Service led Growth in Goa and its Sectoral Linkages: A Granger Causality Analysis.

By Ms. Geetanjali R. Urankar,*

1. Introduction:
Due to the high potential in services to drive economic growth, there has been a lot of research
focus on services in the recent past. Goa, one of the smallest states of India has witnessed a
tremendous growth in its service sector, with the latter contributing over 50% to the state income
and over 40% to the states employment over the last decade, making it a service led economy. The
present paper, seeks to examine the pattern of economic growth in Goa, from 1970-71 till 2003-04, the
determinants of the service sector growth and the extent of stability of the service sector growth.
The inter- sectoral linkages in the state economy, with special reference to the service sector over
the above mentioned period ,as also Goas pre-statehood period(1970-71 till 1986-87)and its post
statehood period(1987-88 till 2003-04)are assessed ,to find out whether the service sector exhibits
feedback linkages with the other sectors in the economy. Results show that the economic growth is
driven by the service sector, which is a major contributor towards Goas NSDP and the service led
growth pattern is stable .Granger causality results show that the inter sectoral linkages, between the
commodity based sectors and the service sector in Goa are weak, and the linkages between the
various market based sub-services is strong, over the last three decades. The intra-sectoral linkages
within the service sector are mainly driven by the Tourism based services, viz, Trade and hotels,
implying that this sector is the causal or Key sector in the service led growth. But a peculiar
finding of the paper is that in the post statehood period, the primary as well as the export sectors
show one way linkage with Trade, Hotel services and there is
* Senior Lecturer, Department of Economics, G.V.M.s College of Commerce and Economics,
Farmagudi Goa, pursuing Ph.D under U.G.Cs, Faculty Improvement Program (FIP) at the
Department of Economics, Goa University.I wish to thank Dr.Shanmugam,of Madras school
of economics,for his valuable suggestions and my guide Dr.P.K. Sudarsan, Goa University
for his guidance. E-mail: geetu_ur@rediffmail.com

also a unidirectional causality from the secondary sector to the service sector, mainly due to the
secondary sectors linkage to the Financial and Banking services. Thus, though consumer based
tourism services are driving service sector growth, in the recent past, producer services of Finance,
banking etc have received a boost due to the industrial growth, besides tourism.
1.1 Pattern of Economic Growth in Goa :
Goa is among the youngest Union Territories of India to have achieved Statehood in May 1987, as
the 25th State of India. Very few States of India have made as major a transition as Goa has done.
Goas economy has in the last forty five years moved towards a rapidly growing service driven
economy from an essentially agrarian and trading economy, which it was in 1961, the year it was
liberated from the erstwhile Portuguese colonial rule. It has made impressive strides in all round
development measured by the various socio- economic indicators. This is revealed from a low
death rate of 8.3 and birth rate of 14.0 and infant mortality rate of 17 in 2001-02. (Economic
Survey 2005-06).The Literacy rate of Goa rose from 31% in 1961-62 to 82.01 % in 2001-02 and
its real per capita income increased from Rs.434 in 1961-62 to Rs.27, 603 in 2001-02.
Since the early years after liberation, especially from the third five year plan onwards, Goas
economic growth rate started rising. The policy of the then Government , of development of social
and economic infrastructure in the public sector and the development of the mining and industrial
sectors by private sector with government acting as a facilitator ,has had a profound impact on the
structure of the economy. In 1961-62 agriculture accounted for 50% of the NSDP as also the
workforce. There were hardly any industries and the economy was called a money order
economy, dependent on the incomes from Goans working out of Goa. Mining was the only major
economic activity then. From Mining alone, the industrial activity of the state has diversified into
services like tourism, banking, insurance, transport, educational services etc and manufacturing of
electronics, pharmaceuticals, engineering, tools, food and beverages and the like.
2

The growth behavior of NSDP is the single most important indicator to measure the performance
of the State economy both for long-term periods and for spatial comparisons. Although both Gross
State Domestic Product (GSDP) and Net State Domestic Product (NSDP) can be used for the
analysis, taking into consideration the nature and availability of data it is held that conceptually
NSDP is a better parameter than GSDP (Subramanian 2003).The present study uses NSDP data at
constant prices from 1970-71 to 2003-04, compiled by the Directorate of Planning Statistics and
Evaluation (DPSE) Goa that is, from Statistical pocket books. Data on Exports are taken from the
Handbook of Goa Mineral Ore Exporters Association. Continuous data on Goas NSDP from
1960-61 till 1969-70 is not available, hence the study period starts from 1970-71.Since NSDP data
is in three different base year series viz. 1970, 1980 and 1993-94 series, for the purpose of
comparison, NSDP series with 1970 base year and 1980 base year have been converted to a
common 1993-94 base year series, using splicing technique suggested by the Central Statistical
Organization CSO- New Delhi.
Table1. The Relative shares of Sectors in NSDP of Goas Economy in (% at 1993-94 constant
prices):
Sector

1970-79

1980-89

1990-2003

Primary sector.

