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An Indian Path To Modernity?

Will the services sector be India?s engine of growth propelling its transition to modernity? In sharp contrast to China, much of India?s ?industrialisation? is services-led. This boom is driven by the creation of associated productive assets such as buildings, telecom, multiplexes, consumer durables and so on through forward and backward linkages with the services sector. It is pertinent that India?s telecom sector took off after IT offshoring.

Telephony and Internet growth has matched that in China. The teledensity gap has no doubt widened from three to five times over the last 10 years, but India?s mobile telephony market is nevertheless growing faster. China had 4.5 times the number of Internet users in 2006 than did India, down from six times in 1999. India?s impressive ?virtual infrastructure? growth relative to China possibly explains why the GDP growth gap between China and India has been narrowing, even as the overall infrastructure gap continues to widen. The services sector, which relies more on virtual than real infrastructure, has accounted for over 70% of India?s GDP growth over the last decade.

Despite apparent differences, the biggest long-term developmental challenge faced by both China and India is fundamentally similar: median incomes continue to languish despite rapid economic growth, as the vast majority of their populations are stuck in low-productivity jobs dependent on agriculture. Just under 60% of India?s billion plus population continues to be dependent on the agricultural sector whose share in national income is shrinking fast and stands at less than 20% now, down from almost a third in the early 1990s. Source: The Financial Express, Alok Sheel << Back
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