The paper has benefited from comments made by an anonymous referee and by seminar and conference participants at the University of Leuven; the World Trade Institute, Bern; the Indian Institute of Management, Bangalore and the National Council of Applied Economic Research, New Delhi. I would also like to thank Peter Holmes, Michael Barrow, Alan Winters, Michael Gasiorek, Simon Evenett, Keith Maskus, Marcelo Olarreaga, Marius Brülhart and Olivier Cadot for helpful suggestions at different stages.
Version of Record online: 24 MAR 2014
© 2014 John Wiley & Sons Ltd
The World Economy
Special Issue: GLOBAL TRADE POLICY 2014 Edited by DAVID GREENAWAY
Volume 37, Issue 12, pages 1773–1793, December 2014
How to Cite
Shingal, A. (2014), The Services Sector in India's States: A Tale of Growth, Convergence and Trade. World Economy, 37: 1773–1793. doi: 10.1111/twec.12163
- Issue online: 13 DEC 2014
- Version of Record online: 24 MAR 2014
India's success story in services is well documented at the national level, but similar literature does not exist for India's states. We bridge this gap by studying India's services growth at the sub-national level. Contrary to earlier commentary on the unsustainability of India's services growth process, our findings suggest that per capita services may be converging across Indian states (this is not true of per capita income); unlike previous studies on India, evidence is provided using both traditional sigma and beta-convergence measures and advanced panel unit root tests from the recent econometrics literature. A disaggregated analysis of services sectors reveals convergence in railways, public administration and financial services. Finally, a Jensen and Kletzer approach to determine tradability and an additional original methodology provide evidence of most services being ‘traded’ across India's states, suggesting the role of such trade in the services growth story even at the sub-national level.