segments has improved in the decade of 2000s.

It has been found that trade, hotel and restaurant grew at 5.89 per cent during 1980- 81 to 1989-90. The growth rate increased to about 8.5 percent during 1990s. However, growth rate for the sub-sector remained static at around 8.5 percent during 2000s. CAGR of both the segments of trade, hotel and restaurant have experienced improvement in 1990s as compared to 1980s. However, for the subsequent decade, moderate rise in the CAGR continued for trade but hotel and restaurant experienced decline in their CAGR during this period.

CAGR for community, social and personal services remained at around 6 to 7 percent during the entire period of the present study. Out of the two segments, of community, social and personal services, public administration and defence experienced decline in the CAGR while other services experienced increase in its CAGR during 1990s than that of 1980s. During the following decade, CAGR of public administration and defence services has registered moderate improvement while CAGR of other services remained more or less static as compared to the previous decade.

During the entire study period, construction grew at a rate of 6.65 percent. This sub- sector has also registered considerable growth during 2000-01 to 2012-13 as evident from a relatively high growth rate of 9.45 percent as compared to a relatively low growth rate of 3.73 percent during 1980-81 to 1989-90.

The above discussion shows that the services sector in India has been growing consis- tently for the last three decades. The examination of CAGR reveals that in most of the services sub-sectors and their segments, the growth rate is more rapid during the decade of 2000s than in the decades of 1980s and 1990s. In the decade of 1990s which is known as the period of liberalisation, trade, hotel and restaurant, and transport, storage and com- munication showed improvement in their growth over the previous decade. The increase in growth rate in the GVA of transport, storage and communication continued in the next decade as well with a growth rate of about 12 percent in the 2000s.

3.3 Acceleration/Deceleration in GVA of Services