Backward and forward linkages of manufacturing sector in India a computable general equilibrium analysis

Abstract

The unbalanced structural shift in the Indian economy is the major issue of concern for the policy planners because this service-led growth is questionable from the sustainability angle in the long-run. The influx of literature on identifying sectoral vulnerabilities and the strengths of the economy has concluded that the service and manufacturing sectors are the fast growing sectors of the economy accompanied by the sluggish growth of the agriculture sector. The present study attempts to show a clear picture of the role played by manufacturing sector in the past two-decades with reference to intra and inter-sectoral linkages at aggregate and disaggregated levels. The newline34 sector matrices has been used to compute the Social Accounting Matrices and Computable General Equilibrium multipliers Rasmussen-Hirschman framework. and intra-sectoral linkages at aggregate and disaggregated level. The linkages have been evaluated under the. The demand side and supply side linkages have been evaluated which include production, employment, household consumption, investment, government expenditure linkages and trade linkages. The study implies that the manufacturing has high forward based production and average employment linkages accompanied with low backward linkages. With exogenous output shocks, high values of government expenditure linkages have been observed which authenticate the fact that the output shock in these sectors will induce the induce public sector s expenditure in the economy. Comparative to consumption linkages, the investment and expenditure linkages of manufacturing sector are high enough. The five same sub-sectors of manufacturing has high export and import linkages which represents that the output shocks have common impact on trade linkages. Sectors like Metal product except machinery and electrical, electronic machinery appliances, Chemicals and Tractors, agricultural implements etc. are having high absorption, employment and forward production linkages.