Intermediate Input Technological Progress Translated into Neoclassical Terms—A Study with Reference to the Indian Economy
While the demand-driven Leontief system leads to a reduction in total output when there is increased efficiency of intermediate inputs, in the neoclassical system technological progress must lead to higher output. This paper presents an explanation of technical progress that resolves the apparent paradox using India’s Input–Output table for 2011–12. The idea of technological improvements has been taken from two current programs of development, namely Pradhan Mantri Krishi Sinchai Yojana (PMKSY) and Pradhan Mantri Gram Sadak Yojana (PMGSY) that would lead to increased efficiency of irrigation and water resource usage and increased efficiency of road connectivity across the country in a multi-sector framework. This paper calculates elasticity of final demands with respect to intermediate inputs, as also price effects arising out of changes in Input–Output coefficients. Results indicate that in order to enhance efficiency of intermediate inputs used in the agricultural sectors, it is necessary to adopt similar efficiency augmenting programs in other sectors of the economy as well. This will lead to a balanced increase in productivity of all sectors and affect agriculture more favorably.
KeywordsInput–Output Agriculture Efficiency of intermediate inputs Technological improvement
JEL ClassificationC67 D57 Q16 O5 O33
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