Structural Change and Service Sector Growth in Haryana

Structural change involves emergence and expansion of new economic activities, new industries and transformation of economy leading to improvements in human capital skills. Structural change occurs when an economy changes the manner it functions.Chenery and Taylor (1968) identified a uniform pattern of change in the structure of production as the income level rose in the national economies. Structural change models highlight the process by which developing nations transform their economic structure from emphasis on the subsistence agriculture sector to a modern manufacturing sector of the economy. This research paper aims to understand the structural change and service sector growth in Haryana. The study has been carried out for the state of Haryana covering the time period from 1970-71 to 2014-15. As per Economic Survey, Haryana (2016-17), the growth in GSDP improved to8.6 percent which is mainly due to the higher growth recorded in services (10.8%) during the year 2016-17.The average annual growth rate in GSDP remained almost above 7 percent. The state economy derives more than 80 percent income from non-agriculture activities. Shift share analysis has been used to understand the structural change in Haryana. The tool decomposes the change in aggregate productivity into two effects: a) within effect (productivity growth) and b) between effects (structural changes).The within effect captures productivity growth within sectors, whereas the between effect measures the productivity effect of labor reallocation across different sectors which is further be divided into static and dynamic effects. These effects show that Haryana has been experiencing movement of labour from low productivity sectors to high productivity sectors and sectors expanding in terms of employment.