The fact that capital-output ratios in services have tended to fall can be interpreted in a variety of ways. In one sense, this can be interpreted as a more efficient use of the capital in the services sector. Thus, the same infrastructure is presumably being used to meet a greater range and quantity of services provision, whether in transport, banking, public administration or other services. In a capital-scarce economy, this is to be welcomed.
 
However, it can also be seen as a way of accentuating the dualism inherent in the economy, with a proliferation of low-wage low-productivity service jobs leading the growth in this sector, rather than more capital-intensive "modern" service activities. In itself, the information on capital-output ratios does not allow for the choice of any particular interpretation; both are possible. However, if there were information on employment and wages in the services sector, there would be some way of reading more into this data.
 
As it turns out, there are no data on wages in the service sector as a whole. However, we do have information on the share of wages in the organised sector of services. As Chart 9  shows, the organised sector constitutes a large and growing part of total services, increasing its share of total services from 46 per cent in 1989-90 to more than 50 per cent in 1995-96. It is likely that the movement of the capital-output ratio in all services as a group would be mirrored in that of the organised sector of services as well.
Chart 9 >>
 
The share of wages (or rather, the broader category "compensation of employees") in the organised sector of services is indicated in Chart 10. This turns out to have fallen very substantially over the same period, from 81 per cent in 1989-90 to less than 68 per cent in 1995-96. This in turn suggests that the profit share in the organised services sector must have gone up.
Chart 10 >>
 
This could have happened in several ways, including through worker competition bidding down wage payments in the service sector. But in a macro sense what this suggests is a process whereby the private organised service sector is taking over many of the activities of both the public sector and the unorganised sector. In the first case, it is able to pay lower wages and thus ensure higher profits for the provision of equivalent services, while in the second case it absorbs some of the low-wage employment that was already in the unorganised sector.
 
This sounds suspiciously close to the scenario of the proliferation of low paid service jobs that was described for some industrial countries above. In countries like India, the process can be intensified by the fact that many private service activities emerge or grow when infrastructure - especially public infrastructure - is poor. Thus, private courier services come up when public postal systems are found wanting, and so on.
 
Of course, the broad macro data described here do not allow for more than a relatively cursory speculation on the possible forces at work, and certainly do not make for a definitive statement on the nature of services sector growth. However, they do mean that the interpretation of such growth should be made with much more caution than is usually the case, and that the possibility of some less than desirable forces at work should be taken seriously.