Jobless Growth in India’s Services Sector

A Descriptive Study

Amita Marwha1

Abstract
The wave of Economic reforms appeared on India’s shores in 1991, much after china’s and other
south East Asian countries such as Malaysia, Singapore and Hong Kong. Due to economic
reforms, however delayed they were, Indian economy were able to brake the shackles of heavy
protectionism and license raj. Economic reforms (1980s reforms and 1991 reforms) did bring out
the economy from the shameful reference of so called “Hindu Growth rate” of witnessing almost
stagnant 3.5% GDP growth rate. Since independence India being a country with a demographic
reality which are both challenging and unique, has a perennial problem of providing employment
to millions of job seekers. The other fact which is unique to India only is that services sector
contribution into growth rate has risen sharply in the developing countries’ economies like India
in nineties, and, therefore, have become a self propelling and dynamic sector in the accelerated
growth in the economies.

This study focuses on services sector as a vector of Indian globalization. The impact of new
economic reforms which acted as a catalyst for service sector is to be reviewed as they opened
door for the growth rate of the country and made India a destination of FDI inflow and out flow
but that increased growth rate is not translated in providing employment to the millions.

Key words- Economic Reforms, Service Sector. Hindu Growth Rate, Globalization

I. INTRODUCTION
“The objective of India’s development strategy since independence has been to establish a
socialistic pattern of society through economic growth with self-reliance, social justice
and alleviation of poverty”2. These objectives were to be achieved within a democratic
political framework using the mechanism of a mixed economy where both public and
private sectors co-exist. “The industrialization strategy articulated by Professor
Mahalanobis during the Second Five Year Plan (Nehru-Mahalanobis Plan) placed

1
Lecturer,Deptt. of Economics,Isabella Thoburn College,Lucknow.

2
Indian Planning Process Essay; Http://W ww.A ntie ssay s.Com/Free- Essay s/Indian-P laning-P roce ss-608641.Html

1
emphasis on the development of heavy industries and envisaged a dominant role for the
public sector in the economy”3. The objectives of industrial policy were: to increase
growth rate, self-reliance, effective policy to reduce foreign interference, to lay strong
foundation for building up of indigenous capacity, encouraging small scale industry,
bringing about balanced regional development, prevention of concentration of economic
power, reduction of income inequalities and control of economy by the State. The
industrialization strategy underlying the first three plans assumed that once the growth
process gets established, the institutional changes would ensure that benefits of growth
trickle down to the poor. As a result government emphasized on growth enhancement and
reduction in poverty alleviation and no separate policy was initiated for the employment
generation as poverty alleviation and employment generation were taken as the automatic
effects of the growth process. But doubts were being raised on the effectiveness of the
trickledown theory as agriculture growth remained constraint due to perverse institutional
conditions. During the last twenty years, there has been tremendous growth in the
contribution of services sector in India. In1980 total contribution of service sector was 38
percent of GDP, while in 2010 this share has increased to 57 percent .This dramatic
development has taken place simultaneously with the substantial decrease in agriculture
contribution in the GDP of the country, which stood at 35 percent during 1980 has
declined substantially to 14 percent in 2010.

During the last fifty years economic reforms have been introduced in the world economies
in different time period and their impact on growth and employment is widely researched
topic among economists, social scientists and various other interdisciplinary fields. Some
economist expresses serious doubts on its sustainability while some think it as a byproduct
of the manufacturing sector, some on the contrary is asking for more research on this
subject of net invisible, which although contributes about 60% in the Indian GDP but lag
far behind as far as employment is concerned.

Review of Literature

3
http://interestingnewsfromallover.blogspot.in/2011/03/how-india-progressed-from-one-among.html

2
 Aristotle in one of his writings Ethica Nicomachea (1132a-1133b) mentioned the problem
associated with the puzzle i.e. “weather a value of the product is determined by its intrinsic
quality or depends on subjective evaluation by the users of the product”. This piece of puzzle
contained the seeds of alternatively looking at product.

Mercantilism which dominated the thinking of Economics of 16th and 17th century had a very
narrow view of the functions of economy. Mercantilists like Jean Bodin (1530-1596), Thomas
Mun (1571-1641) gave importance to the accumulation of the gold, that is in the possession of
the country was considered as the real wealth. Although services was undermined by most of the
mercantilists, some contemporary mercantilists like William petty (1623-1687) of England and
Pierrele Peasant De Boisguillbert( 1646-1714) of France evolved a comprehensive framework of
economic analysis and attached same importance to the production of goods and services
(Delauney and Gadrey 1992).

The role of services in the development process is marked by a long controversy. In fact, the
debate dates back to Adam Smith who was of the view that services ‘perish in the very instant of their
performance and seldom leave any trace or value behind them’4. As such, services have drawn for
themselves a tag of unproductive activity from the classical economists. According to Simon Kuznets
“none of the activities in services sector represents in any significant way the production of
commodities each renders a product that is tangible and not easily embodied in a lasting and
measurable form” 5

While services have long come out of such categorization, the debate seems to have shifted its
focus preponderance of services in the developed world to its level of income ,they recognized the
low productivity in services as a factor behind the faster employment growth in services than in
industry. Fuchs (1965) also came to a similar conclusion for the US economy in the 1960s. Such
productivity differentials formed the basis of the well-known ‘cost disease’ hypothesis of services
propounded by Baumol (1967). Be that as it may, the growing role of services in national economies is
clear and unequivocal particularly for the developed world, which could better be labeled as post-

4
Sanjay K. Hansda;Sustainability of Services-Led Growth: An Input Output Analysis of the Indian Economy

5
Kuznets Simon; Modern Economic Growth ;chapter ‘trends in industrial structure’; page 143

3
industrial society (Bell, 1967). Services like shipping, civil services, defense services was included as
a part of national income by William Petty in his book ‘Political Arithmetic’ (1976)

In the post reform period India did experienced robust economic growth rate which although was
lower than china’s but made India the 12th largest economy in the world by nominal value and 4 th
largest by purchasing power parity. It also resulted in lower inflation and increase in foreign
investment. Foreign portfolio and direct foreign investment have increased since reform began in 1991
and have contributed to healthy foreign reserves.( $ 85 billion in 2003) and a moderate current deficit
of about 1%(2002 -03).