37.5

23.1

15.62

Secondary sector.

19.5

31.20

34.34

Service Sector.

43.0

46.15

50.4

NSDP

100.0

100.0

100.0

Exports sector

39.5

27.06

21.9

The changes in the sectoral shares of Goas NSDP over the period 1970-71 to 2003-04 (see table
1.) shows that for every decade, the tertiary sector has been the major contributor of economic
growth. There has been a fall in the share of the primary sector in the total income from nearly
38% in 1970s to 23.1% in 1980, and a further drastic fall to 15.62 % in the 1990-2003. The
3

secondary sector on the other hand has shown a rapid rise from 19.5% in the decade of the 1970s
to 31.2% in 1980s and further to 34.34% in 1990 until 2003. The tertiary sector has been a major
contributor to the growth process right from 1970. And the share of this sector has grown, from
43% in 1970-79 to 46.15% in 1980-89 to 50% in 1990-2003. Exports of mineral ore also have a
major role in the economic growth of Goas economy, with a share of 39.5 % in 1970s.But there
has been a decline in this share to 27.06% in 1980s.In 1990-2003 period, exports declined to
21.9% of the NSDP. Thus the State economy is been driven by services. While analyzing growth
pattern, one has to also examine the growth rates. The average growth rates of the various sectors
over 1970-2003 period reveal the following.
Table 2. Annual Growth Rates of Real NSDP across the sectors in Goa at 1993-94 constant
prices.
Sector

1970-79

1980-89

1990-2003

Primary sector.

1.90

---0.03

2.05

Secondary sector.

13.91

5.46

10.20

Service Sector.

5.98

7.41

8.17

NSDP
Export sector

5.95
-1.21

5.09
1.91

7.868
12.27

Notes : Trend Growth rate is estimated using equation Ln Y = a + b(Time) at 1993-94 prices; Growth
rates of NSDP are significant at 1% level of significance in each time period.

If one analyses the growth rates, one finds that in the 1970s, the secondary sector recorded the
highest growth rate of 13.91%, due to spurt in the growth of the registered manufacturing
industries, at the rate of more than 40%. The service sector recorded a relatively moderate growth
of 5.98%, while exports showed a negative growth rate. The primary sector grew at 1.90% only. In
the 1980s, the, service sector recorded the highest growth of 7.41% followed by the secondary
sector growing at 5.46 % and export grew at 1.91%. The primary sector had negligible growth. In
4

1990s and early 2000, it was the exports sector which recorded the highest growth rate of 12.27%,
followed by, the industrial sector at 10.20 % while services grew at 8.17% .This period also
experienced a positive growth of about 2.05% due to growth in the mining sector at 2.39% and
agriculture sector at 2.0% .Though Tertiary sector has not recorded the highest growth rates over
the period under study, but this sectors growth rate has been showing a consistently rising trend.
2. Analysis of the Service Sector Growth in Goa:
The Service Sector or the Tertiary sector covers a broad range of activities ranging from
intermediary services or producer services , like communication ,distribution, transport ,banking
and insurance demanded by the manufacturing sector and many of which have high value
potential, to consumption related services like laundry, hotels and restaurant services ,tourism etc
to public or government services. Growth and predominance of the tertiary sector in an economy
could be of two types depending on which category of sub- services from those mentioned above
are contributing to growth. First it could be an engine of growth resulting from an increase of skill
intensive, high value added activities such as software, communications and financial services- the
high value producer services. Second it could be a reservoir of the residual that is a sector which
absorbs the shocks of both agricultural and industrial sectors leading to the growth of low skilled
service activities (Suresh, 2005). The latter is generally associated with public administrative
services, as in such services the existing employed persons are generating higher income from the
same real volume of services. As Mitra (1988) rightly points out, since for public administration
and defense services, expenditures determine income and additional outlay emerges as additional
output, the capital output ratio is low and a large part of the relevant expenditure does not lead to
capital formation and therefore has no long term significance for growth, for the rate of income
growth to continue, expenditure has to be repeated year after year.

