Growth of Service Sector in Haryana

Dr. Anita Moudgil

Associate Professor
Department of Economics
D.A.V. College for Girls
Yamuna Nagar

Abstract

Over the last two decades, Haryana has emerged as one of the most prosperous states of Indian
federation. The State has transformed itself from a State known for its agricultural production to
a well rounded development State. Haryana’s growth and development trajectory has been
progressive since its inception. Service sector boom along with sizeable industrialization has
propelled a vertical increase in state per capita income. The key drivers of fast service sector in
Haryana are -its well-developed physical infrastructure such as power, roads and railways and
social infrastructure like education and health, growing IT sector, several projects such as KMP
Expressway, DMIC Project, international cargo airport and SEZ. The structural change in
Haryana has been in tune with the growth pattern of Indian economy and global economy in
terms of changing shares of sectoral output in the State domestic product. The state economy has
experienced a rise in the share of service sector. Service sector growth became the main driver of
the growth process of the economy of Haryana. An analysis of the growth pattern of Service
sector and sub sectoral growth behavior pattern in terms of output shares is essential to
understand the role of Service sector in the economy of Haryana. Service Sector refers to
multitude of activities which comprise of activities like Trade, Repair Services, Transportation,
Hospitality, Entertainment, Communication, Health, Education, Support and Advisory
Services.The part A of the paper discusses the growth profile of service Sector along with its sub
sectors. Part B analyses the contribution of Service sector to growth in Haryana.
Key
 Growth of Service Sector in Haryana
Dr. Anita Moudgil
Associate Professor
Department of Economics
D.A.V. College for Girls
Yamuna Nagar

