DEFICIT SPENDING 35 Leontief-Keynesian propagation processes so as to examine the excess demand implications of the direct plus induced demand on different sectors. In order to do this, we need to ascertain the structure of excess capacities in different sectors. The data and the methodology used for, making these estimates are discussed below. It should be noted at the outset that we have used tor estimates of the sectoral composition of the Union Government expenditure on commodity purchases and salary disbursal for the financial year 1 971-721. The composition of government demand as shown in terms of the distribution of the government expenditure of Rs. 100 each on commodity purchases and salary disbursals over 20 sectors is shown in Table 1. Then we have estimated the total sectoral—direct and indirect— requirements of the commodity purchases and salary disbursals separately using a semi-closed input-output model with a condensed 20 sector version of the Fifth Plan domestic matrin as its core.2 Our model while endogenising consumption incoporates the rural-urban differences in income propagation across sectors and relates them to consumption behaviour observed in respective areas. As a result of this, the derived consumption becomes sensti-tive to areawise income distribution3 The total sectoral—direct plus induced-demand generated by a government expenditure of Rs. 100 on commodities or salary disbursals Or on both in each of the 20 sectors has been estimated and the results are given in Table 2. Table 2 shows that the level and the patterns of direct and induced sectoral demand requirement is very much different for the commodity and salary components of the government expenditure. Although both the components of the combined expenditure generate the maximum amount of total demand in the agriculture sector, salary disbursals generate almost twice as much as the amount of demand generated by commodity purchases. A given expenditure on these two components generates more or less the same amount of demand in Textiles, Wood products, Paper products, Chemicals, Electricity and other transport. Thus the demand pressure on these sectors will be the same for any compositional changes between commodity purchases and salary disbursals. Commodity purchases generate substantially more demand in Rubber and Petroleum products, Non-Metalic minerals. Metal products, Non-electrical and Electrical machinery, Transport equipment and Railway transport sectors, which in turn means that any expenditure on programmes involving relatively less salary payments puts pressure on the above sectors as compared to programmes involving substantial amount of salary payments such as sbcial services. The direct plus induced demand pattern of the combined expenditure reflect t;he weighted average of commodity purchases and salary disbursals observed in 1971-72. Having estimated the structure of the total sectoral requirement, we have to get the structure of excess capacities for the same year. For the manufacturing sectors, we have used the information on excess capacities estimated in one recent study4 for the year 1971-72. There estimates have