assessment of backward and forward linkages in indian economy… · 2018-07-07 · indian economy...

CHAPTER 6

ASSESSMENT OF BACKWARD AND FORWARD

LINKAGES IN INDIAN ECONOMY: AN INPUT-OUTPUT

BASED ANALYSIS

6.1 Introduction

Over the years the Indian economy has undergone a structural change in its

sectoral composition from a agriculture economy during the 1970s to predominant in

service sector in 1990s. One of the striking features of India’s high economic growth in

the last two decades is the service sector’s boom. The rapid growth of services is an

indication of fundamental changes in the production and consumption structures of our

societies (Ganz, 2005). A major drive towards diversification and modernization of the

Indian economy in later years resulted in increased share of the secondary and tertiary

sectors and declined share of primary sector in the national product (Dasgupta &

Chakraborty, 2006). Sectoral linkages describe a sector’s relationship with the rest of

the economy through its direct and indirect intermediate purchases and sales. The

sectors with the highest linkages should be possible to stimulate a more rapid growth of

production, income and employment than with alternative allocations of resources. The

linkage concept has been recognized as playing a crucial role and providing substantial

contributions towards guiding the appropriate strategies for future economic

development.

The production linkages basically arise from the interdependence of the sectors

for meeting the needs of their productive inputs, whereas the demand linkage arises

from the interdependence of the sectors for meeting final consumption. Further, the

linkages between the two sectors can also be categorized into two groups based on the

direction of interdependence. One is the backward linkage, which identifies how a

sector depends on others for their input supplies and the other is the forward linkage,

which identifies how the sector distributes its outputs to the remaining economy. More

importantly, these two linkages can indicate a sector’s economic pull and push, because

the direction and level of such linkages present the potential capacity of each sector to

stimulate other sectors and then reflect the role of this sector accordingly.

Assessment of Backward and Forward Linkages in Indian Economy: An Input-Output Based Analysis

167

The structural inter-relationships among sectors in an economy are generally

examined in different ways. The institutional, demographic and socio-political context

within which the production process has been taking place over the years plays pivotal

role in shaping the sectoral linkages within the economy. Changes in any of these

perspectives would lead to changes in the growth and composition of different sectors,

and sub-sectors within the sectors, and thereby, the sectoral linkages (Saikia, 2009).

The transfer of surplus resources such as capital, labour and raw materials etc.

from agriculture to industry is one of the important linkages between the two sectors.

Studies show that with the increase in the productivity of agriculture, demand for post-

harvest facilities such as processing, storage, transport, communication and market, etc.

has increased over the years. There is considerable evidence that investments in some

special services such as transport and communication, storage, building of rural

roadways, banking and financial facilities, trade and hotels, social services such as

education, hospitals and other infrastructure, etc. increase agricultural productivity. The

growth in specialized services can enhance higher rates of economic growth, and is also

likely to strengthen ‘agriculture-industry linkages. Similarly, with the increase in per

capita income demand for specialized services that act as inputs in agriculture will

increase, because the demand for services is highly income elastic.

Further, service sector has stronger backward linkages compared to forward

linkages with both agriculture and industry. In the light of the structural changes in the

Indian economy and its sectoral growth composition, some of crucial issues such as the

importance of government policies, role of economic institutions, increasing economic

integration, inter-sectoral resource transfer, changing composition of agricultural sector,

service led growth etc. which have significant impact on sectoral linkages should be

emphasized.

The contribution of agriculture sector in generating demand for the other sectors,

especially the industrial sector, has become more pronounced in recent years. Further,

in view of the structural shift from food grain production to commercial crops, fruits

and vegetables, flower and horticulture etc., and the increasing consumption preferences

for differentiated food products, combined with the development of contract farming


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and vertical linkages in agro-food supply chains, the possibility of improving the

‘agriculture-industry’ inter-dependence in recent years can be well predicted.

6.2 Linkages among Sectors: Vision of different Scholars

A number of researchers have studied sectoral inter-linkages in the Indian

economy. In one of the earliest studies on the subject, Rangarajan (1982) found a strong

degree of association between the agricultural and industrial sectors. In particular, it has

been observed that an addition of 1% growth in the agriculture sector stimulates the

industrial sector output to the extent of 0.5%. That study, however, claimed that the

consumption linkages are much more powerful than the production linkages between

sectors. A study by Bhattacharya and Mitra (1997) provided empirical evidence in

support of a positive linkage among the broad sectors. It established that many services

activities are significantly associated with the agricultural and industrial sectors and this

helps in overall employment generation. Aydin (2007) identified some key sectors with

strong backward and forward linkages of Turkish economy. The study found that for the

development strategy it is very important to determine which industries possess high

backward and forward linkages. Then stimulating final demand or primary inputs

namely of these industries could positively influence the economic activity of the

country. One of the studies which examined the inter-sectoral linkages among different

sectors of the economy are Andreosso & Yue (1999), Bagchi et al. (2005), Chakravarty

(2006), Ashwani & Vashist (2012), Papola (2012). Forthcoming section also presents

the production, demand, forward and backward linkages computed from the data.

6.2.1 Production Linkages

Before calculating the backward and forward linkages the study focuses on

production and demand linkages by using Input-Output analysis. The production

linkages have been explained by using the technological coefficient matrix. Production

linkages refer to the input requirement of any sector, for producing its own output, from

other sectors in the economy. In other words, if the output of one sector requires the

inputs from other sectors, used in its production cycle then these types of linkages are

known as production linkages. One can also term it as interdependence among the

producing sectors in the economy. Table 6.1 presents the sector wise production


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linkages shown by the technology coefficient matrix (A) of basic input-output analysis

at different points of time.

First column of the table 6.1 reveals that to produce one unit of agriculture,

0.167 units of input were required from agriculture sector itself, 0.064 units were

required from industrial sector and 0.058 were required from service sector in 1983-84.

In 1989-90, its dependence on agriculture (0.155) has declined and increased from

industry (0.074) and followed by service sector (0.070); and continuously declining

upto 1998-89 except 2003-04 and again declining in 2006-07. We can see fluctuations

in industrial sector in column 1 while dependence on service sector continuously

increased except in 1998-99 to produce one unit of agriculture. During 1993-94, the

input requirement of agriculture sector from the other two sectors changed in which

industry required 0.063 units and services required 0.083 and it depended more upon

service sector than industrial sector. In 2006-07, for the production of one unit of

agriculture, 0.138 units were required from agriculture itself, 0.083 units were required

from industry and 0.095 from service sector. Overall period from 1983-84 to 2006-07

shows that to produce one unit of agriculture, its dependence upon industrial sector and

service sector increased.

Second column of the table 6.1 shows that in respect of industry its dependence

for inputs on agriculture decreased (from 0.187 units to 0.151 units) in 1989-90 than in

1983-84. During 1983-84, to produce one unit of industry, 0.187 units of input were

required from agriculture sector, 0.317 units were required from industrial sector itself

and 0.176 units were required from service sector. During post reform period,

agriculture requirement increased in 1993-94 and 1998-99 to produce one unit of

industry; further declined in 2003-04 and 2006-07. In 2006-07, agriculture sector

contributed 0.158 units, industrial sector 0.379 units and service sector with 0.206 units

added in the production of one unit of industry. Dependence on service sector increased

from 0.176 units in 1983-84 to 0.240 units in 1998-99 and further decreased to 0.206

units in 2006-07. Overall study period, shows that dependence of industry has decreased

on agriculture but increased on industrial sector throughout the study period i.e. to use

the more inputs from its own sector. However, the dependence of industrial sector on

service sector reduced in 2006-07 than in 1993-94.


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Table 6.1: Sector Wise Production Linkages

Technology Coefficient Matrix for 1983-84

Sector Agriculture Industry Services

Agriculture 0.167 0.187 0.035

Industry 0.064 0.317 0.146

Services 0.058 0.176 0.183



Agriculture 0.155 0.151 0.044

Industry 0.074 0.353 0.124

Services 0.070 0.208 0.176



Agriculture 0.136 0.160 0.039

Industry 0.063 0.345 0.110

Services 0.083 0.238 0.185



Agriculture 0.110 0.179 0.031

Industry 0.069 0.343 0.107

Services 0.062 0.240 0.193



Agriculture 0.177 0.171 0.030

Industry 0.075 0.344 0.147

Services 0.092 0.216 0.184



Agriculture 0.138 0.158 0.034

Industry 0.083 0.379 0.165

Services 0.095 0.206 0.185

Source: Author’s Calculations


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Third column of the table 6.1 explains that to produce one unit of service sector,

0.035 units of agriculture sector, 0.146 units of industrial sector and 0.183 units were

required from service sector itself in 1983-84. Further, the analysis of service sector

reveals that its dependence on agriculture increased in 1989-90 to 0.044 units. It

continuously decreased till 2003-04 and again increased in 2006-07. Industrial

requirement to the production of service sector decreased further from 0.146 units in

1983-84 to 0.107 units in 1998-99 and further increased in 2003-04 and 2006-07.

Overall dependence on service sector itself has increased from 0.183 units in 1983-84 to

0.185 units in 2006-07. In 2006-07, to produce one unit of service sector, 0.034 units

were required from agriculture sector, 0.165 units from industry and 0.185 units were

required from service sector itself. Overall study period from 1983-84 to 2006-07,

shows that dependence of service sector has decreased on agriculture throughout the

study period but fluctuated in case of industry and services itself and increased at the

end of the study period.

Production linkages explain that dependence has increased on industry and

services than agriculture in production of the Indian economy. Agriculture sector also

plays a vital role in the growth of the country but now a days, it is lagging behind.

6.2.2 Demand Linkages

Like production linkages, demand linkages can also be presented by using

Leontief inverse matrix of simple input-output analysis. The logic behind the demand

linkages is that if we want to increase the production of sector one then due to

production linkages inputs from every sector should increase to meet the new demand

requirement. So it explains the increase in demand for goods from all sectors to produce

additional unit of output in one sector. Table 6.2 presents the Leontief inverse matrix for

the given study period.

Column one of table 6.2 reveals that in 1983-84, one unit increase in demand of

agricultural output increased the demand for agriculture itself by 1.236 units, industrial

goods by 0.140 units and demand for services by 0.119 units. Demand for agricultural

goods regularly decreased from 1.236 units in 1983-84 to 1.157 units in 1998-99 and

further increased to 1.260 units in 2003-04 and again declined to 1.207 units in 2006-


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07. Demand for industrial goods increased in 1989-90 to 0.168 units from 0.140 units in

1983-84. Further it fluctuated and finally increased to 0.213 units in 2006-07. Demand

for services increased from 0.119 units in 1983-84 upto 0.162 units in 1993-94 and

further increased its demand continuously except in 1998-99. In 2006-07, for one unit

increase in demand of agriculture output, 1.207 units of agriculture itself were

demanded and demand for industrial goods was 0.213 units and services demanded

were 0.194 units. Demand linkages in service sector become stronger in 2006-07.

