AN APPROPRIATE SYSTEM FOR DEFLATION OF SECTORAL INCOME IN A DEVELOPING ECONOMY ILLUSTRATED BY THE INDUSTRIAL SECTOR OF THE INDIAN ECONOMY FROM 1951 to 1965*

P. N. Mathur

Review of Income and Wealth, 1967, vol. 13, issue 1, 1-11

Abstract: The technique of national income accounting is a part of what Hicks has termed “The Fixprice Method”. Deflation is an attempt to approximate a real economy to a fixprice economy. It is shown that if the propositions of macro‐dynamics are to hold, this deflation cannot be done in accordance with the price structure prevailing at any particular historical time, but must use that given by the capital theory of value, viz., when returns to labour are equal to zero. For a labour‐abundant developing economy this will correspond to prices based on opportunity cost principles. As an illustration, sectoral incomes on this basis have been calculated for the industrial sector of the Indian economy for the years 1951 to 1965.

Date: 1967
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