Agricultural Growth and Structural Changes in the Punjab Economy: An Input-output Analysis

This research report is part of IFPRI's continuous efforts to understand the relationship between technological change in agriculture and overall economic growth that expands employment and income opportunities for the poor in developing countries. The research is a collaborative effort with the Centre for the Study of Regional Development at Jawaharlal Nehru University in New Delhi. The study documents and analyzes the structural changes that have occurred in the Punjab economy since the green revolution of the mid-1960s. With two input-output tables—one for 1969/70 and the other for 1979/80—the authors have traced the sources of structural changes and examined the changes in the intersectoral linkages and the quantum of indirect and induced income and employment generated by different sectors. Thus the study provides information and critical understanding required to develop programs that enhance the sectoral income and employment multipliers. The study highlights changes in the relative importance of the primary, secondary, and tertiary sectors in the economy of Punjab in the wake of improvements in agricultural production technology. It also brings out significant structural changes within these sectors. For instance, within the primary sector, the relative share of crop production has declined, whereas that of animal husbandry has increased. Similarly, within manufacturing a notable change has been the emergence of machine- and metal-based industries. These changes are reflected in the operation of the economy at a higher technological level and in the increased labor productivity in most sectors. Pointing to the large public investment in rural infrastructure that both preceded and followed the introduction of the new agricultural technology, the authors conclude that while the primary importance of agricultural development cannot be denied, its success is by no means independent of other factors. It is notable that the agricultural breakthroughs in Punjab stimulated growth in other sectors of the economy, but not as much as had resulted from similar breakthroughs in other regions or countries, perhaps because of the large net outflow of capital from Punjab. This observation raises important issues on the role of further agricultural growth as well as the problem of interregional disparities and how best to deal with them.