Overall study period shows that demand linkages of services were higher than industry

as well as agriculture.

Column second of table 6.2 explains that for increase in demand of industrial

goods by one unit, demand from agriculture increased by 0.369 units, industry by 1.577

units and services by 0.366 units in 1983-84. Demand linkages of agriculture have

decreased in 1989-90 to 0.320 units and they have been increasing in post reform period

except in 2006-07. Fluctuations have been shown in case of demand linkages of

industry over the study period. Demand linkages of industry increased from 1.577 units

in 1983-84 to 1.668 units in 1989-90 and decreased for the years 1993-94 and 1998-99.

In 2003-04 and 2006-07, industry has shown high demand linkages as compared to the

previous years. In case of services, over the study period services have been showing

increasing trend of demand linkages to increase in demand of one unit of industry in the

economy. In 2006-07, after every increase in demand of industrial goods by one unit,

demand of agriculture increased by 0.347 units, industry by 1.787 units and services by

0.492 units. Overall scenario shows that industry has higher demand linkages with

services than industry itself and agriculture.

Column third of table 6.2 explains that due to increase in demand of services by

one unit, demand from agriculture increased by 0.118 units, industry by 0.287 units and

services by 1.294 units in 1983-84. Demand linkages of agriculture have decreased in

1989-90 to 0.113 units and declined in 1993-94 and 1998-99. They further increased

with the demand of 0.113 units of agriculture and declined again in 2006-07. Demand

linkages of industry decreased from 0.287 units in 1983-84 to 0.261 units in 1989-90

and further decreased for the years 1993-94 and 1998-99. In 2003-04 and 2006-07,

industry has shown high demand linkages to the previous years. Over the study period,


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Table 6.2: Sector Wise Demand Linkages

Leontief Inverse Matrix for 1983-84


Agriculture 1.236 0.369 0.118

Industry 0.140 1.577 0.287

Services 0.119 0.366 1.294



Agriculture 1.221 0.320 0.113

Industry 0.168 1.668 0.261

Services 0.146 0.449 1.290



Agriculture 1.190 0.328 0.101

Industry 0.141 1.644 0.228

Services 0.162 0.514 1.304



Agriculture 1.157 0.348 0.090

Industry 0.142 1.643 0.223

Services 0.132 0.516 1.312



Agriculture 1.260 0.365 0.113

Industry 0.187 1.676 0.309

Services 0.192 0.484 1.321



Agriculture 1.207 0.347 0.121

Industry 0.213 1.787 0.370

Services 0.194 0.492 1.335



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services have been showing increasing trend of demand linkages except in 1989-90. In

2006-07, after the increase in demand of services by one unit, demand of agriculture

increased by 0.121 units, industry by 0.370 units and services by 1.335 units. So, overall

study period shows that services have higher demand linkages with services itself

followed by industry and agriculture.

6.3 Backward and Forward Linkages

One of the most important uses of an input output table is that the

interdependence between various sectors of the economy can be visualized. The aspect

of interdependence arising through technological interconnections between the various

sectors of the economy has led to explore the notion of the “Key Sectors”. Once the

Key Sectors are identified, it is suggested that these sectors be given priority in

investment allocation and in industrial promotion strategy. It is believed that if

resources can be concentrated on these Key Sectors, output, income and employment in

the country will grow more rapidly than if these resources were allocated in some

alternative way.

In this section, an attempt has been made to analyze the backward linkages with

the help of demand-driven input-output model and the forward linkages with the help of

supply-driven input-output model. Before we discuss the backward and forward

linkages, let us first see the intersectoral linkages between different sectors of the input-

output tables.

As we know that one of the important features of an input-output transaction

table is that it illustrates the manner in which the activities of the one sector are linked

with the other sectors. The input-output model enables us to analyze the impact of

change in the public and private expenditure upon the different sectors of the economy.

Any general familiarity with such input-output technique would convince that the

impact of an initial expenditure on an economic system depends not merely in its

expenditure volume but on the inter-industry linkages of the sector with the rest of the

economy (Saxena, 1989).

For the study purpose, the given Input-Output Transaction Tables (IOTTs) for

the years 1983-84, 1989-90, 1992-93, 1998-99, 2003-04 and 2006-07 have been

adjusted to aggregate the whole economy into three sectors i.e. Agriculture, Industry


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and Services. To neutralize the effect of change in prices, the values of Input-Output

tables have been deflated at 2003-04 prices. Hence, all the variables are measured at

2003-04 prices.

6.3.1 Linkages Based on Rasmussen Method

In the input-output framework the production activity of a particular sector has

two kinds of economic effects on other sectors in the economy. If a particular sector

increases its output, this means that there will be increased demand of the other sectors

on which output of that particular sector depends. In this way, the term backward

linkages is used to indicate the kind of interconnection of a particular sector to those

sectors from which it purchases inputs. In other words, we can say each new investment

offers opportunity for the other sectors via demanding raw material and other required

inputs for its own production. This demand creation in the economy is known as

backward linkages. However, some of the sectors have forward linkages in which new

output, from new investment, worked as supply for the other sectors to expand. So,

following paragraphs present the backward and forward linkages calculated by applying

Rasmussen method.

6.3.1.1 Backward Linkages

As the Indian economy has grown, it has witnessed several changes in its

structure. Present section attempted to study the structural changes in the Indian

economy from the year 1983-84 and onwards by using input output analysis, which

provides the tools necessary to evaluate industries including their relationships to the

rest of the economy. To make it more convenient and understand the results, the whole

economy is aggregated into three sectors i.e. Agriculture, Industry and Services.

Table 6.3: Backward Linkages Based on Rasmussen Method

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture 1.495 1.536 1.493 1.431 1.639 1.614

Industry 2.311 2.438 2.486 2.507 2.526 2.627

Services 1.699 1.664 1.633 1.625 1.743 1.826



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The results in table 6.3 reveal that the magnitude of backward linkages increased

for agriculture from 1.495 points in 1983-84 to 1.536 points in 1989-90. During post

reform period, backward linkages for agriculture decreased in 1993-94 and 1998-99 to

1.493 points and 1.431 points respectively. After 2003-04, they have increased and have

shown decline in 2006-07. In general, industry also experienced a trend of increase in

terms of the values of direct backward linkage; with continuous increase upto 2006-07.

It has shown 2.311 points in 1983-84 with consistent boost to 2.627 points in 2006-07.

It shows that demand for industry is increasing over time from pre reform period to post

reform period. It has depicted no more fluctuations. But on the other hand, services

have shown that linkages fluctuate over time and finally increased in 2003-04 and 2006-

07. They had been decreasing upto 1998-99 and its demand as an input has increased in

further time period which showed more backward linkages.

Figure 6.1: Backward Linkages Based on Rasmussen Method

Figure 6.1 describes that industry has been showing higher linkages followed by

services and agriculture in 2006-07. The industry has shown more improvement in

terms of backward linkages. The reason might be its expansion over the years. The

expansion of this sector requires the more construction material, more labor, technology

and other equipments. However, the backward linkages of the agriculture sector became

less in 2006-07. The highest difference from 1983-84 to 2006-07 shown by industry is

0

0.5

1

1.5

2

2.5

3

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

Industry

Services


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0.316 followed by services i.e. 0.127 and agriculture i.e. 0.119. This is an evidence of

the overall expansion of the industrial sector.

6.3.1.2 Forward linkages

It is clear from table 6.4 that the magnitude of forward linkages decreased for

agriculture from 1.724 points in 1983-84 to 1.655 points in 1989-90. After 1989-90,

forward linkages for agriculture further decreased in 1993-94 and 1998-99 to 1.619

points and 1.595 points respectively. In 2003-04, they have increased and have shown

decline in 2006-07. Overall forward linkages have shown decline from 1983-84 to

2006-07 i.e. 1.724 points to 1.676 points in case of agriculture. In case of industry, they

have shown approximate stagnation upto 1998-99 and exposed increment in 2003-04

and 2006-07.

Table 6.4: Forward Linkages Based on Rasmussen Method

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture 1.724 1.655 1.619 1.595 1.738 1.676

Industry 2.004 2.097 2.013 2.009 2.172 2.370

Services 1.778 1.885 1.980 1.960 1.997 2.021


Industry has shown highest forward linkages in 2006-07 than other sectors.

Agriculture has revealed forward linkages with 1.676 points, industry with 2.370 points

and services with 2.021 points. It explains that industry has highest forward linkages

due to increased demand of industrial goods by remaining other sectors. So, industry

plays an important role in the progress of the country. This increasing trend of industry

is shown in fig. 6.2. It confirms that Industry is one of the most important sectors of the

Indian economy. But on the other hand, services have experienced a trend of increase in

terms of the values of direct forward linkages; with continuous increase in overall study

period except 1998-99. It has shown the figure of 1.778 points in 1983-84 with

consistent boost to 2.021 points in 2006-07. It shows that demand for services is

increasing over time from pre reform period to post reform period. It has depicted no


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more fluctuations. Figure 6.2 describes that services have shown higher forward

linkages after agriculture in 2006-07. The reason might be its expansion over the years.

The highest difference from 1983-84 to 2006-07 shown by industry is 0.366 points

followed by services i.e. 0.243 and with negative increment by agriculture i.e. -0.048.

Figure 6.2: Forward Linkages Based on Rasmussen Method

Overall time period shows that industry has higher forward linkages than

services and agriculture.

6.4 Intersectoral Dependence for the 58 Sectors (Rasmussen Method)

The focus of this section is on the results derived from 58 sectors to disclose the

intersectoral linkages and interdependence for the detailed sectors and a comparison of

the results derived from the last two methods.

