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.
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 postharvest 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 167
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 168
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. 169
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 Technology Coefficient Matrix for 1989-90 Sector Agriculture Industry Services Agriculture 0.155 0.151 0.044 Industry 0.074 0.353 0.124 Services 0.070 0.208 0.176 Technology Coefficient Matrix for 1993-94 Sector Agriculture Industry Services Agriculture 0.136 0.160 0.039 Industry 0.063 0.345 0.110 Services 0.083 0.238 0.185 Technology Coefficient Matrix for 1998-99 Sector Agriculture Industry Services Agriculture 0.110 0.179 0.031 Industry 0.069 0.343 0.107 Services 0.062 0.240 0.193 Technology Coefficient Matrix for 2003-04 Sector Agriculture Industry Services Agriculture 0.177 0.171 0.030 Industry 0.075 0.344 0.147 Services 0.092 0.216 0.184 Technology Coefficient Matrix for 2006-07 Sector Agriculture Industry Services 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 170
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 2006-171
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, 172
Table 6.2: Sector Wise Demand Linkages Leontief Inverse Matrix for 1983-84 Sector Agriculture Industry Services Agriculture 1.236 0.369 0.118 Industry 0.140 1.577 0.287 Services 0.119 0.366 1.294 Leontief Inverse Matrix for 1989-90 Sector Agriculture Industry Services Agriculture 1.221 0.320 0.113 Industry 0.168 1.668 0.261 Services 0.146 0.449 1.290 Leontief Inverse Matrix for 1993-94 Sector Agriculture Industry Services Agriculture 1.190 0.328 0.101 Industry 0.141 1.644 0.228 Services 0.162 0.514 1.304 Leontief Inverse Matrix for 1998-99 Sector Agriculture Industry Services Agriculture 1.157 0.348 0.090 Industry 0.142 1.643 0.223 Services 0.132 0.516 1.312 Leontief Inverse Matrix for 2003-04 Sector Agriculture Industry Services Agriculture 1.260 0.365 0.113 Industry 0.187 1.676 0.309 Services 0.192 0.484 1.321 Leontief Inverse Matrix for 2006-07 Sector Agriculture Industry Services Agriculture 1.207 0.347 0.121 Industry 0.213 1.787 0.370 Services 0.194 0.492 1.335 Source: Author s Calculations 173
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 inputoutput 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 174
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 Source: Author s Calculations 175
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. 3 2.5 2 1.5 1 Agriculture Industry Services 0.5 0 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07 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 176
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 Source: Author s Calculations 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 177
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. 2.5 2 1.5 1 Agriculture Industry Services 0.5 0 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07 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), 178
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) subsector, 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. 179
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) 180
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 Source: Author s Calculations 181
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 182
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). 183
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) 184
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) Note: Figures in parenthesis are their respective Ranks Source: Author s Calculations 185
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. In 1993-94, highest forward linkages are for sector Trade (52) with first 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). 186
In 2003-04, highest forward linkages are for sector Trade (52) with first rank 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). In 2006-07, highest forward linkages are for sector Trade (52) with first rank 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. 6.5.1 Backward Linkages 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 187
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 Source: Author s Calculations 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. 188
0.9 0.8 0.7 0.6 0.5 0.4 0.3 Agriculture Industry Services 0.2 0.1 0 1983-84 1989-90 1993-94 1998-99 2003-04 2006-07 Figure 6.3: Backward Linkages Based on Chenery & Watanabe Method It shows that demand of industrial goods is increasing over time. 6.5.2 Forward Linkages 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. 189