present study is estimated over a twenty-year period from 196O--{)1 to
1979-80. Another feature worth noting is that the model uses data on value added at constant prices for the use-based sectors of industry rather than the indust rial production indices . The latter are known to suffer from serious limitations.? Section 1 presents an overview of the trends in the growth of agriculture and industry covering the period form 196O--{)1 to date. Section 2 sets out the principal linkages between the two sectors . Section 3 presents the model - its specifications as weIl as the OLS estimates derived from using time series data for the period from 196O--{)1 to 1979-80. Section 4 analyses three simulations of the model with a view to tracing the effect of specified changes in the agricultural sector on the endogenous variables of the model. More specificaIly, the model is used alternatively to trace the effect of ' no drought' in 1974-75 and an increase in the trend growth rate of the output of foodgrains and non-foodgrains. The impact of an increase in the terms of trade is also analysed.
1. OVERVIEW OF TRENDS
An analysis of the trends in the growth of agriculture and industry in
the Indian economy since the mid-1950s clearly reveals a continuing dominant role played by agriculture in the economy. The share of agriculture in the Net Domestic Product at 197~71 prices was as high as 58 per cent in 1956-57 and it declined to 49 per cent in 1970-71 and 39 per cent in 198~1 (Table 10.1). However, even in 1980-81 agriculture was by far the largest contributor to the Net Domestic Product. A bird's eye-view of the relative rates of growth in the major sectors of the economy from 1956-57 to 1983-84 is provided in Table 10.2. Whether we take the period from the beginning of the Second Five Year Plan to 1983-84 or the twenty-year period ending in 198~1, the growth of value added in agriculture was around 2 per cent per annum and that in industry was between 4.5 and 5 per cent per annum. The long-term growth of industry exceeded that of agriculture by 2.7-2.8 per cent per annum . The long term rate of growth of the Net Domestic Product at 1970-71 prices was of the order of 3.5 per cent per annum. As Table 10.2 shows, the first three years of the 1980s recorded a higher growth rate than the long-term average both for agriculture and for industry and this was reftected in