Terms of Trade in a Multi-Sectoral Framework: Analysis for All-India and States

Surajit Deb
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Surajit Deb: Ram Lal Anand College (Evening)

No 112, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: Conventionally, the analytical treatment of domestic terms of trade is accomplished within a dual economy framework, wherein its empirical estimation is worked out by calculating the barter terms of trade between an "agriculture" and "industry" sector. However, since contemporary economies have undergone rapid structural transformation, which has seen the emergence of a third "services' sector, it has become vital to analyse shifts in sectoral terms of trade by exploiting a multi-sectoral framework. In this paper, we employ a multi-sectoral accounting framework to examine the pattern of terms of trade movements in India. The estimates of "terms of trade effect" are generated for the three broad domestic sectors, viz. agriculture and allied, industry and services, and further for a detailed nine-sector classification. We also construct comparable estimates of terms of trade effect for three broad sectors encompassing fifteen major states in India. The time period of analysis is 1951-97 at the all-India level and 1971-96 at the level of individual states. A natural consequence of the two-sector analysis of domestic terms of trade has been that adverse movements in agriculture are believed to emerge due to supportive industrial terms of trade. Our multi-sectoral analysis indicates that terms of trade gains in the Indian economy, if any, have accrued in the agriculture and services sectors, and not in the manufacturing (or aggregate industry) sector.

Keywords: terms of trade measure; national accounts; service sector; regional variation. (search for similar items in EconPapers)
JEL-codes: C82 E31 O17 O18 Q11 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2002-12
New Economics Papers: this item is included in nep-geo
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