Table1: Trend for India’s GDP growth rate from 1960-2009

Year Growth Rate (%Age)

Pre Reform 1960-1980 3.5%
1980-1990 5.4%
Period
Post Reform 1990-2000 4.4%
2000-2009 6.4%
Period
Source-IMF publication international financial statistics yearbook, 2008

Figure 1: Trend for India’s GDP growth rate from 1960-2009

Chart Title
0.07
0.06
0.05
0.04 Year
Axis Title

0.03 Growth Rate (%Age)

0.02
0.01
0
Pre Reform Post Reform
Period Period

The impact of economic reforms on employment in general is said to be divergent. There is

heavy dependency on unorganized sector by labour force for their employment, income and

4
livelihood.

Table 2: Pre and Post Reform Macro Scenario of Employment on CDS Basis

All India Pre reform Post reform(Million)

1983 1993-94 1999-2000 2004-05 2009-10
Population 718.20 894.01 1003.73 1092.83
Labour force 263.82 335.97 363.33 419.65 428.9
Work force 239.49 315.84 336.75 384.91 400.8
Unemployment 9.22 6.06 7.32 8.28 6.53

rate
No. of unemployed 24.34 20.13 26.58 34.74 28.0
Source: Databook for DCH; 22nd April 2013

Figure 2: Pre and Post Reform Macro Scenario of Employment on CDS Basis

1400
1200
1000
800 Population
600 Labour force
400 Work force
200
No. of unemployed
0
1983 1993-94 1999- 2004-05 2011-12
2000

In the Indian context, the increasing share of services in GDP has been a source of controversy
ever since independence. Rao (1954) discounted it as an indicator of development in the context
of a developing country. Nevertheless, the dominance of services was traced back to factors such
as the increasing role of government in economic planning and execution, the historical role of
urban middle class in wholesale trade and distribution, and the demonstration effect of high
income countries (Panchamukhi, et al, 1986). The sustainability of a service-led growth was
once again questioned by Shah (1987) and Mitra (1988). Bhattacharya and Mitra (1989; 1990)
also felt that the service-led growth could have serious implications for inflation, income
distribution and balance of payments since income (employment) might have grown faster than

5
employment (income) in the organized (un-organized) services. Besides, ‘…income from service
sector is growing much in excess of the demand generated for the services by the commodity
sector’ (p. 2449).
However, in view of the similar pattern of growth both in net material product and NDP during
1950-51 to 1983-84, Datta (1989) refuted the view of overgrowth of the services sector. Given
the limited role of services in employment generation and absorption, policy intervention was
advocated in some circles (Mazumdar, 1995, and Arunachalam and Kumar, 2002).
Bhowmik (2000) highlighted the fact that about 50 per cent industries in the Indian economy
were direct and direct plus indirect services intensive in 1991-92. Besides, services appeared to
be the most growth-inducing and generated a higher value added in other industries than in their
own. The process of economic development has been associated with structural change. The
pioneering work of Fisher (1935), Clark (1940) and Kuznets (1971) postulates a set of stylized
facts relating to the now industrialized countries. They suggest that once countries have
industrialized and reached an advanced stage of economic development, the share of the
manufacturing sector declines, while the share of the services sector increases. Rowthorn and
Wells (1987) provide a similar description of the patterns of structural change in today’s
advanced economies, focusing on employment. There is a wide consensus in the literature this
increasing share of the services sector in total output and employment is attributable to high-
income elasticity of demand for final product services, contracting out of services from firms in
the manufacturing sector, and increased international trade in services. A section of the literature
also suggests that the increasing share of services in total employment is attributable to a slow
increase in productivity, relative to the industrial sector [Rowthorn and Wells, 1987; Baumol,
1967. In the context of this literature on structural change, the case of India is unusual.
Table 3 shows that during the period from 1983 to 2004-05, the share of the agriculture in total
employment declined by about 12 percentage points. On the other hand, the share of the
industrial and services sectors in total employment increased by about 5 and 7 percentage points
respectively. Which indicates that the workforce has shifted somewhat more towards services
than to industry, it is not commensurate to the case of total output. It implies that during the last
two decades, the productivity of services has risen relative to industry. This contradicts Baumol’s
‘Cost Disease’ hypothesis.

6
 Table 3: Sectoral Shares in Total Employment: 1983 to 2004-05

Pre Reform Period Post Reform Period

Sector 1983 1987-88 1993-94 1999-00 2004-05

Agriculture 68.6 65 64.7 59.9 56.4

Manufacturin 13.8 15.9 14.8 16.3 18.8

g
Services 17.6 19.1 20.5 23.9 24.8

Source: National Sample Survey Organization, Surveys on Employment

Figure 3: Sectoral Shares in Total Employment: 1983 to 2004-05

80

70

60

50
Agriculture
40
Manufacturing
30 Services

20

10

0
1983 1987-88 1993-94 1999-00 2004-05

This relative increase in the productivity of services is likely to affect the nature of employment
being created in the sector in terms of wage and non-wage attributes. This is especially
interesting given that services comprise a set of highly heterogeneous economic activities. For
some observers, the dramatic growth of the services sector in India reflects rapid strides made by
educated professionals employed in business process outsourcing, software, financial and
telecommunications services. In contrast, some others see the growth of services as the

7
expansion of the unorganized sector as an employer of last resort because economic growth has
not created sufficient employment opportunities elsewhere. This suggests that the nature of
employment generated is likely to vary across different sub-sectors of services.

There is a study by Ghose (1999) which constructs an ‘employment quality index’ for India by
analyzing employment growth in four categories: regular wage employment in the organized
sector, self-employment in the organized sector, regular wage employment in the unorganized
sector, and casual wage-employment. He shows that during the period from 1977-78 to1993-94;
quality of employment was higher in services than in agriculture and industry.

Similarly, a study on the OECD economies reveals that, relative to the industrial sector, the
services sector is characterized by higher average earnings, longer average job tenure and higher
job satisfaction [OECD, 2001]. These studies, however, do not base their results on rigorous
econometric analysis. Moreover, they view the services sector as a composite whole, which is
not very meaningful given that it is extremely heterogeneous.