1) Introduction
Rapid changes in the economic structure of the economy of Haryana have taken place due
to fast growth of IT and IT-enabled sectors, Banking and Financial Services, infrastructural
development and technological advancement leading to increasing role varied services. The
changes in the organization of production (due to technological advancements), IT and IT-
enabled activities, skilled ICT work force and dynamic market demands have led to the growth
of producer services and distributive services. Such services which contribute directly to
manufacturing capacity are now established like other Service sub sectors independent from the
process of Manufacturing. Service Sector in Haryana caters to industry demands not only in
India but also in foreign countries. Haryana has experienced rise in the growth of Producer
Services and Distributive Services.
Objective: The paper aims to analyze the fast growth of Service sector in Haryana and to
understand its contribution to growth in Haryana.
2) Coverage and methodology: The study has been carried out for the State of Haryana
covering the time period from 1970-71 to 2013-14. The selected variables are NSDP, Shares of
Output at aggregate level and disaggregate level. Data on NSDP, GSDP, Primary Sector,
Secondary Sector and Service Sector and its sub sectors at constant prices have been obtained
from Economic and Statistical Organization (ESO), Haryana. The process of splicing has been
used to convert the data (1965-66 to 2013-14) into a common base year 2004-05. Normalization
of the spliced values of the NSDP, GSDP, Sectoral Shares, Per capita income has been done to
remove the discrepancies in the data. Splicing old index to new index series= {Old index} X
{100(index of the new base year)}/ {Old index of the overlapping year}.Normalization of the
series = {Ratio of the spliced value (calculated) of NSDP or GSDP to totaled value of NSDP or
GSDP (sum total of sectoral spliced values)} X { Spliced value of ith sector}.The contribution
of a sector to growth: Cg = ( Wi.gi/gy) (Nandkarni,A,2009).Where W= share / weight of the ith
sector; gi= growth rate of ith sector ; gy= aggregate growth rate. The contribution of a sector
depends on two factors: a) its growth rate (gi); b) its share in output .(Wi).Various
studies(Bathla(2003);Chakravarty(2006);Fuchs(1968);Handsa(2003);Singh,I(2000);Wolfi,A.,(20
05) confirmed the significant role of fast growing service sector in India. The growth of Indian
economy and its some States like Haryana became service-led growth. Moreover the growth
pattern became skewed towards service sector and towards skill intensive activities.
An analysis of the growth pattern of Service sector and sub sectoral growth behavior pattern in
terms of output shares is essential to understand the role of Service sector in the economy of
Haryana. The part A of the paper discusses the growth profile of service Sector along with its sub
sectors. Part B analyses the contribution of Service sector to growth in Haryana.
 Part A
3) Definition and Classification of Service Sector
Service Sector refers to multitude of activities which comprise of activities like Trade, Repair
Services, Transportation, Hospitality, Entertainment, Communication, Health, Education,
Support and Advisory Services.
Fisher (1939) defined Service Sector (Tertiary Sector) as consisting of Transport,
Communication, Trade, Government, Personal and Domestic Services and in some versions
Construction. Kuznets (1958) included Transportation, Communications and Public Utilities in
the Service Sector. In Modern Economic Growth (1966), he defined the Service Sector as
comprising of Trade, Finance, Real Estate, Personal, Domestic, Professional and Government
Services (Kuznets. 1966). Foote and Hatt (1953) classified Service industries into three
categories: Tertiary, Quaternary and Quinary. The first category covers Domestic and Quasi-
Domestic Service i.e., Restaurants and Hotels, Barber and Beauty Shops, Laundry and Dry
Cleaning Establishments, Repair and Maintenance Services and also handicrafts once performed
at home. The Quaternary category comprises Finance, Administration, Transportation,
Communication and Commerce. Katouzian (1970) has provided a classification of the Service
Sector into three categories: New Services, Complementary Services and Old Services.
According to him, New Services are those which experienced a substantial shift in demand with
the advent of ‘high mass consumption’ and thereafter their consumption seems to be an
increasing function of per capita income and leisure time like Education, Modern Clinical and
Medical Services, Entertainments like Holiday Resorts, Hotels and Restaurants etc. In the
Complementary Services, Katouzian includes Services whose production normally takes a sharp
turn with the rise of Manufacturing Production. It includes Intermediary Services like Banking,
Finance, Transportation, Wholesale and Retail Trade which are of complementary nature to the
production process. On the other hand, Old Services consist of those activities which flourished
before industrialization and whose importance and contribution has almost continuously declined
overtime such as Domestic Services. Hill, T.P. (1977) defines a Service as a change in the
condition of a person or good belonging to some economic unit as a result of the activity of some
other economic unit. According to Hill, “Goods and Services belong in different logical
categories.” He focused on the fact that producers cannot accumulate stock or inventory of
Services, stressing that Services must be consumed as they are produced unlike the goods that
can be produced and then stored. This makes it essential for the user and the provider of the
service to interact. Browning., & Singlemann. in ‘Gershuny., & Miles.(1983) offered an
alternative classification of the Services Sector in four categories: a) Distributive, b) Producer, c)
Social and d) Personal Services.. Bhagwati (1984) argues that Services can be divided into two
categories. a) Those that necessarily require the physical proximity of the user and the provider;
and second, those that do not essentially require this though it may be useful. Services that
require essential physical proximity have been further categorized into three groups that are: a)
Mobile Provider and Immobile User, e.g., shifting labour to the construction site. b) Mobile user
and Immobile provider, e.g., Hospital Services c) Mobile User And Mobile Provider, e.g.,
Lectures, Haircuts and Alike. Bhagwati (1985) added that Services for which physical
proximity is inessential, i.e., the long distance Services, are on a rise due to technical progress,
e.g., Banking and Insurance. However, unlike in the case of goods where factor mobility and
trade are distinct phenomena, in the case of Services the distinction vanishes as factor mobility
and trade in Services are two integral aspects of Service transaction. Bhattacharya and Mitra
(1997) categorized Services Sector workers into four occupational categories i.e. Bureaucratic
Services, Distributive Services, Consumer Services and Producer Services. Ghani, I., (2011),
categorized Services into two broad categories--Modern Services and Traditional Services.
Modern Services linked to Information Communication Technology (ICT) and can be sold
separately as services apart from the products (rather than as one unit).Such services are in high
demand due to increasing role of ICT services like insurance claims; BPOs, KPOs, Remote
Management, Legal and Medical Transcripts etc.The Traditional Services (less ICT-Intensive)
are Transport, Trade, Hotel, Restaurant, Beauty Shops, Barbers, Education, Health and other
Government and Community Services. He mentioned the 3Ts: “Tradability, Technology,
Transport costs” which is responsible for the growth of modern services.
In the World Trade Organization (WTO) classification, the Services have been classified into
12 sectors. 1. Business including Professional And Computer Services 2.Communication
Including Telecom, Postal and Courier Services 3.Construction and Related Engineering
Services 4.Distribution Services 5.Educational Services 6.Environmental Services 7.Financial
including Insurance and Banking Services 8.Health Related and Social Services 9.Tourism and
Trade Related Services 10.Recreational, Cultural and Sporting Services 11.Transport Services
12.Other Services not included elsewhere.
UN System of National Accounts recommends the following classification. Primary:
Agriculture, Hunting, Forestry, Fishing; Secondary: Mining and Quarrying, Manufacturing,
Electricity, Gas, Water; Construction. Tertiary: Wholesale and Retail Trade, Restaurants and
Hotels; Transport, Storage and Communication; Financing, Insurance, Real Estate and Business
Services; Community, Social and Personal Services; activities not adequately defined. In short,
Services represent mixed bag and multifarious group of economic activities not directly
associated with the Manufacture of goods, Mining or Agriculture.

Classification of Service Sector

Service sub sector-I Service sub sector-II Service sub sector-III

Trade, Hotels, Financial and Business Community, Social and

Transport and Services Personal services
Communication

Segment-A Segment-C Segment-E

(I) Railways (I)Banking and (I)Public Administration
(Ii) Transport By Insurance , Financial and Defense
Other Means Services Segment-F
(Iii) Storage Segment-D (Ii) Other Services:
(Iv) Communication (Ii) Real Estate, Community Services,
Segment-B Ownership of Dwellings Health Services,
(V) Trade & Repair And Business Education Services,
Services Services/Professional Social Services
(Vi) Hotels and Services
Restaurants

Source: Central Statistical Organization, 2008. National Income Accounting of India .

