Thinking Aloud: Volume II, Issue 3

The theme of Thinking Aloud August 2015 issue is on the Services Sector. The first article on “Rethinking ‘industrial policy’: How to increase ‘manufacturing content’ of services?” rejects the narrowness of conventional industrial policy and aims at broadening the scope of industrial policy that can incorporate the service sectors as well. This article focuses on developing a new concept called the ‘manufacturing content’ of services which is defined as the share of domestic manufacturing value-added in the services final demand in an economy. The cross-country panel econometric regression analysis suggests that to increase the ‘manufacturing content’ of services, policies should aim at raising the manufacturing value-added share in GDP, promoting larger services exports, raising the share of domestic savings in GDP thus facilitating scopes for accelerated domestic investment, and strategic openness of the economy with some safeguards for the incipient manufacturing sectors. The second article on “What determines domestic services value-added share in gross exports?” highlights the limitation of gross export statistics which fails to take into account the contribution of value-added by other sectors. This article, using cross-country panel econometrics, suggest that countries with higher GDP per capita tend to have higher share of domestic service sector’s value-addition in agricultural gross exports. Also, higher the services value-added share in GDP, higher would be the services value-added contribution to agricultural, manufacturing and services gross-exports. Rise in factor productivity contributes positively to the rise in services value-added contribution to manufacturing gross exports. Finally, a conversation with Dr. Rupa Chanda has been published in the interview section where she talks about the prospect of intra-regional trade in services in South Asia.