Gordon and Gupta (2004) study empirically estimate the growth of service sector in India.
Gordon and Gupta shows that on demand side high growth of services output in the 1990s was
mostly due to factors such as increasing input usage of services by other sectors i.e. higher
domestic demand, higher foreign demand for services and higher income elasticity for final
demand for services. They measure the increasing usage of services in other sectors through
changes in the input output coefficients. The matrices for different years show that that the use of
the service sector input to industry increased by about 40% from 1979-80 to 1993-94. But the
role of elastic final demand for services was found to be difficult to measure since it is difficult
to split the growth in private final consumption expenditure into expenditure on goods and that
on services. None the less they use a rough estimate and conclude that there is a sharp growth in
the final demand services in the 1990s. Alternatively, the increased usage of services by
manufacturing sector has been estimated.This heterogeneity, while not explicitly analyzed, is
emphasized in a recent study on India by Mazumdar and Sarkar (2008). Using earnings data
for the period from 1983 to 1999-2000, they show that the gap between low and high earners is
large in the services sector, relative to the industrial sector.

8
The services sector scenario in India is complex and is characterized by uneven development in
different types of services and across regions. In global perspective, the growing importance of
services sector within the Indian economy cannot be denied. The growth in output in the sector
in recent times has mostly come from the rapid development of skill intensive services in the
information technology (IT) and professional services segments, mostly oriented towards the
external market. However, not all services have shown equal dynamism in their growth. The star
performer has been IT and IT enabled services (ITES), while other services that serve as crucial
inputs to workings of the national economy (as support for agriculture and industry have not
developed as expected When it comes to exports India’s boom is attributed to then IT and ITES
sectors, which grew by 485 percent between 2000 and 2006, while their output grew by 339
percent in the same period. As per the World Trade Organization (WTO) data, India’s total
services exports grew by 354 percent during 2000-06. The destination for IT and ITES exports
has largely been the US followed by the EU. Asia-Pacific region and the Gulf States are
expected to become increasingly more important markets for Indian IT and ITES firms, though
the US will continue to be the dominant market.

III. ECONOMIC REFORMS AND INDIA’S GDP GROWTH RATE.

India which is one of the largest agricultural- based economies remained closed until 1990s.By
1991 there was growing awareness that inward looking import substitution policy, overvalued
exchange rate coupled with tight monetary policy and high fiscal deficit resulted in high cost
domestic industrial structure.
Hence the new economic policy reforms of 1991 stressed on import liberalization which will
provide domestic firms access to capital equipment embodied with new technologies, better
intermediate inputs and expands their choice set to act. A freedom to invest and enter the market
increases the extent of competition puts pressure on the incumbents to upgrade their technologies
often through imported machinery. With the entry of new firms in a more competitive market,
the process of creative destruction goes to work. Efficient firms drive out inefficient firms,
factors gets reallocated to more productive use increasing the overall productivity of factors in
the economy. Due to technology transfer, productivity in industry and service sectors grows
rapidly attracting labor from agriculture. The re-allocation of labor from agriculture to more

9
productive sectors contributes further to growth. This process also makes the workers left behind
in agriculture better off because the real wage rises as labor markets tighten in agriculture.

Table 4: Real GDP growth rate-pre and post reform period India 1980-2010

Year Real GDP Growth Rate

Pre reform period

1980-81 7.2
1981-82 5.6
1982-83 2.9
1983-84 7.9
1984-85 4.0
1985-86 4.2
1986-87 4.3
1987-88 3.5
1988-89 10.2
1989-90 6.1
1990-91 5.3
1991-92 1.4
1992-93 5.4
1993-94 5.7
Post reform period
1994-95 6.4
1995-96 7.3
1996-97 8.0
1997-98 4.3
1998-99 6.7
1999-00 8.0
2000-01 4.1
2001-02 5.4
2002-03 3.9
2003-04 8.0
2004-05 7.1
2005-06 9.5
2006-07 9.6
2007-08 9.3
2008-09 6.7
2009-10 8.6
2010-11 9.3
2011-12 6.2
2012-13 5.0

10
 Source: various NSSO rounds, planning commission, Economic surveys

Figure 4: Real GDP growth rate-pre and post reform period India 1980-2010

Real GDP Growth Rate

12
8
4
0
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
8 0- 82- 84- 86- 88- 90- 92- 94- 96- 98- 00- 02- 04- 06- 08- 10- 12-
19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20

Real GDP Growth Rate

In the post reform period India’s GDP did made a stride in the upward direction and service

sector was the major contributor in this .But India did see the occasional increase in its GDP in

1980-81,1983-84,1988-89 in which growth rate reached to 10%.

This was due to the factors like :

1. High rate of investment went from about 19% of GDP in the early 1970s to nearly 25%
of GDP in the early 1980s.
2. Dani Rodrik, a well known growth economist at Harvard, and Arvind Subramanian, an
Indian economist at IMF, continuing a line of work pioneered by American economist
Brad Dlong, has argued that the acceleration in Indian economy really came before 1991.
In any event, faster growth in 1980s can be explained simply of catching up because
there was severe recession in 1979 due to oil shock.
3. One example of liberalization was known as ‘Broad-Banding’. In the earlier period, if
private –sector entrepreneur was given permission to produce something; he produced
exactly that and nothing else. Broad bending meant that as long as he didn’t use more

11
 raw materials, he was entitled to make something else.

IV .RELATIONSHIP BETWEEN EMPLOYMENT AND OUTPUT GROWTH:

In economics literature the relationship between employment and economic growth can be best
described under the background of economic growth theories, business cycle theories and
Okun’s law (1962). Economic growth is the principal yardstick of macroeconomic performance.
The three main factors or component of economic growth are the

 Capital accumulation results from an increase in capital stock and improved human
resources. Three components of capital accumulation are:

 Physical capital stock

 Infrastructure

 Human capital

 Population and eventually labor force growth-shifts in PPF. It includes effects of increase
in physical and human resources on PPF.

 Technological Progress –L/K augmenting. It can be of three types

 Neutral

 Saving

 Labour saving

 Capital saving

 Augmenting

 Labour -augmenting

12
  Capital- augmenting

According to Kuznets six features are present in the growth process of every developed nation
are:

I. High rates of per capita output and population growth.

II. High rates of total factor productivity increase.

III. High rates of economic structural transformation.

IV. High rates of social, political and ideological transformation.

V. International economic outreach for markets and raw materials.

VI. Limited international spread of this economic growth to 1/3 of the world’s
population.

Total Factor Productivity-Contribution of TFP Growth to GDP Growth (%)

TFP is the output per unit of all inputs and measures the efficiency with which all inputs are
used. With rapid economic growth usually occurs an increase in productivity.
There are normally two sources of such productivity increase.

