Chapter-VINPUT-OUTPUT ANALYSIS OF TERTIARY SECTOR

As already mentioned, in India, the excessive growth oftertiary sector and its effect on economic growth, employmentand sustainability of the system has become a matter ofconcern. The broad hypothesis of the study is that excessiveand skewed tertiarization of the economy has its ownconsequences in terms of structure, linkage pattern andmacro dynamics of the system. In tune with this hypothesis,current chapter deals with analysis of input-output structureand inter-sectoral linkages with special reference to tertiarysector in India. Input-output framework is a convenient waysto analyze a huge mass of data and explore the underlyingdisaggregate structural relationships in an economy. First,the analysis has been carried out aggregate level and then ithas been elaborated to sixty sector disaggregation level. Ataggregate level, the input-output structure and linkagepatterns have been analyzed for three sector level: theprimary, secondary and tertiary sector. Same exercise, forfiner details of dynamics, has been carried out at the sixtysector level disaggregation. Accordingly, the chapter has beendivided into three sections; first being the aggregate analysis;second being the disaggregate analysis; and third being theconcluding section of the chapter.

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IAggregate Level Analysis

At aggregate level economy has been divided in to threesectors: primary, secondary and tertiary sector. For this threesector classification input structure, output structure andboth backward and forward linkages have been worked outfor analysis. The objective of the section is to delineate thebroad structure with special reference to tertiary sector in theIndian economy.

Tertiary Sector Specific Output Structure

Tertiary sector specific output structure can be bestelaborated by analysis of sector-wise deliveries of output forintermediate input use. Percentage share of tertiary sectorvis-a-vis other sectors in distribution of output of a sectorgives a rough approximation of dependence of the system ontertiary sector, for output disposal. This analysis for outputdistribution, at aggregate level, has been done for variousIOTT tables available for the Indian economy (table 5.1).Instead of traditional classification of primary secondary andtertiary, we have divided the economy into commodity andservices sector, to understand the nature and trends intertiarization process of the economy. It gives the relativepercentage distribution of inter-industry utilization of outputof commodity and tertiary sectors, for various discrete yearsfrom year, 1968-69 to 2006-07.

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Table 5.1: Sectoral Percentage Distribution Deliveries ofOutput in Different Years in India

Deliveries of Output (Percent)Sector Year Commodity

SectorServiceSector

IntermediateUse

FinalUse

TotalOutput

Commo-dity

Sector

1968-691973-741978-791983-841989-901993-941998-992003-042006-07

33.6034.5038.0040.3042.5040.3041.2045.7046.56

5.205.305.906.506.207.607.909.3011.44

38.8039.8043.9046.8048.6048.0049.1055.0058.00

61.2060.2056.1053.2051.4052.0050.9045.0042.00

100100100100100100100100100

Servicesector

1968-691973-741978-791983-841989-901993-941998-992003-042006-07

21.8021.2023.4024.4027.8026.8023.6024.6029.26

9.409.4015.5013.1012.8011.7013.2012.8018.60

31.2030.6038.9037.5040.6038.5036.8037.4035.86

68.8069.4061.1062.5059.4061.5063.2062.6064.14

100100100100100100100100100

Source: Various Issues of Input-output Transaction Tables, CSO

As per table 5.1, total intermediate input use, as apercentage of gross value of output that was 38.80 percent in1968-69, improved to 43.90 percent in 1978-79, to 48.60 in1989-90, touched the level of 58.00 in year, 2006-07. Thisimplies that total intermediate input from commodity sectorto itself and service sector, taken together, is continuouslyimproving. Continuously improving intermediate input usedelivery and shrinking final consumption of a sector is ahealthy sign of economic growth which implies that instead ofoutput destined to final consumption directly, the processingpart of the system is entering in between and productionsystems of the economy are improving. The breakup of thisintermediate input use into commodity and service sector canhighlight the further dynamics of this tertiarization system.The commodity sector in the year, 2006-07, utilized 46.56percent of commodity output for its intermediateconsumption, as compared to 33.60 percent in 1968-69,

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38.00 percent in 1978-79, 42.50 percent in 1989-90, 41.20percent in 1998-99 and 45.70 percent in year 2003-04. Thatis to say, during the pre-nineties regime, the percentageshare of intermediate input deliveries utilization ofcommodity sector to itself is consistently on the rise. In thenew regime, characterized by widespread reforms, there hasbeen a slight decline in percentage share of output utilizationof commodity sector but later it picked up. This implies thatthe overall output utilization capacity of commodity sector foritself has been improving during the whole period underconsideration. On the other hand, the intermediate input usedeliveries of commodity sector to service sector has alsoimproved over time; it has almost doubled in year 2006-07,as compared to 1973-74. The percentage share of outpututilization of commodity sector itself is quite substantial, butits proportional contribution to tertiary sector is quite less.However, there seems to be some improvement on thisaccount since the introduction of new economic regime.Although the trend of intermediate use of output ofcommodity sector is quite encouraging, yet its share in finaluse has shown a declining trend over the entire period underconsideration. This shows that forward linkage of commoditysectors for delivery of its output, as intermediate input toservices sector has improved and the earlier stand alone typeof tertiary sector is getting integrated with the commoditysector of the economy.

Analysis of deliveries of tertiary sector to commoditysector and to itself, are indicative of the fact that this share isalso improving over the last few decades with few exceptions.A look at the trend of intermediate use of services in

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commodity sector output, shows that during the year 2006-07, it was 29.26 percent as compared to 21.80 percent in1968-69, 23.40 percent in 1978-79, 27.80 percent in 1989-90 and 24.60 percent in 2003-04. It implies that the outputof services for intermediate consumption in commodity sectorhas been consistently improving from 1968-69 to 1989-90.But during the reforms period, it has improved considerably.

Total intermediate input use of services sector outputthat was 31.20 percent of gross value of output in 1968-69,became 38.90 in 1978-79 and touched the level of 40.60percent in 1989-90 but thereafter have registered a slightdecline. This implies the reforms period has improved thefinal consumption and intermediate consumption hasdecreased marginally. Same behaviour pattern is beingobserved at the disaggregate level.

Tertiary Sector Specific Input Structure

Tertiary sector specific input structure can be bestelaborated by analysis of sector-wise inputs to a sector, fromother sectors. Percentage share of tertiary sector vis-a-visother sectors in distribution of input of a sector gives a roughapproximation of dependence of tertiary sector on othersectors for its input requirements. The analysis for inputcomposition, at aggregate level, has been done for variousIOTT tables available for the Indian economy (table 5.2). Tablegives a synoptic view of percentage share of distribution ofinter-industry utilization of inputs for both commodity andtertiary sectors, as based on input-output transactions tablesof different years.

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To analyze the input structure, simplest measure is theintermediate inputs consumed per unit of output by a sector.To produce a unit value of output, commodity sector got33.60 percent intermediate input from itself, in the year1968-69. This mark touched the level of 41.30 percent in1989-90 and 46.10 percent, in 2006-07. In the initial reformsperiod, this percentage witnessed, a marginal damp, but lateron recovered and is on the rise during the last decade. Samebeahaviour pattern is being displayed by the tertiary sectorinputs received from commodity sector, but with minor toand fro adjustments, it has shown a marginal recovery in thelast decade. Tertiary sector’s input requirement fromcommodity sector per unit of output has almost doubled from7.50 percent in year 1968-69 to 15.05 percent in 2006-07.Tertiary sector’s input requirement from itself, per unit ofoutput, has witnessed an improvement from 9.40 percent inyear 1968-69 to 12.70 percent in 2006-07. Over the lastdecade of reforms the backward linkage of tertiary sector hasimproved; it has improved more with the commodity sectorthan the tertiary sector itself.

On the whole, it may be concluded that the percentageshare of input utilization of commodity sector, in itself isquite substantial, but its proportional contribution to tertiarysector is quite less. However, there seems to be someimprovement, on this account, since the introduction of newpolicy regime. Although the trend of intermediate use ofinputs is quite encouraging, yet its share in final use hasthroughout shown a declining trend over the entire periodunder consideration.

