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An empirical investigation on the inter-sectoral linkages in India

Author

Listed:
  • Kaur, Gunjeet
  • Bordoloi, Sanjib
  • Rajesh, Raj

Abstract

For a developing country like India where socio-economic problems such as poverty,unemployment and inequality influence policy decisions, it becomes important to study interlinkages among the constituent sectors so that positive growth impulses emerging among the sectors could be identified and fostered to sustain the growth momentum. An in-depth understanding of inter-sectoral dynamics becomes all the more important for policy makers so that effective monetary, credit and fiscal policies could be designed in order to be able to achieve the broader objective of inclusive development. In this backdrop, the present paper endeavors to study inter-sectoral linkages in the Indian economy both through input-output (I-O) approach and econometric exercises using co-integration and state-space models. Cointegration analysis is carried out both at sectoral and sub-sectoral levels since mid-1980s. At the broad sectoral level, primary, secondary and tertiary (excluding community, social and personal services) sectors display strong long-run equilibrium relationship amongst each other. These sectors also display strong long-run equilibrium relationship with one another in a bivariate framework. At the sub-sectoral level, existence of long-term equilibrium was found between ‘trade, hotels, transport & communication’ and ‘manufacturing’ sectors. Further, the financial sector activity in the ‘banking & insurance’ sector was found to be co-integrated with the ‘manufacturing’ and ‘primary’ sectors. The sectors, which displayed long-run equilibrium relationships, were re-estimated through state space model using Kalman filter. This also corroborated that variation in one sector influenced the other sector’s performance over time. In view of the prevailing sectoral inter-relationships, the paper explores policy options so that positive growth impulses developing among the sectors are fostered.

Suggested Citation

  • Kaur, Gunjeet & Bordoloi, Sanjib & Rajesh, Raj, 2009. "An empirical investigation on the inter-sectoral linkages in India," MPRA Paper 40419, University Library of Munich, Germany, revised 2009.
  • Handle: RePEc:pra:mprapa:40419
    as

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    File URL: https://mpra.ub.uni-muenchen.de/40419/1/MPRA_paper_40419.pdf
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    References listed on IDEAS

    as
    1. Sangeeta Dhawan & K. K. Saxena, 1992. "Sectoral Linkages and Key Sectors of the Indian Economy," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 27(2), pages 195-210, July.
    2. Allan G. B. Fisher, 1939. "Production, Primary, Secondary And Tertiary," The Economic Record, The Economic Society of Australia, vol. 15(1), pages 24-38, June.
    3. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Macroeconomic analysis of economic development; Input–Output Tables; Inter-sectoral Linkages; Agriculture; Industry; Services;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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