 One derives from the shift of labour from low-productivity agriculture to relatively higher
productivity economic activities in manufacturing and services.
 A second source of productivity increase is derived from what is called ‘Total Factor
Productivity’ which refers to improvement in output for reasons other than increase in
inputs of capital or labour. It is also known as Solow residual, which means techniques
by which labour and capital combine and usually it is estimated as a residual of increase
in output that cannot be explained by increases in physical quantities of labour and
capital.

13
  There are many possible factors that affect TFP growth. Whether they have had a
significant effect on TFP growth is an important question for practical and policy
purposes. degree of openness of the economy; foreign direct investment (FDI); R&D
activities; change in economic structure; economic and political stability; economy of
scale; and education and job training are some of the factors that affect TFP

Table-5:Total Factor Productivity Growth by Sector-1950-51to 1970-80

and 1980-81 to 2003-04

Sector 1950-51to 1979-80 1980-81 to 2003-04

Total 1950-51 1965-66 Total 1980-81 1992-93

to to to to

1964-65 1979-80 1991-92 2003-04

GDPfc: Total 0.9% 1.9% 0.1% 3.0% 2.5% 3.6%
Agriculture 0.2% 1.0% -0.5% 2.1% 2.2% 2.1%
Mining - -4.3% -2.1% 2.9% -0.2% 4.3%

3.1%
Manufacture - 0.4% -0.8% 2.0% 1.3% 2.8%

0.3%
Electricity - -17.0% 0.6% 4.4% 4.1% 4.7%

7.6%
Construction - -0.7% -1.9% - -1.7% 1.3%

0.9% 0.7%
Trade, Hotel - 1.3% -3.0% 2.6% 1.6% 3.6%

1.0%
Transport, - -2.1% 1.5% 3.8% 2.8% 4.9%

comm. 0.2%
Other Services 4.0% 5.8% 2.4% 4.4% 4.1% 4.7%
Source : National

Accounts Statistics, KLEMS, Central Statistical Organization (CSO), Government of India; The output, input and productivity

series will cover the period, 1980 onwards (Current estimates cover 1980 to 2004).

14
Figure 5: Total Factor Productivity Growth by Sector-1950-51to 1970-80

and 1980-81 to 2003-04

10

1950-51to 1979-
5 80 Total
1950-51to 1979-
80 1950-51 to
0 1964-65
GDPfc... Agri... Mi Manu... Elec... Const... Trad... Tra Other ... 1950-51to 1979-
80 1965-66 to
1979-80
-5 1980-81 to 2003-
04 Total
1980-81 to 2003-
-10 04 1980-81 to
1991-92

-15

-20

V. SERVICE SECTOR CONTRIBUTION TO GROWTH

The twin objectives of ensuring economic growth with equity and social justice have guided
India’s strategy for planned economic development since independence. The initial five year
plans focused on high economic growth and alleviation of poverty through creation of
employment opportunities was taken as natural outcome of this development process. Overtime,
however, it was realized that these economic processes were too slow and uneven and hence
incapable of solving the problem of unemployment and poverty itself despite the economy
registering robust growth of 7-8%.

Among policymakers, there has been a growing concern with “jobless growth” as a major
obstacle for the poor to benefit from the positive growth performance experienced by many
countries worldwide. Therefore, the impact of growth on poverty is seen as depending on the
extent to which growth generates employment and good earning opportunities. However, if
employment growth is achieved at the expense of wage reductions, it may have a meager impact
on poverty. Moreover, since in many low income countries the poor cannot afford to be
unemployed, policies should be more concerned with raising the income of the working poor,
15
rather than, or in addition to, reducing the unemployment rate. Another recurrent issue for the
policy discussion is whether poverty is more effectively reduced by a growth pattern that favors
the sectors of the economy in which the poor are found (i.e., Agriculture) in order to enhance
employment opportunities or by a pattern that disproportionately advances the sectors in which
the poor are not found, so that more of the poor can be drawn into the higher earning parts of the
economy.
Table 6 documents the trends in GDP growth rate in various subsectors in the service sector .Per
capita GDP accelerated after the reforms, from an average of 3.1 percent a year to 4.1 percent.
This should have normally been associated with higher employment growth, but that is possible
only when both the LFPR and productivity growth remain constant. Given the sharp acceleration
in skill levels (and therefore productivity), however, some decline in the rate of job growth was
to be expected. And the rate of job growth did decline, from 2.4 percent a year to 1.7 percent,
mirroring the decline in the potential labor force growth noted earlier. Growth in private income
per worker mirrored productivity growth, almost tripling from 1.6 percent a year to 4.2 percent.

Table 6: Trends in GDP Growth Rate in Various Subsectors in the Service Sector
Avg. Growth in 1950s-70s Avg. Growth in 1980s Avg. Growth in 1990s

S ECTOR (Share in GDP in 1980) (Share in GDP in 1990) (Share in GDP in 2000)

T RADE AND HOTELS

Trade 4.8(11.7) 5.9(11.9) 7.3(13.7)

Hotels & Restaurants 4.8(0.7) 6.5(0.7) 9.3(1.0)

T RANSPORT AND OTHERS

Railway 4.2(1.5) 4.5(1.4) 3.6(1.1)

Transport by other means 6.3(3.6) 6.3(3.8) 6.9(4.3)

Storage 5.5(0.1) 2.7(0.1) 2(0.1)

Communication 6.7(1.0) 6.1(1.0) 13.6(2.0)

F INANCE
Banking 7.2(1.9) 11.9(3.4) 12.7(6.3)

Insurance 7.1(0.5) 10.9(0.8) 6.7(0.7)

16
 Real Estate 2.6(4.0) 7.7(4.8) 5.0(4.5)

Business Services 4.2(0.2) 13.5(0.3) 19.8(1.1)

Legal Services 2.6(0.0) 8.6(0.0) 5.8(0.0)

R ESIDUAL SERVICES
Public Administration 6.1(5.3) 7.0(6.0) 6.0(6.1)

Personal Service 1.7(1.6) 2.4(1.1) 5.0(1.1)

Community Services 4.8(4.0) 6.5(4.3) 8.4(5.5)

Other Services 3.4(1.1) 5.3(1.0) 7.1(0.7)

Source: Reproduced from Gordon and Gupta (2004) computed from National Accounts Statistics