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Table 5.2: Sectoral Percentage Distribution of IntermediateInput Receipts in Different Years in India

Intermediate Input Receipts (Percent)Sr.No. Sector Year Commodity Sector Service Sector

1. Commodity Sector

1968-691973-741978-791983-841989-901993-941998-992003-042006-07

33.6034.5038.0039.5041.3039.1039.5045.5046.10

15.2016.4014.1016.0014.8014.8014.0015.4016.20

2. Service Sector

1968-691973-741978-791983-841989-901993-941998-992003-042006-07

7.506.909.7010.2012.0014.2013.8014.9015.05

9.409.4015.5013.7013.7012.4014.2012.9012.70

3. Intermediate Use ….. ….. …..4. Net Indirect Taxes ….. ….. …..5. Gross Value Added ….. ….. …..

6. Total Output

1968-691973-741978-791983-841989-901993-941998-992003-042006-07

100100100100100100100100100

100100100100100100100100100

Source: Various Issues of Input-output Transaction Tables, CSO

Sectoral Shares in Gross Value Added

The gross value added and trends therein, act as acatalyst for the growth of a sector. Table 5.3, gives trends inpercentage distribution of gross value added betweencommodity and service sector in India. In year, 1968-69, outof gross value added in the economy, commodity sectorcontributed 69.30 percent; it touched the level of 71.20percent and then gradually slides down to 54.20 percent in1998-99 and to 45.30 percent in year 2006-07. On the otherhand, value addition share of service sector that was 30.70percent in 1973-74, rose to 45.80 percent in 1998-99 andfinally touched the percentage share level of 54.70. Thus,

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during the post-reform period, the share of gross value addedfrom output of commodity sector has shown a decliningtrend, whereas that from the services’ output hascontinuously risen, indicating a spurt in tertiary sectoractivities. This rising share of tertiary sector in gross valueadded is acting as a catalyst for the growth of tertiary sectorin India.

Table 5.3: Sector-wise Percentage Distribution of Gross ValueAdded in India.

Gross value added share (Percent)Year Commodity Sector Service Sector1968-691973-741978-791983-841989-901993-941998-992003-042006-07

69.3070.1063.3063.0071.2056.1054.2047.2045.30

30.7029.9036.7037.0028.8043.9045.8052.8054.70

Source: Calculated

Two important conclusions emerge from this analysis.First, the improving intermediate input use is indicative of thefact that processing part of the system is improving over time.The final use component is progressively being replaced bythe processed or manufactured one; which is a positivedevelopment. Secondly, the commodity sector is graduallybeing integrated with service sector for disposal of its outputfor intermediate inputs to service sector.

Aggregate Level Linkage Patterns

The transformation of the Indian economy for the lastfour decades is indicative of the fact that from a traditionalagro-economy till the 1970s, the economy has transformedinto a predominantly service-oriented economy, especiallysince the mid 1980s. Economic reforms initiated in the mid-

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eighties and their execution from early nineties has seen theshare of tertiary sector in GDP rising continuously for theIndian economy. The shift in composition of GDP has broughtabout substantial changes in the inter-sectoral productionand demand linkages. This has brought the issue, as to howthe tertiary sector is linked up with the two other commodity-producing sectors of the economy. The study of inter-sectorallinkages is need of the time so that the positive growthstimuli among sectors could be identified and fostered tosustain the economic growth momentum. In the Indiancontext, the researchers have attempted, linkage analysistechniques extensively. Considering inter-dependence amongthe sectors of the economy, it may be presumed that demandfor one sector in a closed economy is a function of outputsgenerated in the other sectors.

An input-output table captures the dynamics of howoutput of one industry goes into another industry where itserves as an input, and thereby shows inter-dependence ofthe sectors, both as buyer of output and as supplier ofinputs. Each column of the table reports monetary value ofan industry’s inputs, while each row represents value of anindustry’s outputs. Both production and demand linkagesamong the sectors can be examined from these input-outputmatrices. First are called backward linkages and the later arecalled forward linkages.

The production l inkages or backward l inkages canbe derived from input-output coefficient matrix A. Thebackward linkages, among various sectors of the Indianeconomy basically arise from inter-dependence of sectors, formeeting their productive input needs. The production

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linkages between the sectors have been illustrated throughthe analysis of available input-output tables for differentyears spaced evenly in the temporal dimension (table 5.4).

To produce one unit worth of output, in the year 1968-69, primary sector required 0.182 unit worth of input fromitself, 0.044 from secondary sector and 0.016 from thetertiary sector; that is for input requirements primary sectordepended more on itself and on secondary sector and itsdependence on tertiary sector was, the least. After a decade,the production linkage pattern of primary sector appeared forprimary, secondary and tertiary sectors as, 0.160, 0.069 and0.021, respectively. In the year 1998-99, production linkagepattern for primary sector appeared as, 0.118, 0.198 and0.030 for primary, secondary and tertiary sector respectively.Later in year, 2006-07, per unit input requirement of primarysector have been 0.115, 0.188 and 0.520, from three sectorsrespectively. Production linkage pattern of primary sector,over time, is indicative of the fact that primary sector’sdependence on tertiary sector has improved in the past. Thatis to say primary sector, especially in the recent past, isgetting integrated with tertiary sector on the production orbackward side.

In production linkage terms, per unit input requirementpattern of secondary sector from primary, secondary andtertiary has been 0.127, 0.338 and 0.139 in 1968-69; 0.033,0.427 and 0.104 in 1998-99; and 0.024, 0.469, 0.110 in2006-07 respectively. In the past, as compared to other twosectors, much of the secondary sector’s dependence for inputhas been, on itself. At aggregate level, integration of

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secondary sector with tertiary for input requirements has notappeared in a significant way.

In terms of backward linkages, in year 1968-69, toproduce one unit worth of output tertiary sector required0.017 unit worth of input from primary sector, 0.134 unitworth of input from secondary sector and 0.099, from itself. Itis observed that in the year 1968-69, input dependence oftertiary sector has been biased more towards secondarysector than towards primary sector and this bias has notchanged much, in the last few decades.

The above discussion is indicative of the fact that thestructural transformation of Indian economy, in last fewdecades, is characterized following stylized fact aboutbackward linkages: (i) the primary sector’s dependence onitself and the secondary sector for input requirements hasimproved significantly, but its backward integration withtertiary sector has also shown a tendency of improvement inthe recent past; (ii) the secondary sector has reduced itsinput dependence on primary and the tertiary sectors andtraditionally, it is depending more on itself than other twosectors; and (iii) input dependence of tertiary sector is morealigned with the secondary sector, than with the primarysector. Thus, at aggregate level, the primary and secondarysectors of Indian economy have a poor backward linkage withthe tertiary sector, which at present is a major chunk of grossdomestic product of the country. This requires a further in-depth disaggregate analysis, fortified with a wider database,to derive some finer conclusions regarding the viability ofsuch a skewed pattern of growth.

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Table 5.4: Inter-Sectoral Production Linkages in the IndiaSectorYear Sector

Primary Secondary TertiaryPrimary 0.182 0.127 0.017Secondary 0.044 0.338 0.1341968-69Tertiary 0.016 0.139 0.099Primary 0.160 0.130 0.039Secondary 0.069 0.350 0.1071978-79Tertiary 0.021 0.153 0.099Primary 0.166 0.042 0.035Secondary 0.146 0.379 0.1751989-90Tertiary 0.048 0.193 0.190Primary 0.118 0.033 0.025Secondary 0.198 0.427 0.2141998-99Tertiary 0.030 0.104 0.136Primary 0.115 0.024 0.025Secondary 0.188 0.469 0.2232006-07Tertiary 0.520 0.110 0.138

Source: Calculated

Aggregate level sectoral demand l inkages or forward

linkages for some discrete years are given in table 5.5.Throughout, the demand linkages of primary sector withsecondary sector have been stronger as compared to thetertiary sector. The demand linkage of the secondary sector

with the primary sector declined from 0.247 in 1968-69 to0.075 in 2006-07. Demand linkage of tertiary sector withsecondary sector improved significantly from 0.233 in theyear 1968-69, to 0.517 in 2006-07, indicating risingimportance of secondary for tertiary sector, though itremained almost static in case of primary sector. Forwardlinkage of primary sector has slightly improved withsecondary sector but is relatively poor with the tertiarysector. Tertiary sector has highest forward linkage with itselfand then with secondary sector.

