SECTOR GROWTH IMPACTS ON ECONOMIC DEVELOPMENT OF INDIA

Abstract

India is still in the early stage of development and therefore intersectoral linkage analysis is of timely importance to reach higher economic development levels with a proper institutional set up and policy of the country. This paper explores inter sectoral growth linkages among the agriculture, industry, service, and the export of India and identifies the role of each sector growth in the economic development of the country. Vector Auto Regression (VAR) model based on Johansen co-integration method was employed along with Granger Causality Test in order to examine inter sectoral linkages of India by using data from year 1961 to year 2017. On one hand, it was shown that the agriculture sector had provided a positive impact on the service sector growth with a comparatively large magnitude in the Indian economic development. The export growth also had made a positive link to the agriculture sector growth. On the other hand, India’s industry and service sectors did not make any spillover on the other sectors to stimulate its economic development except their direct impact through their own growths. Therefore, India’s strongest sector in making links with other sectors is the agriculture sector followed by the external sector (export).