Temples and Power

the household sector is a lagged function of the national income and the terms of trade between agriculture and industry. Gross capital formation in the corporate sector depends on the national income and the terms of trade of the previous year, with the terms of trade exercising a negative influence on profitability and investment. The savings of the public sector are determined, with a year's lag, positively by the national income and negatively by the foodgrains terms of trade. Gross capital formation in the public sector depends on the sector's saving and the capital inflows from abroad, with a time-trend added to indicate the planning authorities' deliberate decision to increase investment. The output of basic and capital goods is negatively influenced by the import of such goods and of course positively by the gross capital form- ation. Then, finally, the total industrial production is a function of the outputs of consumer and capital goods, but it is not an identity because the output of intermediate goods is taken as determined by the other two components.