Table 5.5: Sectoral Demand Linkages in the IndiaSectorYear Sector

Primary Secondary Tertiary1968-69 Primary 1.231 0.247 0.059

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Secondary 0.088 1.585 0.233Tertiary 0.036 0.244 1.174Primary 1.215 0.260 0.083Secondary 0.137 1.625 0.1941978-79Tertiary 0.050 0.277 1.172Primary 1.221 0.104 0.074Secondary 0.324 1.755 0.3841989-90Tertiary 0.148 0.416 1.356Primary 1.153 0.075 0.051Secondary 0.426 1.858 0.4641998-99Tertiary 0.090 0.222 1.242Primary 1.138 0.075 0.072Secondary 0.485 1.976 0.5172006-07Tertiary 0.134 0.262 1.282

Source: Calculated

Hence to sum up, it can be said that the emergingstructure of the Indian economy is characterized by greaterintegration of the sectors and sub-sectors. From finalconsumption oriented system, the economy is shifting to rigorof processing as displayed by the rise in intermediateconsumption. Inter-sectoral linkages are improving over time,but the emerging tertiary sector is still loosely connected torest of the sectors on the backward and forward front.

IDisaggregate Level Analysis

Preceding section covered the aggregate analysis andthis section deals with disaggregate analysis. For disaggregateanalysis, available input-output tables of Indian economyhave been converted in to a common 60x60 sector schemeand uniform pricing system. This section covers variousaspects of sectoral change at disaggregate level.

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Output Deliveries to Tertiary Sector

Magnitude of disaggregate sectoral output deliveries totertiary sector gives an idea about the forward dependence ofa sector on tertiary sector for disposing off its output. Tertiarysector growth is healthy, if it generates a strong outputbuying opportunity from other sectors. A sector’s output isdisposed off as, intermediate input and final consumptioncategory. Out of the total intermediate input, the inputdestined to tertiary sector gives the forward dependence ofproduction systems of the economy on tertiary sector.

Deliveries of sectors at disaggregate level forintermediate use by tertiary sector as a percentage of its totalintermediate input use deliveries have been analyzed in thefollowing section. For intermediate input requirements out oftotal inputs of tertiary sector, the percentage of inputssupplied by primary sector is given in table 5.6. In year2006-07, the primary sectors which supplied more than one-fourth of their intermediate input supplies to tertiary sector,are “other minerals” (57.55 percent), “other crops” (49.39percent), “forestry and logging” (30.89 percent), “coal andlignite” (29.53 percent), and “animal husbandry” (28.29percent). All these sectors except “coal and lignite” haveshown a significant improvement in the output delivery over aperiod, under consideration.

“Food crops” and “other crops” sectors, one of theprimary sub-sectors of major interest for the economy,supplied just 12.63 percent and 49.43 percent respectively oftheir intermediate input deliveries to the tertiary sector. But

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one important thing to be noted regarding both the sectors isthat over the time their share of deliveries to tertiary sector ison the rise. In majority of other agriculture related sectors,the share contribution to their intermediate input delivery isnegligible at present and during the period underconsideration this share has decreased. Same is true forother non–agricultural primary sectors. Thus as far asintermediate input deliveries of output to tertiary sectors areconcerned, traditional agriculture sectors are gettingintegrated with the tertiary sector as a result of opportunitiesgenerated by the new economic regime and reforms processfollowed by the economy.

Table 5.6: Output Delivery of Primary Sectors forIntermediate Use by Tertiary Sector as Percentage of itsTotal Intermediate Input Use Deliveries

YearCode Sector

1993-94 1998-99 2003-04 2006-07

1 Food Crops 11.55 10.99 7.82 12.63

2 Cash Crops 3.63 0.00 0.05 1.29

3 Plantation Crops 5.00 0.00 0.58 0.75

4 Other Crops 19.96 20.25 33.98 49.39

5 Animal Husbandry 16.40 7.40 17.06 28.29

6 Forestry and logging 17.77 12.13 21.39 30.89

7 Fishing 9.59 5.68 1.88 1.97

8 Coal and lignite 52.03 50.22 37.66 29.53

9 Crude Petroleum and Naturalgas 18.86 0.00 2.81 1.70

10 Iron ore 5.78 0.00 0.00 0.00

11 Other Minerals 49.79 49.47 53.26 57.55

Source: Computed

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Deliveries of secondary sectors for intermediate useby tertiary sector as percentage of its total intermediate inputuse deliveries are given in table 5.7. Secondary sectors, whichdelivered more than three-fourth of their intermediate inputdeliveries to tertiary sector in the year 2006-07 are, “cement”(97.50 percent), “railway transport equipment” (88.39percent), “coal tar products” (82.90 percent), “non-metallicmineral products” (80.41 percent), and “printing, publishingand allied activities (79.32 percent). In majority of these biginput suppliers of intermediate inputs to tertiary sector, theintermediate input deliveries share has shown a significantimprovement in the past. There are numerous sectors, if wetake a cut-off point to be fifty percent. The sectors with verypoor forward linkage with tertiary sector are tobaccoproducts, cotton textiles, woolen textiles, leather products,chemicals, fertilizers, basic metals, agricultural machineryand industrial machinery. Forward linkage of secondarysectors in terms of intermediate inputs is significant and isimproving over time.

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Table 5.7: Delivery of Secondary Sectors for Intermediate Useby Tertiary Sector as Percentage of its Total IntermediateInput Use Deliveries

YearCode Sector1993-94 1998-99 2003-04 2006-07

12 Sugar 16.00 8.57 16.47 20.55

13 Food Products Excluding Sugar 26.40 24.85 27.06 33.76

14 Beverages 72.83 61.00 56.52 56.17

15 Tobacco products 6.74 0.03 0.06 0.05

16 Cotton Textiles 14.78 1.97 0.49 0.51

17 Wool, Silk & Synthetic Fiber Textiles 11.17 0.32 0.49 0.54

18 Jute, hemp, Mesta textiles 20.19 11.62 17.45 27.95

19 Textile Products including Wearing 17.34 11.94 21.36 14.19

20 Wood and wood products 59.81 52.02 44.12 44.97

21 Furniture and fixtures-wooden 61.42 45.86 81.94 72.55

22 Paper and Paper Products 28.53 21.26 16.56 15.28

23 Printing, Publishing and AlliedActivities 75.08 42.05 79.81 79.32

24 Leather and leather products 8.83 0.57 0.79 0.76

25 Plastic and Rubber Products 48.69 44.42 34.87 31.91

26 Petroleum products 69.53 72.99 69.24 68.36

27 Coal tar products 55.64 54.39 82.69 82.90

28 Inorganic heavy chemicals 5.44 0.72 0.19 0.19

29 Organic heavy chemicals 6.30 1.78 1.35 1.10

30 Fertilizers 1.76 0.15 0.31 0.20

31 Paints, varnishes and lacquers 46.38 48.51 60.17 61.39

32 Pesticides, Drugs and OtherChemicals 22.60 32.38 16.25 15.72

33 Cement 97.34 46.96 96.38 97.50

34 Non-Metallic Mineral Products 74.45 73.40 77.73 80.41

35 Iron & steel Industries and Foundries 28.17 21.92 37.77 41.57

36 Other Basic Metals Industry 5.78 0.00 0.01 0.00

37 Metal Products except Machinery andTransport Equipment 29.12 31.84 33.60 29.44

38 Agriculture Machinery 4.38 0.00 0.00 0.00

39 Industrial machinery for Food &Textiles 8.05 0.00 0.00 0.00

40 Other Machinery 21.13 47.34 16.71 15.77

41 Electrical, Electronic Machinery &Appliances 48.50 41.64 37.37 30.34

42 Railway Transport Equipment 76.17 12.22 93.65 88.39

43 Other Transport Equipment 41.62 56.06 42.61 44.55

44 Miscellaneous ManufacturingIndustries 68.80 78.88 44.62 45.35

45 Construction 77.05 78.10 64.00 66.91

Source: Computed

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Deliveries of tert iary sectors for intermediate use byitself as percentage of its total intermediate input usedeliveries are presented in table 5.8. In year 2006-07, sectorswith above 90 percent of such deliveries are “water supply”,“storage and warehousing “, “hotels and restaurants”,“education and research”, and “medical and health”. Sectors,“ownership of dwelling” and “public administration anddefense”, by their very nature, have no such deliveries totertiary sector itself. In almost all of other sectors, thispercentage share comes out to be more than 45 percentmark. In its temporal dimension, there is a mixed trend.Hence forward linkage of tertiary sectors with tertiary sectoritself is quite strong as compared to other two counterparts,the primary and secondary sectors.