As per National Product Classification for Service Sector, India (NPC-SS, 2010), Service
activities have been classified as under: (From Section 6 to Section 9)--
Section 6: Distributive Trade Services; Accommodation, Food and Beverage Serving Services;
Transport Services; and Electricity, Gas and Water Distribution Services Section 7: Financial
and Related Services; Real Estate Services; and Rental and Leasing Services. Section 8:
Business and Production Services Section 9: Community, Social and Personal Services-Public
Administration and other Services provided to the Community as a whole; Compulsory Social
Security Services, Administrative Services of the Government Education Services, Human
Health and Social Care Services.
In short, Service sector involves many vistas of activities like modern high productivity services
like medical, management and IT professionals, legal services and modern services such as
software, IT (internet), IT enabled, technology based services like BPOs, web-hosting, software
developing and designing, cellular phone services (telecommunication),Geographic Information
System, financial services and low productivity services like transport, domestic helps,
hawkers, personal services like hair dresser. Services can be stated as intermediate and final
consumption services, producer and household services, basic and non-basic services,
distributive services, financial services, performing arts services, real estate, renting and business
activities, public administration and social security, education, health and social work, other
community, social and personal services etc.
The present research paper uses the classification given by CSO in National Accounts System
because the State Statistical Abstract Haryana provides data as per this classification.
Sub sector –I Segment A- Transport, Storage, Railways, Communication (T, S, R, and C)
Segment B- Trade, Repair Services, Hotels, Restaurants (T, H, R).
Sub sector –II Segment C- Banking and Financial Services, Insurance Services (BFSI)
Segment D- Real Estate and Business/Professional Services (RE)
Sub Sector-III Segment E- Public Administration (PA) Segment F- Other Services (OTHS).*
*-include Community services, Health services, Education and Training, Social services.

4) Service Sector Growth in Haryana Economy:

Though Haryana is geographically a small State, the contribution of the State in the National
Gross Domestic Product at constant (2011-12) prices has been estimated to be 3.6 percent( Quick
Estimates,2016-17).There is high growth of all the sectors, especially the service sector, as
shown in Table I.
Table 1: Annual growth rate, Haryana (2013-14 to 2017-2018)
Sector 2013-14 2014- 2015- 2016- 2017-
15 16(P) 17(P) 18(A)

Agriculture 2.8 -2.3 3.8 6.4 2.4

& Allied
Industry 7.4 4.6 10.5 5.9 7.7
Services 10.1 10.4 9.3 8.8 9.4
GSDP 8.3 6.6 10.3 8.2 8.0
Source: Economic Survey Report. 2017-18
The structural change in Haryana has been in tune with the growth pattern of Indian economy
and global economy in terms of changing shares of sectoral output in the State domestic product.
The state economy has experienced a rise in the share of service sector. Service sector growth
became the main driver of the growth process of the economy of Haryana.

Figure I : Comparison of Per Capita Income of Haryana with All India

(2011-12 Prices)
180000

160000

140000
Haryana
120000

100000

80000
All India
60000

40000

20000

2014-15(P) 2015-16(P) 2016-17(A) 2017-18(Q)

Table 2: Sector wise Growth Profile of NSDP, Haryana (percent)

Period Primary Secondary Service Sector NSDP
Sector Sector
1965-66 to 1980-81 4.77 6.69 7.50 5.87
1980-81 to 1995-96 3.08 6.54 6.38 5.05
1995-96 to 2006-07 2.87 5.57 10.40 6.67
2006-07 to 2013-14 2.19 4.76 10.52 6.88
1965-66 to 2013-14 3.62 6.47 8.67 6.33
Source: Calculated, (ESO, Haryana)