For a proper understanding of the exact growth centers and its possible linkages, one needs to
classify the various sub-sectors under the service sector. RBI classification, (RBI 2002) is taken as
a standard classification. In the present study this classification is adopted with minor variations.
Since in Goa Other Services have been provided by the government to a very large extent, hence
they are included in government instead of the consumer services category, as is done by RBI
classification. Again since no separate data on trade is available, it gets clubbed with hotels and
restaurants and would be treated as consumer services. The average share of these sub-sector
groups in value-added is given in table 3.
Table 3. The Share of Various Services in Goas Service Sector (in % terms at 1993-94
constant prices):
Sectors

1970-79 1980-89

1990-2003 1970-86 1987-2003

Trade, Hotels &Restaurant

21.0

26.3

27.51

24.41

26.15

(Consumer Services)
Transport, Storage etc.

25.0

23.0

18.40

22.65

20.80

(Producer Services)
Finance, Banking& Real Estate

20.0

24.20

33.0

21.77

31.37

(Producer Services)
Community, Social&Personal Services

34.0

26.50

21.09

31.16

21.67

(Government Services)
Other Service category includes those services offered by government and private agencies in various
areas such as Health Care, Education etc.
A decade wise analysis shows that while in 1970s, Government services had the highest share in
Services, by, 1980s, though Government services continued, having the highest share, the share of
Consumer services, due to the rapid growth of Tourism, also showed an almost equal share in the
service sector. And by 1990s, the share of producer services especially ,the Finance and Banking
6

sector, showed the highest share of 33.0%,followed by Trade and Hotels, with a 24.41% share in
total services output ,the latter mainly due to growth of Tourism. If one analyses the pre-statehood
and post statehood trends for services, one finds that, before statehood, Government services were
the major services contributing 31.16% towards, total services output, and in the post statehood
period, Finance and Banking services, with 31.37% of the Service output are the leading sector.

Table 4. Growth rates of Service sector and its Sub sectors:

Sub Sectors
1. Trade, Hotels and Restaurants

1970-80
5.7

1981-1990
3.4

1991-2003
15

2. Transport, Storage, Communications

3. Finance, Banking and Insurance Real Estate.
4. Community, Social and Personal services.
Total Service sector

2.0
7.1
12.0
5.98

15.0
8.3
7.3
7.41

10
12.7
7.7
8.17

If the growth rates are compared, one finds ,in 1970s, Government services showed highest
growth rate in 1970s with Community ,Social and Personal Services growing at 12.0%,while,
Producer Services like Transport Services ,registered the highest growth in 1980s at 15.0% and
Trade, Hotels and Restaurants showed the highest growth at 15.0%,followed by Banking and
Financial Services growing at 12.7% in the 1990s .Thus one can conclude that the share of
government services in the economy has declined and that of producer services ,especially
Banking ,Finance and Consumer Services like Trade and Hotels has gone up. These services have
mainly gone up due to rising per capita income with the rapid growth of Tourism as also growth of
pharmaceutical industry in Goa.
2.1 The Extent of Stability in Goas Service Sector Growth:
To assess the fluctuations in growth an instability index is calculated. Measurement of
instability in time series data requires an explicit assumption of what constitutes the acceptable
and the unacceptable components. A systematic component, which can be predicted, does not
7

constitute instability and hence, it should be eliminated, from the data .The remaining
unpredictable component represents the instability. In this study, Instability index (I) suggested
by Parthasarathy (1984) is used where; the instability index is calculated using the following
statistic from the residuals (ei) of the exponential trend equation for the various sectoral real
incomes and for the state economys NSDP:
to n
I = ei

/ (n-k)

i=1
Where
ei = residual of ith observation.
N =number of observations.
K = number of parameters estimated.
Table 5. Index of Instability for the Major Sectors in Goa (1970-71 till 2003-04)
Time period.

Primary

Secondary

Service

Exports

Total NSDP.

1970-1979
1980-89
1990-2003
1970-2003.

Sector.
0.05135
0.07865
0.06035
0.07821

Sector.
0.140285
0.1355358
0.129782
0.166565

Sector.
0.057424
0.0727074
0.079325
0.115689

0.129490
0.124850
0.329942
0.341363

0.047120
0.079730
0.044547
0.092369

In the seventies the industrial sector, which registered the highest growth rate also showed the
highest

instability of 0.140285, mainly due to a spurt in the number of large scale capital

intensive industrial units. By the 1980s, the service sector had the highest growth rate, but showed
the lowest value of instability among the various sectors. In the period 1990s and early 2000, the
export sector which showed the highest growth rate also showed the highest instability, of 0.33.
The latter has been mainly due to the fact in the 1990s, due to devaluation of the Indian rupee;
there was a surge in export earnings. Due to international competition from Argentina, Brazil etc,
the presence of large buyers, the market for mineral ore exports has virtually become a buyers
market. Exports being dependent on external factors show high instability. Thus the industrial
sector and export sectors, growth shows more volatility as compared to the growth of the tertiary
8