Table 5.8: Delivery of Tertiary Sectors for Intermediate Use byTertiary Sector as Percentage of its Total IntermediateInput Use Deliveries

YearCode Sector1993-94 1998-99 2003-04 2006-07

46 Electricity 54.41 59.92 52.90 51.34

47 Water Supply 68.96 24.91 89.54 90.54

48 Railway Transport Services 49.51 49.00 38.92 44.83

49 Other Transport Services 36.44 45.96 46.20 48.03

50 Storage and warehousing 100.00 32.19 99.93 99.92

51 Communication 66.69 74.36 60.76 56.59

52 Trade 35.80 30.99 35.00 37.91

53 Hotels and restaurants 97.69 47.97 99.27 99.37

54 Banking 63.20 48.32 58.54 55.69

55 Insurance 61.45 40.74 53.54 54.20

56 Ownership of dwellings 0.00 0.00 0.00 0.00

57 Education and research 100.00 100.00 100.00 100.00

58 Medical and health 95.66 68.54 100.00 100.00

59 Other Services 61.25 78.61 61.73 56.17

60 Public Administration andDefense 0.00 0.00 0.00 0.00

Source: Computed

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Backward Linkages with Tertiary Sector

Input to a sector from tertiary sectors as a percentageof gross value of output of a sector gives the backwarddependence of a particular sector, for inputs. Higher thepercentage for a sector, higher is the dependence on tertiarysector. This percentage dependence of each of the sixtysectors on tertiary sector as a whole has been computed forall the four reference years under consideration and theranking, 1 to 60, has been done by giving 1st top rank tohighly dependent and 60th to the least dependent sector.

Input dependence of each of the primary sectors ontertiary sector as a whole is presented in table 5.9. In theyear 2006-07, out of 11 primary sectors 7 sectors lie in theabove 50 rank category, showing thereby a very smallbackward dependence on tertiary sector. In year 2006-07agriculture, plantation crops, fishing, other crops, cash cropsand forestry sectors got less than ten percent of their inputper unit of output requirement from tertiary sector. Inagriculture, this input requirement as a percentage of outputis 14.65 percent for food crops and 11.96 percent for animalhusbandry. ‘Crude petroleum and natural gas’ and ‘coal andlignite’ sectors have this percentage requirement of 12.35percent and 10.71 percent, respectively. In the temporaldimension, an important fact highlighted by the table is thathigh backward linkage related sectors have improved theirranking over time. Thus the higher and improved dependenceon tertiary sector for input requirement per unit of output isidentified by ‘food crops’, ‘animal husbandry’, ‘coal andlignite’, and ‘crude petroleum and natural gas’ sectors in theprimary sectors category. With the passage of time, primary

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sector are moving up on the ladder of backward linkage, i.e.,input dependence with tertiary sector.

Table 5.9: Input to Primary Sectors from Tertiary Sectors as aPercentage of Gross Value of Output of a Sector

Years

1993-94 1998-99 2003-04 2006-07Code Sector

Percent Rank Percent Rank Percent Rank Percent Rank

1 Food Crops 10.9 47 9.34 49 13.00 42 14.65 38

2 Cash Crops 6.1 55 6.07 54 6.12 55 6.04 55

3 Plantation Crops 3.67 59 4.66 57 2.77 58 2.77 59

4 Other Crops 6 56 3.11 59 2.63 59 3.48 57

5 Animal Husbandry 7.71 52 5.22 56 13.31 41 11.96 44

6 Forestry and logging 6.93 53 6.73 53 6.89 53 6.83 53

7 Fishing 4.03 58 3.55 58 2.93 57 3.08 58

8 Coal and lignite 16.64 39 12.78 45 11.27 47 10.71 48

9 Crude Petroleum and Nat.gas 6.18 54 5.79 55 13.42 40 12.35 42

10 Iron ore 13.43 45 13.74 40 12.45 45 9.33 50

11 Other Minerals 9.74 49 9.34 50 7.64 52 6.89 52

Source: Computed

For secondary sector , in year 2006-07, the top tenhigh ranking sectors in terms of input from tertiary sector asa percentage of gross value of output of a sector, fall either insecondary sectors or tertiary sectors. As per table 5.10,among the top ten, secondary sectors are ‘cotton textile’, ‘jute,hemp, mesta textiles’, ‘cement’, ‘other basic metals industry’,‘food products excluding sugar’, ‘non-metallic mineralproducts’, in order. In these sectors more than 25 percent ofinput per unit of output comes for tertiary sector. Higherdependence on tertiary sector for input is a quite widespreadphenomena in secondary sectors but there are some sectorswhich have a very low input dependence, e.g., sectors like‘petroleum products’, ‘metal products except machinery andtransport equipment’, ‘inorganic heavy chemicals’, ‘organicheavy chemicals’, and ‘furniture and fixtures-wooden’. That isto say heavy manufacturing or manufacturing dependentheavily on extraction and relatively lighter processing has a

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poor backward linkage with tertiary sector. But in general,the input dependence of secondary sectors is relativelypronounced, as compared to the primary sectors and thisdependence is improving over time, especially during the neweconomic regime. So gradually the primary and secondarysectors of the economy are getting integrated with tertiarysector for input requirements.

Table 5.10: Input to Secondary Sectors from Tertiary Sectoras a Percentage of Gross Value of Output of a Sector

Years1993-94 1998-99 2003-04 2006-07Code Sector

Percent Rank Percent Rank Percent Rank Percent Rank12 Sugar 19.2 35 19.24 34 31.45 8 25.03 1513 Food Products Excluding Sugar 20.06 31 22.04 27 25.86 14 27.92 914 Beverages 21.43 25 19.55 33 17.79 34 17.77 3215 Tobacco products 23.68 17 27.82 13 19.42 30 19.91 2916 Cotton Textiles 30.67 5 46.82 3 43.35 2 45.48 217 Wool, Silk & Synth. Fiber Text. 24.82 14 23.53 24 27.14 13 27.01 1118 Jute, hemp, mesta textiles 38.41 3 32.7 7 39.27 3 40.94 319 Textile Products 21.12 27 19.69 32 20.33 28 21.00 2420 Wood and wood products 15.34 41 21.32 30 22.13 23 22.87 2021 Furniture and fixtures-wooden 13.49 44 13.34 42 11.7 46 11.33 4522 Paper and Paper Products 27.19 8 24.42 21 23.67 19 23.06 1823 Printing, Pub. and Allied Ind. 18.04 37 20.6 31 17.81 33 17.88 3124 Leather and leather products 24.45 15 30.91 10 24.8 16 25.75 1325 Plastic and Rubber Products 19.38 34 26.81 15 14.2 38 13.22 4026 Petroleum products 9.61 50 13.72 41 6.83 54 6.79 5427 Coal tar products 42.00 1 52.76 1 25.19 15 25.01 1628 Inorganic heavy chemicals 25.03 12 12.75 46 14.17 39 12.84 4129 Organic heavy chemicals 25.72 11 13.33 43 15.52 37 14.75 3730 Fertilizers 21.9 24 25.26 18 23.8 18 22.61 2131 Paints, varnishes and lacquers 23.34 18 22.45 26 12.54 44 12.28 4332 Pesticides, Drugs and Chemicals 22.42 23 24.6 20 17.48 36 16.29 3533 Cement 35.86 4 32.66 8 38.79 4 35.98 434 Non-Metallic Mineral Products 24.21 16 24.18 22 29.42 10 27.6 1035 Iron & steel Ind. & Foundries 24.84 13 27.63 14 27.59 12 26.53 1236 Other Basic Metals Industry 22.79 20 23.7 23 33.22 6 30.67 637 Metal Products 20.35 29 18.85 37 10.86 48 9.41 4938 Agriculture Machinery 20.31 30 23.2 25 22.88 20 20.95 2539 Ind. machinery for Food & Text. 21.16 26 26.52 17 18.1 32 16.31 3440 Other Machinery 22.66 21 25.26 19 19.85 29 18.13 3041 Electrical, Electronic Mach. 19.81 32 21.55 29 21.24 25 20.6 2742 Railway Transport Equipment 10.74 48 49 2 17.61 35 14.81 3643 Other Transport Equipment 25.76 10 28.88 12 27.89 11 25.52 1444 Misc. Manufacturing Industries 18.9 36 15.41 39 22.68 21 20.19 2845 Construction 22.54 22 19.14 35 22.55 22 21.91 23