6.4.1 Backward Linkages

Table 6.5 shows the values of direct backward linkages calculated by the

Rasmussen Method which shows a consistent increase in the case of Electrical,

Electronic Machinery and Appliances (41) over the study period. There are some

sectors for which the backward linkages experienced are higher in the initial year 1983-

84 and lower in 2006-07. These are Plantation Crops (3), Animal Husbandry (5),

Fishing (7), Other Minerals (11), Tobacco Products (15), Furniture & Fixture (21), Coal

Tar Products (27), Organic Heavy Chemicals (29), Paints, Varnishes & Lacquers (31),

0

0.5

1

1.5

2

2.5

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

Industry

Services


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Pesticides, Drugs & Other Chemicals (32), Gas & Water Supply (47), Trade (52),

Hotels & Restaurants (53), Education & Research (56) and Medical & Health (57). It

means with the passage of time their demand from other sectors decreased with

decrease in the backward linkages. The only sector which has been showing stability

over the study period is Banking (54), as there are very little fluctuations nearly

negligible for its backward linkages. In case of backward linkages, there are some

sectors which show increasing trend during the same time period except for a slight

jump or fall in an individual year. These are Forestry & Logging (6), Pesticides, Drugs

& Other Chemicals (32), Industrial Machinery for Food & Textiles (39), Other

Transport Equipment (43), Construction (45) and Electricity (46). Table 6.5 depicts that

there is no such sector of Indian economy which is showing overall decreasing trend

from the initial year to final year of the study but there are some sectors which are

showing decreasing trend except for a slight jump or fall in an individual year. These

are Animal Husbandry (5) and Trade (52).

In 1983-84, highest backward linkages are for sector Food Products excluding

Sugar (13) with first rank followed by Coal Tar Products (27), Iron & Steel Industries &

Foundries (35), Agricultural Machinery (38), Inorganic Heavy Chemicals (28),

Industrial Machinery for Food & Textiles (39) and Fertilizers (30) with rank seven in

the series of backward linkages. Low backward linkages with rank 50 which have

shown in the table 6.5 are Communication (51), followed by Plantation Crops (3),

Insurance (55), Other Services (58), Other Crops (4), Crude Petroleum & Natural Gas

(9), Forestry & Logging (6), Fishing (7). However, lowest backward linkages have been

shown by Wood & Wood Products except Furniture (20) with last rank assigned by

Rasmussen Method.

In 1989-90, highest backward linkages are for sector Industrial Machinery for

Food & Textiles (39) with first rank followed by Iron & Steel Industries & Foundries

(35), Paints, Varnishes & Lacquers (31), Wool, Silk & Synthetic Fibre Textiles (17),

Fertilizers (30) and Inorganic Heavy Chemicals (28) with rank six in the series of

backward linkages. Low backward linkages with rank 52 are in case of Fishing (7) sub-

sector, followed by Other Minerals (11), Insurance (55), Crude Petroleum & Natural

Gas (9), Other Services (58), Education & Research (56). Lowest backward linkages

have been exhibited by Forestry & Logging (6) with lowest rank.


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Table 6.5: Backward Linkages Based on Rasmussen Method for 58 Sectors

Sector 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

1 1.6778 (39) 1.8598 (36) 1.8698 (39) 1.6962 (39) 2.4748 (18) 2.3842 (22)

2 1.4497 (45) 1.4212 (47) 1.3943 (46) 1.4141 (47) 1.6355 (43) 1.5505 (46)

3 1.2655 (51) 1.3253 (50) 1.2552 (53) 1.3630 (48) 1.1843 (58) 1.1740 (58)

4 1.2000 (54) 1.3099 (51) 1.2478 (54) 1.2449 (54) 1.2612 (53) 1.2704 (53)

5 1.7457 (38) 1.5329 (45) 1.4811 (45) 1.4299 (46) 1.4913 (49) 1.3741 (51)

6 1.1659 (56) 1.1708 (58) 1.1943 (57) 1.1858 (58) 1.1946 (57) 1.1964 (57)

7 1.1523 (57) 1.2807 (52) 1.3303 (49) 1.2700 (53) 1.3204 (51) 1.4070 (49)

8 1.5690 (42) 1.7985 (38) 1.7371 (41) 1.5607 (43) 1.5516 (47) 1.5988 (44)

9 1.1869 (55) 1.2193 (55) 1.2926 (52) 1.2282 (55) 1.5532 (46) 1.5361 (47)

10 1.3029 (49) 1.5692 (43) 1.6104 (42) 1.5326 (44) 1.4983 (48) 1.4393 (48)

11 1.3263 (47) 1.2680 (53) 1.3459 (48) 1.3134 (50) 1.2386 (55) 1.2326 (54)

Industry

12 2.2230 (20) 2.2448 (25) 2.2221 (26) 2.2164 (26) 2.4514 (21) 2.3662 (23)

13 3.4868 (1) 2.3222 (22) 2.3113 (24) 2.4163 (17) 2.5961 (11) 2.5389 (15)

14 2.1924 (21) 2.1957 (26) 2.0644 (31) 2.1060 (31) 2.4697 (19) 2.5201 (16)

15 1.9923 (34) 2.0043 (33) 2.0255 (34) 2.1086 (30) 1.8916 (38) 1.8940 (38)

16 2.2802 (14) 2.5806 (9) 2.4106 (21) 2.7951 (3) 2.9353 (3) 2.9199 (4)

17 2.1763 (22) 2.8102 (4) 2.6679 (7) 2.4243 (16) 2.6695 (7) 2.6441 (11)

18 2.2726 (15) 2.3782 (19) 2.6255 (9) 2.2454 (25) 2.4927 (16) 2.4281 (19)

19 2.2352 (18) 2.2670 (23) 2.5123 (15) 2.3306 (21) 2.2084 (31) 2.2557 (29)

20 1.1073 (58) 1.8988 (34) 1.8904 (38) 1.9320 (36) 2.0250 (35) 1.9962 (35)

21 1.6396 (40) 1.7505 (40) 1.7458 (40) 1.8235 (37) 1.6561 (42) 1.6376 (42)

22 2.3867 (8) 2.3985 (16) 2.4528 (19) 2.4101 (19) 2.5852 (13) 2.5477 (13)

23 2.2402 (17) 2.6346 (8) 2.4613 (18) 2.4163 (18) 2.3704 (23) 2.3485 (24)

24 2.3039 (13) 2.6864 (7) 2.5342 (14) 2.6685 (9) 2.4210 (22) 2.4255 (20)

25 2.1470 (26) 2.3740 (20) 2.6764 (5) 2.6749 (7) 2.3137 (25) 2.3918 (21)

26 2.1358 (28) 1.8840 (35) 2.2468 (25) 2.1506 (28) 2.2334 (28) 2.2914 (28)

27 2.9207 (2) 2.4033 (15) 2.5365 (13) 2.6267 (11) 2.0434 (34) 2.0691 (34)

28 2.5716 (5) 2.7030 (6) 1.8982 (37) 1.6190 (41) 1.7326 (40) 1.7366 (40)

29 1.9766 (35) 1.6630 (41) 2.0228 (35) 1.6379 (40) 1.9583 (36) 1.9723 (36)


181

30 2.4908 (7) 2.8097 (5) 2.7776 (3) 2.6674 (10) 2.8212 (5) 2.8581 (5)

31 2.1704 (23) 2.8899 (3) 2.4688 (17) 2.3599 (20) 2.0861 (33) 2.0927 (33)

32 2.2618 (16) 2.3506 (21) 2.4495 (20) 2.4690 (15) 2.4652 (20) 2.5152 (17)

33 2.1515 (25) 2.3884 (18) 2.3634 (22) 2.2715 (23) 2.4874 (17) 2.4731 (18)

34 2.0033 (33) 2.4396 (13) 2.2132 (27) 2.1792 (27) 2.2997 (26) 2.3212 (26)

35 2.6227 (3) 2.9018 (2) 2.8325 (1) 2.5904 (12) 2.6684 (8) 2.7559 (6)

36 2.3760 (9) 2.5584 (10) 2.5441 (12) 2.5336 (14) 3.0354 (2) 3.0462 (3)

37 2.1071 (29) 2.3932 (17) 2.5971 (10) 2.2684 (24) 2.2356 (27) 2.3038 (27)

38 2.6034 (4) 2.4378 (14) 2.6507 (8) 2.5873 (13) 2.6233 (10) 2.7099 (8)

39 2.5285 (6) 2.9144 (1) 2.8117 (2) 2.8605 (2) 3.1674 (1) 3.2991 (1)

40 2.3595 (10) 2.4808 (12) 2.5792 (11) 2.7480 (5) 2.5027 (15) 2.5711 (12)

41 2.1665 (24) 2.2651 (24) 2.6864 (4) 2.7569 (4) 2.8463 (4) 3.1019 (2)

42 1.5409 (43) 1.7885 (39) 2.5062 (16) 2.9269 (1) 2.6538 (9) 2.6532 (10)

43 2.3405 (11) 2.5344 (11) 2.6759 (6) 2.7342 (6) 2.7088 (6) 2.7301 (7)

44 2.0500 (32) 2.0363 (32) 2.3402 (23) 2.6736 (8) 2.5945 (12) 2.5460 (14)

Services

45 2.0950 (31) 2.1711 (27) 2.1710 (28) 2.0132 (35) 2.2231 (30) 2.3237 (25)

46 2.1430 (27) 2.1629 (28) 2.1621 (29) 2.2813 (22) 2.5478 (14) 2.6965 (9)

47 1.8231 (37) 1.6322 (42) 1.5769 (44) 1.5788 (42) 1.6953 (41) 1.7033 (41)

48 2.1000 (30) 2.0786 (31) 1.9457 (36) 2.1018 (33) 2.3310 (24) 2.1930 (32)

49 1.9403 (36) 1.8388 (37) 2.0297 (32) 2.0137 (34) 2.1596 (32) 2.2401 (30)

50 1.5966 (41) 1.5438 (44) 1.5775 (43) 1.7552 (38) 1.8966 (37) 1.9086 (37)

51 1.2908 (50) 1.3760 (48) 1.3251 (50) 1.2724 (52) 1.5623 (45) 1.5681 (45)

52 1.4769 (44) 1.4468 (46) 1.3698 (47) 1.2769 (51) 1.2932 (52) 1.2276 (55)

53 2.3191 (12) 2.1370 (30) 2.0276 (33) 2.1054 (32) 2.2298 (29) 2.2251 (31)

54 1.3343 (46) 1.3259 (49) 1.2187 (55) 1.3166 (49) 1.3592 (50) 1.3757 (50)

55 1.2586 (52) 1.2224 (54) 1.3179 (51) 1.4944 (45) 1.6037 (44) 1.6009 (43)

56 1.3091 (48) 1.1861 (57) 1.2125 (56) 1.2091 (56) 1.1982 (56) 1.2082 (56)

57 2.2309 (19) 2.1428 (29) 2.0950 (30) 2.1222 (29) 1.7808 (39) 1.8022 (39)

58 1.2366 (53) 1.2013 (56) 1.1558 (58) 1.2079 (57) 1.2584 (54) 1.2759 (52)

Note: Figures in parenthesis are their respective Ranks



182

In 1993-94, highest backward linkages are for sector Iron & Steel Industries &

Foundries (35) with first rank followed by Industrial Machinery for Food & Textiles

(39), Fertilizers (30), Electrical, Electronic Machinery & Appliances (41), Plastic &

Rubber Products (25) and Other Transport Equipment (43) with rank six in the series of

backward linkages. Low backward linkages with rank 52 which have shown in the table

6.5 are Crude Petroleum & Natural Gas (9) followed by Plantation Crops (3), Other

Crops (4), Banking (54), Education & Research (56), Forestry & Logging (6). Above

all, lowest backward linkages have been exhibited by Other Services (58) with rank 58.