sector which shows more stability. For the entire period under study, the export sector shows the
highest instability, with an index of 0.341363, followed by the industrial sector with an index of
0.166565, followed by the service sector with a value of 0.115689.Though the primary sector is
least volatile, its growth rate being negligibly low, is not very relevant. Among the remaining
sectors, service sector is less volatile and hence more stable. Since this sector contributes nearly
50% of the state income, and its growth rate has shown a consistently growing and stable trend
,the next section studies whether the service sector growth is autonomous or has linkages with the
other sectors in the economy.
3. Inter Sectoral growth linkages using Granger Causality:
The paper proposes to test the hypothesis that the Primary, Secondary and Export sectors have
growth linkages with the Service sector, implying that tourism led growth in Goa is not
autonomous but can generate growth impulses in the other sectors in the economy.

3.1 Methodology
In the present study, we first determine the order of integration of variables using Augmented
Dickey Fuller(ADF) unit root test; if the variables are integrated, they are converted into stationary
series and we employ Granger Test for testing causality .
3.1.1 Unit Root Test:
The test used for checking whether data is Stationary or not is Dickey Fuller Test.But the Dickey
Fuller Test has a substantial weakness, it does not take account of possible autocorrelation in the
error term, ut. If the error terms are auto correlated (that is they are not white noise) then the OLS
estimates of equation whose stationary property is tested for, are not efficient.So Augmented
Dickey Fuller (ADF) test advocated by Dickey and Fuller (1981) is to be used where lagged values
9

of the variable, in question is included as additional explanatory variable to approximate the

autocorrelation. This is generally regarded as the most efficient test. If the following equation is
considered for testing stationarity of variable Y using ADF test :
k
Yt = .Yt-1 + i . Yt -1 + ut.. (1).
i=1
Then following steps have to be carried out to test for stationary and convert a non stationary
variable into a stationary one:
First, choose the type of test, either the Augmented Dickey-Fuller (ADF) test or the Phillips-Perron
(PP) test.
Second, specify whether to test for a unit root in the level, first difference, or second difference of
the series. One can use this option to determine the number of unit roots in the series. If the test
fails to reject the test in levels but rejects the test in first differences, then the series contains one
unit root and is said to be integrated of order one I (1).If the test fails to reject the test in levels and
first differences but rejects the test in second differences, then the series contains two unit roots
and is integrated of order two I(2). It is unusual for an economic series to be integrated of an order
higher than two.
Third, specify whether to include a constant, a constant and linear trend, or neither in the test
regression. The choice is important since the distribution of the test statistic under the null
hypothesis differs among these three cases.
-Fourth, one has to specify the order of serial correlation in the series. For the ADF test, you
specify the number of lagged first difference terms to add in the test regression. For the PP test,
you specify the lag truncation to compute the Newey-West heteroskedasticity and autocorrelation
(HAC) consistent estimate of the spectrum at zero frequency.In the present test ADF test is used.
Akaike Information Criterion (AIC) and the Schwarz Criterion (SC) are utilized to select the lag
10

length. But whichever test is used, the residuals should be white noise. Thus to specify the
model ,which provides the best adjustment in the present study we make use of AIC and SC ,in
order to select the model that minimizes the criteria values.
To detect error term auto correlation, the LM test is used and the probability of the Q statistic is
computed.
3.1.2. Granger Causality Test:
In the study we adopt the familiar concept of causality as proposed by Granger (1969). Granger
proposed for a pair of linear covariance stationary time series X and Y. X causes Y, if the past
values of X can be used to predict Y more accurately than simply using the past values of Y.
Formally, X is said to cause Y if 1 (Yt: Yt- i, Xt-j) < 2 ( Yt: Yt- i.) where is the variance of
forecast error and I,j =1,2,3,..k.
Testing for Granger causation involves determining whether lagged values of variable X has
any influence in explaining variable Y when lagged values of Y are present . Consider the
following equations (2) and (3)
Yt = A1(L)Yt-1 +A2 (L)X t-1 + ut (2)

Xt = B1(L)Yt-1 + B2 (L)Xt-1 + ut..(3)

A1(L) , A2(L) , B1(L) and B2(L) are polynomials in the lag operator ,L. If lagged values of the
variable X do not significantly explain the variable Y in the presence of the lagged values of Y ,
then it is said that X does not cause Y in the Granger sense. If lagged Ys do not explain X in
the presence of lagged values of variable X, then Y does not cause X in the Granger sense.
In other words if A2(L)is zero in equation (2) , but B1(L) in (3) is not , then Y is casual and
there is unidirectional causality from Y to X .If on the other hand B1(L) is zero but A2(L) is not
11

then X causes Y. If both A2(L) and B1(L) are zero then there is no causation among X and Y.
Finally if both A2(L) and B1(L) are not zero , then variables X and Y are mutually causal.