Source: Computed

Input dependence of tert iary sector on itself (table 5.11),is relatively higher as compared to the primary and secondarysectors. In the year 2006-07, out of the top ten high rankingsectors in terms of input from tertiary sector as a percentage ofgross value of output of a sector, four fell in the tertiary sectoritself; these are ‘electricity’, ‘water supply’, ‘railway transport

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services’ and ‘storage and warehousing’ sectors, in order. But interms of ranking, the sectors like ‘public administration anddefense’, ‘ownership and dwelling’, ‘education and research’ lielow, in terms of input dependence from tertiary sector.

Table 5.11: Input to Tertiary Sectors from Tertiary Sector as aPercentage of Gross Value of Output of a Sector

Years1993-94 1998-99 2003-04 2006-07Code Sector

Percent Rank Percent Rank Percent Rank Percent Rank

46 Electricity 40.13 2 46.07 4 45.44 1 48.55 1

47 Water Supply 23.05 19 26.75 16 35.09 5 34.58 5

48 Railway Trans.Services 26.48 9 37.83 6 30.11 9 30.61 7

49 OtherTransport Serv. 27.28 7 29.67 11 22.07 24 23.53 17

50 Storage andwarehousing 27.29 6 31.62 9 31.73 7 30.29 8

51 Communication 11.70 46 9.41 48 10.02 50 13.37 39

52 Trade 19.71 33 13.33 44 12.84 43 10.72 47

53 Hotels andrestaurants 16.18 40 17.32 38 20.89 26 22.40 22

54 Banking 13.50 43 19.04 36 18.62 31 17.43 33

55 Insurance 15.04 42 21.73 28 20.89 27 20.69 26

56 Ownership ofdwellings 5.54 57 6.87 52 4.91 56 4.67 56

57 Education andresearch 8.26 51 10.13 47 8.42 51 9.16 51

58 Medical andhealth 20.75 28 43.71 5 10.09 49 10.79 46

59 Other Services 17.92 38 8.45 51 23.95 17 22.98 19

60 Public Adm. &Def. 0.00 60 0.00 60 0.00 60 0.00 60

Source: Computed

Sectoral Shares in Gross Value of Output

Share of a sector or a group of sectors in the nationalgross value of output, gives the relative importance of a sectorin the economy. Three sectors of the economy, ‘construction’,‘trade’ and ‘other transport services’, constitute more thanone-fourth of total national gross value of output.Historically, for the last two decades, with minor alterations,these sectors occupy the same rank in the country. Weight-wise share of individual primary sectors in national grossvalue of output (table 5.12) is relatively on the lower side

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except sectors like ’food crops’, ‘animal husbandry’ and ‘othercrops’. In the year 2006-07, the combined share of ‘foodcrops’, ‘animal husbandry’ and ‘other crops’ sectors has been9.34 percent and they ranked 6, 10 and 14 respectively in theeconomy. In the temporal dimension, food crops share hasbeen 6.80 percent in the year 1993-94 with rank 3 in theeconomy; which reduced to 5.53 percent in 1998-99 and to4.69 percent in 2003-04. Likewise, sector ‘animal husbandry’had a share of 5.03 percent of national gross value of outputin 1993-94. This share reduced to touch the percentagecontribution level of 4.42 percent, 3.57 percent and 2.91percent in the years 1998-99, 2003-04 and 2006-07,respectively. Accordingly the national ranking of the ‘animalhusbandry’ sector slipped from 6th to 10th. Same bahaviourpattern is being displayed by ‘other crops’; which in terms ofranking has shifted from 5th to 14th during the same span oftime. Almost, all the sectors have slide down on the nationalranking on the same pattern, except ‘plantation crops’ thatimproved in percentage share terms from 0.48 percent to1.05 percent, during time span of 1993-94 to 2006-07. Thusin the total economy, the primary sectors, food crops, othercrops and animal husbandry are below 10 percent share atpresent. With the transition, share of primary sectors in thenational output is shrinking over time. This is exactly inconsonance with the economic development related theoryand empirics.

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Table 5.12: Sector-wise Share of Primary Sectors in NationalGross Value of Output in Different Years in India

1993-94 1998-99 2003-04 2006-07Code SectorPercent Rank Percent Rank Percent Rank Percent Rank

1 Food Crops 6.80 3 5.53 4 4.69 4 4.10 6

2 Cash Crops 2.14 15 1.72 18 1.64 20 1.38 24

3 Plantation Crops 0.48 44 0.40 46 1.20 25 1.05 28

4 Other Crops 5.60 5 5.38 5 2.87 13 2.37 14

5 Animal Husbandry 5.03 6 4.42 8 3.57 7 2.91 10

6 Forestry and logging 0.76 33 0.66 34 0.49 43 0.38 45

7 Fishing 0.71 36 0.69 33 0.62 38 0.51 41

8 Coal and lignite 0.95 29 0.82 32 0.68 34 0.59 38

9 Crude Petrol. andNat. gas

0.57 39 0.44 43 0.67 35 0.69 34

10 Iron ore 0.06 59 0.06 60 0.09 58 0.15 55

11 Other Minerals 0.24 53 0.21 54 0.27 49 0.33 48

Total (Economy) 100 100 100 100

Source: Computed

Sector-wise shares of secondary sectors, in nationalgross value of output, in different years in India are given intable 5.13. In year 2006-07, major contributors to nationaloutput are ‘electrical, electronic machines and appliances’(4.73 percent), ‘petroleum products’ (3.54 percent), ‘iron andsteel industries and foundries’ (3.28 percent), and ‘foodproducts excluding sugar’ (2.94 percent). All these sectorshave improved their share, as well as the nation rankingduring the new policy regime. Majority of the secondarysectors have shown a decrease in share, as well as, adecrease in national ranking. If we combine the findings ofprimary and secondary sectors, sectors relating to ‘foodcrops’, ‘processed food products’ and ‘basic raw materialprocessing relating to petroleum, iron and steel’ dominatesthe commodity sectors in terms of size, share and nationalranking. This is a low value addition area of operation. Theshare of high end technology based processing products orinnovative niche product is still negligible. In secondary

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sectors, still the economy is relying on age old processingindustries. Only skill formation, new technology and massiveresearch and development can give the high value addedniche products, in the industrial sector.

As already said, three sectors of the economy,‘construction’, ‘trade’ and ‘other transport services’ constitutemore than one-fourth of total national gross value of output.By and large, the place in the national ranking is alsounaltered during the reforms period. Share of some sectorsthat used to be in the public sectors has gone down duringthe past and so has been their ranking (table 5.14). Thesectors are ‘electricity’, ‘water supply’ and ‘railway transportservices’. ‘Storage and warehousing’ has consistentlyremained to be the last ranked one. Sectors that haveregistered an improvement in share, up to 2003-04 and aslight fall thereafter are, ‘hotels and restaurants’, ‘banking’,‘insurance’, ‘education and research’, and ‘medical andhealth’. This fall has partially been due to the ongoing globalfinancial crisis and economic slowdown. Thus improvementin share of tertiary sector during the reforms period is notevenly distributed in spatial dimension (across the sub-sectors) and in the temporal dimension.

