Rashmi Banga

Global Economic Crisis: Impact and Restructuring of the Services Sector in India

The Indian economy has shown considerable resilience to the global economic crisis by maintaining one of the highest growth rates in the world. The services sector accounted for around 88% of the growth rate in real gross domestic product in 2008–09. To demystify the relatively resilient growth of the services sector in India, this study examines both the demand-side and the supply-side factors that have contributed to its growth. To assess the role of external demand, income elasticity of export demand for the aggregated services and some of the disaggregated services of India were estimated.

India‘s Exports of Software Services Role of External Demand and Productivity

Services sector in India showed a remarkable resilience to global economic crisis and grew at a rate of 9.3 per cent explaining around 88 per cent of the growth rate in real GDP of India in 2008–09. Exportsof software services helped considerably in providing the necessary resilience. The main objective of the paper is to examine the role of external demand and productivity growth in exports of software services. Global income elasticity of demand for export of software services is estimated for the period 1970–2008. Sources of total factor productivity growth in Indian IT services firms are identified using Data Envelopment Analysis for the period 1994–95 to 2007–08. It is found that high income demand elasticity for India–s software services has contributed substantially to its growth. But more importantly, there has been a steep rise in productivity growth in the post-2000 period which is attributable mainly to technological innovation.

Impact of Remittances on Poverty in India: Empirical Evidence

Remittances have been an important source of external funding for India. The span of Indian diaspora stretches across the globe in all continents. The Ministry of Overseas Indian Affairs has registered the presence of non-resident Indians (NRIs) in 180 of the 183 countries of the world. The numbers have varied from just two in Lebanon to almost a million in the USA. Estimated at over 30 million, India ranks second to Chinese diaspora. The growing number of migrants from India has added to the remittance inflow over the years. Data in this regard reveals that, even though the remittance flows to the Indian economy during the 1980s remained more or less stable, the postreform period from 1991 onwards has experienced a significant increase in remittances. There has been an annual average trend growth of 16 % during the period 1990 to 2008. In 2008, after the outbreak of economic crisis, India reported 34 % growth over 2007.