lower efficiency with which public capital is utilised and also of infrastructural disparity across the states. The industrial licensing system was dismantled as a part of the reforms, which also determined the location of investment gave the private sector the freedom to choose its location and minimise the transportation cost to large domestic market. The result was a shift of their production base to the metropolitan areas of the richer states, which covered most of the large domestic markets in the country. The manufacturing exports sector needed to minimise transportation costs to international markets and hence preferred to locate it near the coastal areas that had good infra structure. Since these facilities were mostly available in the relatively developed states in the western and the southern parts of the country this preference increased the regional inequality between these states and the poorer ones. Chapter-VII Sustainability of Services Sector India’s emergence as one of the fastest growing economies in the 1990s is largely attributed to the rapid growth of its services sector. The services sector grew in this decade at an average of 7.9% per annum, far ahead of agriculture (3%) and manufacturing (5.2%). The contribution of services to gross domestic product (GDP) has been more than 50 % per annum since year 2000. The share of services sector in trade has also increased substantially. This growth has been accompanied by increasing foreign direct investment (FDI) approvals in services sector. Though these trends are mainly in line with global trends, two features are distinctive to India’s services sector. First, in the period 1950s to 1990s the share of agriculture in GDP declined by about 25 percentage points while industry and services sector gained equally. The share
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