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Table 5.13: Sector-wise Share of Secondary Sectors inNational Gross Value of Output in Different Years in India

Year=1993-94 Year=1998-99 Year=2003-04 Year=2006-07Code Sector

Percent Rank Percent Rank Percent Rank Percent Rank

12 Sugar 0.76 31 0.50 41 0.65 36 0.52 40

13 Food ProductsExcluding Sugar 2.62 14 4.45 7 3.68 6 2.94 9

14 Beverages 0.25 51 0.39 47 0.50 41 0.62 36

15 Tobacco products 0.53 40 0.58 37 0.22 50 0.28 50

16 Cotton Textiles 1.87 17 1.51 20 1.13 28 0.98 30

17 Wool, Silk &Synthetic FiberTextiles

1.26 21 0.84 30 0.74 33 0.65 35

18 Jute, hemp, Mestatextiles 0.12 58 0.16 57 0.09 59 0.08 59

19 Textile Productsincluding Wearing 0.93 30 1.08 25 1.63 21 1.42 23

20 Wood and woodproducts 0.48 43 0.51 40 0.17 53 0.14 56

21 Furniture andfixtures-wooden 0.15 57 0.28 52 0.16 56 0.14 58

22 Paper and PaperProducts 0.61 38 0.56 38 0.47 44 0.40 43

23 Printing, Pub. andAllied Activities 0.44 46 0.34 50 0.41 45 0.35 46

24 Leather and leatherproducts 0.48 41 0.38 48 0.32 48 0.28 49

25 Plastic and RubberProducts 1.18 25 1.00 28 1.17 26 1.21 27

26 Petroleum products 1.21 23 1.37 23 3.39 8 3.54 7

27 Coal tar products 0.20 55 0.16 56 0.16 54 0.17 54

28 Inorganic heavychemicals 0.31 50 0.49 42 0.57 40 0.56 39

29 Organic heavychemicals 0.31 49 0.43 44 0.49 42 0.47 42

30 Fertilizers 0.71 35 0.82 31 0.62 37 0.60 37

31 Paints, varnishesand lacquers 0.34 48 0.34 49 0.34 47 0.34 47

32 Pesticides, Drugsand Other Chem. 3.02 10 2.54 12 2.86 14 2.74 13

33 Cement 0.48 42 0.42 45 0.37 46 0.39 44

34 Non-MetallicMineral Products 0.67 37 0.64 35 0.79 32 0.84 31

35 Iron & steelIndustries andFoundries

2.78 13 2.39 15 2.68 16 3.28 8

36 Other Basic MetalsIndustry 0.76 32 0.64 36 0.58 39 0.71 33

37 Metal Products 1.22 22 1.22 24 1.13 27 1.38 25

38 AgricultureMachinery 0.24 52 0.23 53 0.20 51 0.25 51

39 Industrial mach.for Food & Textiles 0.18 56 0.16 55 0.16 55 0.20 52

40 Other Machinery 1.17 27 1.07 26 1.49 22 1.84 18

41 Electrical,Electronic Mach. &Appl.

1.87 18 1.47 22 3.21 10 4.73 4

42 Railway TransportEquipment 0.41 47 0.07 58 0.17 52 0.17 53

43 Other TransportEquipment 1.58 19 1.69 19 1.80 19 1.75 20

44 Misc.ManufacturingIndustries

1.39 20 1.79 17 1.39 24 1.53 21

45 Construction 7.15 2 7.32 2 8.61 2 11.46 1

Total (economy) 100.00 100.00 100.00 100.00

Source: Computed

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Table 5.14: Sector-wise Share of Tertiary Sectors in NationalGross Value of Output in Different Years in India

Year=1993-94 Year=1998-99 Year=2003-04 Year=2006-07Code Sector

Percent Rank Percent Rank Percent Rank Percent Rank

46 Electricity 3.42 8 3.70 9 2.89 12 2.30 15

47 Water Supply 0.23 54 0.31 51 0.15 57 0.14 57

48 Railway TransportServices 1.20 24 1.00 27 1.08 30 1.04 29

49 Other TransportServices 6.62 4 6.12 3 7.09 3 6.83 3

50 Storage andwarehousing 0.06 60 0.07 59 0.06 60 0.05 60

51 Communication 0.75 34 0.95 29 1.12 29 1.23 26

52 Trade 9.62 1 8.86 1 8.86 1 8.66 2

53 Hotels andrestaurants 1.12 28 1.48 21 2.01 18 2.29 16

54 Banking 2.84 12 3.60 10 3.29 9 2.78 11

55 Insurance 0.45 45 0.51 39 0.83 31 0.73 32

56 Ownership ofdwellings 3.11 9 2.42 14 2.72 15 2.22 17

57 Education andresearch 1.93 16 2.54 13 2.12 17 1.82 19

58 Medical and health 1.17 26 2.11 16 1.42 23 1.50 22

59 Other Services 3.58 7 4.80 6 4.18 5 4.25 5

60 Public Adm. andDef. 2.87 11 3.32 11 3.05 11 2.77 12

Total (economy) 100.00 100.00 100.00 100.00

Source: Computed

Share of final consumption in Gross Value of Output

Share of final consumption in gross value of output(table 5.15) gives an idea about the processing complexity orthe forward linkage of a sector. Higher percentage value offinal consumption in gross value of output means, less ofprocessing is involved in the sector and thereby it impliesthat it has a poor forward linkage with other primary orsecondary sectors. Tertiary sector related sub-sectors like‘ownership and dwelling’ and ‘public administration anddefense’, supply almost cent-percent of their gross value ofoutput for final consumption, hence have no linkage with theprimary and secondary sectors on the forward side. Othersectors that supply more than three-fourth of their output tofinal consumption category are, ‘construction’, ‘hotels andrestaurants’, ‘education and research’, and ‘medical and

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health’. If we look the table in its temporal dimension sectorslike ‘communication’, ‘trade’, and ‘banking’ have shown amarginal decrease in this share over the period, underconsideration. Hence the major chunk of tertiary sectoroutput goes as a final consumption, instead of intermediateconsumption. The emerging structure of tertiary sector in thenew regime is characterized by loose forward linkages withthe primary and secondary sectors of the economy; which isnot a healthy sign of development patterns. The very viabilityof the total economic system that is heavily dependent onpoorly integrated tertiary sectors becomes questionable andneeds to be analyzed at larger level of disaggregation.

Table 5.15: Sector-wise Share of Final Consumption in GrossValue of Output in Tertiary Sector in India

Final Consumption as a Percentage ofGross Value of OutputCode Sector

1993-94 1998-99 2003-04 2006-0746 Electricity 9.16 14.23 10.67 14.8347 Water Supply 63.11 60.13 60.41 51.5048 Railway Transport Serv. 31.10 31.23 39.76 29.3149 Other Transport Services 49.90 59.66 56.51 54.1850 Storage and warehousing 0.92 1.50 1.73 1.0651 Communication 34.55 30.87 30.37 24.5152 Trade 55.20 58.07 48.95 48.4253 Hotels and restaurants 83.80 65.02 78.42 81.1454 Banking 21.83 24.98 23.94 18.2255 Insurance 4.61 11.48 25.99 22.9756 Ownership of dwellings 100.00 98.80 100.00 100.0057 Education and research 99.60 99.50 99.24 98.8858 Medical and health 88.21 99.27 97.73 97.6959 Other Services 54.45 60.00 65.23 65.1460 Public Adm. and Defense 100 98.02 100.00 100.00

Source: Computed

Sector-wise Gross Value Added per Unit of Output

Gross value added per unit of output is anapproximation to relative efficiency of a sector in valueaddition. Sector-wise gross value added per unit of output in

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different year, in India is given in table 5.16. In year 2006-07,gross value added per unit of output in secondary sector hasbeen 0.2140. In the same year, gross value added per unit ofoutput has been approximately 3 times of secondary sector,in tertiary sector and 3.5 times in primary sector. Ataggregate economy level, the gross value added per unit ofoutput that was 0.5327 in the beginning of reforms process,improved to 0.5685 in year 1998-99 but thereafter, it hasslide down to 0.4974 and 0.4790, in the years 2003-04 and2006-07, respectively. So, at aggregate level, the gross valueadded per unit of output has gone down significantly in thelast decade. This decrease in gross value added per unit ofoutput is evenly distributed among the three sectors:primary, secondary and tertiary sectors. Another importantpoint, worth noting is that today and historically the primarysector has the highest gross value added per unit of output; itis 0.7190 per unit of output in year 2006-07. Primary sector,except a minor fall in 2003-04, has registered animprovement in the past. Size-wise tertiary sector, is next toprimary in terms of its gross value added per unit of outputand secondary sector is the least, in this regard. Bothsecondary and tertiary sector have depicted a reduction thegrow value added per unit of output in the last decade.