20
10
0 Avg. Growth in 1950s-70s (Share
in GDP in 1980)
Avg. Growth in 1980s (Share in
GDP in 1990)
Avg. Growth in 1990s (Share in
GDP in 2000)

TRADE LIBERLIZATION AND GROWTH

In order to empirically test the relationships between services growth and liberalization
measures, as a part of economic reforms an index of liberalization is needed. Such an index is
difficult to create using the available information. Nonetheless, preliminary evidence of the
effect of reform-related measures on services growth is provided by analyzing the correlation
between the flow of FDI and the increase in private sector participation in services to sector
growth. The relationship between the cumulative flow of FDI and services growth in the 1990s
performance is found to be quite strong (even though this information is available only at a
highly aggregated level, and the direction of causation is not clear a priori). The positive and
significant association holds even if we exclude the fastest growing communications sector.
Similarly, the participation of the private sector in services activities also increased in the 1990s

17
(for some activities, the share started increasing in the 1980s).The relationship is likely to be
stronger if we include business services, for which the data on private and public shares are not
available, but most of which originates in the private sector. On the other hand ,sectors that have
witnessed limited opening ,like air transport ,legal service ,real estate ,dwellings, railways post
and storage, have grown less slowly than the rest of the service sector.

Table: Financial Year Wise % Growth of GDP in Service Sector through FDI

Year Financial Year % Growth of

FDI Inflow (US $ GDP in Service
Million) Sector
2000-01 4,029 51.83
2001-02 6,130 53.02
2002-03 5,035 53.18
2003-04 4,322 53.04
2004-05 6,051 53.06
2005-06 8,961 53.87
2006-07 22,826 52.71
2007-08 34,843 53.93
2008-09 41,873 54.72
2009-10 37,745 55.14
2010-11 34,847 56.37
2011-12 46,553 59.0

% Growth of GDP in Service Sector

60

58
56
54 % Growth of GDP in
Service Sector
52
50
48
0 1 02 03 0 4 0 5 0 6 07 0 8 09 1 0 11 1 2
0 0 - 0 1 - 0 2 - 0 3 - 0 4 - 0 5 - 0 6 - 0 7 - 0 8 - -2 0 1 0 - 1 1 -
2 0 20 20 2 0 2 0 2 0 20 2 0 20 0 0 9 20 2 0
2

18
 Financial Year FDI Inflow (US $ Million)
50,000
45,000
40,000
35,000
30,000
25,000 Financial Year FDI Inflow
20,000 (US $ Million)
15,000
10,000
5,000
0
0 1 02 03 0 4 0 5 06 07 0 8 0 9 1 0 1 1 12
0 0 - 0 1 - 0 2 - 0 3 - 0 4 - 0 5 - 0 6 - 0 7 - 0 8 - - 20 1 0 - 1 1 -
2 0 20 20 2 0 2 0 20 20 2 0 2 0 0 0 9 2 0 20
2

In the above given line graph it is evidently clear that opening up the economy had a tremendous
contribution in the growth rate of the service sector. In 2006-07 FDI inflow took the major leap
as exports increased to three fold during the last three years: In 2005-06 with a growth of 42.0%
it reached to US $ 61.4 billion. Growth has been particularly rapid in software services, business
services, financial services and communication services. In 1990-91, net invisibles trade was US
$ -242million, which increased to US $13143 million in 1999-00, US $ 27801 million in 2003-
04 and US $ 42655 million in 2005-06.

Table 6: Correlation Analysis

CORRELATION
FDI INFLOW FDI INFLOW GDP Growth Rate
Service Sector
Pearson Correlation 1 .761
N 12
GDP (service Pearson Correlation .761 1
sector) N 12

Goodness of Fit Test

MODEL SUMMARY

Model R R Square Adjusted R Std Error Of The

Square Estimate

19
 1 0.788 .621 .583 1.26

The above table shows goodness of the fit. Here the coefficient of determination(R square) is
0.621 and the Adjusted R Square is 0.582. It means that 58.3 % of the variation in service sector
GDP is explained with the help of FDI. And standard error of the estimate is 1.26118.

VI.Hypothesis and methodology

Shapley decomposition is based on the premise that economic growth is determined by the
combined rates of growth in employment and labour productivity. As long as growth in real
Gross Domestic Product (GDP) exceeds growth in labour productivity, employment will rise.
Thus research questions are:
Hypothesis
 Growth rate in the economy after 1991 were led by economic reforms but failed to
increase employment.
 Growth leads to increase in employment.
Methodology
Quantitatively I examine the dynamic relationship between employment and growth for India
using a time series analysis for the period from 1983 to 2011-2012.For the qualitative analysis
we use the shapley’s decomposition Analysis to examine the contribution of growth in
employment and change in its quality to GDP per capita across different phases of growth over
1972-73 to 2011-12.two indicators of the change in employment quality are :one structural
change in employment and two TFP growth rate.
Dynamic relationship between employment and growth: A time series based approach.
Employment and Economic Growth (1983-2009)
Table:Average annual economic growth in India(%)
Sectors 1983-87 1987-93 1994-00 2000-05 2005-10 1983-93 1994-2010
Agriculture 2.0 3.90 3.40 1.88 2.73 3.5 2.86
Industry 5.52 5.72 7.00 5.56 8.54 5.59 7.13
Manufacturing 5.7 5.28 7.39 5.93 9.35 5.5 7.75
Construction 4.5 5.39 6.40 9.26 10.44 5.0 7.79
Services 6.69 6.45 8.65 7.77 9.97 6.56 8.7
Transport and 6.3 5.51 9.62 9.24 10.35 5.9 11.2
communication
Trade and 5.6 5.71 9.76 9.54 9.4 5.6 8.9
hotel

20
 Finance, 9.0 9.02 7.75 7.13 11.44 9.2 8.8
insurance, real
estate and
business
services
GDP Growth 4.8 5.37 6.71 6.07 8.65 5.3 6.95
Rate
Source: Central Statistical Organization
In the above given table it shows that the economic growth rate which was 4.8% during 1983-87 jumped to 5.37% in
1987-93,6.7% in 1994-00 and further to 8.65 % during 2005-10. It also shows that both service sector and industry sector
are the two main driver of growth in india.