The Table 2 shows that the long term growth of Net State Domestic product in Haryana has
been 6.33 percent. The growth rate of NSDP rose above 6 percent after 1995-96 and it sustained
after that. The growth rate of Service sector always remained above the Primary and secondary
Sectors. Haryana’s economic growth can be called Service –led growth, especially after 1995-96,
showing the impact of introduction of economic reforms.
The growth of the economy of Haryana is service led as is rapidly growing especially in service
sector, like transport, trade, real estate, IT, BPO. The economy of Haryana developed many
institutions which served as centres of growth like national level education/training institutions.
The service sub sectors can be classified into four sub sectors-Trade, Hotels, Restaurants
(T,H,R);Ttransport,Storage,Railways,Communication(T,S,R,C);Banking and Financial services,
Real Estate(BFSI); Public Administration and Other Services (PA,OS).As per the official
estimates, all these sub sectors grew at a fast rate and contributing to the growth of service sector
.in Haryana. During the period, 2012-13 to 2017-18, Financial, Real Estate & Professional
Services segment grew at the rate of 8.64 percent while Public Administration, Defence and
Other Services grew at the rate of 7.19 percent. T.P. Hill (1977) defines a service as a change in
the condition of a person or good belonging to some economic unit as a result of the activity of
some other economic unit.(Economic Survey Report,2017-18).Table IV and graph II show the
Relative share of three broad sub sectors namely- Trade, Hotels, Restaurants and Transport,
Communication; Banking, Finance and Insurance; Public Administration & Other services in
the service sector output for the period 1972-73 to 2013-14.It is found that up to 1980-81,the
largest sub sector was Banking, Finance and Insurance(BFSI), followed by Public
Administration & Other services(PA+OTHS) and then Trade, Hotels, Restaurants and
Transport, Communication (T,H,R+TR,COM). The year 1983-84, there was a sharp rise in the
share of Trade, Hotels, Restaurants and Transport, Communication (T,H,R+TR,COM) from
19.85 percent in 1980-81 to 36.49 percent in 1983-84, with a fall in the share of other two sub
sectors i.e. Banking, Finance and Insurance; Public Administration & Other services.By the end
of the year 2000, Trade, Hotels, Restaurants and Transport, Communication (T,H,R+TR,COM)
became the largest sub sector ( contributing more than 50 percent) in terms of its contribution to
service sector output. In Haryana, manufacturing sector remained the key driver of growth
during the 80s and 90s but till 1995-96. (Table II).After 1995-96, the fast growth of the economy
of Haryana has been powered by growth of service sector which was led by, IT, ITes, sector
along with Real Estate, Banking and Financial services, Business services. Gurugram emerged as
the third biggest centre after Hyderabad and Bangalore. The IT and ITes sector became the key
driver in the growth of service sector and played a significant role in raising the software exports
in Haryana from Rs. 890 crore (1999-00) to Rs.14000 crore (2006-07) to a very higher level
worth Rs. 42160 crore (2015-16) showing a rise of 6 to 6.5 percent over the previous
year.(NASSC,EPC). Gurugram is a major contributor. Gurugram led the highest IT exports with
more than 500 IT and IT-enabled service companies like Microsoft, HCL, Google, IBM,
Motorola, Samsung. Haryana falls in the category of level one States in the implementation of
core infrastructure projects of SWAN (State wide Are network for connecting all its offices to
block level. The growth of many industries in Haryana,especially in Gurugram prompted
providing the Outsourcing Solutions in Software, IT, service and sales through delivery facilities
and Call centres, domain expertise services and Graphics Animations and many more alike.
Moreover, the growth of e-Commerce (Amazon, Snapdeal), retail sector, transportation sector,
development of National Highways, Express ways (Physical Infrastructure) contributed to the
generation of service activities. Besides, the close proximity to the National Capital, Ease of
doing business, availability of skilled labour, better communication Network and Liberal
Entreprise Promotion Policies helped Haryana in the fast growth of service sector.

Table 3: Relative Share of Broad Sub Sectors in Service Sector, Haryana

year PA, Total

BFSI+RE OTHS** service
T,H,R+TR ** * sector
*,COM Sub sector Sub (I+II+III)
Sub sector -II sector -III
-I
 1974-75 17.83 46.61 35.54 100
1975-76 18.65 45.59 35.75 100
1990-91 39.77 36.89 23.332 100
1991-92 42.72 34.33 22.93 100
1992-93 38.69 37.99 23.31 100
1993-94 39.88 36.57 23.54 100
1994-95 46.83 32.43 20.72 100
1995-96 47.63 31.95 20.4 100
2010-11 58.44 25.6 15.94 100
2011-12 57.88 26.97 15.13 100
2012-13 56.93 27.46 15.59 100
2013-14 54.84 29.27 15.87 100
Source: Calculated. (Base year, 2004-05)
*T, H, R+TR,COM-Trade,Hotels,Restaurants+Transport,Communication
** BFSI-Banki8ng, Finance, and Insurance: ***PA+OTHS- Public Administration
+ Other services

Figure II: RELATIVE SHARE OF SERVICE SUB SECTORS IN SDP,HARYANA

100%
90%
80%
70%
60%
50% SUB SECTOR-III(PA,OS)
40% SUB SECTOR -II(BFSI)
30%
20% SUB SECTOR-I(TRSCTR,H)
10%
0%
 Figure III A : Pre-reform Period Figure III B: Post -Reform Period
7 Year Moving Average Growth 7 Year Moving Average Growth Rate
Rate Service Sector,Haryana Service Sector, Haryana (Percent)
10 (Percent) 16
9 14
8
12
7
6 10

5 8
4
6
3
2 4

1 2
0
0
1969-70
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90

1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Source: Calculated on the basis of data from ESO, Haryana

Figure IV : Growth Rate of Service Sector

7 Year Moving Average Growth Rate Service Sector,haryana
14

12
7 year moving
average growth rate
10 Service sector

6 Linear (7 year
moving average
growth rate Service
4
sector)
2

Source: Calculated on the basis of data from DESA, Haryana

Table 4: Percentage Shares of Various Sectors in Output, Haryana

(at Constant Prices 2004-05)
Year Primary Sector Secondary Sector Tertiary Sector
1970-71 60.13 20.95 18.92
1980-81 48.06 24.70 27.23
1990-91 39.64 29.78 30.57
2000-01 29.14 30.50 40.34

2010-11 16.87 29.56 53.57

2013-14
15.28 27.73 56.98
2014-15 14.1 27.0 58.9
Source: Calculated and Spliced at 2004-05 Prices. DESA, Haryana, Statistical Abstracts Various Years.