In 1998-99, highest backward linkages are for sector Railway Transport

Equipment (42) with first rank followed by Industrial Machinery for Food & Textiles

(39), Cotton Textiles (16), Electrical, Electronic Machinery & Appliances (41), Other

Machinery (40) and Other Transport Equipment (43) with rank six in the series of

backward linkages. Low backward linkages have shown with rank 52 by Rasmussen

Method in case of Communication (51), followed by Fishing (7), Other Crops (4),

Crude Petroleum & Natural Gas (9), Education & Research (56), Other Services (58).

However, rank 58 has been shown by Forestry & Logging (6) with lowest backward

linkages.

In 2003-04, highest backward linkages are for sector Industrial Machinery for

Food & Textiles (39) with first rank followed by Other Basic Metal Industry (36),

Cotton Textiles (16), Electrical, Electronic Machinery & Appliances (41), Fertilizers

(30) and Other Transport Equipment (43) with rank six in the series of backward

linkages. Low backward linkages with rank 52 which have shown in the table 6.5 in

case of Trade (52) followed by Other Crops (4), Other Services (58), Other Minerals

(11), Education & Research (56), Forestry & Logging (6) and rank 58 has been depicted

by Plantation Crops (3).

Similarly, in 2006-07, highest backward linkages shown by Industrial

Machinery for Food & Textiles (39) with first rank followed by Electronic Machinery

& Appliances (41), Other Basic Metal Industry (36), Cotton Textiles (16), Electrical,

Fertilizers (30) and Iron & Steel Industries & Foundries (35) with rank six in the series

of backward linkages. Low backward linkages with rank 52 are in case of Other


183

Services (58), followed by Other Crops (4), Other Minerals (11), Trade (52), Education

& Research (56), Forestry & Logging (6). Above all, lowest backward linkages have

been exhibited by Plantation Crops (3) with rank 58 assigned by Rasmussen Method.

6.4.2 Forward Linkages

Table 6.6 shows the values of direct forward linkages calculated by the

Rasmussen Method in which it is depicted that there is not even a single sector which

shows consistent increment during the overall study period. There are some sectors for

which the forward linkages experienced are high in the initial year 1983-84 and low in

2006-07. These are Food Crops (1), Cash Crops (2), Other Crops (4), Animal

Husbandry (5), Coal & Lignite (8), Cotton Textiles (16), Wool, Silk & Synthetic Fibre

Textiles (17), Jute, Hemp & Mesta Textiles (18), Textile Products including Wearing

Apparel (19), Wood & Wood Products except Furniture (20), Furniture & Fixture (21),

Paper & Paper Products (22), Coal Tar Products (27), Cement (33), Non Metallic

Mineral Products (34), Iron & Steel Industries & Foundries (35), Agricultural

Machinery (38), Industrial Machinery for Food & Textiles (39), Railway Transport

Equipment (42), Other Transport Equipment (43), Electricity (46), Railway Transport

Services (48), Storage & Warehousing (50), Medical & Health (57) and Other Services

(58). It means with the passage of time their demand of final goods by other sectors

decreased with decrease in the forward linkages. Only one sector which has been

showing stability over the study period is Education & Research (56), as there are very

little fluctuations nearly negligible for its forward linkages. In case of forward linkages,

there are some sectors which show increasing trend during the time period except for a

slight jump or fall in an individual year. These are Fishing (7), Beverages (14),

Pesticides, Drugs & Other Chemicals (32), Other Basic Metal Industry (36) and

Communication (51). Table 6.6 depicts that there is no such sector of Indian economy

which is showing overall decreasing trend of forward linkages from the initial year to

final year but there are some sectors which are showing decreasing trend except for a

slight jump or fall in an individual year. These are Cotton Textiles (16), Jute, Hemp &

Mesta Textiles (18), Cement (33), Agricultural Machinery (38), Railway Transport

Equipments (42) and Storage & Warehousing (50).


184

Table 6.6: Forward Linkages Based on Rasmussen Method for 58 Sectors

Sector 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

1 1.8578 (19) 1.7158 (26) 1.5533 (32) 1.4780 (31) 1.8611 (26) 1.7025 (27)

2 2.9166 (9) 3.1022 (7) 2.7656 (10) 2.6729 (11) 2.9567 (10) 2.7918 (11)

3 1.3556 (38) 1.2013 (49) 1.1720 (48) 1.1656 (46) 1.3760 (38) 1.3901 (35)

4 2.1156 (17) 2.2982 (16) 2.2366 (15) 2.2941 (16) 1.7494 (28) 1.6245 (29)

5 1.7969 (22) 2.0705 (18) 1.9035 (21) 1.7402 (23) 1.8698 (25) 1.7644 (25)

6 1.4119 (36) 2.0553 (19) 1.7989 (24) 1.6781 (26) 1.8188 (27) 1.7579 (26)

7 1.0317 (56) 1.0506 (54) 1.0617 (54) 1.0431 (56) 1.0502 (53) 1.1000 (51)

8 2.8586 (10) 3.0637 (8) 3.2271 (8) 3.1880 (8) 2.9119 (11) 2.7528 (12)

9 3.4610 (6) 3.0532 (9) 3.5557 (7) 2.9299 (10) 4.3897 (5) 4.6098 (4)

10 1.0356 (55) 1.0268 (56) 1.0605 (55) 1.0917 (51) 1.0662 (52) 1.0911 (53)

11 1.6658 (24) 1.9579 (20) 2.0050 (19) 2.2261 (17) 2.0313 (23) 2.1029 (23)

Industry

12 1.2221 (46) 1.1490 (51) 1.1233 (50) 1.0871 (52) 1.2427 (43) 1.2725 (42)

13 1.3554 (39) 1.2869 (44) 1.2425 (42) 1.3767 (37) 1.5397 (31) 1.5011 (32)

14 1.0308 (57) 1.0655 (53) 1.0327 (57) 1.0623 (54) 1.1256 (49) 1.1324 (49)

15 1.1144 (51) 1.0422 (55) 1.0476 (56) 1.0675 (53) 1.1020 (51) 1.1308 (50)

16 1.7881 (23) 1.6391 (27) 1.6966 (26) 1.5911 (29) 1.4192 (35) 1.4262 (33)

17 1.4489 (32) 1.5624 (32) 1.5802 (31) 1.4232 (33) 1.4113 (36) 1.3811 (37)

18 1.4390 (34) 1.3926 (37) 1.1819 (46) 1.2406 (43) 1.1032 (50) 1.0958 (52)

19 1.3289 (41) 1.3493 (40) 1.2478 (41) 1.2713 (42) 1.2083 (44) 1.1873 (46)

20 1.4191 (35) 1.3734 (39) 1.5295 (33) 1.6545 (27) 1.3833 (37) 1.3819 (36)

21 1.1023 (52) 1.0236 (57) 1.0986 (52) 1.1142 (50) 1.0288 (56) 1.0238 (57)

22 2.3549 (13) 2.6908 (12) 2.3755 (13) 2.3866 (12) 2.2617 (18) 2.1987 (20)

23 1.2016 (48) 1.1899 (50) 1.2016 (44) 1.1912 (45) 1.2966 (42) 1.2841 (41)

24 1.2767 (44) 1.3764 (38) 1.3597 (39) 1.4128 (35) 1.3091 (41) 1.3367 (40)

25 1.6203 (26) 1.6030 (29) 1.8975 (22) 1.7400 (24) 2.1314 (21) 2.1838 (21)

26 3.6853 (5) 2.6318 (13) 2.3285 (14) 2.3691 (14) 4.5092 (4) 4.5720 (5)

27 1.3464 (40) 1.3403 (41) 1.3700 (38) 1.3614 (38) 1.1844 (46) 1.2340 (44)

28 2.0319 (18) 1.9131 (23) 1.9566 (20) 2.3764 (13) 2.3801 (16) 2.4819 (16)

29 1.8250 (21) 2.2299 (17) 2.1142 (16) 2.1691 (18) 2.2781 (17) 2.4190 (17)


185

30 1.5265 (30) 1.5978 (30) 1.5273 (34) 1.7036 (25) 1.5426 (30) 1.5952 (30)

31 1.3128 (42) 1.4127 (36) 1.3845 (37) 1.3939 (36) 1.3463 (40) 1.3430 (39)

32 2.9485 (8) 3.9478 (4) 4.3964 (5) 3.5906 (7) 4.3691 (6) 4.4907 (6)

33 1.2044 (47) 1.2019 (48) 1.1557 (49) 1.1390 (48) 1.1356 (48) 1.1612 (47)

34 1.5689 (28) 1.3237 (42) 1.2915 (40) 1.2959 (40) 1.4626 (32) 1.5365 (31)

35 4.9300 (3) 4.5740 (3) 4.9679 (4) 5.0558 (3) 3.7591 (8) 4.0920 (7)

36 2.1464 (15) 2.9671 (11) 2.6548 (11) 3.0675 (9) 3.1199 (9) 3.3984 (9)

37 2.2130 (14) 2.5644 (15) 2.0823 (17) 2.0820 (19) 2.0696 (22) 2.2413 (19)

38 1.3046 (43) 1.2982 (43) 1.1854 (45) 1.1374 (49) 1.0275 (57) 1.0289 (56)

39 1.2644 (45) 1.4373 (35) 1.6153 (29) 1.4660 (32) 1.1522 (47) 1.1549 (48)

40 1.8299 (20) 1.9565 (21) 1.8917 (23) 1.8383 (21) 2.3880 (15) 2.5104 (15)

41 1.6075 (27) 1.8626 (24) 1.7580 (25) 1.8030 (22) 2.5891 (12) 2.7254 (13)

42 1.6311 (25) 1.6188 (28) 1.5237 (35) 1.3583 (39) 1.4321 (34) 1.2608 (43)

43 1.4486 (33) 1.5649 (31) 1.5180 (36) 1.2750 (41) 1.4389 (33) 1.4259 (34)

44 1.4737 (31) 1.5574 (33) 1.6942 (27) 1.5682 (30) 2.1988 (19) 2.3970 (18)

Services

45 2.1193 (16) 1.9180 (22) 2.0636 (18) 1.9282 (20) 2.4763 (13) 3.0722 (10)

