The historical roots of India’s booming service economy…

Profs Stephen Broadberry and Bishnupriya Gupta had written a paper in 2010 on the topic.

They summarise it in ideas4india post:

India stands out from other emerging economies because its growth has been led by the service sector rather than labour-intensive manufactures. This column summarises recent research showing that India has a long history of strength in services, and its service-led development may play to historical strengths rather than hindering its progress. 

They say higher education available to select few is a major reason behind this:

The productivity gap between UK and India has been smaller in services than in industry or agriculture since the First World War. The recent emergence of a dynamic service-led Indian economy thus has long historical roots. But why did the service sector perform better in India, even in colonial times? Our study suggests that the answer can be found at least in part in India’s education system.
This may at first sight seem surprising, since India’s record of investment in human capital, as well as in physical capital, has been less than impressive. Under-investment in education overall has clearly contributed to India’s disappointing productivity performance over the long run.
But there has been a longstanding bias in educational investment towards secondary and higher education, which has produced a small group of highly-educated workers, who have worked largely in services. This is relatively straightforward to demonstrate empirically for the recent past, when data are available on educational attainments of workers by sector.
It can also be shown for the colonial period, where data on literacy are available by caste. A small group of high castes, including not only the priestly Brahmans and warrior castes but also trading casts, desired secondary and higher education as well as primary education. However, the majority of the population, working in agriculture and cottage industry, required little education to perform their jobs and had little scope for advancement because of the caste system, so demand for education was depressed.
The interesting bit is how higher education continues to be available to very few despite several attempts to expand the base. Yes, one should be proud of this historical legacy of service sector but not sure whether reasons for it are really to be proud of.

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