3.2 Model Estimation and Empirical Results:

Unit root results based on Augmented Dickey Fuller Test, for the primary, secondary, export and
the service sectors of Goas economy for the entire period, 1970-2003 are presented first. The
Service or the Tertiary sector is included in greater detail by taking all its sub sectors as given in
the System of National Accounts. Thus four broad components of the services viz. (a) Trade-HotelRestaurant (THR), (b) Transport- Storage- Communication (TSC), (c) Financial- Insurance, real
estate- Business (FRB) and (d) Community-Social-Personal services (CSPD) are also examined.
Based on RBI guidelines, one can classify, THR as consumer services, TSC and FBR as Producer
services and CSS as government services. In view of varied nature of services, one can group them
into two i.e. marketed and non-marketed services. Marketed services may indicate NSDP derived
from a, b and c sectors and non- marketed services can represent social, community and other
services that are provided by the government to the society at large. Since, Secondary sector,
Export and Primary Sectors, are more likely to have value addition based linkages with marketed
services, rather than non-marketed services, the Community, Social Services, does not have much
significance and hence are excluded from the analysis.
The unit root ADF tests confirm that the real NSDP series of primary sector, secondary sector,
export sector and the tertiary sector are difference-stationary and integrated of order one for 19702003 period as also for post state hood and pre-statehood period taken separately. Only Tertiary
sector is I(2) for pre-statehood period. And Trade and Transport are I(2) for post-statehood
period.Following are the results of ADF/DF tests for the period 1970-2003:
Table 6.DF/ADF tests for various Sectors of Goas economy from 1970-2003 (at 1993-94 prices)

12

Sectors

Model

DF/ADF tests

lag

Critical value

AIC

QStat

Primary

Constant

-3.013144**

-2.967767

-2.60611

(after 1lag )
0.086

Secondary

Constant

-4.051859*

-3.661661

-0.725655

0.037

Tertiary

Constant+trend

-6.895737*

-4.273277

-2.419342

0.179

Trade,Hotels and

Constant

-3.059889***

-2.960411

-0.880768

0.079

Restaurant(THS)
Transport,Storage ,

Constant

-4.007447*

-3.661661

-0.190773

0.44

Communication(TSC)
Finance,Banking,
Constant

-4.569818*

-3.653730

-1.043022

0.286

Real Estate(FBR)
Community
and

Social
Constant

-3.402983**

-2.960411

-3.012043

0.219

Services(CSS)
Exports

Constant+trend

-3.667087**

-3.562882

-0.348558

0.318

*, **,*** are MaKinnon (1996) one sided p values, at 1%,5% and 10% level of significance respectively.

In order to know the inter-sectoral linkages, as also the linkages between the other sectors and the
service sector in greater detail, Granger Causality tests for the various services have been used .The
major findings are shown as below:

Table 7: Granger Causality Tests between the Sectors from 1970 to 2003, 1970-1986 and 1987-2003 (199394 prices).
1970-2003

1970-1986

1987-2003

Sectors

Direction

F test

lags

F test

lags F test

lags

1Primary &

Primary-Secondary.

0.33630

0.00191

1.38576.

Secondary

Secondary-Primary.

2Primary &

Primary-Tertiary.

2.85770.

0.00156.

1.14967

3.Primary &

Tertiary-Primary.
PrimaryExports.

0.03728.
1
3.94777*** 1.

0.12554.
0.86697.

1
1.

0.32613.
3.29655***

1.
1

Exports

Exports Primary

0.01568.

1.

0.92598.

1.

0.12636

1.

4.Secondary &

Secondary-Tertiary.

0.93051.

1.

3.11542.

1.

7.28551**

1.

Tertiary.

Tertiary-Secondary.

2.31294.

1.

0.44477.

1.

0.00448.

1.

Tertiary

13

5.Secondary &

Secondary Exports.

0.06255

1.

0.00695.

1.

0.00713.

1.

Exports.

Exports-Secondary.

0.37015.

1.

0.17576

1.

2.04927.

1.

6.Tertiary &

Tertiary Exports.

1.74771.

1.

0.10688.

1.

0.19712.

1.

