INTRODUCTION‌

I

ndia’s services sector has not only outperformed other sectors of the Indian economy, but has also played an important role in India’s integration with world trade and capital markets. India’s liberalisation of services has been a

challenging process in several sub-sectors, but clearly those services where integration through trade and FDI has gone further are also the ones that have exhibited more rapid growth along with positive spillovers on the rest of the economy.

There is, however, a concern1 about the sustainability of a services-led growth process which largely stems from exports of skill-based services. The prevailing view is that for services growth to be sustained, the sector cannot remain dependent on external demand. It must also be driven by internal demand. More broad-based growth within the services is also required to ensure balanced, equitable and employment-oriented growth, with backward and forward linkages to the rest of the economy. In this regard further infrastructural and regulatory reforms and FDI liberalisation in services can help diversify the sources of growth withing India’s services sector and provide the required momentum.

In recent years, there has been a debate in the country regarding the selection of the sector which can lead the growth process in the country. This debate originated from the fact that the services sector contributed over 62 per cent in the GDP during the decade 2001–12. But the debate has been somewhat solved by the newly published Economic Survey 2014–15 in favour of the manufacturing sector. The Survey has gone to quote several empirical studies of recent times linking both services and manufacturing sectors to a great many real issues—potential to create employment, need of skilled and unskilled labour force, formality anf informality of the sector, etc. For this, the idea of ‘Make in India’ has acclaimed timely action from the government. Again, the importance of expanding the Railways and enhancing public investment in it have also been pointed out.2 These findings are also in line with several other studies of the recent times.3‌