Cyclical Analysis of India’s Economic Growth: Is Service Sector Catching up?

Abstract

This paper analyses the cyclical fluctuations of economic growth in India emphasizing upon the service sector for the period 1952 to 2006. Using Hodrick and Prescott (HP) Filter method, we estimate the trend components and cyclical components of real GDP, agriculture, services and industry. The results show that service sector is subject to less cyclical volatility as compared to other sectors. Hence, it can be argued that service sector is more stable than industrial sector. After estimating the trend series, we again apply H-P filter method on the series of output deviation to derive cyclical movements and irregular components or short-term shocks. Thus the economy had undergone one completed business cycle and other ongoing cycle during the period of study.