70
60
50
40
30
20
10
0 1994-2010
1983-93
2005-10
2000-05
1994-00
1987-93
1983-87

Avg. Growth in 1950s-70s Avg. Growth in 1980s Avg. Growth in 1990s

S ECTOR (Share in GDP in 1980) (Share in GDP in 1990) (Share in GDP in 2000)

T RADE AND H OTELS

Trade 4.8(11.7) 5.9(11.9) 7.3(13.7)

Hotels & Restaurants 4.8(0.7) 6.5(0.7) 9.3(1.0)

T RANSPORT AND OTHERS

Railway 4.2(1.5) 4.5(1.4) 3.6(1.1)

Transport by other means 6.3(3.6) 6.3(3.8) 6.9(4.3)

Storage 5.5(0.1) 2.7(0.1) 2(0.1)

21
Communication 6.7(1.0) 6.1(1.0) 13.6(2.0)

F INANCE
Banking 7.2(1.9) 11.9(3.4) 12.7(6.3)

Insurance 7.1(0.5) 10.9(0.8) 6.7(0.7)

Real Estate 2.6(4.0) 7.7(4.8) 5.0(4.5)

Business Services 4.2(0.2) 13.5(0.3) 19.8(1.1)

Legal Services 2.6(0.0) 8.6(0.0) 5.8(0.0)

R ESIDUAL SERVICES
Public Administration 6.1(5.3) 7.0(6.0) 6.0(6.1)

Personal Service 1.7(1.6) 2.4(1.1) 5.0(1.1)

Community Services 4.8(4.0) 6.5(4.3) 8.4(5.5)

Other Services 3.4(1.1) 5.3(1.0) 7.1(0.7)

Table 2: GROWTH OF EMPLOYMENT (UPSS)

Sector 1972- 1977-78/883 1983/87-88 1987-88/93- 1993-94/99- 1999- 2004-
73/77- 94 2000 2000/2004- 05/2009-
78 2005 2010

PRE REFORM PERIOD POST REFORM PERIOD

Primary sector 1.78 1.56 0.28 2.16 0.05 1.40 -1.63
Mining& 4.36 7.14 5.34 1.69 -2.11 2.41 3.00
quarrying
Manufacturing 5.43 3.08 4.66 005 1.62 5.06 -1.06
Utilities 2.78 12.39 7.21 4.37 -5.89 3.22 1.02
Construction 1.67 6.84 13.91 -0.11 6.38 8.18 11.29
Secondary sector 4.78 3.95 6.44 0.19 2.44 5.83 3.46
Trade, hotelling 6.40 2.87 3.96 3.62 6.28 4.01 1.10
Transport & 6.21 5.36 3,02 3,67 5.09 5.23 2.14
communication
etc.
Financing, real 6.84 7.68 1.41 5.24 5.28 9.62 5.77
estate ,insurance
and business
services
Community, 3.24 3.01 0.31 6.68 -1.48 2.71 0.99
social and
personal services
Tertiary sector 4.86 3.46 2.11 5.03 2.85 4.08 1.59
All non 4.82 3.67 4.09 2.82 2.68 4.81 2.41
agriculture sector
Total 2.61 2.19 1.53 2.39 1.04 2.81 0.22

22
Source:T.S Papola estimate based on various round of NSSO employment and unemployment data; employment performance of
the Indian economy: the long term experience.

Theoretically output is expected to have a positive long run relationship between growth and
employment as according to Okun’s law 3% increase in growth rate leads to 1% fall in
unemployment rate as output is expected to have a long run positive effect on labor demand.
While testing this relationship in India I used Keynesian model of employment .in this model
employment is a function of GDP, wage level and the cost of capital. The model thus takes into
consideration the substitution effect arising from the substitutability between capital and labour. I
estimate the following Keynesian equation to establish relationship between employment and
growth.
¿ Lt =α+ β 1 ln Q t + β 2 ln W t + β 3 ln COC t +u
Where Q, K, L and COC denote GDP, Capital, labour and user cost of capital respectively. In
this equation GDP is expected to have positive relationship with employment. The real wage
level expected to have negative impact on labour demand. Inclusion of the real user cost is
essential for theoretical reasons. Positive value of COC means that the substitution effect (i.e.
substitution of labour for capital by producers) is stronger than the income effect.
The analysis is based on the quin quennial surveys of NSSO beginning with the one conducted in
In this chapter several empirical studies employing various macro-economic variables (as
suggested by theory) in cross-country analysis regressions have been employed to examine the
employment-economic growth relationship in both developed and developing nations. For
instance, Levine and Renelt (1992), Barro (1991) and Becker et al. (1990) used simple regression
analysis to assess the relationship between the level of employment and other macro-variables
highlighted in their studies. Pandalino and Vivarelli (1997) used panel data to study the
employment/economic growth relationship in G-7 countries. Fofana (2001) studied the
employment-economic growth relationship for a single country, Cote d’Ivoire using time series
data for the study. The methodology of this study takes after Fofana’s, and as such we specify
our basic model as:
EMPT=f (GDP,FPC,PE)…………………………………….(1)
Where:
EMPT = Total Employment
GDP = Real Gross Domestic Product

23
FPC = Foreign Private Capital (a proxy for Foreign Direct Investment)
PE = Public Expenditure
Assuming a linear relationship among explanatory variables the explicit form of equation (1)
becomes:

EMPT ¿ β O + β 1GDP + β 2FPC + β 3PE + ε……………………….(2 a)

An alternative form of the equation was the replacement of GDP with the growth rate of GDP
represented by GDPGR as stated in equation (2b) below:

EMPT = φ 0 + φ 1GDPGR + φ 2FPC +φ 3PE + e ……………………….(2b)

Degree of openness by creating an index by dividing the sum of exports (X) and imports (Q) by
GDP: O = (X+Q)/Y.
Empirical analysis

For the purpose of the study,aggregate annual time series data at country level and at current
price is used.Aggregate data is normally very useful in establishing long term econometric
relationship between the variables.
As it is known that usually economic time series move together, therfore if all the variables are
included simultaneously in the equation there may be the possibility of multi colinerarity.
VARIABLES NUMBER OF MEAN STANDARD
OBSERVATIONS DEVIATION
EMPLOYMENT IN 30 35.7523 6.1888
MILLION
GDP GROWTH IN 30 2131250 1163038
MILLION
REALGDP 30 6.319 2.227
GROWTH RATE
PUBLIC 30 5494.4 5650.4
EXPENDITURE IN
MILLION
FDI INFLOW 30 6.569333 11.25229
Over the period the average employment in the country is 35.75 million,while the average
growth of GDP is 6.3% and the average annual real GDP figure is Rs. 2131250 million. In

24
 addition to mean figure a standard deviation of the variables is also reported.Real GDP growth
rate in india has lowest variability,lowest than employment.

