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• During 1993–2018, market services grew at a faster rate than non-market services. • Applying Domar weights we observed that transport and storage was the highest contributor among market services industries, while public administration has made relatively higher contribution to aggregate non-market services TFP growth. • TFP growth in manufacturing has a significant positive effect on TFP growth of both market services and non-market services. • Market services TFP growth is positively impacted by a spillover effect of TFP growth in India's trade partners. The services have been the driver of India's overall growth since the onset of economic reforms in the 1990s. The value-added share of services increased from 41 percent in 1990 to 53 percent in 2018. On average, the sector grew at 7.5 percent annually during 1993–2018, contributing to about half of the aggregate economic growth. Using the India KLEMS data, we examine the trends in total factor productivity (TFP) in individual industries within services and their contribution to aggregate TFP growth in the sector during 1993–2018. We find that transport and storage was the highest contributor among various market services industries followed by financial services, while public administration made a relatively high contribution to aggregate non-market services TFP growth. Moreover, we investigate the factors driving TFP growth in the services sector, particularly the role of manufacturing TFP – looking into spillover effect from manufacturing to market services and non-market services. Our results suggest that TFP growth in manufacturing had a significant positive impact on TFP growth in the services sector. Also, we find evidence of significant productivity spillover effect to India's services sector from other countries, particularly the developed countries. [ABSTRACT FROM AUTHOR]

Productivity rise as a source of growth has high potential to uplift millions out of poverty. Mitigating the productivity gap can play vital role in helping developing countries to offset with developed countries. In this regard, present study attempts to scrutinize the relationship and significance of various determinants of total factor productivity (TFP) in India for the period 1990-1991 to 2019-2020. To this end, autoregressive distributed lag bounds testing approach has been utilized. The results pinpoint that trade openness and unemployment have a positive impact on total factor productivity. On the other hand, inflation has a negative but insignificant relationship with total factor productivity, both in the short and long run. The results imply that exports need to be diversified, and import of capital goods should be encouraged to enhance TFP in the long run. Further, foreign-owned business entities need to be encouraged to hire domestic workers, which would result in enhanced TFP in the long run. [ABSTRACT FROM AUTHOR]