46 5.1204 (2) 6.0847 (2) 6.1288 (2) 7.0059 (1) 5.7089 (2) 4.7943 (3)

47 1.1762 (49) 1.2710 (45) 1.1177 (51) 1.1607 (47) 1.1909 (45) 1.1875 (45)

48 2.4173 (12) 2.5737 (14) 2.4222 (12) 2.3482 (15) 2.1920 (20) 2.1446 (22)

49 3.2117 (7) 3.6499 (6) 5.3377 (3) 4.2222 (5) 4.8272 (3) 4.8189 (2)

50 1.0793 (53) 1.0689 (52) 1.0840 (53) 1.0478 (55) 1.0447 (54) 1.0408 (54)

51 1.4026 (37) 1.5217 (34) 1.6414 (28) 1.6324 (28) 1.9076 (24) 2.0421 (24)

52 6.2373 (1) 6.2678 (1) 6.7320 (1) 6.3577 (2) 6.7163 (1) 6.6122 (1)

53 1.1392 (50) 1.2071 (47) 1.1754 (47) 1.2269 (44) 1.3565 (39) 1.3517 (38)

54 2.5903 (11) 3.0029 (10) 3.8389 (6) 4.4735 (4) 4.1714 (7) 3.8750 (8)

55 1.5523 (29) 1.7310 (25) 1.5826 (30) 1.4201 (34) 1.7272 (29) 1.6393 (28)

56 1.0053 (58) 1.0080 (58) 1.0105 (58) 1.0090 (58) 1.0083 (58) 1.0085 (58)

57 1.0427 (54) 1.2300 (46) 1.2169 (43) 1.0368 (57) 1.0300 (55) 1.0332 (55)

58 4.6548 (4) 3.7349 (5) 3.0228 (9) 4.1701 (6) 2.4074 (14) 2.5605 (14)




186

In 1983-84, highest forward linkages are for sector Trade (52) with first rank

followed by Electricity (46), Iron & Steel Industries & Foundries (35), Other Services

(58), Petroleum Products (26), Crude Petroleum & Natural Gas (9) and Other Transport

Services (49) with rank seven in the series of backward linkages. Low forward linkages

with rank 50 as depicted in the table 6.6 in case of Hotels & Restaurants (53), followed

by Tobacco Products (15), Furniture & Fixture (21), Storage & Warehousing (50),

Medical & Health (57), Iron Ore (10), Fishing (7), Beverages (14). However, lowest

forward linkages have been shown by Education & Research (56) with rank 58 assigned

by Rasmussen Method.

In 1989-90, there are highest forward linkages for sector Trade (52) with first

rank followed by Electricity (46), Iron & Steel Industries & Foundries (35), Pesticides,

Drug & Other Chemicals (32), Other Services (58) and Other Transport Services (49)

with rank six in the series of backward linkages. Less forward linkages which have been

shown in the table 6.6 with rank 52 in case of Storage & Warehousing (50), followed by

Beverages (14), Fishing (7), Tobacco Products (15), Iron Ore (10), Furniture & Fixture

(21). Among all sectors Education & Research (56) have shown lowest rank.


followed by Electricity (46), Other Transport Services (49), Iron & Steel Industries &

Foundries (35), Pesticides, Drug & Other Chemicals (32) and Banking (54) with rank

six in the series of backward linkages. Low forward linkages have been shown by

Furniture & Fixture (21) with rank 52, followed by Storage & Warehousing (50),

Fishing (7), Iron Ore (10), Tobacco Products (15), Beverages (14) and lowest forward

linkages have been shown with rank 58 by Education & Research (56).

In 1998-99, there are highest forward linkages for sector Electricity (46) with

first rank followed by Trade (52), Iron & Steel Industries & Foundries (35), Banking

(54), Other Transport Services (49) and Other Services (58) with rank six in the series

of backward linkages. Less forward linkages have been shown in the table 6.6 with rank

52 in case of Sugar (12) sub-sector and lowest forward linkages in descending order

have shown by Tobacco Products (15), Beverages (14), Storage & Warehousing (50),

Fishing (7), Medical & Health (57) and Education & Research (56).


187


followed by Electricity (46), Other Transport Services (49), Petroleum Products (26),

Crude Petroleum & Natural Gas (9) and Pesticides, Drugs & Other Chemicals (32) with

rank six in the series of backward linkages. However, low forward linkages with rank

52 have exhibited in the table 6.6 are Iron Ore (10), followed by Fishing (7), Storage &

Warehousing (50), Medical & Health (57), Furniture & Fixture (21), Agricultural

Machinery (38) and lowest rank has been shown by Education & Research (56).


followed by Other Transport Services (49), Electricity (46), Crude Petroleum & Natural

Gas (9), Petroleum Products (26) and Pesticides, Drugs & Other Chemicals (32) with

rank six in the series of backward linkages. Low forward linkages have shown in case

of Jute, Hemp & Mesta Textiles (18) sub-sector with rank 52 followed by Iron Ore (10),

Storage & Warehousing (50), Medical & Health (57), Agricultural Machinery (38),

Furniture & Fixture (21). However, lowest forward linkages have been shown by

Education & Research (56) with last rank i.e. 58.

6.5 Linkages Based on Chenery & Watanabe Method

Each new investment offers opportunity for the other sectors via demanding raw

material and other required inputs for its own production. This demand creation in the

economy is known as backward linkages. However, some of the sectors have forward

linkages in which new output, from new investment, worked as supply for the other

sectors to expand. Table 6.7 presents the forward and backward linkages calculated by

applying Rasmussen method.


The results in Table 6.7 reveal that the backward linkages of industrial and

service sector are more in 2006-07 as compared to the backward linkages in 1993-94 of

the same sectors. However, the backward linkages of the agriculture sector decreased in

2006-07. The service sector has shown more improvement in terms of backward

linkages. The reason might be its expansion over the years. The expansion of this sector

requires more construction material, more labor, technology and other equipments.

With growth of Indian economy lot of changes have occurred in the structure of the


188

country. To make understanding easier, all sub sectors of the economy have been

aggregated into three major sectors, which can seen in following table.

Table 6.7: Backward Linkages Based on Chenery & Watanabe Method

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture 0.289 0.299 0.281 0.241 0.343 0.316

Industry 0.680 0.712 0.744 0.762 0.731 0.743

Services 0.363 0.344 0.344 0.330 0.362 0.384


The results in table 6.7 explain the magnitude of backward linkages. Agriculture

sector has shown increment from 0.289 points in 1983-84 to 0.299 points in 1989-90.

During post reform period, backward linkages for agriculture decreased in 1993-94 and

1998-99 to 0.281 points and 0.241 points respectively. In 2003-04, it has shown

increment and again declined in 2006-07. In general, industry also experienced a trend

of increase in terms of the values of direct backward linkages; with continuous increase

upto 1998-99. It has shown 0.680 points in 1983-84 with consistent improvement to

0.762 points in 1998-99. It shows that demand for industrial production is increasing

over time from pre reform period to post reform period. It has given a picture of little

fluctuations in 2003-04 and shows increased backward linkages in 2006-07. But on the

other side, service sector has depicted increasing trend from 1983-84 and became

stagnant in 1989-90 and 1993-94 with 0.344 points. In 1998-99, it decreased and

showed highest linkages in 2006-07 i.e. 0.384 points. It means with increase in

infrastructure, demand for services is increasing over time.

Figure 6.3 describes that industry has been showing highest linkages followed

by services and agriculture during overall study period. The industry has more

backward linkages because of the development of Indian economy which is due to the

expansion of other sectors of the economy too. However, the backward linkages of the

agriculture sector become less in 1998-99. The highest difference from 1983-84 to

2006-07 shown by industry i.e. 0.063 followed by agriculture i.e. 0.027 and services i.e.

0.021.


189

Figure 6.3: Backward Linkages Based on Chenery & Watanabe Method

It shows that demand of industrial goods is increasing over time.


The results in table 6.8 reveal that the highest forward linkages are shown by

industrial sector followed by service sector in 2006-07, the same trend is in case of

backward linkages. However, the forward linkages of the agriculture sector decreased

marginally from 0.388 in 1983-84 to 0.331 in 2006-07. The industrial sector has shown

improvement in terms of forward linkages. The magnitude of forward linkages

decreased for agriculture from 0.388 points in 1983-84 to 0.349 points in 1989-90.

Agriculture sector has shown declining trend in case of forward linkages throughout the

study period except in 2003-04. In case of industry, it has shown increment from 0.526

points in 1983-84 to 0.551 points in 1989-90. With decline in forward linkages upto

1998-99, it has shown increment again in 2003-04 and maintains this increment in

2006-07 with increase in forward linkages. Service sector has shown highest forward

linkages after post reform period in 1993-94 i.e. 0.506. Overall study period shows that

service sector depicts increasing trend but it showed tremendous increment in 1993-94

and moved back to 0.486 points in 2006-07. It shows that demand for services increased

due to economic reforms.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

Industry

Services


190

Table 6.8: Forward Linkages Based on Chenery & Watanabe Method

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture 0.388 0.349 0.335 0.319 0.378 0.331

Industry 0.526 0.551 0.517 0.519 0.567 0.627

Services 0.417 0.455 0.506 0.495 0.492 0.486


Figure 6.4 describes that industry has been showing highest forward linkages

during overall study period. In 1993-94 and 1998-99, industrial and service sectors

showed approximately equal forward linkages. During post reform period, demand of

industrial products increased with increase in demand of services. In 2006-07, industry

has shown forward linkages. With minimum difference in the forward linkages in the

year 1983-84, agriculture and services have been showing different trend in forward

linkages. Their gap has been increasing over time and minimum gap is shown in 2003-

04. The highest difference in forward linkages is shown by industry from 1983-84 to

2006-07 to the extent of 0.101 points followed by services and agriculture. Overall time

period shows that industry has highest forward linkages after services and agriculture.

Figure 6.4: Forward Linkages Based on Chenery & Watanabe

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

Industry

Services


191

6.6 Intersectoral Dependence for the 58 Sectors (Chenery & Watanabe

Method)

The focus of this section is on the results derived from 58 sectors to disclose the

intersectoral linkages and interdependence for the detailed sectors and a comparison of

the results derived from the two methods.