Exports.
Exports-Tertiary.
0.31917.
1.
3.45170*** 1.
0.28218.
1.
*** and ** shows statistical significance at 10% and 5% levels respectively. The lags are based on AIC and SIC
criterion, and indicate the lags.

From the above table 7, one finds that, the intersect oral linkages are absent between most of the
sectors. There is no causality between the Primary and Secondary Sector, the Primary and Tertiary
Sector, for the entire period, considered under study, as also, during the pre-statehood and poststatehood period. Primary Sector exhibits a unidirectional causality towards, the export sector, for
the period 1970-2003 and the post statehood period. The linkage between the sectors is due to the
production of mineral ore, in the primary sector which is exported. The secondary and service
sector does not show any inter linkage, during the entire period of 1970-2003, though; there is
unidirectional causality from secondary sector towards service sector output, during the poststatehood period. This is mainly due to the growth of many modern industries in Goa, during the
post-statehood period. The Secondary and Exports sector are not causality linked, as Goas exports,
are resource based, mineral ore. The Tertiary sector also does not seem to be having linkages with
the export sector, except during the pre-statehood period, when the linkage is from Exports to the
Tertiary sector. Thus in Goa, the intersect oral linkages are not very strong in the economy. A
linkage, in the long run can be found only from Primary to Export sector, due to the dependence of
exports on local Mining Activity. Tertiary sector showed a linkage with the export sector, during
the pre-statehood period, while in the last two decades, due to industrial growth secondary sector is
showing a one way causal linkage with the service sector.

14

Though the Primary Sector does not show linkages with the tertiary Sector as a whole, it does have
linkages with some important sub-services within the service sector. While there is a one way
dependence of Primary sector on THR services for the entire period. The causation is reversed, in
the statehood period. TSC services, have linkage with the Primary sector, mainly due to the
Mining Activity, during the pre-statehood period. But with Mining showing a negative growth rate
in the recent past there is no linkage among the two sectors, in the post statehood period. Primary
sector and Financial services are showing no causality, in any of the periods, under study. Thus
Primary sector shows linkages with THR services, in the recent past.

Table 8: Granger Causality Tests between Primary, and Sub-Sectors of Tertiary Sectors from 1970 to
2003 ,1970-1986 and 1987-2003 (1993-94 prices) .
Sectors
1.Primary&Trade,Hotels,

Direction
Primary

Restaurants (THR)

to THR.
THR

to

1970-2003
F test
0.03728.

lags
1.

1970-1986
F test
0.46140.

lags
1.

1987-2003
Ftest
11.3851*.

lags
1.

2.95604.***

1.

0.0184.

1.

0.56563.

2.

0.02076.

1.

2.01713.

1.

0.03577.

1.

1.98415.

1.

8.52418**.

1.

0.29466.

2.

0.21636.

1.

1.91448.

1.

0.79269.

1.

0.02067.

1.

0.535012.

1.

0.13769.

1.

Primary.
2.Primary&Transport,Storage,

Primary

Communications(TSC)

to TSC
TSC

to

Primary.
3.Primary&Finance, Banking,

Primary

Real Estate (FBR)

to FBR
FBR

to

15

Primary
***,** shows statistical significance at 10% and 5% levels respectively. The lags are based on AIC
and SIC criterion, and indicate the lags, for the causal dependent variable.
Table 9. Granger Causality Tests between Secondary, and Sub-Sectors of Tertiary Sectors from 1970 to
2003 ,1970-1986 and 1987-2003 (1993-94 prices) .
1970-2003
Sectors

1970-1986

1987-2003

Direction

F test

lags

F test

lags

Ftest

lags

1Secondary&

Secondary

0.92518.

1.

0.04131.

1.

0.56135.

1.

Trade,Hotels,Restaurants

-THR.

(THR).

THR-.

0.48874

1.

0.17894.

1.

0.61753.

2.

0.35423.

1.

0.51840

1.

0.75627

1.

0.00029.

1.

0.23164.

1.

0.18702.

2.

0.08149

1.

0.97406.

1.

3.000***.

1.

Secondary
2.Secondary&

Secondary.-

Transport,Storage,

TSC

Communications (TSC).

TSCSecondary

3.Secondary&

Secondary

Finance, Banking,

.FBR

Real Estate (FBR)

1.
0.91086.

1.

3.24831***

1.

0.16048.

***,**, shows statistical significance at 10% and 5% levels respectively. The lags are based on AIC and
SIC criterion, and indicate the lags, for the causal dependent variable.

From the table 9. one can conclude that , there are no strong ;linkages in Goa, between the Secondary
and the THR and TSC sevices over 34 years. But there a linkage from Financial services to the
Secondary sector, during the pre-statehood period. This is mainly because of the Financial Institutions,
which started in this period and gave large scale financial assistance, for industrial projects in Goa.

