Price Indices for Flows in Input-output Transaction Table in India: A Double-Deflation Approach

In India, the constant price input-output (I-O) flows receive comparatively less attention. Large data requirements and availability constraints compel users of constant price flows and real technology coefficients to work with only one price deflator, namely output deflator. The deflation technique is based on the heroic unique price assumption which assumes that output deliveries are uniformly priced across the using sectors and other agents of the economy. In practice, a given sector sells different basket of commodities to various sectors. Thus, the supply price may be different for sectors. A preferred approach is to use double-deflation procedure which exploits separate price deflators for output, supply, exports and imports. The present paper illustrates that results of the two deflation techniques yield different technology coefficients through a sensitivity analysis. Recognising the growing need, expanding interest in real coefficients, price indices (PIs) are computed at the most disaggregated level of sectors as given in India input-output transaction tables (IOTT) for each of the 3 years, namely 1998–1999, 2003–2004 and 2007–2008 at the prices of the base year 1993–1994. This gives the researcher added freedom and flexibility to replicate similar exercise at a desired level of sector to suit the specific research question. Availability of PIs at the most disaggregated level is expected to encourage the use of real technology coefficients in research based on the India IOTT.