Table 5 : Compound Annual Growth Rates (CAGR) Service Sub Sectors

(1974-75 TO 2014-15) percent
Sub Sector 1974-75 to 1994-95 1994-95 to 2014-15 1974-75 to 2014-
(Period-I) (Period-II) 15
Railways 2.74 12.8 6.5
Transport by Other 12.8 8.15 10.18
Means
Communication 1.43 19.23 9.5
Transport, 10.13 9.29 9.5
Railways,
Communication
(Segment –A)
Trade, Hotels, 27.98 17.47 15.48
Restaurants
(Segment –B)
Service Sub sector-I 12.98 11.80 12.29
(Segment A+B)
Banking Insurance, 10.96 16.48 12.86
Financial,
(Segment-C)
Real Estate & 5.21 8.51 5.75
ProfessionalServices
(Segment-D)
Service sub sector-II 5.72 10.5 7.03
(Segment C+D)
Public 6.7 8.85 7.35
Administration
(Segment-E)
Other Services 4.2 9.56 6.07
(Segment-F)
Service sub sector- 4.79 9.40 6.3
III
(Segment E+F)
Service sector 7.65 10.96 8.76
(Sub Sector I-III)
(Segments A-F)
Source: Calculated by Regressing Data obtained from Statistical Abstracts (1970-71 to 2015-16), Haryana.
Significant at 5% Level.

Figure V:
Service Sub Sector Compound Annual Growth Rate
(1974-75 To 2014-15) Percent

Service sector I-III (Segment A-F)

Service sub sector-III(Segment E+F) 1974-75 to 2014-15
Other Services(Segment F)
Public Administration(Segment E)
Service sub sector-II (Segment C+D)
1994-95 to 2014-15
Real Estate & Professional Services…
Banking,Insurance & Financial…
Service Sub sector-I(Segment A+B)
Trade,Hotels, Restaurants(Segment B) 1974-75to 1994-95

Transport, Railways, Communication…

Communication
Transport by other means
Railways

0 5 10 15 20 25 30

The table 5 shows the compound annual growth rates of service sub sectors during the
period 1974-75 to 2014-15. It has been disaggregated into two time periods- Period-I (1974-75 to
1994-95) and Period-II (1994-95 to 2014-15).Segment –A of Service sub sector-I grew at the
CAGR of 10.13 percent and 9.29 percent during period I and II respectively and at 9.5 percent
during the entire period, of this, Railways (at 12.8 %) and Communication (at 19.23%) grew
much faster during period II. Segment B –Trade, Hotels and Restaurants experienced a very high
growth during both periods I (27.98%) & II (17.47%) and at 15.48 % during the entire period
and occupied first place. Segment C also grew at a faster rate during period II at 16.48%.
Segment F doubled its growth rate during period II at 9.56%.Comparing the three Service sub
sectors I, II, III, it is found that Sub sector I was able to maintain its growth rate at 12 percent
throughout and its growth remained faster of the other two sub sectors. The growth of service
sector also remained higher near to 8 percent, especially during period I at10.96 percent. This
trend of higher growth rates led to the rising share of Service sector in output. (Table 5.3).

In short, the Service Sector in Haryana has become the backbone of social and economic,
industrial development because of its fast growing pattern and its use as intermediate and final
use. It has attained the place of maximum contributors to state output and income to the people.

Figure VI :Relative Share of Three main Sub Sectors in Service

GSDP,Haryana

100%

90%
Sub sector-III(Public
80%
Administration+ Other
70% services)
60%

50%

40% Sub sector-II(Banking -

Insurance+ Real
30%
Estate)
20%

10%

0%
Sub Sector-
I(Trade,Hotels
&Transport,Storage,Co
mmunication)
 Figure VII : Size of Marketable
and Non-marketable
Services, Haryana
(1970-71 to 2014-15)
100000
Market
90000 able
80000 services
70000
Crores Rupees

60000
50000
40000 Non-
30000 market
20000
able
services
10000
0
1970-71
1976-77
1983-84
1988-89
1993-94
1998-99
2003-04
2008-09
2013-14

Part B

Contribution of Service Sub Sectors to Growth in Haryana: It is essential to understand the

relative significance of share and contribution to growth by a sector. While, estimating the
Contribution of Service sub sectors in Service sector Growth in Haryana, “a distinction is made
between the share of a sector in GSDP/NSDP and its contribution to growth.”-Nandkarni, 2009.
“The correct statistical way of identifying the leading sector is not by looking at the current share
of the sector or its relative growth that has produced the current share of the sector but by
looking at the contribution of the sector to aggregate growth….” Nandkarni, 2009. In case of
service sector in Haryana, its contribution to output growth always remained higher than its share
in output (NSDP) and after 1995-96, the contribution of service sector to output growth
consistently increased. The growth of Intermediate Services contributed much to the growth of
Service Sector in Haryana.

Table 6: Comparison of Sectoral Shares and Contribution to Growth

 7- Year Moving Average (Percent)
Year Service Sector Share Service Sector
Contribution
1968-69 19.44
1970-71 20.05 25.31
1974-75 22.94 43.56
1980-81 26.37 35.34
1984-85 27.97 44.71
1993-94 31.26 40.58
1995-96 32.97 50.01
2003-04 45.07 62.20
2006-07 49.22 66.36
2008-09 52.50 73.09
2010-11 55.51 78.60
Source: Calculated.