16

This causation is reversed in the post statehood period, as the industrial sectors growth has contributed
to the growth of banking activity in Goa in the recent past.
Table 10: Granger Causality Tests between Exports and Sub-Sectors of Tertiary Sectors from 1970 to
2003, 1970-1986 and 1987-2003 (1993-94 prices).
Sectors
1.Exports &Trade, Hotels,

Direction
Exports
to

Restaurants (THR)

-THR.
THR to

1970-2003
F test
2.07032.

lags
1.

1970-1986
F test
1.89129.

lags
1.

1987-2003
F test
3.82394***.

lags
1.

0.16342.

1.

0.19967.

1.

0.09311.

2.

1.80865.

1.

0.42765.

1.

0.90813.

1.

1.

2.27587

1.

0.05977.

2.

Exports.
2.Exports

Exports

&Transport,Storage,

TSC

Communications(TSC)

TSCto

to

0.03805.

Exports
3.Exports&

Exports

Finance,Banking,

FBR.

Real Estate (FBR)

FBR

to

0.03910.

1.

23.9736*

1.

1.57836.

1.

to

3.31702***

1.

2.34705.

1.

0.09041.

1.

Exports.
***, **,* shows statistical significance at 10%, 5% and 1% levels respectively . The lags are based on
AIC and SIC criterion, and indicate the lags, for the causal dependent variable.

Exports show one way linkage with the THR services, in the post-statehood period. Transport sector
shows no linkage with exports in any of the time periods. But FBR shows strong linkages with exports.
There is one way linkage from FBR to Exports during the period 1970-2003 as also during the prestatehood period. This is due the fact that Mining and Export of mineral ore were major economic
activities in Goa, in the 1970s and this contributed substantially to Goas income, output and
employment. Growth in this activity boosted the Financial and banking activity in Goa. Due to
instability and fluctuations in Export sectors income in the last decade, the linkages of export sector
with Financial and banking services have weakened.

17

Table 11. Granger Causality Tests between the Sub-Sectors of Tertiary Sectors from 1970 to 2003, 19701986 and 1987-2003 (1993-94 prices)

18

1970-2003

Sectors

1.Trade,Hotels,

Direction

THR

Restaurants(THR

TSC.

) & (TSC)

TSC

1970-1986

1987-2003

F test

lags

F test

lags

F test

lags

to

3.29918***.

1.

0.02766.

1.

0.12852.

1.

to

2.67391.

1.

1.38096.

1.

0.67493.

2.

to

5.16946**.

1.

1.35563.

1.

1.60743.

1.

THR.

2.THR &FBR.

THR
FBR.

0.13560.

FBR

to

3TSC&

THR
TSC

to

Finance,Banking,

FBR.

Real Estate (FBR)

FBR

0.40075.
1.

0.14879.
1.

2.

6.86829**

1.

4.23603***

1.

2.71506.

1.

4.71353**

1.

0.97332.

1.

4.63076**

1.

to

TSC.
***,**,* shows statistical significance at 10%,5% and 1% levels respectively. The lags are based on AIC and
SIC criterion, and indicate the lags, for the causal dependent variable.

From table 11 one finds that, the sub sectors within the service sector, show linkages, for the entire
period of time ,i.e. 1970-2003.Trade, Hotels and Restaurants, show one way causality towards
Transport Storage and Communications, although, they may not be linked over shorter time periods.
Trade and Hotel services also, have an influence in determining the Finance and banking services
output. The Transport, Storage and Communication and Finance and banking services show bidirectional linkages, for a long period of time. In the pre-statehood period, the direction of linkage is

19

from Transport services to Finance and banking, as Transport services was the dominant sector in the
1980s, which drove service growth and in the 1990s, it was the Finance and banking sector which
showed a very high growth rate, facilitating the Transport activity. This clearly, brings out the Fact, that
in Goa, it is mainly; Tourism based services, namely, Trade, hotels and Restaurants which have a
linkage with other sub-services and are facilitating service growth.
Conclusion: Thus from the above inter-sectoral and intra-sectoral analysis, one can clearly, observe
that the inter sectoral linkages, between the commodity based sectors and the service sector in Goa are
weak, and the linkages between the various market based sub-services is strong, over the last three
decades. The intra-sectoral linkages within the service sector are mainly driven by the Tourism based
services, viz, Trade and hotels, implying that this sector is the causal or Key sector in the service led
growth. But a peculiar finding of the paper is that in the post statehood period,the primary as well as
the export sectors show one way linkage with Trade, Hotel services and there is also a unidirectional
causality from the secondary sector to the service sector, mainly due to the secondary sectors linkage
to the Financial and Banking services. Thus ,though consumer services are driving service sector
growth, in the recent past, producer services of Finance ,banking etc have received a boost due to the
industrial growth .Thus, one may conclude that, though Goas service economy is presently tourist
based , there is a potential for the state to develop high value producer services which exhibit linkages
with its industrial sector.