Table 1 : Descriptive statistics on selected variables of India(1981-2010)

Table 1 presents a summary of the descriptive statistics of the data used in the research .over the
period the average total employment in the economy is 35.75 million,while the average growth
rate of the GDP is 6.3% and the average annual Real GDP figure is Rs 2131250 million. In
addition to the mean figure standard deviation for each variable is also reported. Apart from
employment which is showing lowest variability after real GDP growth rate in india is a striking
revealation despite the fact other macro economic indicators of the country have been showing
positive uptrends after the reform period.
A real GDP growth rate is a measure of economic growth from one period
to another expressed as a percentage and adjusted for inflation(i.e. expressed in real as opposed
to nominal terms). The real economic growth rate is a measure of the rate of change that a nation's
Gross Domestic Product (GDP) experiences from one year to another. Contrary to the general
perception real GDP growth have shown lowest variability in India which point to the fact that there is
lowest rate of change as far as Real GDP growth is concerned. This fact has been corroborated by the
IMF 6 India’s growth has not been more variable than other developing regions in the period 1960-80:
indeed, it has the lowest standard deviation amongst all regions although the coefficient of variation is
higher than for the Middle East, Latin America, and Asia. Between 1980 and 1999, however, India’s
growth exhibits the lowest variation in terms of both the standard deviation and the coefficient of
variation. Thus, India outperformed all regions, save East Asia, in terms of average growth, and
outperformed all regions, Including East Asia, in terms of the stability of growth. Interestingly, and
contrary to some claims, Indian growth was more stable in the 1980s than in the 1990s.
Quality of employment
Quality of employment in an economy can be judged by certain indicators. Some of the
important indicators are:

6
Dani Rodrik and Arvind Subramanian ,IMF WORKING PAPER WP/04/77, From “Hindu Growth” to Productivity
Surge: The Mystery of the Indian Growth Transition

25
 1. Wages received by workers.
2. Number of days during the year in which casual labour force were employed.
3. Share of workers engaged in organized and unorganized sectors.
4. Proportion of workers engaged in self employment, regular salaried employees and
casual workers.
5. Distribution of work opportunities among primary, secondary and tertiary activities.
6. Productivity of workers based on their levels of skills and educational attainments.
Service sector and the wages received.

Table 2 :Correlation Matrix of Variabes

VARIABLES EMP FDI GDP PE R and REAL VALUE

GROWTH D GDP ADDITI
ON
EMP 1.0000 0.8303 0.9753 0.9413 0.9862 0.4242 0.9619

FDI 0.8303 1.0000 0.9125 0.9285 0.8699 0.5050 0.9221

GDP 0.9753 0.9125 1.0000 0.9907 0.9910 0.4611 0.9981

GROWTH

PE 0.9413 0.9285 0.9907 1.0000 0.9792 0.4386 0.9965

R and D 0.9862 0.8699 0.9910 0.9792 1.0000 0.4488 0.9862

REAL GDP 0.4242 0.5050 0.4611 0.4386 0.4488 1.0000 0.4540

VALUE 0.9619 0.9221 0.9981 0.9965 0.9862 0.4540 1.0000

ADDITION

26
A correlation matrix which shows the magnitude and direction of the relationship between each
pair of variables being analyzed is presented in above given Table. A negative sign of a
correlation coefficient shows there is an inverse relationship between the two variables. The
correlation matrix is symmetric about the diagonal and the diagonal has values of 1.0000 since
there is a perfect correlation of the variable with itself. The correlation matrix shows that all
among the explanatory variables have the expected positive relationship with the dependent
variable EMP. However, it is observed that EMP and GDP have a strong positive correlation
coefficient of 0.975. This is expected given the postulated strong and positive relationship
between employment and output in economic literature. In contrast, the growth rate of GDP
(GDPGR) has a positive but relatively low correlation coefficient with the employment level in
the economy (0.42). This is rather surprising as economic growth is expected to be job-creating
and as such exhibit positive and strong correlation between EMP and GDPGR in an economy
experiencing an aggregate unemployment rate of about 20% and youth unemployment rate of
over 40% (NBS, 2010).

Dependent Variable: HPTRENDEMP

Method: Least Squares
Date: 08/30/15 Time: 17:31
Sample (adjusted): 1 29
Included observations: 29 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C 35540.02 2264.564 15.69398 0.0000

GDP_GROWTH_IN_MILLON 0.024962 0.001064 23.46027 0.0000

R-squared 0.953237    Mean dependent var 83125.45

Adjusted R-squared 0.951505    S.D. dependent var 24625.76
S.E. of regression 5422.956    Akaike info criterion 20.10114
Sum squared resid 7.94E+08    Schwarz criterion 20.19544
Log likelihood -289.4666    Hannan-Quinn criter. 20.13067
F-statistic 550.3845    Durbin-Watson stat 0.116489
Prob(F-statistic) 0.000000

In the regression analysis above the regression equation is Y=α +Βx+μ there is a dependent
variable employment which has been filtered as data was non stationary and then the model was
constructed having independent variable GDP growth in million and the relation is positive with

27
every 1% increase in GDP growth in million will lead to 0.024% predicted increase in
employment in service sector which also shows that service sector employment is not being
affected by GDP growth as much as should have been. R squared is .95% which shows that
regression is fitted and Durbin Watson test less that 1% shows there is no autocorrelation in the
analysis

Dependent Variable: HPTRENDEMP

Method: Least Squares
Date: 08/30/15 Time: 17:38
Sample (adjusted): 1 28
Included observations: 28 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C 51248.79 708.8362 72.29990 0.0000

HPTRENDRANDD 3.025132 0.056312 53.72128 0.0000

R-squared 0.991071    Mean dependent var 81564.69

Adjusted R-squared 0.990728    S.D. dependent var 23571.78
S.E. of regression 2269.762    Akaike info criterion 18.36149
Sum squared resid 1.34E+08    Schwarz criterion 18.45664
Log likelihood -255.0608    Hannan-Quinn criter. 18.39058
F-statistic 2885.976    Durbin-Watson stat 0.100602
Prob(F-statistic) 0.000000

In the regression analysis above the regression equation is Y=α +Βx+μ there is a dependent
variable Employment which has been filtered as data was non stationary and then the model was
constructed having independent variable research and development which was filtered using
Hedrick Prescott method as the data was not stationary and the relation is positive with every
increase in 1% increase in research and development the employment in service sector increase
by 3.02% which also shows that service sector employment can be increased by investing more
in research and development making labour force more skilled and more employable. R squared
being 99 % shows the fitness of the model to the regression model.