Table 6.9 shows that the values of direct backward linkages calculated by the

Rasmussen Method show a consistent increase in case of Electrical, Electronic

Machinery and Appliances (41) over the study period. There are some sectors for which

the backward linkages experienced are high in the initial year 1983-84 and low in 2006-

07 that are Plantation Crops (3), Animal Husbandry (5), Fishing (7), Other Minerals

(11), Tobacco Products (15), Furniture & Fixture (21), Coal Tar Products (27), Organic

Heavy Chemicals (29), Paints, Varnishes & Lacquers (31), Pesticides, Drugs & Other

Chemicals (32), Gas & Water Supply (47), Trade (52), Hotels & Restaurants (53),

Education & Research (56) and Medical & Health (57). It means with the passage of

time their demand from other sectors decreased causing decrease in the backward

linkages. The only sector which has shown stability over the study period is Banking

(54). There are very little fluctuations nearly negligible for its backward linkages. In

case of backward linkages, there are some sectors which showed increasing trend

during the time period except for a slight jump or fall in an individual year. These are

Forestry & Logging (6), Pesticides, Drugs & Other Chemicals (32), Industrial

Machinery for Food & Textiles (39), Other Transport Equipment (43), Construction

(45) and Electricity (46). Table 6.9 depicts that there is no such sector of Indian

economy which is showing overall decreasing trend from the initial year to final year

but there are some sectors which are showing decreasing trend except for a slight jump

or fall in an individual year. These are Animal Husbandry (5) and Trade (52).

In 1983-84, highest backward linkages are for sector Food Products excluding

Sugar (13) with first rank followed by Coal Tar Products (27), Petroleum Products (26),

Sugar (12), Iron & Steel Industries & Foundries (35), Jute, hemp & Mesta Textiles (18)

and Inorganic Heavy Chemicals (28) with rank seven in the series of backward


192

linkages. Less backward linkages with rank 50 are in case of Communication (51) as

shown in the table 6.9 and lowest backward linkages with descending order are in case

of Plantation Crops (3), Insurance (55), Other Services (58), Other Crops (4), Crude

Petroleum & Natural Gas (9), Forestry & Logging (6), Fishing (7). With rank 58, Wood

& Wood Products except Furniture (20) depicted lowest rank in case of backward

linkages.

In 1989-90, highest backward linkages are for sector Fertilizers (30) with first

rank followed by Paints, Varnishes & Lacquers (31), Sugar (12), Food Products

excluding Sugar (13), Inorganic Heavy Chemicals (28) and Iron & Steel Industries &

Foundries (35) with rank six in the series of backward linkages. With rank 52, Fishing

(7) sub sector has shown low backward linkages and other sectors which have shown

far less backward linkages are Other Minerals (11), Insurance (55), Crude Petroleum &

Natural Gas (9), Other Services (58), Forestry & Logging (6). Above all, Education &

Research (56) has shown lowest backward linkages.

In 1993-94, highest backward linkages are for sector Fertilizers (30) with first

rank followed by Petroleum Products (26), Jute, hemp & Mesta Textiles (18), Coal Tar

Products (27), Sugar (12) and Food Products excluding Sugar (13) with rank six in the

series of backward linkages. Low backward linkages with rank 52 are in case of

Banking (54) as shown in the table 6.9 and lowest backward linkages with descending

order are in case of Crude Petroleum & Natural Gas (9), Plantation Crops (3), Other

Crops (4), Education & Research (56), Forestry & Logging (6) and Other Services (58)

with rank 58, depicted lowest rank in case of backward linkages.

In 1998-99, highest backward linkages are for sector Coal Tar Products (27)

with first rank followed by Cotton Textiles (16), Fertilizers (30), Food Products

excluding Sugar (13), Petroleum Products (26) and Sugar (12) with rank six in the

series of backward linkages. With rank 52, Communication (51) sub-sector has shown

low backward linkages and other sectors which have shown far less backward linkages

are Fishing (7), Other Crops (4), Education & Research (56), Crude Petroleum &

Natural Gas (9), Other Services (58). Forestry & Logging (6) has shown lowest rank.


193

Table 6.9: Backward Linkages Based on Chenery & Watanabe Method

for 58 Sectors

Sector 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

1 0.3548 (40) 0.4334 (38) 0.4346 (39) 0.3564 (39) 0.6421 (26) 0.6083 (28)

2 0.2339 (45) 0.2190 (47) 0.2123 (47) 0.2143 (47) 0.3329 (43) 0.2808 (44)

3 0.1399 (51) 0.1793 (50) 0.1373 (54) 0.1788 (49) 0.0904 (58) 0.0886 (58)

4 0.1082 (54) 0.1612 (51) 0.1339 (55) 0.1279 (54) 0.1460 (53) 0.1340 (53)

5 0.5077 (34) 0.3598 (41) 0.3316 (42) 0.3030 (43) 0.3218 (44) 0.2576 (46)

6 0.0891 (56) 0.0929 (57) 0.0963 (57) 0.0930 (58) 0.0959 (57) 0.0962 (57)

7 0.0704 (57) 0.1413 (52) 0.1576 (51) 0.1339 (53) 0.1485 (52) 0.2019 (50)

8 0.2778 (43) 0.3949 (39) 0.3544 (41) 0.2614 (45) 0.2452 (47) 0.2605 (45)

9 0.1013 (55) 0.1163 (55) 0.1380 (53) 0.1101 (56) 0.2581 (46) 0.2455 (47)

10 0.1506 (49) 0.2932 (45) 0.2850 (45) 0.2549 (46) 0.2348 (48) 0.1988 (51)

11 0.1617 (47) 0.1297 (53) 0.1688 (49) 0.1523 (51) 0.1183 (55) 0.1099 (55)

Industry

12 0.8104 (4) 0.8404 (3) 0.8330 (5) 0.8477 (6) 0.8759 (6) 0.8455 (6)

13 1.7567 (1) 0.8376 (4) 0.8066 (6) 0.8662 (4) 0.8891 (4) 0.8860 (5)

14 0.6026 (22) 0.6195 (26) 0.5568 (33) 0.5972 (31) 0.6726 (21) 0.6997 (19)

15 0.5987 (24) 0.6304 (25) 0.6270 (26) 0.6655 (26) 0.5159 (35) 0.5154 (35)

16 0.6939 (13) 0.8221 (7) 0.7908 (8) 0.9656 (2) 0.9447 (2) 0.9423 (2)

17 0.5728 (29) 0.8058 (10) 0.7604 (12) 0.6800 (23) 0.7733 (9) 0.7638 (12)

18 0.7431 (6) 0.7801 (11) 0.8899 (3) 0.7038 (22) 0.8361 (7) 0.8233 (8)

19 0.6185 (20) 0.5897 (31) 0.6832 (23) 0.6066 (30) 0.5322 (33) 0.5511 (32)

20 0.0537 (58) 0.6492 (23) 0.5756 (32) 0.5763 (33) 0.6653 (22) 0.6479 (25)

21 0.4530 (38) 0.4437 (37) 0.4284 (40) 0.4637 (37) 0.3681 (40) 0.3515 (41)

22 0.6924 (14) 0.6858 (19) 0.7269 (18) 0.7209 (20) 0.7666 (10) 0.7473 (16)

23 0.5856 (27) 0.7740 (12) 0.6635 (25) 0.6582 (27) 0.5985 (28) 0.5905 (31)

24 0.6728 (15) 0.8197 (8) 0.7611 (11) 0.8321 (8) 0.7495 (15) 0.7616 (14)

25 0.6012 (23) 0.6728 (21) 0.7756 (9) 0.8038 (11) 0.6144 (27) 0.6394 (26)

26 0.8440 (3) 0.6917 (17) 0.9092 (2) 0.8631 (5) 0.7580 (14) 0.7985 (9)

27 1.0692 (2) 0.7613 (14) 0.8809 (4) 0.9717 (1) 0.5797 (30) 0.5927 (30)

28 0.7410 (7) 0.8349 (5) 0.4749 (37) 0.3403 (41) 0.3763 (39) 0.3741 (39)


194

29 0.4865 (36) 0.3491 (42) 0.5186 (35) 0.3453 (40) 0.4774 (37) 0.4820 (37)

30 0.7330 (8) 0.9419 (1) 0.9163 (1) 0.9078 (3) 0.9368 (3) 0.9408 (3)

31 0.5847 (28) 0.8914 (2) 0.7319 (16) 0.7306 (18) 0.5292 (34) 0.5293 (33)

32 0.6233 (18) 0.6838 (20) 0.7281 (17) 0.7748 (14) 0.6989 (20) 0.7115 (18)

33 0.6328 (16) 0.7561 (15) 0.7350 (15) 0.7282 (19) 0.7871 (8) 0.7755 (11)

34 0.5385 (32) 0.7735 (13) 0.6754 (24) 0.6783 (24) 0.6472 (24) 0.6480 (24)

35 0.7445 (5) 0.8262 (6) 0.8025 (7) 0.7635 (15) 0.7607 (13) 0.7827 (10)

36 0.7123 (10) 0.7361 (16) 0.7180 (19) 0.7548 (16) 0.9909 (1) 0.9726 (1)

37 0.4909 (35) 0.5912 (30) 0.6883 (22) 0.5838 (32) 0.5063 (36) 0.5156 (34)

38 0.6996 (12) 0.6155 (28) 0.7080 (20) 0.7177 (21) 0.7142 (17) 0.7260 (17)

39 0.7030 (11) 0.8094 (9) 0.7681 (10) 0.8123 (9) 0.8845 (5) 0.9049 (4)

40 0.6299 (17) 0.6550 (22) 0.7029 (21) 0.7833 (12) 0.6458 (25) 0.6538 (22)

41 0.5596 (31) 0.6060 (29) 0.7404 (14) 0.7769 (13) 0.7662 (11) 0.8298 (7)

42 0.2675 (44) 0.3698 (40) 0.6181 (29) 0.8350 (7) 0.7141 (18) 0.6908 (20)

43 0.6189 (19) 0.6860 (18) 0.7598 (13) 0.8072 (10) 0.7633 (12) 0.7505 (15)

Services

44 0.5263 (33) 0.5000 (35) 0.6268 (27) 0.7438 (17) 0.7128 (19) 0.6879 (21)

45 0.5716 (30) 0.5623 (32) 0.5796 (31) 0.5235 (34) 0.5912 (29) 0.6197 (27)

46 0.5890 (26) 0.6165 (27) 0.6201 (28) 0.6445 (29) 0.7293 (16) 0.7617 (13)

47 0.4071 (39) 0.3257 (43) 0.3043 (44) 0.3158 (42) 0.3674 (41) 0.3650 (40)

48 0.6052 (21) 0.5529 (33) 0.4501 (38) 0.5150 (36) 0.5522 (32) 0.4967 (36)

49 0.4796 (37) 0.4530 (36) 0.5238 (34) 0.5193 (35) 0.5670 (31) 0.5956 (29)

50 0.3228 (41) 0.2940 (44) 0.3185 (43) 0.3905 (38) 0.3953 (38) 0.3845 (38)