The Table 6 compares the relative share and contribution of sectors to growth in Haryana during
the period 1965-66 to 2014-15. The calculations have been done by converting the data into 7
years moving average as per Nandkarni Methodology. The Service sector experienced a
consistent rise in its share to State Domestic Income since 1965-66. The Contribution of Service
Sector to growth depends on to factors a) its relative share in State Domestic Income; b) its
growth rate. The Contribution of Service Sector in Haryana remained above the share because of
higher growth rate. In 1970-71, the share was jus t20.05 % and Contribution to growth became
25.31 %. In 2010-11, the share rose to 55.51 % while the Contribution rose to 78.60 %.
Therefore, the Service Sector has been the driving sector of growth in Haryana. These results
match with the results of (Nandkarni, 2009) Indian economy in this regard. Within Service
Sector, the key driving sub sectors in the growth of service sector in Haryana are- Trade, Hotels,
Restaurants as their contribution to growth remained higher than their share in service sector
output throughout the entire period 1970-71 to 2013-14, especially during 1977-78 to 1990.
Banking and Financial services and Insurance (BFSI), gained momentum after 1990 and its
contribution continued to be more than its share. Estate and Public Administration& Other
services whose contribution to growth remained less than their share in the service sector except
a few years.

The table 7 shows that during the 1980s, the contribution of Secondary sector was highest
because during this period, many new industries were started, the share of this sector in state
output rose along with rising growth rates. During the post reform period, it was the Service
sector, which picked up faster growth rate because of many new services like IT & IT-enabled
Services, financial services, real estate services and business services. In case of service sector in
Haryana, its contribution to output growth always remained higher than its share in output
(NSDP) and after 1992-93, the contribution of service sector to output growth consistently
increased as compared to its share and as compared to the contribution of other two sectors in
output growth (NSDP).The results are stated in table nos.4.20a, 4.20b and 4.20c.The contribution
of each sector to growth depends on its share in State domestic product and its growth rate. The
contribution of Primary sector exceeded the other two sectors till the year 1977-78 because its
share was quite larger than other two sectors, Secondary sector and Service sector. Afterwards,
the contribution of Service sector remained greater than that of Primary and Secondary sectors
till 1988-89. But the higher growth rate and ever rising share of Service sector both contributed
to the enhanced contribution of Service sector. This was 78.60 percent in 2010-11 as against 5.9
percent contribution of Primary Sector and 18.41 percent contribution of Secondary sector. This
trend is clearly visible in the Tables 4.20a &4.20b and figures 4.15a-4.15c.
Table 7: Contribution to Growth in Haryana
7 Year Moving Average (2004-05 Prices)
Year Prim Second Servi Year Prim Seconda Servic
ary ary ce ary ry Sector e
Sect Sector Sect Secto Sector
or or r
Pre- Post
Reform Reform
Period Period
1968-69 60.2 22.6 21.1 1990-91 40.1 28.5 35.7
1969-70 50.4 28.3 25.3 1991-92 49.9 25.6 27.5
1970-71 22.8 45.2 42.2 1992-93 20.7 35.9 44.9
1971-72 54.3 21.9 26.6 1993-94 29.1 31.0 40.5
1972-73 26.1 38.9 41.1 1994-95 10.9 33.7 56.5
1973-74 27.2 34.8 43.5 1995-96 13.0 38.1 50.0
1974-75 36.2 29.8 36.7 1996-97 18.5 25.8 57.8
1975-76 23.3 35.3 43.1 1997-98 15.3 22.0 65.1
 1976-77 45.4 25.4 32.7 1998-99 8.0 22.2 74.4
1977-78 43.8 28.1 31.2 1999-00 9.6 20.8 73.5
1978-79 33.0 37.0 35.3 2000-01 6.3 26.7 71.5
1979-80 29.6 37.7 37.6 2001-02 12.8 25.7 63.8
1980-81 28.0 40.4 36.9 2002-03 8.8 24.5 69.3
1981-82 28.0 40.4 36.9 2003-04 10.5 29.7 62.2
1982-83 26.7 45.8 32.1 2004-05 8.3 30.1 63.6
1983-84 35.6 36.6 28.2 2005-06 10.7 25.3 65.4
1984-85 -0.69 56.6 44.7 2006-07 8.9 25.5 66.3
1985-86 33.0 40.4 31.8 2007-08 7.7 22.7 71.3
1986-87 29.3 40.0 36.7 2008-09 8.9 20.4 73.0
1987-88 34.2 40.5 30.0 2009-10 9.1 19.9 72.5
1988-89 33.9 36.6 34.1 2010-11 5.9 18.4 78.6
1989-90 34.8 31.2 39.6 2011-12 5.0 15.0 80.0
Source: Calculated for the Period 1965-66 to 2014-15.
Data from DESA, Statistical Abstracts, Haryana.

