The process of economic growth has always been characterised by structural changes. In primeval stages of economic development, the share of agriculture both in output and employment is overwhelmingly large. As industrialisation proceeds apace, demand for agricultural goods slides down, and market for industrial goods goes up. When the economy reaches a still higher stage of development, the service sector comes into its own, overtaking both agriculture and industry. Service sector has emerged as the largest and fast-growing segment in the world economy today.

Correspondingly, the Indian service sector has also registered unprecedented growth; it has now become a major driving force spearheading the economy. The LPG phase [liberalisation/privatisation /globalisation] of Indian economy, commencing from the 1990s set the pace for a rapid turnaround of the service sector. It is during the last two decades that India has changed from an agrarian base into a knowledge base. Knowledge base creates, disseminates, and employs information in the developmental process of an economy.

The service sector holds the key to accelerating growth and promoting plenty and prosperity in the country. Services are extensively used by people in their day-to-day activities. “The objective of this book is to analyse the role of the service sector in development, with reference to the Indian experience”, says Gaurav Nayyar in the preface. When a research thesis is transformed into a book, the metamorphosis usually suffers from a structural handicap. The academic straitjacket of the previous format is not easy to let go.

But this volume takes the reader step by step in a linear and logical fashion, which makes the narrative easy to read and retain. In the words of the author: “… the results of one chapter set the stage for the analysis in the next chapter, or a set of results from one chapter validate important assumptions in a subsequent chapter.” Thus, the book is born as a cohesive and consistent literary work.

Real growth

The opening chapter provides an overview of the book, besides an introduction into its central theme. A detailed discussion follows about the migration of the economy from agriculture to industry and from industry to service sector. The second chapter recounts the presence of conceptual problems, statistical constraints, and measurement difficulties in analysing output and productivity in the service sector. Nevertheless, it moves forward and attempts to resolve theses issues in order to recognise the dominant role of the service sector.

The book, then, provides ample evidence to establish that growth in service sector is real, and not notional. Another factor surfacing in this context is the quantum of exports triggered by software technology, call centres, and business process outsourcing. The author, then, employs advanced econometric tools like Engel Curve Estimates [so named after Ernst Engel, an economist from Belgium, who evolved this technique] to explore and vindicate demand potential for the service sector in India.

Towards this, a household survey is conducted in respect of six types of services viz., education, health, entertainment, personal, communication, and transport. The results demonstrate that “services” account for a larger share in the domestic budget, when family income is on the rise — more prosperity in the family means more scope for services.

The fifth chapter creates history by opening “the black box of the service sector”. In other words, the service sector is disaggregated with reference to a set of ten economic attributes for furthering a full-scale analysis of its features and framework. While examining the scope for, and nature of, finding employment in the service sector, the book declares that employment opportunities are more in areas where educational requirements and quality of life are both at the low end of the scale.

The penultimate chapter addresses issues of labour productivity in agriculture vis-à-vis urban informal sector. A significant recommendation made is that public investment in economic and social infrastructure is an essential determinant of labour productivity. The last chapter is devoted to a summary of the earlier chapters: “to present and synthesize the main conclusions from each chapter of the book and to explore possible links between them.” The book ends with a beacon call to academic scholars that “future research must focus on carrying out detailed case studies of individual segments of the service sector.”

The service sector in India's Development by Gaurav Nayyar; Cambridge University Press, 4381/4, Ansari Road, Daryaganj, New Delhi-110002. Rs. 895.

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