Table 5.16: Sector-wise Gross Value Added per Unit ofOutput in Different year, in India

Gross Value Added per Unit of Output in YearSectors 1993-94 1998-99 2003-04 2006-07Primary 0.7498 0.7792 0.7086 0.7190Secondary 0.2546 0.3395 0.2191 0.2140Tertiary 0.6070 0.6234 0.6183 0.6009 India 0.5327 0.5685 0.4974 0.4790

Source: Calculated from IOTT of various years

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Above analysis of gross value added per unit of outputis in highly aggregate terms. Within each of the three sectors,there might be some sub-sectors, behaving in an altogetherdifferent way, as compared to the aggregation. Gross valueadded per unit of output at sixty sector level disaggregation isgiven in table 5.17. In year 2006-07, top quartile (one fourth)of sixty sectors, in order of gross value contribution per unitof output, lie in either in primary sectors or tertiary sectors.In primary sectors, all sectors except ‘food crops’ and ‘ironore’ fall in these top 15 contributors to gross value added perunit of output.

‘Food crops’, the major sub-sector of agriculture islosing its contribution to gross value of output per unit ofoutput over time. Similarly the ‘iron ore’, is also loosing theground in this regard. In tertiary sector, the ‘publicadministration’ and ‘defense’ appearing at number one isdeceptive; since it is not value addition in economic terms. Intertiary sectors, ‘ownership and dwelling’, has a gross valueadded to the level of 0.95 per unit of output in year 2006-07.In ‘education and research’, it is also to the tune of nearly0.90 per unit of output. It is followed by ‘banking’ (0.79),‘communication’ (0.79), ‘insurance’ (0.70) and ‘other services’(0.70). Among the top contributor to gross value added perunit of output, in tertiary sectors, the top ranking sectors are‘ownership and dwelling’, ‘education and research’, ‘trade’,‘banking’, ‘communication’ and ‘insurance’. In all thesesectors, the service penetration rate has been very low andthere is a huge unfilled demand.

The gross value added per unit of output is medium orvery small in secondary sectors in India. All the sectors lie in

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the national ranking of 15 to 60. In the new policy regime,spanning over two decades, much of new investment,technology, research and development have bypassed thesecondary sector. Manufacturing processes from world overhave concentrated in China; whereas the tertiary sectorrelated processes have concentrated in India. Further theglobal experience has shown that product development lifecycle for services is shorter than goods produced by primaryand secondary sectors. This shorter product development lifecycle and relatively higher level of gross value addition perunit of output, is acting as a catalyst for faster growth oftertiary sector in India. Further, in case of India, most of thebusiness process outsourcing has been in the tertiary sectorsonly. The information technology, the sunrise sector has alsobeen a part of the tertiary sector. Another reason for highvalue addition in services is because of rigor of informationtechnology in its processes; which saved the manpower andother inputs. Due to low value added per unit of output inmanufacturing, it has been bypassed in the transition ofdevelopment from primary to secondary and to tertiary.

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Table 5.17: Disaggregate Sector-wise Gross Value Added perUnit of Output in Different Year, in India

Gross Value Added per Unit of Output1993-94 1998-99 2003-04 2006-07Code Sector

Ratio Rank Ratio Rank Ratio Rank Ratio Rank1 Food Crops 0.6932 16 0.7304 16 0.5372 22 0.5321 222 Cash Crops 0.8265 11 0.8162 14 0.7716 12 0.7792 123 Plantation Crops 0.8718 5 0.8487 11 0.9138 3 0.9153 34 Other Crops 0.8324 10 0.8721 7 0.8995 5 0.8815 65 Animal Husbandry 0.6658 19 0.6985 19 0.6745 18 0.7405 136 Forestry and logging 0.9000 3 0.9000 5 0.9000 4 0.9000 47 Fishing 0.8395 8 0.8550 10 0.8498 8 0.8484 98 Coal and lignite 0.6198 20 0.7187 17 0.7367 14 0.7199 159 Crude Petro.and Nat. gas 0.8499 7 0.8615 8 0.7209 15 0.7369 1410 Iron ore 0.6857 17 0.7128 18 0.7455 13 0.6257 1911 Other Minerals 0.8221 12 0.8381 12 0.8543 7 0.8653 812 Sugar 0.1802 58 0.1771 57 0.1573 57 0.1574 5713 Food Products Exc. Sugar 0.1930 56 0.1405 58 0.1200 60 0.1205 5814 Beverages 0.2825 40 0.3568 33 0.2896 36 0.2914 3715 Tobacco products 0.3864 28 0.3706 30 0.4286 25 0.4312 2516 Cotton Textiles 0.2698 44 0.2751 44 0.2394 45 0.2442 4417 Wool, Silk & Synthetic Fiber 0.2447 50 0.2075 55 0.1645 56 0.1710 5518 Jute, hemp, mesta textiles 0.3026 37 0.3504 34 0.3464 29 0.3488 2919 Textile Prod. incl. Wearing 0.3156 36 0.3029 38 0.2874 37 0.2911 3820 Wood and wood products 0.4664 25 0.4942 24 0.4830 23 0.4859 2321 Furniture and fixture 0.4939 23 0.4608 26 0.4127 26 0.4152 2622 Paper and Paper Products 0.2087 55 0.2252 53 0.2082 49 0.2109 4923 Printing, Pub. & Allied Act. 0.3874 27 0.4098 28 0.3304 30 0.3306 3124 Leather and leather prod. 0.2939 38 0.2687 45 0.3017 35 0.3051 3425 Plastic and Rubber Products 0.2862 39 0.2756 43 0.1934 53 0.1758 5426 Petroleum products 0.1070 59 0.1249 60 0.1669 55 0.1689 5627 Coal tar products 0.0441 60 0.1290 59 0.1287 59 0.1103 5928 Inorganic heavy chemicals 0.3168 35 0.3610 32 0.2244 46 0.2267 4629 Organic heavy chemicals 0.2652 45 0.3332 36 0.2677 42 0.2691 4230 Fertilizers 0.2144 53 0.2955 41 0.1900 54 0.1928 5331 Paints, varnishes &lacquers 0.2507 48 0.2647 46 0.2242 47 0.2264 4732 Pesti., Drugs & Other Chem. 0.2395 51 2.4012 2 0.2794 40 0.2805 4133 Cement 0.2606 46 0.2873 42 0.2784 41 0.2811 4034 Non-Metallic Mineral Prod. 0.3335 32 0.3646 31 0.3295 31 0.3310 3035 Iron & steel Ind. & Found. 0.1903 57 0.2514 48 0.2419 44 0.2384 4536 Other Basic Metals Industry 0.2157 52 0.2406 49 0.2025 51 0.1995 5137 Metal Products 0.2780 41 0.3021 39 0.3042 34 0.3000 3538 Agriculture Machinery 0.2581 47 0.2349 50 0.2063 50 0.2032 5039 Ind. Mach. for Food & Text. 0.2136 54 0.2249 54 0.1997 52 0.1967 5240 Other Machinery 0.2730 42 2.7367 1 0.2522 43 0.2486 4341 Electrical, Electronic Mach. 0.2492 49 0.2628 47 0.1406 58 0.1027 6042 Railway Transport Equip. 0.4272 26 0.2000 56 0.2829 38 0.2832 3943 Other Transport Equipment 0.2729 43 0.2305 51 0.2133 48 0.2147 4844 Misc. Mfg. Industries 0.3499 31 0.2254 52 0.2799 39 0.2952 3645 Construction 0.3805 30 0.4249 27 0.3554 28 0.3528 2846 Electricity 0.3262 33 0.3365 35 0.3246 33 0.3246 3347 Water Supply 0.7061 15 0.6784 21 0.6268 19 0.6268 1848 Railway Transport Services 0.5375 21 0.4676 25 0.4766 24 0.4766 2449 Other Transport Services 0.3859 29 0.3970 29 0.3731 27 0.3540 2750 Storage and warehousing 0.6690 18 0.5919 23 0.5919 21 0.5919 2151 Communication 0.8331 9 0.8570 9 0.7850 11 0.7850 1152 Trade 0.7420 14 0.8182 13 0.8337 9 0.8688 753 Hotels and restaurants 0.3220 34 0.3290 37 0.3290 32 0.3290 3254 Banking 0.8510 6 0.7862 15 0.7862 10 0.7862 1055 Insurance 0.8034 13 0.6977 20 0.6977 16 0.6977 1656 Ownership of dwellings 0.9447 2 0.9311 4 0.9499 2 0.9523 257 Education and research 0.8835 4 0.8726 6 0.8954 6 0.8954 558 Medical and health 0.4671 24 0.2975 40 0.6237 20 0.6237 2059 Other Services 0.5007 22 0.6345 22 0.6827 17 0.6968 1760 Public Adm. &Defense 1.0000 1 1.0000 3 1.0000 1 1.0000 1