Dependent Variable: HPTRENDEMP

Method: Least Squares
Date: 08/30/15 Time: 17:40
Sample (adjusted): 1 29
Included observations: 29 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C 59095.17 2250.592 26.25761 0.0000

PE 5.564431 0.377912 14.72413 0.0000

R-squared 0.889253    Mean dependent var 83125.45

Adjusted R-squared 0.885152    S.D. dependent var 24625.76
S.E. of regression 8345.489    Akaike info criterion 20.96330
Sum squared resid 1.88E+09    Schwarz criterion28 21.05760
Log likelihood -301.9679    Hannan-Quinn criter. 20.99283
F-statistic 216.8000    Durbin-Watson stat 0.153642
Prob(F-statistic) 0.000000
In the regression analysis above the regression equation is Y=α +Βx+μ there is a dependent
variable Employment
Dependent Variable: HPTRENDEMP
Method: Least Squares which has been filtered as
Date: 08/30/15 Time: 17:43 data was non stationary
Sample (adjusted): 1 29
Included observations: 28 after adjustments
and then the model was
constructed having
Variable Coefficient Std. Error t-Statistic Prob.   independent variable
C 69197.59 3201.293 21.61552 0.0000 Public expenditure the
FDI 0.797128 0.104544 7.624817 0.0000 relation is positive with

R-squared 0.690983    Mean dependent var 82657.50

every increase in 1%
Adjusted R-squared 0.679098    S.D. dependent var 24946.00 increase in Public
S.E. of regression 14131.46    Akaike info criterion 22.01894 Expenditure the
Sum squared resid 5.19E+09    Schwarz criterion 22.11410
Log likelihood -306.2652    Hannan-Quinn criter. 22.04803 employment in service
F-statistic 58.13784    Durbin-Watson stat 0.491955 sector increase by 5.56%
Prob(F-statistic) 0.000000
% which also shows that
service sector in
employment can be
increased by investing more in Public expenditure provided with the linkages for the service
sector to grow tin the coubtry through infrastructure building .

29
In the regression analysis above the regression equation is Y=α +Βx+μ there is a dependent
variable Employment which has been filtered as data was non stationary and then the model was
constructed having independent variable Public expenditure the relation is positive with every
increase in 1% increase in Public Expenditure the employment in service sector increase by
5.56% % which also shows that service sector in employment can be increased by investing
more in Public expenditure provided with the linkages for the service sector to grow tin the
coubtry through infrastructure building .

Dependent Variable: HPTRENDEMP

Method: Least Squares
Date: 08/31/15 Time: 08:23
Sample (adjusted): 1 29
Included observations: 29 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C 45830.80 2370.548 19.33342 0.0000

VA_CONSTANT 0.049498 0.002668 18.55061 0.0000

R-squared 0.927248    Mean dependent var 83125.45

Adjusted R-squared 0.924554    S.D. dependent var 24625.76
S.E. of regression 6764.076    Akaike info criterion 20.54311
Sum squared resid 1.24E+09    Schwarz criterion 20.63741
Log likelihood -295.8751    Hannan-Quinn criter. 20.57264
F-statistic 344.1251    Durbin-Watson stat 0.105919
Prob(F-statistic) 0.000000

30
In the regression analysis above the regression equation is Y=α +Βx+μ there is a dependent
variable Employment which has been filtered as data was non stationary and then the model was
constructed having independent variable Public expenditure the relation is positive with every
increase in 1% increase in Public Expenditure the employment in service sector increase by
5.56% % which also shows that service sector in employment can be increased by investing
more in Public expenditure provided with the linkages for the service sector to grow tin the
coubtry through infrastructure building .

Dependent Variable: HPTRENDEMP

Method: Least Squares
Date: 08/31/15 Time: 08:14
Sample (adjusted): 1 29
Included observations: 29 after adjustments

Variable Coefficient Std. Error t-Statistic In the regression analysis

Prob.  
above the regression
C 45367.32 2416.101 18.77708 0.0000
GROSS OUTPUT 0.034058 0.001855 18.35999 0.0000 equation is Y=α +Βx+μ
there is a dependent
R-squared 0.925842    Mean dependent var 83125.45
variable Employment
Adjusted R-squared 0.923096    S.D. dependent var 24625.76
S.E. of regression 6829.121    Akaike info criterion 20.56225 which has been filtered as
Sum squared resid 1.26E+09    Schwarz criterion 20.65655 data was non stationary
Log likelihood -296.1526    Hannan-Quinn criter. 20.59178
F-statistic 337.0891    Durbin-Watson stat 0.096437 and then the model was
Prob(F-statistic) 0.000000 constructed having
independent variable
Public expenditure the
relation is positive with every increase in 1% increase in Public Expenditure the employment in
service sector increase by 5.56% % which also shows that service sector in employment can be
increased by investing more in Public expenditure provided with the linkages for the service
sector to grow tin the coubtry through infrastructure building .

31
Dependent Variable: HPTRENDEMP
Method: Least Squares
Date: 09/13/15 Time: 19:36
Sample (adjusted): 1 28
Included observations: 28 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C -9047.553 1710.278 -5.290108 0.0000

HPTRENDGDPGROWTHINMILLIN 0.135828 0.003559 38.16053 0.0000
HPTRENDRANDD -1.044053 0.154017 -6.778833 0.0000
HPTRENDVACONSTANT -0.192415 0.004800 -40.08966 0.0000
PE 0.575191 0.127202 4.521866 0.0002
GOSS_OUTPUT -0.011862 0.000917 -12.94168 0.0000

R-squared 0.999983    Mean dependent var 81564.69

Adjusted R-squared 0.999979    S.D. dependent var 23571.78
S.E. of regression 107.4611    Akaike info criterion 12.37954
Sum squared resid 254053.5    Schwarz criterion 12.66502
Log likelihood -167.3136    Hannan-Quinn criter. 12.46682
F-statistic 259817.7    Durbin-Watson stat 1.424021
Prob(F-statistic) 0.000000

Conclusion

32