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

Author

Listed:
  • Surajit Deb

    (Ram Lal Anand College (Evening))

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.

Suggested Citation

  • Surajit Deb, 2002. "Terms of Trade in a Multi-Sectoral Framework: Analysis for All-India and States," Working papers 112, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:112
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    References listed on IDEAS

    as
    1. Pierre Gutmann, 1981. "The Measurement Of Terms Of Trade Effects," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 27(4), pages 433-453, December.
    2. Fisher, Franklin M. & Shell, Karl, 1972. "The Economic Theory of Price Indices," Elsevier Monographs, Elsevier, edition 1, number 9780122577505 edited by Shell, Karl.
    3. J. B. D. Derksen, 1980. "Measuring International And Inter‐Sectoral Terms Of Trade: Some Methodological Issues," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 26(3), pages 341-349, September.
    4. repec:bla:revinw:v:17:y:1971:i:3:p:285-97 is not listed on IDEAS
    5. Kjeld Bjerke, 1968. "Some Reflections On The Terms Of Trade," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 14(2), pages 183-198, June.
    6. Yoshimasa Kurabayashi, 1971. "The Impact Of Changes In Terms Of Trade On A System Of National Accounts: An Attempted Synthesis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 17(3), pages 285-297, September.
    7. Fisher,Franklin M. & Shell,Karl, 1998. "Economic Analysis of Production Price Indexes," Cambridge Books, Cambridge University Press, number 9780521556231.
    8. Surajit Deb, 2002. "The Debate on Agriculture-Industry Terms of Trade in India," Working papers 109, Centre for Development Economics, Delhi School of Economics.
    9. R. Courbis, 1969. "Comptabilite Nationale A Prix Constants Et A Productivite Constante," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 15(1), pages 33-76, March.
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    More about this item

    Keywords

    terms of trade measure; national accounts; service sector; regional variation.;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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