RESEARCH REPORT AGRICULTURAL GROWTH AND STRUCTURAL CHANGES IN THE PUNJAB ECONOMY: AN INPUT-OUTPUT ANALYSIS G. S. Bhalla G. K. Chadha S. P. Kashyap R. K. Sharma August 1990 In collaboration with the INTERNATIONAL CENTRE FOR THE FOOD STUDY OF REGIONAL POLICY DEVELOPMENT at JAWAHARLAL NEHRU RESEARCH UNIVERSITY INSTITUTE The International Food Policy Research Board of Trustees Institute was established in 1975 to identify and analyze alternative national and inter- Gerry Helleiner national strategies and policies for meeting Chairman, Canada food needs in the world, with particular em- Harris Mutio Mule phasis on low-income countries and on the Vice Chairman, Kenya poorer groups in those countries. While the research effort is geared to the precise objec- Sjarifuddin Baharsjah tive of contributing to the reduction of hun- Indonesia ger and malnutrition, the factors involved are many and wide-ranging, requiring analy Anna Ferro-Luzzi sis of underlying processes and extending Italy beyond a narrowly defined food sector. The Institute's research program reflects world- Ibrahim Saad Ahmed Hagrass wide interaction with policymakers, adminis- Egypt trators, and others concerned with increasing Yujiro Hayami food production and with improving the Japan equity of its distribution. Research results are published and distributed to officials and James Charles Ingram others concerned with national and interna Australia tional food and agricultural policy. Roberto Junguito The Institute receives support as a constitu- Colombia ent of the Consultative Group on Interna- Dharma Kumar tional Agricultural Research from a number India of donors including Australia, Belgium, Canada, the People's Republic of China, Theodore W. Schultz the Ford Foundation, France, the Federal U.S.A. Republic of Germany, India, Italy, Japan, Leopoldo Soli's the Netherlands, Norway, the Philippines, Mexico the Rockefeller Foundation, Switzerland, the United Kingdom, the United States, and M. Syeduzzaman the World Bank. In addition, a number of Bangladesh other governments and institutions contrib- Charles Valy Tuho ute funding to special research projects. Cote d'lvoire Just Faaland, Director Ex Officio, Norway AGRICULTURAL GROWTH AND STRUCTURAL CHANGES IN THE PUNJAB ECONOMY: AN INPUT-OUTPUT ANALYSIS G. S. Bhalla G. K. Chadha S. P. Kashyap R. K. Sharma Research Report 82 International Food Policy Research Institute in collaboration with the Centre for the Study of Regional Development at Jawaharlal Nehru University August 1990 Copyright 1990 International Food Policy Research Institute. All rights reserved. Sections of this report may be reproduced without the express permission of but with acknowledgment to the International Food Policy Research Institute. Library of Congress Cataloging- in-Publication Data Agricultural growth and structural changes in the Punjab economy : an input-output analysis / G. S. Bhalla ... [et al.]. p. cm. — (Research report / International Food Policy Research Institute ; 82) "August 1990." Includes bibliographical references. ISBN 0-89629-085-9 1. Agriculture—Economic aspects—India— Punjab. 2. Punjab (India)—Economic condi- tions. 3. Input-output analysis—India—Punjab. I. Bhalla, G. S. II. Jawaharlal Nehru University. Centre for the Study of Regional Development. III. Series: Research report (International Food Policy Research Institute) : 82. HD2075.P8A74 1990 90-5108 338.1'0954'5—dc20 CIP CONTENTS Foreword 1. Summary 9 2. Growth of the Punjab Economy Since 1960/61 12 3. Method of Compilation and Sources of Data 32 4. Structural Features of the Punjab Economy 41 5. Linkage Analysis of the Punjab Economy 57 6. Income and Employment Multi- pliers in the Punjab Economy 71 7. Conclusions and Policy Implica- tions 87 Appendix 1: Supplementary Tables 89 Appendix 2: Description of Sectors of the Punjab Economy, 1979/80 108 Appendix 3: Methodology for Calcu- lating Multipliers 112 Bibliography 117 TABLES 1. Net state domestic product at 12. Sectoral trade margins: pur- factor cost, by industry of origin, chasers'-producers' price ratios, 1960/61-1983/84 13 1979/80 34 2. Area, output, yield, and growth 13. Sectoral distribution of net value rates of principal crops of Punjab, added and gross value of output 1950/51-1984/85 16 in Punjab, 1969/70 42 3. Sectoral allocation of total ex- 14. Sectoral distribution of net value penditure in the five-year plans added and gross value of output of Punjab, 1951-56 to 1980-85 20 in Punjab, 1979/80 43 4. Educational facilities in rural 15. Sectoral distribution of workers Punjab, 1966-83 21 and of output and value added per worker in Punjab, 1969/70 46 5. Capital structure in Punjab agri- culture, 1951-82 23 16. Sectoral distribution of workers and of output and value added 6. Input structure in Punjab agri- per worker in Punjab, 1979/80 47 culture, 1960/61-1980/81 24 17. Distribution of final expenditure 7. Value of output, factor shares in in Punjab, 1969/70 and 1979/ value added, and labor produc- 80, and in India, 1979/80 