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REIMAGINING INDIA
Table 3: India In The Cross Section: Shares Of Mfg. & Services, 2000
Panel A
Share Of Output
Share Of Employment
Manufacturing Services Industry Services
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii)
Log GDP Per-capita 13.18** 15.41** 10.88 8.01 51.79*** 52.4*** 38.99 39.69**
(6.41) (6.38) (10.34) (10.3) (11.28) (11.23) (23.91) (23.83)
Log GDP Per-capita 2 -0.61 -0.72* -0.19 -0.04 -2.67*** -2.71*** -1.49 -1.54
(0.12) (0.38) (0.6) (0.6) (0.62) (0.63) (1.31) (1.3)
India Indicator 2.4** 0.26 -0.05 3.77** 0.56 1.13 -17.22*** -16.57***
(0.73) (1.11) (1.17) (1.46) (1.17) (1.36) (3.03) (3.78)
Control For Size No Yes No Yes No Yes No Yes
Observations 149 149 156 156 76 76 74 74
Panel B
Change In Share Of output (1981-2000)
Change In Share Of Employment
Manufacturing Services Industry Services
(i) (ii) (iii) (iv)
Log Initial GDP Per-Capita -1.19*** 3.96*** -3.37*** 2.91**
(0.66) (0.77) (0.92) (1.39)
Average Annual growth rate 0.7** 0.41 0.47 -0.18
(0.33) (0.53) (0.6) (0.64)
India Indicator -2.56* 9.86*** 1.7 0.94
(1.37) (1.63) (2.05) (3.59)
Observations 93 116 39 38
Notes: Robust standard errors are reported in parentheses
***represents significance at 1%, **represents significance at 5%, *represents significance at 5%, *represents significance at 10%
Country size is measured by area in square killometers.
rapid increase in the share of manufacturing,
a decline in agriculture and an
uncertain or modest effect on services.
However, between 1980 and 2002, India’s
share of services in value added exploded
from 37 percent to 49 percent. Its share
of manufacturing in value added remained
broadly unchanged at 16 percent,
while the decline in agriculture mirrored
the performance of services. 6 The corresponding
numbers for employment were
19 percent to 22 percent and 14 percent
to 18 percent (Table 1).
Is this evolution in sectoral shares unusual
when compared with that of other
countries? In Table 3, columns 1 and 2,
panel A, we see that the coefficient of the
India indicator is still positive but smaller
than in the corresponding specification
for 1981. 7 Furthermore, in the regressions
using the change in the share of
manufacturing value-added to overall
growth (column 1, Panel B), the India indicator
is negative. Thus, the data suggest
a relative slowing in manufacturing
growth.
In contrast, the performance of services
over this period has been unusual.
India’s share in services is a significant 3.8
percent higher than in other countries in
2000 (Table 3, panel A, column 4). This
is broadly confirmed in the change regressions
(panel B), where India records
an increase in the size of the services sector
that is 10 percentage points of GDP
greater than that of the average country.
What happened to labor, skill intensity
and diversification in manufacturing after
the reforms? In Figure 1, we plot the evolution
in the share of output generated in
labor-intensive relative to non labor-intensive
industries for India and a selected
158 THE IIPM THINK TANK