Technology Coefficients in the Indian Economy: A Comparative Input-Output Analysis between Nominal and Real Coefficients

Abstract

The use of constant price Input-Output (I-O) models is based on a widely accepted ex-ante notion without a strong empirical analysis. The present paper contributes by filling the research gap with regards to a comparison of nominal and real technology coefficients of India for the latest year 2007-08. In addition, the paper recognizes use of separate price indices for sectoral output and domestic supply. The deflation methodology makes use of specific deflators for inter-industry transactions.The results show structural changes for exports and imports in real terms, as compared with the corresponding nominal shares. Comparison of the nominal and real technology coefficients for individual sectors is revealing, particularly for the energy commodities. The paper validates the hypothesis that nominal and real I-O flows show significantly different production technologies with wide variations across sectors of the economy. Lower input coefficients, in real terms, can be resource saving for the downstream industries. At the same time, higher input coefficients indicate stronger backward linkages from the input providing upstream industries. This can have significant implications on energy requirements of the economy.