Economic Development and Intersectoral Labour Supply: the Indian Case

In: International social science journal: ISSJ, Volume 26, Issue 2, p. 284-301

Abstract

The possibility of intersectoral transfers of population in the foreseeable future is investigated, for the Indian case. Sectors in this case are divided functionally (agricultural/nonagricultural), & the analysis runs in terms of transfers from the agricultural to the nonagricultural sector. The procedure followed is an estimation of the demand for labor in the nonagricultural sector for the period 1971-1986, followed by setting this estimation against the probable supply of labor from within nonagriculture itself. To estimate the demand for labor the time series of national income believed attainable by 1985-1986 is divided into its agricultural & nonagricultural components. The next step involves estimation of the increase in capital required to produce the desired increase in nonagricultural income; this is done by estimating the value of the marginal capital-output ratio in the nonagricultural sector. Applying the incremental capital-output ratio to the increment in nonagricultural income gives an incremental series of capital in this sector. Applying the incremental capital-labor ratio further to this incremental capital gives the incremental LF required over the period by the nonagricultural sector; this is the demand for labor. The supply of labor, calculated using natural growth of population in the nonagricultural sector, is matched with aggregate demand for labor. Conclusions are then drawn on this gap between the 2 series. There would be 2 phases seen in India from 1974 onward: (1) nonagricultural labor supply still exceeds demand; & (2) sectoral transfer of agricultural workers. 1 Figure, 9 Tables. R. Lent.