Publicado originalmente em: NAKED KEYNESIANISMIndias Growth Model: A Need for ChangeBy Suranjana Nabar-Bhaduri (Guest Blogger)India has been cited as an example of an alternative development strategy under which economic growth in the early stages of development is service sector-led rather than manufacturing-led. The international press has heralded its exemplary growth performance, projecting it as one of the emerging market economies that will take over the world economy. As expected in the process of development, the share of the agricultural sector in GDP has decreased over time. However, the share of the manufacturing sector has not shown any significant increase. Rather, the services sector has emerged as the main contributor to Indias economic growth, especially since the 1990s. Evidence suggests that between 1993 to 2007, more than 60 per cent of the increase in Indias GDP was driven by an increase in services GDP. This growing importance of the service sector is partly the result of a meteoric rise in services exports, mainly software and information technology (IT)-enabled services. This performance has been greatly associated with the offshoring process in the developed world, and Indias ability to provide English-speaking workers at relatively lower wages. Indias trade balance and current account have shown persistent deficits, and it has relied on earnings from services exports, remittance inflows, and capital inflows to sustain these deficits.When one evaluates the ability of this current growth path to generate inclusive and sustainable development, the picture is far from promising. The contribution of the IT-enabled services and the IT industry to employment generation has been miniscule, given the size of the Indian workforce, and the fact that a major part of this workforce remains rural and unskilled. While the total estimated size of the Indian workforce is more than 450 million, total employment in these services is only around 2 million workers. The rest of the employment in the services sector has been in low-productivity self-employment services in the unorganized sector. Furthermore, employment in IT-enabled services and the IT sector falls way short of the annual increment of around 12 million in the Indian workforce. 65 per cent of Indias population of nearly 1.2 billion people is now below the age of 25, leading to the emergence of a young population, a fall in the dependency ratio and a rise in the worker-population ratio. Without concrete policy efforts to accelerate the growth and expansion of agriculture and manufacturing, India cannot tap into the demographic advantage of a relatively young population by providing productive employment for both expanding output, and making the process of growth more inclusive. Equally important, there remain the questions of meeting the needs of food, clothing, investment and industrial products that must constitute a large part of consumption before a sufficiently high standard of living can be attained.It has been generally argued that Indias trade and current account deficits can be financed and sustained by earnings from services exports, remittances and capital inflows, particularly portfolio investment inflows. Though India is nowhere close to a balance of payments crisis, this argument neglects the constraint imposed by external demand.