Cement, Energy and Environment July-Sep 2002

· I I SUSTAIN~BLE DEVEL~~MENT . HOUSING- AN El\IPLOYMENT GENERATOR " Impac t of Investm ent in Housi ng secto r on GOP and Employment in Indian Economy" – A Study sponsored by HUDCO and prepared by Baku! H. Dholakia and Ravind ra H. Dho lakia of Indian Institute o f Management, Ahmedabad. We are reproducing relevant portions for the benefit of our members. Thi s study is probably the first such attempt and specifical ly focusses on: I. Inte r-indu stry linkages of housing investment; and 2. Impact of in vestment in housing/construction sector on generation of income and emp loyment in Indian economy. There are wide variations in the re lative strength of backward Iinkages among different sectors. The coeffic ient of backward linkages of construction sector and construction-related manufacturing is fo und to be 0.487 and 0.68 18 ' which can be considered fa irly high. Construction-related manufacturing sector and construction sector rank first and fourth among the 14 sectors in terms of the coefficient of direct backward linkage. The two sectors wh ich are found to have higher va lues of the coeffic ient of backward linkage in relation to that for the constru cti on sec to r are: Other Manufacturi ng and Electricity. Gas & Water Supply. All other sectors of the economy have a coefficient of backward linkage, which is lowe r than that of the construction sector. Thus, the construction sector has very strong backward lin kages >vith other sectors, which c learly indi cates that the growth of construction sector would provide significant stimulus for severalother sectors to grow. Estimates of Direct Bac kward Linkage Coeffi c ient prove the point. ft is evident in the light of such Intei·-Ind ustry interdependence and linkages that a change in the fina l demand for the output of a given sector leads to changes in the output levels of almost all sectors of the economy. Moreover when the sectoral out put levels change due to a given change in final demand, value added by each sector a lso changes. This, in turn, leads to a change in nat ional income , and consequently in persQnal income. It is obvi ous that any change in sectoral expenditure will have far– reaching implications in the form of a chain of repercussions on the out– put and income levels in all sectors of the economy. An attempt is made to examine the overall impact of housing in vestment on income generation, in relation to similar impact of investment in other sectors, in terms of an analysis of income multipliers computed for different sectors ofl ndian economy. The income multipli er effect calculation consists of: (a) Direct income generated per unit of output in each sector (b) Increase in Ciutput of various sectors required for providing additional inputs to the given sector whose final demand has undergone an initial increase. (c) Increase in output levels of different sectors req uired to support the additional output generated in second round. The estimates of income mul tip li e rs Type-1 computed fo r each of the fourteen major sectors of Indian economy on the basis of input-output data relating to the year 1996-97 are presented in the Table below. Income multipliers presented in the Table capture the direct and indirect effects of a change in fi nal demand of the given sector on the sectora l output and income leve ls based on the assumption that the fina l demand of a ll other sectors wou ld remain unchanged. It is evident from the estimates of income multiplier given in the Table that construction sector ranks fourth among 14 broad sectors and Type-( mult ip li er is 1. 95. Construction-related manufacturing sector ranks first and has the highest value of 3 .14 as its income multiplier. s Scc1or Income Sec10r"s No multiplier I Ag1icullure 1.4 169 2 Forcs1 & logging 1.0887 3 Fishing I 141 1 4 Mining. 1.2956 5 Conslruction·rel::ued 3. 1431 m:mttfacturing 6 Other manufacturing 2.7027 7 lonstntction 1.9<191 8 Elecuici1y. gas and 2.0650 waler supply <) Tmnspon 1.8183 10 Tmdc 1.3301 I I Financial services 1.2201 12 Social scn,ices 1.3023 13 Publicadmmistr:uion 1.0000 and dofence 14 Other services 1.3047 Courtesy: Indian Construction, BAI, Alay 02. Pp 5-7. Fax: 022-./950507 Email: bai@vsnl.com Web: ll'll 'lv.buildersindia.com raul.. 6 11 12 10 I 2 4 .I 5 7 I I 9 14 ~ HICII\VAY TO HEAVEN The Economic Times. 1./.07.02 If there is one sector, which is flu sh with fu nd s, has strong backward linkage and is fu elling big-time growth in the economy, it is su rely wo ul d-be roads and highways. The last two years saw plans getti ng firmed up on the