The Contribution of Economic Sectors to Economic Growth: The Cases of China and India

Abstract

China and India have recently achieved spectacular economic growth where GDP per capita grows rapidly in both countries. Thus, this study examines the contribution of economic sectors to economic growth in both countries by using time series data from 1978 to 2007. Three economic sectors were analyzed: agricultural sector, manufacturing sector and services sector. Augmented Dickey-Fuller (ADF) unit-root test shows that the time series data are stationary at first difference. Then, correlation analysis indicates that each economic sector has strong, positive and significant linear relationship with economic growth in China and India. In addition, the results of multiple regression analysis show that agriculture, manufacturing and services sectors have positive relationship with GDP per capita in China and India. However, the contribution of economic sectors to economic growth differs in China and India. Manufacturing sector contributes the highest to China’s economic growth while services sector is the highest contributor to India’s economic growth.