51 0.1424 (50) 0.1844 (49) 0.1615 (50) 0.1353 (52) 0.2328 (49) 0.2423 (48)

52 0.2828 (42) 0.2611 (46) 0.2248 (46) 0.1626 (50) 0.1562 (51) 0.1235 (54)

53 0.7146 (9) 0.6406 (24) 0.5961 (30) 0.6541 (28) 0.6517 (23) 0.6534 (23)

54 0.2036 (46) 0.2027 (48) 0.1472 (52) 0.2059 (48) 0.2099 (50) 0.2086 (49)

55 0.1300 (52) 0.1225 (54) 0.1920 (48) 0.2826 (44) 0.2898 (45) 0.2882 (43)

56 0.1555 (48) 0.0924 (58) 0.1119 (56) 0.1233 (55) 0.1022 (56) 0.1028 (56)

57 0.5906 (25) 0.5383 (34) 0.5157 (36) 0.6670 (25) 0.3405 (42) 0.3414 (42)

58 0.1273 (53) 0.1106 (56) 0.0798 (58) 0.0998 (57) 0.1433 (54) 0.1483 (52)




195

In 2003-04, highest backward linkages are for sector Other Basic Metal Industry

(36) with first rank followed by Cotton Textiles (16), Fertilizers (30), Food Products

excluding Sugar (13), Industrial Machinery for Food & Textiles (39) and Sugar (12)

with rank six in the series of backward linkages. Less backward linkages with rank 52

are in case of Fishing (7) as depicted in table 6.9 and lowest backward linkages with

descending order are for sub-sectors – Other Crops (4), Other Services (58), Other

Minerals (11), Education & Research (56), Forestry & Logging (6). Plantation Crops

(3) with rank 58, depicted lowest rank in case of backward linkages.

In 2006-07, highest backward linkages are for sector Other Basic Metal Industry

(36) with first rank followed by Cotton Textiles (16), Fertilizers (30), Industrial

Machinery for Food & Textiles (39), Food Products excluding Sugar (13) and Sugar

(12) with rank six in the series of backward linkages. With rank 52, Other Services (58)

have exhibited low backward linkages and other sectors which have shown far less

backward linkages are Other Crops (4), Trade (52), Other Minerals (11), Education &

Research (56), Forestry & Logging (6). However, Plantation Crops (3) sub-sector has

shown lowest rank.


Table 6.10 shows that the values of direct backward linkages calculated by the

Rasmussen Method show a consistent increase in case of Electrical, Electronic

Machinery and Appliances (41) over the study period. There are some sectors for which

the backward linkages experienced are higher in the initial year 1983-84 and lower in

2006-07 and these are Plantation Crops (3), Animal Husbandry (5), Fishing (7), Other

Minerals (11), Tobacco Products (15), Furniture & Fixture (21), Coal Tar Products (27),

Organic Heavy Chemicals (29), Paints, Varnishes & Lacquers (31), Pesticides, Drugs &

Other Chemicals (32), Gas & Water Supply (47), Trade (52), Hotels & Restaurants

(53), Education & Research (56) and Medical & Health (57). It means with the passage

of time their demand from other sectors decreased with decrease in the backward

linkages. Only one sector which has been showing stability over the study period is

Banking (54). There are very little fluctuations nearly negligible for its backward

linkages. In case of backward linkages, there are some sectors which showed increasing


196

trend during the time period except for a slight jump or fall in an individual year. These

are Forestry & Logging (6), Pesticides, Drugs & Other Chemicals (32), Industrial

Machinery for Food & Textiles (39), Other Transport Equipment (43), Construction

(45) and Electricity (46). Table 6.10 depicts that there is no such sector of Indian

economy which is showing overall decreasing trend from the initial year to the final

year of study but there are some sectors which are showing decreasing trend except for

a slight jump or fall in an individual year. These are Animal Husbandry (5) and Trade

(52).


followed by Other Services (58), Electricity (46), Iron & Steel Industries & Foundries

(35), Cash Crops (2), Petroleum Products (26) and Pesticides, Drugs & Other

Chemicals (32) with rank seven in the series of forward linkages. Low forward linkages

shown are by Tobacco Products (15) with rank 50, followed by Furniture & Fixture

(21), Hotels & Restaurants (53), Storage & Warehousing (50), Beverages (14), Fishing

(7), Medical & Health (57), Iron Ore (10) and lowest forward linkages are shown by

Education & Research (56) with rank 58.


followed by Electricity (46), Pesticides, Drugs & Other Chemicals (32), Cash Crops (2),

Iron & Steel Industries & Foundries (35) and Other Services (58) with rank six in the

series of forward linkages. Lesser forward linkages have been shown in the table 6.10

with rank 52 by Beverages (14), followed by Tobacco Products (15), Fishing (7),

Storage & Warehousing (50), Furniture & Fixture (21), Iron Ore (10). Among all

sectors Education & Research (56) has shown lowest rank.


followed by Other Transport Services (49), Electricity (46), Pesticides, Drugs & Other

Chemicals (32), Iron & Steel Industries & Foundries (35) and Cash Crops (2) with rank

six in the series of forward linkages. Low forward linkages are shown by Fishing (7)

with rank 52, followed by Hotels & Restaurants (53), Storage & Warehousing (50),

Tobacco Products (15), Beverages (14), Iron Ore (10) and lowest forward linkages have

been shown with rank 58 by Education & Research (56).


197

Table 6.10: Forward Linkages Based on Chenery & Watanabe Method

for 58 Sectors

Sector 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07

Agriculture

1 0.5995 (15) 0.4503 (23) 0.3771 (28) 0.3354 (29) 0.4981 (26) 0.4394 (26)

2 1.3564 (5) 1.5544 (4) 1.3320 (6) 1.3160 (8) 1.3931 (6) 1.3227 (7)

3 0.2486 (35) 0.1399 (45) 0.1114 (46) 0.1044 (46) 0.2410 (35) 0.2491 (35)

4 0.6842 (12) 0.7281 (14) 0.6125 (15) 0.7823 (12) 0.4091 (27) 0.3360 (29)

5 0.5118 (20) 0.7103 (17) 0.6281 (13) 0.4770 (21) 0.5146 (24) 0.4619 (25)

6 0.2594 (32) 0.7279 (15) 0.5429 (18) 0.4459 (22) 0.5593 (19) 0.5196 (22)

7 0.0271 (55) 0.0399 (54) 0.0504 (52) 0.0344 (54) 0.0371 (52) 0.0831 (50)

8 0.8772 (9) 0.8707 (10) 0.9360 (10) 0.9157 (10) 0.7378 (12) 0.6784 (17)

9 0.6789 (13) 0.7662 (12) 1.0451 (8) 0.8530 (11) 0.8588 (9) 0.9001 (11)

10 0.0074 (57) 0.0059 (57) 0.0129 (57) 0.0188 (55) 0.0207 (53) 0.0230 (53)

11 0.3538 (25) 0.5449 (20) 0.5763 (16) 0.6592 (15) 0.5027 (25) 0.5077 (23)

Industry

12 0.1744 (45) 0.1174 (48) 0.0980 (48) 0.0672 (51) 0.1907 (41) 0.2128 (39)

13 0.2343 (40) 0.2148 (42) 0.1864 (39) 0.2870 (34) 0.3733 (29) 0.3539 (28)

14 0.0274 (54) 0.0568 (52) 0.0293 (56) 0.0536 (53) 0.0925 (47) 0.0960 (48)

15 0.1020 (50) 0.0404 (53) 0.0454 (55) 0.0632 (52) 0.0925 (48) 0.1156 (47)

16 0.4870 (21) 0.4089 (24) 0.4530 (24) 0.4014 (26) 0.3120 (31) 0.3218 (30)

17 0.3105 (27) 0.3671 (28) 0.3874 (27) 0.3016 (31) 0.3050 (32) 0.2846 (33)

18 0.2979 (29) 0.2746 (34) 0.1305 (44) 0.1761 (40) 0.0713 (50) 0.0652 (51)

19 0.2432 (36) 0.2484 (40) 0.1514 (42) 0.1708 (41) 0.1412 (45) 0.1305 (45)

20 0.2564 (33) 0.2684 (37) 0.3158 (30) 0.4057 (24) 0.2144 (38) 0.2135 (38)

21 0.0856 (51) 0.0122 (56) 0.0722 (50) 0.0833 (48) 0.0202 (54) 0.0150 (55)

22 0.7799 (10) 0.9063 (9) 0.7393 (12) 0.7797 (13) 0.7160 (15) 0.6884 (15)

23 0.1357 (47) 0.0887 (50) 0.1050 (47) 0.1153 (45) 0.1450 (44) 0.1436 (42)

24 0.2159 (42) 0.2728 (35) 0.2634 (36) 0.2916 (33) 0.2300 (37) 0.2452 (36)

25 0.3733 (24) 0.3268 (29) 0.4683 (23) 0.4177 (23) 0.5839 (18) 0.5982 (18)

26 1.2382 (6) 0.7222 (16) 0.5211 (20) 0.5425 (18) 1.2907 (8) 1.3424 (6)

27 0.1699 (46) 0.1507 (44) 0.1399 (43) 0.1279 (43) 0.0778 (49) 0.0899 (49)

28 0.5623 (18) 0.4911 (21) 0.4825 (22) 0.6877 (14) 0.6653 (17) 0.6861 (16)


198

29 0.4479 (22) 0.6251 (19) 0.5597 (17) 0.6030 (16) 0.5375 (21) 0.5747 (21)

30 0.2679 (31) 0.3039 (32) 0.3056 (32) 0.3966 (27) 0.2778 (33) 0.3203 (31)

31 0.2033 (44) 0.2690 (36) 0.2401 (38) 0.2540 (35) 0.2016 (40) 0.1973 (40)

32 1.2035 (7) 1.5832 (3) 1.7518 (4) 1.4249 (7) 1.6354 (4) 1.6585 (3)

33 0.1071 (49) 0.1201 (47) 0.0830 (49) 0.0797 (49) 0.0618 (51) 0.0605 (52)

34 0.3502 (26) 0.1781 (43) 0.1788 (40) 0.1872 (38) 0.2446 (34) 0.2613 (34)

35 1.7589 (4) 1.4933 (5) 1.6479 (5) 1.9024 (3) 1.4556 (5) 1.5401 (5)

36 0.5811 (16) 0.8581 (11) 0.7869 (11) 1.0450 (9) 0.8541 (10) 0.9031 (10)

37 0.5645 (17) 0.7346 (13) 0.5317 (19) 0.5399 (19) 0.5385 (20) 0.5923 (20)

38 0.2251 (41) 0.2172 (41) 0.1527 (41) 0.1183 (44) 0.0188 (55) 0.0204 (54)

