Estimating sectoral net saving (dissaving) of labour and capital in India under pre and post liberalisation: An input-output approach

The crucial assumption in the orthodox measure of total factor intensity as developed by Leontief is that all intermediate inputs are produced domestically. Naturally, it appears to be unrealistic to some extent. When some of the intermediate inputs are imported, Riedel has suggested a method of calculating total factor intensity which takes into account the factor requirements in producing goods which are exchanged for imported inputs. Using these two alternative methods, this paper obtains estimates of factor intensity for different producing sectors in India. The exercise carried out in this study has shown that the importation of intermediate inputs as prevailed in the years 1989–90, 1993–94, 1998–99, 200304, 2007–08 and 2013–14 results in a net saving of capital and a net dissaving of labour. This suggests that our economy tending to be more and more footloose, globalised and with growing import dependent, production structure fits in with our labour surplus capital scarce factor endowment pattern. More specifically, India being a Less Developed Country with abundance of labour and scarce capital, our finding probably makes a strong case in favour of the present pattern of import liberalization followed in India.