Social accounting matrix construction and multiplier analysis

A social accounting matrix (SAM) can be used to estimate key macroeconomic indicators such as gross domestic product (GDP), gross value added (GVA), material input intensity, labour and capital intensity, average savings rate, per capita income of households, etc. They can also serve as a database for more complex models like the multiplier and computable general equilibrium (CGE) models.

A multiplier analysis allows for the estimation of direct and induced indirect impacts of exogenous shocks on economic output. Unlike input-output tables, SAM considers the entire circular flow of income in the economy by accounting for household earnings from various sources and expenditures. So, a multiplier analysis using SAM helps in understanding the impact of changes in economic activity on household income and income inequality. The multiplier model is based on assumptions of fixed coefficients of technology and price neutrality. While the model is useful in understanding the structural set-up of an economy and short-term policy implications, the assumptions restrict long-term policy analysis.

This note details the construction of SAM for base year 2017-18 and explains how it can be used for analysing low-carbon development scenarios in India through a simple multiplier model. The note outlines the development of SAM literature in India over time and discusses how the SAM proposed by CSTEP adds to it. It then describes the process of constructing the proposed CSTEP SAM and introduces low-carbon scenarios for analysis. It also puts forth the limitations of the exercise and the way forward.

CSTEP SAM_2017-18

The detailed SAM model is available under Downloads.