39 0.2049 (43) 0.3129 (31) 0.4016 (26) 0.3285 (30) 0.1203 (46) 0.1227 (46)

40 0.3963 (23) 0.4835 (22) 0.4179 (25) 0.4025 (25) 0.7229 (14) 0.7775 (13)

41 0.3080 (28) 0.4052 (25) 0.3742 (29) 0.3620 (28) 0.6972 (16) 0.7293 (14)

42 0.2898 (30) 0.2657 (38) 0.2677 (35) 0.1859 (39) 0.2095 (39) 0.1359 (44)

43 0.2371 (39) 0.3138 (30) 0.2626 (37) 0.1618 (42) 0.2373 (36) 0.2294 (37)

44 0.2405 (37) 0.2799 (33) 0.3115 (31) 0.2354 (36) 0.5372(22) 0.5965 (19)

Services

45 0.5344 (19) 0.3756 (27) 0.5107 (21) 0.4774 (20) 0.7291 (13) 0.9772 (9)

46 1.7969 (3) 2.1948 (2) 2.0878 (3) 2.4234 (2) 1.9635 (2) 1.5811 (4)

47 0.1295 (48) 0.1311 (46) 0.0618 (51) 0.0719 (50) 0.1467 (43) 0.1428 (43)

48 0.6711 (14) 0.7040 (18) 0.6185 (14) 0.5944 (17) 0.5216 (23) 0.4750 (24)

49 0.9711 (8) 1.1769 (7) 2.3854 (2) 1.6850 (6) 1.9119 (3) 1.9144 (2)

50 0.0323 (53) 0.0276 (55) 0.0463 (54) 0.0089 (57) 0.0068 (57) 0.0063 (57)

51 0.2386 (38) 0.2562 (39) 0.2904 (33) 0.2928 (32) 0.3816 (28) 0.4371 (27)

52 2.8460 (1) 2.8572 (1) 3.0789 (1) 2.9289 (1) 3.0812 (1) 3.0262 (1)

53 0.0600 (52) 0.0777 (51) 0.0488 (53) 0.0871 (47) 0.1590 (42) 0.1664 (41)

54 0.7504 (11) 0.9291 (8) 1.2728 (7) 1.6891 (5) 1.3519 (7) 1.2328 (8)

55 0.2523 (34) 0.3831 (26) 0.2814 (34) 0.2000 (37) 0.3537 (30) 0.3054 (32)

56 0.0022 (58) 0.0041 (58) 0.0054 (58) 0.0062 (58) 0.0038 (58) 0.0036 (58)

57 0.0238 (56) 0.1117 (49) 0.1145 (45) 0.0179 (56) 0.0136 (56) 0.0150 (56)

58 2.1858 (2) 1.3485 (6) 0.9669 (9) 1.7069 (4) 0.7461 (11) 0.8190 (12)




199


followed by Electricity (46), Iron & Steel Industries & Foundries (35), Other Services

(58), Banking (54) and Other Transport Services (49) with rank six in the series of

forward linkages. Again low forward linkages are shown in the table 6.10 with rank 52

by Tobacco Products (15) and lowest forward linkages in descending order have been

shown by Beverages (14), Fishing (7), Iron Ore (10), Medical & Health (57), Storage &

Warehousing (50) and Education & Research (56).


followed by Electricity (46), Other Transport Services (49), Pesticides, Drugs & Other

Chemicals (32), Iron & Steel Industries & Foundries (35) and Cash Crops (2) with rank

six in the series of forward linkages. Low forward linkages with rank 52 as depicted in

the table 6.10 are in case of Fishing (7), followed by Iron Ore (10), Furniture & Fixture

(21), Agricultural Machinery (38), Medical & Health (57), Storage & Warehousing (50)

and lowest rank is shown by Education & Research (56) with rank 58.


followed by Other Transport Services (49), Pesticides, Drugs & Other Chemicals (32),

Electricity (46), Iron & Steel Industries & Foundries (35) and Petroleum Products (26)

with rank six in the series of forward linkages. However, low forward linkages have

been shown by Cement (33) with rank 52, followed by Iron Ore (10), Agricultural

Machinery (38), Furniture & Fixture (21), Medical & Health (57), Storage &

Warehousing (50) and lowest forward linkages have been shown by Education &

Research (56) with last rank i.e. 58.

6.7 Comparison of the results given by the two methods

Although there are similarities in the trends of change in backward linkages and

forward linkages in case of both the methods, it is easy to find that there are obvious

differences between rankings of the linkage indicators of the two methods. Below, there

is a brief explanation of the difference between the results of backward and forward

linkages by these two methods for the year 2006-07.


200


Comparison for backward linkages, tables 6.5 and 6.9 have shown remarkable

differences in the respective ranks of different sectors observed e.g. in the case of Sugar

(12), Food Products excluding Sugar (13), Wood & Wood Products except Furniture

(20), Petroleum Products (26), Agricultural Machinery (38) and Other Machinery (40).

For Sugar (12) assigned is rank 6 is assigned by Chenery & Watanabe method

and rank assigned by Rasmussen method is much lower i.e. 23. It means that Chenery &

Watanabe method overestimates the backward linkages of Sugar sector. Similarly for

Food Products excluding Sugar (13) show a tremendous difference in ranks in case of

backward linkages as computed by these two methods can be observed. Chenery &

Watanabe method calculated 5th

rank as compared to Rasmussen method with rank 25th

.

Rasmussen method shows very low backward linkages in case of Food Products

excluding Sugar sector. So, the contribution to final demand by sector Food Products

excluding Sugar is higher according to Chenery & Watanabe method. For Wood &

Wood Products except Furniture (20) sector, 25th

rank is assigned by Chenery Watanabe

method against the Rasmussen method which shows 35th

rank. So this sector has been

overestimated by Chenery & Watanabe method in comparison to the Rasmussen

method. For Petroleum Products (26), there is huge difference in their ranks assigned by

these two methods. Chenery & Watanabe method shows 9th

rank and Rasmussen

method shows 28th

rank of this sector. Petroleum Products having more backward

linkages means they contributes more in development of the economy. For Agriculture

Machinery (38), rank shown is 17th

has been given by Chenery & Watanabe method,

whereas rank given by Rasmussen method is much lower i.e. 8th

. It means that

Rasmussen method overestimates the backward linkages of Agriculture Machinery.

With increase in technology, to increase in production of the food products, agricultural

machinery is needed. So, backward linkages of Agricultural Machinery are higher in

case of Rasmussen method. For Other Machinery sector (40), analysis assigns rank 22

as per Chenery & Watanabe method and rank given by Rasmussen method is much

higher i.e. 12. It means that Rasmussen method overestimates the backward linkages of

Other Machinery sector.


201


Forward linkages shown in tables 6.6 and 6.10 depict remarkable differences in

their respective ranks which are observed mainly in case of Coal & Lignite (8), Crude

Petroleum & Natural Gas (9), Paper & Paper Products (22), Coal Tar Products (27) and

Cement (33).

For Coal & Lignite (8), its ranking of forward linkages as given by Chenery &

Watanabe method is 17th

but Rasmussen method explores its rank equal to 12th

.

Rasmussen method gives more weightage to Coal & Lignite sector. So, this sector has

high forward linkages according to Rasmussen method than Chenery & Watanabe

method. For Crude Petroleum & Natural Gas (9), rank 11th

assigned by Chenery &

Watanabe method has a significant difference with 4th

rank assigned in case of

Rasmussen method. For Paper & Paper Products (22) sector, 15th

rank is assigned by

Chenery Watanabe method against the Rasmussen method which shows 20th

rank. So

this sector is overestimated by Chenery & Watanabe method in comparison to the

Rasmussen method. For Coal Tar Products (27), there is not much difference in their

ranks as shown by these two methods. Chenery & Watanabe method shows 49th

rank

and Rasmussen method shows 44th

rank. For Cement (33), table shows that the rank

52nd

is given by Chenery & Watanabe method whereas rank given by Rasmussen

method is 47th

. It means that Rasmussen method overestimates the forward linkages of

Cement sector.

6.8 Key Sectors

Appendix tables A47 to A48, show that there are certain similarities between the

results of the Chenery & Watanabe method and Rasmussen method. But it is easy to

find in the category of key sectors that there are some obvious differences between

these results by these both methods.

According to Rasmussen method, sectors which show strong forward linkages

are Cash Crops (2), Coal & Lignite (8), Crude Petroleum & Natural Gas (9), Trade (52),

Banking (54) and Other Services (58). Sectors which shows strong backward linkages

are Sugar (12), Food Products excluding Sugar (13), Beverages (14), Cotton Textiles

(16), Wool, Silk & Synthetic Fibre Textiles (17), Jute, Hemp & Mesta Textiles (18),


202

Textile Products including Wearing Apparel (19), Leather & Leather Products (24),

Fertilizers (30), Cement (33), Non Metallic Mineral Products (34), Agricultural

Machinery (38), Industrial Machinery for Food and Textiles (39) and Other Transport

Equipment (43). Key sectors are Paper & Paper Products (22), Pesticides, Drugs &

Other Chemicals (32), Iron & Steel Industries & Foundries (35), Other Basic Metal

Industry (36) and Electricity (46). Rest of the sectors fall in the category of weak

linkages.

According to Chenery & Watnabe, strong forward linkages are shown by Cash

Crops (2), Coal & Lignite (8), Crude Petroleum & Natural Gas (9), Trade (52), Banking

(54) and Other Services (58). Sectors which show strong backward linkages are Sugar

(12), Food Products excluding Sugar (13), Beverages (14), Cotton Textiles (16), Wool,

Silk & Synthetic Fibre Textiles (17), Jute, Hemp & Mesta Textiles (18), Textile

Products including Wearing Apparel (19), Printing, Publishing & allied Activities (23),

Leather & Leather Products (24), Coal Tar Products (27), Fertilizers (30), Cement (33),

Non Metallic Mineral Products (34), Agricultural Machinery (38), Industrial Machinery

for Food and Textiles (39), Other Transport Equipment (43) and Hotels & Restaurants

(53). Key sectors are Paper & Paper Products (22), Iron & Steel Industries & Foundries

(35), Other Basic Metal Industry (36) and Electricity (46). However, rest of the sectors

fall in the category of weak linkages.

Key sectors which need more attention from the government or policy makers to

grow for the development of the country, which are commonly found by Rasmussen

and Chenery & Watanabe Method are, Paper & Paper Products (22), Iron & Steel

Industries & Foundries (35), Other Basic Metal Industry (36) and Electricity (46).

assessment of backward and forward linkages in indian economy… · 2018-07-07 · indian economy...

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