15 - Chapter 6 PDF

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 Indias high economic growth in
the last two decades is the service sectors 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 sectors 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 sectors 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
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
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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.
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

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

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

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

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

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: Authors 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 2006171

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
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

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

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

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

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

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
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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 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
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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

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 200607. 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
Agriculture
1.5
Industry
Services
1
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

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
1.5
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 198384 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)
1.4497 (45)
1.4212 (47)
1.3943 (46)
1.4141 (47)
1.6355 (43)
1.5505 (46)
1.2655 (51)
1.3253 (50)
1.2552 (53)
1.3630 (48)
1.1843 (58)
1.1740 (58)
1.2000 (54)
1.3099 (51)
1.2478 (54)
1.2449 (54)
1.2612 (53)
1.2704 (53)
1.7457 (38)
1.5329 (45)
1.4811 (45)
1.4299 (46)
1.4913 (49)
1.3741 (51)
1.1659 (56)
1.1708 (58)
1.1943 (57)
1.1858 (58)
1.1946 (57)
1.1964 (57)
1.1523 (57)
1.2807 (52)
1.3303 (49)
1.2700 (53)
1.3204 (51)
1.4070 (49)
1.5690 (42)
1.7985 (38)
1.7371 (41)
1.5607 (43)
1.5516 (47)
1.5988 (44)
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

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)
2.9166 (9)
3.1022 (7)
2.7656 (10)
2.6729 (11)
2.9567 (10)
2.7918 (11)
1.3556 (38)
1.2013 (49)
1.1720 (48)
1.1656 (46)
1.3760 (38)
1.3901 (35)
2.1156 (17)
2.2982 (16)
2.2366 (15)
2.2941 (16)
1.7494 (28)
1.6245 (29)
1.7969 (22)
2.0705 (18)
1.9035 (21)
1.7402 (23)
1.8698 (25)
1.7644 (25)
1.4119 (36)
2.0553 (19)
1.7989 (24)
1.6781 (26)
1.8188 (27)
1.7579 (26)
1.0317 (56)
1.0506 (54)
1.0617 (54)
1.0431 (56)
1.0502 (53)
1.1000 (51)
2.8586 (10)
3.0637 (8)
3.2271 (8)
3.1880 (8)
2.9119 (11)
2.7528 (12)
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)

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.
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

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
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

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
Agriculture
0.4
Industry
Services
0.3
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.
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

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 200304. 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.
0.7
0.6
0.5
0.4
Agriculture
Industry
0.3
Services
0.2
0.1
0
1983-84 1989-90 1993-94 1998-99 2003-04 2006-07
Figure 6.4: Forward Linkages Based on Chenery & Watanabe

190

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 200607 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
191

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.
192

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)
0.2339 (45)
0.2190 (47)
0.2123 (47)
0.2143 (47)
0.3329 (43)
0.2808 (44)
0.1399 (51)
0.1793 (50)
0.1373 (54)
0.1788 (49)
0.0904 (58)
0.0886 (58)
0.1082 (54)
0.1612 (51)
0.1339 (55)
0.1279 (54)
0.1460 (53)
0.1340 (53)
0.5077 (34)
0.3598 (41)
0.3316 (42)
0.3030 (43)
0.3218 (44)
0.2576 (46)
0.0891 (56)
0.0929 (57)
0.0963 (57)
0.0930 (58)
0.0959 (57)
0.0962 (57)
0.0704 (57)
0.1413 (52)
0.1576 (51)
0.1339 (53)
0.1485 (52)
0.2019 (50)
0.2778 (43)
0.3949 (39)
0.3544 (41)
0.2614 (45)
0.2452 (47)
0.2605 (45)
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)
193

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)

194

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
195

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).
196

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)
1.3564 (5)
1.5544 (4)
1.3320 (6)
1.3160 (8)
1.3931 (6)
1.3227 (7)
0.2486 (35)
0.1399 (45)
0.1114 (46)
0.1044 (46)
0.2410 (35)
0.2491 (35)
0.6842 (12)
0.7281 (14)
0.6125 (15)
0.7823 (12)
0.4091 (27)
0.3360 (29)
0.5118 (20)
0.7103 (17)
0.6281 (13)
0.4770 (21)
0.5146 (24)
0.4619 (25)
0.2594 (32)
0.7279 (15)
0.5429 (18)
0.4459 (22)
0.5593 (19)
0.5196 (22)
0.0271 (55)
0.0399 (54)
0.0504 (52)
0.0344 (54)
0.0371 (52)
0.0831 (50)
0.8772 (9)
0.8707 (10)
0.9360 (10)
0.9157 (10)
0.7378 (12)
0.6784 (17)
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)
197

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)

198

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.
199

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.
200

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),
201

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).
202

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CHAPTER 6

ASSESSMENT OF BACKWARD AND FORWARD

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

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Linkages among Sectors: Vision of different Scholars

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Technology Coefficient Matrix for 1989-90

Technology Coefficient Matrix for 1993-94

Technology Coefficient Matrix for 1998-99

Technology Coefficient Matrix for 2003-04

Technology Coefficient Matrix for 2006-07

Source: Authors Calculations

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Leontief Inverse Matrix for 1989-90

Leontief Inverse Matrix for 1993-94

Leontief Inverse Matrix for 1998-99

Leontief Inverse Matrix for 2003-04

Leontief Inverse Matrix for 2006-07

Source: Authors Calculations

Assessment of Backward and Forward Linkages in Indian Economy:

Backward and Forward Linkages

Assessment of Backward and Forward Linkages in Indian Economy:

Linkages Based on Rasmussen Method

Source: Authors Calculations

Assessment of Backward and Forward Linkages in Indian Economy:

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

Figure 6.1: Backward Linkages Based on Rasmussen Method

Assessment of Backward and Forward Linkages in Indian Economy:

Source: Authors Calculations

Assessment of Backward and Forward Linkages in Indian Economy:

Figure 6.2: Forward Linkages Based on Rasmussen Method

Intersectoral Dependence for the 58 Sectors (Rasmussen Method)

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Note: Figures in parenthesis are their respective Ranks

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Note: Figures in parenthesis are their respective Ranks

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Linkages Based on Chenery & Watanabe Method

Assessment of Backward and Forward Linkages in Indian Economy:

Source: Authors Calculations

Assessment of Backward and Forward Linkages in Indian Economy:

Figure 6.3: Backward Linkages Based on Chenery & Watanabe Method

Assessment of Backward and Forward Linkages in Indian Economy:

Source: Authors Calculations

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

Figure 6.4: Forward Linkages Based on Chenery & Watanabe

Assessment of Backward and Forward Linkages in Indian Economy:

Intersectoral Dependence for the 58 Sectors (Chenery & Watanabe

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Assessment of Backward and Forward Linkages in Indian Economy:

Note: Figures in parenthesis are their respective Ranks

Assessment of Backward and Forward Linkages in Indian Economy: