Rangarajan, C.
(1982)
Agricultural growth and industrial performance in India.
Other.
International Food Policy Research Institute, Washington.
Abstract
The report examines the linkages between agriculture and industry in India and the closeness of the ties between agricultural performance and industrial growth. Agriculture influences industry through three types of linkages -- production, demand, and savings and investment. These are incorporated in a macro-economic model to study the effects on industry of a given rate of agricultural growth. Historical data for (1961-72) with appropriate lag structures are used. Total industrial output, is separated into consumption goods and basic and capital goods. Agricultural output is treated as an exogenous variable, whereas the terms of trade between agriculture and industry are treated as endogenous. The values simulated by the model are tested against the actual values. The model captures fluctuations in industrial production but there are wide differences in the values for year-to-year growth of basic and capital goods. The basic simulation (1), is deterministic, but the model is also simulated stochastically. Simulation 2 shows the effects of a one-time increase in agricultural output. Simulation 3 traces the effect of a change in one variable, food grain terms of trade. Simulation 4 attempts to determine what would have happened if agricultural output had increased steadily during the period. Finally, Simulation 5 studies the influences of a 1% increase in the agricultural growth rate. The results of Simulations 2 and 5 indicate that a 1% growth in agricultural output increases industrial production by about 0.5% and thus national income by a little more than 0.7%
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