49 tivity in wheat cultivation in- Punjab, 1970/71-1983/84 25 18. Per capita consumption expen- diture and its distribution in 8. Regression results for value of Punjab, 1969/70 51 output, factor shares in value added, and labor productivity in 19. Per capita consumption expen- wheat cultivation in Punjab, diture and its distribution in 1970/71-1983/84 25 Punjab, 1979/80 52 9. Rural poverty ratio in major In- 20. Distribution of average monthly dian states, 1970/71, 1977/78, per capita expenditure on major and 1983/84 27 commodity groups in rural Pun- jab, 1964/65-1983 53 10. Levels and growth of production and employment in selected in- 21. Commodity expenditure elasti- dustries in Punjab, 1970/71- cities for cultivating households 1982/83 29 in rural Punjab, 1974/75 54 11. Sectoral classifications of the 22. Interindustrial flows and pat- Punjab economy, 1979/80 and terns of final demand in Punjab, 1969/70 33 1979/80 58 23. Interindustry coefficient table, 35. Direct, indirect, and induced Punjab, 1979/80 59 sectoral income and multipliers 24. Interindustrial flows and pat- in Punjab, with import leakages, terns of final demand in India, 1979/80 76 1979/80 60 36. Direct and indirect sectoral em- 25. Interindustry coefficient table, ployment and multipliers in India, 1979/80 61 Punjab, with import leakages, 1969/70 78 26. Leontief inverse for the Punjab interindustry table, without im- 37. Direct and indirect sectoral em- port leakages, 1979/80 61 ployment and multipliers in Punjab, with import leakages, 27. Leontief inverse for the Punjab 1979/80 79 interindustry table, with import leakages, 1979/80 61 38. Direct, indirect, and induced sectoral employment and mul- 28. Leontief inverse for the India tipliers in Punjab, with import interindustry table, without im- leakages, 1969/70 80 port leakages, 1979/80 62 39. Direct, indirect, and induced 29. Leontief inverse for the India sectoral employment and mul- interindustry table, with import tipliers in Punjab, with import leakages, 1979/80 62 leakages, 1979/80 81 30. Linkage analysis of Punjab's 40. Direct and indirect sectoral economy, without import leak- wage incomes and multipliers in ages, 1969/70 and 1979/80 68 Punjab, with import leakages, 31. Linkage analysis of Punjab's 1969/70 82 economy, with import leakages, 41. Direct and indirect sectoral 1969/70 and 1979/80 69 wage incomes and multipliers in 32. Direct and indirect sectoral in- Punjab, with import leakages, come and multipliers in Punjab, 1979/80 83 with import leakages, 1969/70 73 42. Direct, indirect, and induced 33. Direct and indirect sectoral in- sectoral wage incomes and mul- come and multipliers in Punjab, tipliers in Punjab, with import with import leakages, 1979/80 74 leakages, 1969/70 84 34. Direct, indirect, and induced 43. Direct, indirect, and induced sectoral income and multipliers sectoral wage incomes and mul- in Punjab, with import leakages, tipliers in Punjab, with import 1969/70 75 leakages, 1979/80 85 ILLUSTRATIONS 44. Interindustry flows and patterns 1. Index of agricultural production: of final demand in Punjab, 1979/ India and Punjab, 1960/611986/ 80 89 87 17 45. Linkage analysis of Punjab's 2. Index of agricultural productivity: economy, without import leak- India and Punjab, 1960/61-1983/ ages, 1969/70 100 84 18 46. Linkage analysis of Punjab's economy, with import leakages, 1969/70 102 47. Linkage analysis of Punjab's economy, without import leak- ages, 1979/80 104 48. Linkage analysis of Punjab's economy, with import leakages, 1979/80 106 FOREWORD This research report is part of IFPRI's continuous efforts to understand the relation- ship between technological change in agriculture and overall economic growth that expands employment and income opportunities for the poor in developing countries. The research is a collaborative effort with the Centre for the Study of Regional Develop- ment at Jawaharlal Nehru University in New Delhi. The study documents and analyzes the structural changes that have occurred in the Punjab economy since the green revolution of the mid-1960s. With two input-output tables—one for 1969/70 and the other for 1979/80—the authors have traced the sources of structural changes and examined the changes in the intersectoral linkages and the quantum of indirect and induced income and employment generated by different sectors. Thus the study provides information and critical understanding required to develop programs that enhance the sectoral income and employment multipliers. The study highlights changes in the relative importance of the primary, secondary, and tertiary sectors in the economy of Punjab in the wake of improvements in agricultural production technology. It also brings out significant structural changes within these sectors. For instance, within the primary sector, the relative share of crop production has declined, whereas that of animal husbandry has increased. Similarly, within man- ufacturing a notable change has been the emergence of machine- and metal-based industries.