Source: Computed

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Sector-wise Consumption Coefficients

Although, the final consumption coefficients are notstable overtime and their comparison over a long run is notvalid but just to have an idea about the relative level anddirection of change therein overtime, two type of finalconsumption coefficients have been worked out. First beingthe sector-wise personal consumption expenditure per unit ofgross value of output and second being the net exports perunit of output. But net exports related coefficients did notadd much to the information, hence have been left out offurther analysis. As expected, PCFE, for agricultural sectorsis high for all the sectors, but in most of the sectors these arereducing overtime; showing thereby that more of the servicesare entering the consumption bill of the people. Being, mostof the secondary sectors catering the needs of intermediateinputs of other sectors, as expected, the PCFE coefficients arenil or are relatively on the poorer side. Relatively higherPCFE per unit of output is associated with tertiary sectorslike, ‘medical and health’, ‘ownership and dwelling’,‘education and research’, and ‘hotels and restaurants’. Theseare improving overtime in most of these sectors. On the wholePCFE coefficients are larger and improving overtime for thetertiary sectors.

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Table 5.18: Sector-wise Personal Final Consumption Expenditure(PFCE) per Unit of Gross Value of Output in India

PFCE per unit of gross value of outputCode Sector 1993-94 1998-99 2003-04 2006-071 Food Crops 0.7642 0.7316 0.5483 0.58022 Cash Crops 0.2860 0.3017 0.1417 0.21513 Plantation Crops 0.5416 0.3546 0.5646 0.57564 Other Crops 0.6302 0.5699 0.5645 0.55105 Animal Husbandry 0.7143 0.7143 0.6894 0.66646 Forestry and logging 0.6461 0.6501 0.7507 0.74177 Fishing 0.7294 0.7205 0.7274 0.65278 Coal and lignite 0.0130 0.0199 0.0173 0.00639 Crude Petroleum and Nat. gas 0.0032 0.0000 0.0038 0.017810 Iron ore 0.0000 0.0000 0.0000 0.000011 Other Minerals 0.0000 0.0000 0.0000 0.000012 Sugar 0.8443 0.8546 0.5963 0.523713 Food Products Excl. Sugar 0.7738 0.8518 0.7578 0.731414 Beverages 0.7658 0.8924 0.8094 0.796615 Tobacco products 0.9231 0.8875 0.9379 0.928816 Cotton Textiles 0.5690 0.5805 0.5162 0.480717 Wool, Silk & Synth. Textiles 0.6323 0.6154 0.5722 0.591118 Jute, hemp, mesta textiles 0.0288 0.0246 0.1120 0.162819 Textile Products 0.3611 0.3567 0.4442 0.368920 Wood and wood products 0.0296 0.0576 0.0433 0.062521 Furniture & fixtures-wooden 0.4640 0.4725 0.4376 0.134522 Paper and Paper Products 0.0995 0.1381 0.1107 0.118923 Printing, Pub. and Allied Act. 0.5577 0.7041 0.3174 0.244424 Leather and leather products 0.3382 0.3270 0.4245 0.439625 Plastic and Rubber Products 0.1320 0.1964 0.1256 0.106826 Petroleum products 0.3621 0.3629 0.1941 0.214227 Coal tar products 0.0000 0.0051 0.0000 0.000028 Inorganic heavy chemicals 0.0000 0.0000 0.0000 0.000029 Organic heavy chemicals 0.0000 0.0000 0.0000 0.000030 Fertilizers 0.0000 0.0000 0.0000 0.000031 Paints, varnishes and lacquers 0.0000 0.0392 0.0523 0.022332 Pesticides, Drugs & Chem. 0.1474 0.1920 0.2030 0.193933 Cement 0.0000 0.0000 0.0000 0.000034 Non-Metallic Mineral Prod. 0.1123 0.0502 0.0659 0.009835 Iron & steel Ind. &Foundries 0.0000 0.0000 0.0000 0.000036 Other Basic Metals Industry 0.0000 0.0000 0.0000 0.000037 Metal Prod. Excl. Machinery 0.2496 0.1870 0.0751 0.061338 Agriculture Machinery 0.0000 0.0008 0.0000 0.000039 Industrial machinery 0.0000 0.0000 0.0000 0.000040 Other Machinery 0.0292 0.0301 0.0305 0.067541 Elect., Electronic Machinery 0.0881 0.0415 0.0977 0.103842 Railway Transport Equip. 0.0000 0.0000 0.0000 0.000043 Other Transport Equipment 0.1925 0.1908 0.1988 0.128944 Misc. Mfg. Industries 0.1085 0.1775 0.1550 0.123445 Construction 0.0000 0.0000 0.0019 0.024046 Electricity 0.0770 0.0821 0.0972 0.112947 Water Supply 0.3024 0.2854 0.1864 0.101548 Railway Transport Services 0.2579 0.2181 0.2030 0.122849 Other Transport Services 0.3631 0.4975 0.4452 0.424550 Storage and warehousing 0.0000 0.0000 0.0000 0.000051 Communication 0.2186 0.3425 0.2376 0.182252 Trade 0.4031 0.3939 0.3792 0.367753 Hotels and restaurants 0.6707 0.7663 0.6913 0.636554 Banking 0.1367 0.2794 0.2092 0.156755 Insurance 0.0836 0.3646 0.2230 0.308556 Ownership of dwellings 0.9936 1.0000 1.0000 1.000057 Education and research 0.5083 0.5345 0.6427 0.625458 Medical and health 0.5865 0.7901 0.8131 0.792059 Other Services 0.5187 0.2628 0.1811 0.120860 Public Adm. and Defense 0.0000 0.0000 0.0000 0.0000

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IIIConclusion

The thesis that emerges from the above analysis is thatthe emerging structure of the Indian economy ischaracterized by greater integration of the sectors and sub-sectors and has lead to a widespread tertiarization in thesystem. From final consumption-oriented system, theeconomy is shifting to rigor of processing, as displayed by therise in intermediate consumption. Inter-sectoral linkages areimproving over time, but the emerging tertiary sector is stillloosely connected with rest of the sectors on the backwardand forward front. Excessive tertiaization of the Indianeconomy is the result of higher value addition per unit ofoutput.