Bibliography:
Ashok Mitra (April 1988), Disproportionality and the Service Sector: A Note, Social Scientist Vol
16(4).
Babu, M. Suresh (July 23, 2005), Keralas Growth Trajectory, Economic and Political Weekly
(EPW) Mumbai.

20

Dickey, D.A and Fuller, W.A(1981),Likelihood Ratio Statistics for Autoregressive Time series
with a Unit Root, Econometrica, Vol.49(4),1057-72.
Directorate of Planning, Statistics & Evaluation, (2005), Economic Survey 2005-06, Government
of Goa , Panaji-Goa.
Directorate of Planning, Statistics & Evaluation, Statistical Pocket Books ,from 1970-71 upto
2001-02. Government of Goa , Panaji-Goa.
Directorate of Planning, Statistics & Evaluation,(2003), State Income Data 2001,2002 and 2003,
Government of Goa , Panaji-Goa.
Goa Mineral Ore Exporters Association(GMOE) Goan Mineral Ore Exports Selected
Statistics,Panaji- Goa. Various issues from 1970-71 upto 2003-04.
Granger, C.W.J. (1969), Investigating Causal relations by Econometric Models and Cross
Spectral Methods, Econometrica, July, pp. 424-438.
Parthasarathy G. (1984),Growth and Fluctuations of Agricultural Production: A Districtwise
Analysis ,in Andhra Pradesh ,EPW Volume,19(26) ,June 30 ,ppA74 to A 84.
Reserve Bank of India (2002), Regional Dimension of Economic Growth in India, Report on
Currency and Finance 2000-01.
Subramanian (2003), Regional Industrial Growth under Economic Liberalization, ManakNew
Delhi.p48.

21

Service led Growth in Goa and its Sectoral Linkages: A Granger Causality Analysis.
By Ms. Geetanjali R. Urankar,*

1. Abstract:
Due to the high potential in services to drive economic growth, there has been a lot of research
focus on services in the recent past. Goa, one of the smallest states of India has witnessed a
tremendous growth in its service sector, with the latter contributing over 50% to the state income
and over 40% to the states employment over the last decade, making it a service led economy. The
present paper, seeks to examine the pattern of economic growth in Goa, from 1970-71 till 2003-04, the
determinants of the service sector growth and the extent of stability of the service sector growth.
The inter- sectoral linkages in the state economy, with special reference to the service sector over
the above mentioned period ,as also Goas pre-statehood period(1970-71 till 1986-87)and its post
statehood period(1987-88 till 2003-04)are assessed ,to find out whether the service sector exhibits
feedback linkages with the other sectors in the economy. Results show that the economic growth is
driven by the service sector, which is a major contributor towards Goas NSDP.While service
sector growth in the 1970s is attributed to the growth of public administrative services, later on
tourism services like trade and hotels contributed the highest to the service sector. Even producer
services like Financial and Banking services have a share in the service led growth. Further more
compared to the other sectors the service sector growth in Goa has been stable .Granger causality
results show that the inter sectoral linkages, between the commodity based sectors and the service
sector in Goa are weak, and the linkages between the various market based sub-services is strong,
over the last three decades. The intra-sectoral linkages within the service sector are mainly driven
by the Tourism based services, viz, Trade and hotels, implying that this sector is the causal or

22

Key sector in the service led growth. But a peculiar finding of the paper is that in the post
statehood period, the primary as well as the export sectors show one way linkage with Trade, Hotel
services and there is also a unidirectional causality from the secondary sector to the service sector,
mainly due to the secondary sectors linkage to the Financial and Banking services. Thus, though
consumer based tourism services are driving service sector growth in Goa , in the recent past,
producer services of Finance, banking etc have received a boost due to the industrial growth and
have a potential to grow further if industrial growth sustains.

* Senior Lecturer, Department of Economics, G.V.M.s College of Commerce and Economics,

Farmagudi Goa, pursuing Ph.D under U.G.Cs, Faculty Improvement Program (FIP) at the
Department of Economics, Goa University.I wish to thank Dr.Shanmugam,of Madras school
of economics,for his valuable suggestions and my guide Dr.P.K. Sudarsan, Goa University .

23