The paper tries to study productivity spillovers from foreign direct investment in the services sector of India. Using firm-level data for the period 2000–2010, horizontal and vertical spillovers are tested with the help of panel data fixed effects ‘within’ model. Spillovers across different industries of the services sector are also examined. It is inferred that horizontal spillovers positively affect total factor productivity of domestic firms in the services sector. Spillovers through backward vertical channels and forward vertical channels are, however, encountered to be negative. At an industry level, it is deduced that productivity spillovers vary across different industries with horizontal spillovers being more dominant than vertical spillovers.
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