A Portfolio Theoretic Model of Sectoral Growth: Some Evidence for India

Ganti Subrahmanyam and R Venkateswarlu

The Icfai Journal of Applied Economics, 2008, vol. VII, issue 2, pages 19-24

Abstract: The paper investigates using the empirical version of Capital Asset Pricing Model (CAPM) the sectoral growth relation of the major sectors to the national GDP growth of the Indian economy for the period 1980-81 to 2003-04. The results indicate that the Indian agriculture sector receives amplified effects of macro policies and other shocks to the national economy. The industrial sector is found to move one-to-one with the national growth. The financial and electricity sectors’ growth is unrelated to the national growth. The trade and services sectors seem to act as shock absorbers and stabilizers of national output fluctuations. The paper emphasizes the importance of sectorial structure for economic policy purpose. The policies that we formulate, Might yield results incommensurate; When sectors grow disparately, And respond to shocks desperately.

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