Table 8: Comparison of Sectoral Shares and Contribution to Growth, Haryana

Year Primar Primary Seconda Secondary Service Service
y Sector ry Sector Sector Sector
Sector Contributio Sector Contributi Share Contribution
Share n Share on
1970-71 57.17 50.45 22.28 28.39 20.05 25.31
1980-81 47.2 29.6 26.43 37.07 26.37 35.34
1993-94 37.28 29.11 31.45 31.05 31.26 40.58
1995-96 35.19 13.06 31.84 38.15 32.97 50.01
2003-04 27.16 10.57 29.16 29.78 45.07 62.20
2006-07 22.11 8.98 28.66 25.56 49.22 66.36
2008-09 19.93 8.9 27.57 20.48 52.50 73.09
2010-11 18.12 5.91 26.36 18.41 55.51 78.60
Source: Calculated for the Period 1965-66 to 2014-15 (7 Year Moving Average).
Data from DESA, Haryana.
Table 9 : Decadal Contribution to Growth, Haryana
Decade Primary Sector Secondary Sector Service Sector
1960s 55.35 25.52 23.24
1970s 36.31 32.51 35.81
1980s 28.48 40.63 35.21
1990s 21.55 28.41 52.64
2000s 8.949 24.51 68.9
Source: Calculated for the Period 1965-66 to 2014-15 (7 Year Moving Average). Data from DESA,
To Sum up, it is only the Service Sector which has an increasing share and contribution to
growth, with the contribution to growth always higher than its share in output and dominating the
other two sectors after 1988-89.The 7 year moving average growth rate of Service Sector has
always remained much higher than the growth rate of output (NSDP) since 1969-70 to 2010-11.
(Figure 4.15d). It was much higher and was double digit growth rate constantly after 1997-98
leading to a very high contribution to growth above 70 percent. Haryana growth became service -
led since the beginning of 90s because its contribution to growth remained higher than its
relative share due to its consistent higher growth. After 1993-94, the higher growth rates of
Service Sector made its contributions much higher than Primary and Secondary Sectors. The
results match with the results of Nandkarni, Avdoot (2009) regarding India’s Service led growth,
mentioned in ‘static contribution of Service to growth. Therefore a) Haryana’s economic growth
can be called Service –led growth; b) Productivity based externalities from services to
Manufacturing and Agriculture lead to higher growth rate of these sectors. The first point that
Haryana’s economic growth can be called Service –led growth is proved above and the second
point offers further areas of research in Haryana.

Figure VIIII: Share V/s Contribution to Growth, Service Sector

90 (7-year moving average)
80
Service
70 SectorShare
60
Percent

50
Service
40 Sector
30 Contribution

20

10

Figure IX A : Share V/S Figure IX B: Share V/S

Contribution, Railways. Contribution,communication
RAILWA Comm
(7year Moving Average) (7 Year Moving Average)
YS unicati
6 SHARE 6 on
SHARE
IN IN
5 SERVIC 5 SERVI
E CE
SECTOR SECTO
4 4 R

3 3
percent
percent

2 2 Comm
RAILWA
unicati
YS
1 CONTRI 1
on
CONT
BUTION RIBUTI
TO
0 GROWT 0
ON TO
GROW
TH IN
1974-75
1977-78
1980-81
1985-86
1988-89
1991-92
1994-95
1997-98
2000-01
2003-04
2006-07
2009-10

H IN
1974-75
1977-78
1980-81
1985-86
1988-89
1991-92
1994-95
1997-98
2000-01
2003-04
2006-07
2009-10

SERVI
-1 SERVIC
E -1 CE
SECTO
SECTOR R
-2
 Figure: IX C : Share V/S
Transpo
Contribution, Transport By Other Means rt by Figure IX D : Share V/S
(7 Year Moving Average) other Contribution, Trade,Hotels.
60 means (7 Year Moving Average)
SHARE 250
50 IN
Trade,HOTELS
SERVICE
SHARE IN
40
SECTOR 200 SERVICE
SECTOR

150
percent

30

percent
Trade,HOTELS
20 Transpo
rt by
100 CONTRIBUTION
TO GROWTH IN
other SERVICE
10 means
50 SECTOR
CONTRI
BUTION
0 TO
GROWT
0
1974-75
1977-78
1980-81
1985-86
1988-89
1991-92
1994-95
1997-98
2000-01
2003-04
2006-07
2009-10

H IN

1974-75
1978-79
1984-85
1988-89
1992-93
1996-97
2000-01
2004-05
2008-09
SERVICE
SECTOR

Figure IX F: Share V/S Contribution

Figure IX E : Share V/S (Public Administration)
Contribution, Banking And (7year Moving Average)
Public
Finance Banking,Fi Administr
14
18
(7year Moving Average) nance,Insu ation
16
rance 12 SHARE IN
14
SHARE IN SERVICE
12 SERVICE 10 SECTOR
SECTOR 8
percent

Percent

10

8
6
6
Banking,Fi 4
4 nance,Insu Public
2 rance 2 Administr
ation
0
CONTRIBU 0 CONTRIB
TION TO
UTION TO
1974-75
1976-77
1978-79
1980-81
1984-85
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
1974-75
1977-78
1980-81
1985-86
1988-89
1991-92
1994-95
1997-98
2000-01
2003-04
2006-07
2009-10

