Analysing Intra-industry Trade and Revealed Comparative Advantage in Services: A Study of India’s Services Sector

Abstract

Over the past two decades, the services sector has gained increasing prominence in the global economy, both in terms of its contribution to gross domestic product (GDP) and international trade. Following the World Trade Organization (WTO)’s General Agreement on Trade in Services (GATS) in 1994, global services exports have expanded significantly—from $2,558.34 billion in 2005 to $6,217.45 billion in 2019—reflecting a growth rate of over 143%, far outpacing the 81% growth in goods exports over the same period. In this context, the present study examines India’s performance in services exports through three key dimensions: (a) the trend and composition of services exports from 2002 to 2021, (b) the intensity of intra-industry trade (IIT) in services, and (c) India’s revealed comparative advantage (RCA) in services trade between 2005 and 2020. To analyse trends and structural changes, the study employs annual and compound growth rates along with Spearman’s rank correlation to assess shifts in the composition of services exports. The Balassa index is used to estimate India’s RCA across service categories. The findings indicate that while India has experienced robust growth in services exports—with an increasing share in GDP and total trade—the composition of these exports has remained largely stable over time. The average IIT index stands at 0.61, suggesting moderately high IIT, particularly in construction and financial services. Furthermore, India exhibits strong comparative advantages in telecommunications, computer and information services and other business services. The analysis is based on secondary data sourced from the WTO trade in services database and the International Trade Centre (ITC) Trade Map, drawing primarily on International Monetary Fund (IMF) statistics from 2001 to 2021.

JEL Codes: F10, F13, F19

Keywords

Service sector services export intra-industry trade dynamic revealed comparative advantage rank correlation India

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