GROWTH GROWTH
IN SERVICE IN
SECTOR SERVICE
SECTOR

Figure IX H: Share v/s Contribution,

Other Services
Figure IX G : Share v/s (7 year Moving Average) Other
6
Contribution, Real Estate Services
35 SHARE IN
Communicat SERVICE
5 ion SHARE IN 30 SECTOR
SERVICE
SECTOR 25
4
20
percent

3
15

2 Communicat Other
10
ion Services
CONTRIBUTI CONTRIBUTIO
1 ON TO 5
N TO
GROWTH IN
SERVICE GROWTH IN
0
0 SECTOR SERVICE
SECTOR
1974-75
1977-78
1980-81
1985-86
1988-89
1991-92
1994-95
1997-98
2000-01
2003-04
2006-07
2009-10

-1
 The above figures IX A to IX H indicate clearly that the key driving sub sectors in the growth
of service sector in Haryana are- Trade, Hotels, Restaurants as their contribution to growth
remained higher than their share in service sector output throughout the entire period 1970-
71 to 2013-14, especially during 1977-78 to 1990. The sub sectors which got robust after
1990-91(after economic reforms) are-Railways Transport by other Means, Storage, and
Communication sector (after 1994-95). Another important sub sector is ‘Banking and
Financial services and Insurance’ (BFSI), which gained momentum after 1990 and its
contribution continued to be more than its share. Two sub sectors namely, Real Estate and
Public Administration& Other services whose contribution to growth remained less than their
share in the service sector except a few years. To Sum up, Haryana’s economic growth can
be called Service –led growth, especially after 1995-96.

The service sector growth in Haryana has been mainly concentrated in districts falling in the
National Capital Region (NCR) i.e. Gurgaon, Faridabad and Sonipat. Gurgaon has seen the
highest, 16.45 percent per annum, rate of growth in service sector from 2000-01 to 2011-12 and
has rapidly emerged as the hub of knowledge and knowledge-based industry in India. In
Faridabad services sector has grown at an average annual growth rate of 14.3 percent during the
same period. In contrast, in districts such as Fatehabad, it has grown at even less than 9
percent.The benefits of higher growth in Haryana remained confined to a few districts only.The
variations in the overall growth and service sector growth among the various districts of Haryana
can be attributed to many factors like proximity to NCR, higher level of development of
infrastructure, spread of banking and other financial institutions, National Highways, Higher
literacy rates, more levels of Private Investments in Gurugram and Faridabad.

 After 1995-96, the fast growth of the economy of Haryana has been powered by growth
of service sector which was led by, IT and IT-enabled sectors along banking and financial
services, Trade and Transport with Real Estate, Banking and Financial services, and
Business services.
 Out of the three sub sectors, the sub sector I (Transport, Storage & Communication and
Trade, Hotels) occupied the largest share in Service sector in Haryana.
 The sub sectors which got momentum in the 90s are-Railways, Storage, and
Communication sector, Trade and Repair Services, Hotels & Restaurants. Transport by
other Means, Real Estate and Public Administration and Other services whose
 contribution to growth remained less than their share in the service sector except a few
years.
 There has been ‘Growth-inducing Structural Change’ within Service sector reflected in
terms of the Fast growing service sub sectors which experienced higher growth rates,
increase in productivity with rising share in Service output and employment. The share
of intermediate services rose from 70% in 1979-80 to 85% in 2014-15 (including 24%
points rise in the share of sub sector-II. (BFSI).
 Almost all the Service sub sectors experienced a higher growth rate of output. There has
been fast growth of Intermediate Services during 1974-75 to 2014-15.
 Transport, Storage, Railways, Communication (segment A) by 9.5%;
Trade, Repair Services, Hotels & Restaurants (segment B) by 15.48%;Banking, Finance
& Insurance (segment C) by 12.86%; Real estate & Business services (segment D) by
5.75%.
 Gurugram emerged as the third biggest centre after Hyderabad and Bangalore. The IT
and IT-enabled sector became the key driver in the growth of service sector.
 The close proximity to the National Capital, Ease of doing business, availability of
skilled labour, better communication Network helped Haryana in the fast growth of
service sector. Although, there are inter-district variation in the growth of Service sector
in Haryana, yet each of the district experienced more than 8% annual average growth
rate during 2000-01 to 2011-12.
 In short, the Service Sector in Haryana has become the backbone of economic growth.
“When Service sector expand and grow in terms of Intermediate Services, its growth
become sustainable”, Nandkarni, A. (2009). Haryana’s Service –led growth like India’s
Service-led growth can be been called sustainable because of fast growth of intermediate
services which provide input services to other economic sectors.
 Regarding Service Sector manpower requirements, Haryana has very less number of
institutes which provide Vocational Education and Training For Retail Sector, Logistics,
Banking, Insurance Communication, Hospitality, Stock Management and alike.
 Moreover, the quality of education and training in Haryana is not up to the mark.
 In short, the Service Sector in Haryana has become the backbone of economic growth.
“When Service Sector expand and grow in terms of Intermediate Services, its growth
 becomes sustainable”, Nandkarni, A., (2009). Haryana’s Service –led growth like India’s
Service-led growth can be been called sustainable because of fast growth of Intermediate
Services which provide input services to other economic sectors.

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