national income measures the flow of goods and services in an economy during a given period

8/3/2019 National Income Measures the Flow of Goods and Services in an Economy During a Given Period

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AN ANALYSIS OF THE

GROWTH OF NATIONALINCOME OF INDIA SINCE

INDEPENDENCE

BY: KAUSTUV MONI KALITA

(ROLL NO: BAM11021)

PARINITA BARUAH

(ROLLNO: BAM11022)

RAMAKANTA SINGHA

(ROLLNO: BAM11023)

DEBOPRATIM BORAH

(ROLL NO: BAM11024)

KAUSHIK HANDIQUE

(ROLLNO: BAM11025)


2/23

INTRODUCTION

National income measures the flow of goods and services in an economyduring a given period, i.e. it measures the productive power of the economy in

the given period. It provides a wide view of the countrys entire economy, as

well as of the various groups in the population who participate as producers

and income receivers.

Some countries are wealthy while some countries are not and some countries

are in-between. Under such circumstances, it would be difficult to evaluate the

performance of an economy. Performance of an economy is directly

proportionate to the amount of goods and services produced in an economy.

Thus, national income available over a substantial period reveals the basic

changes in the countrys economy in the past and can also suggest trends for

the future. Moreover, these estimates depict a clear picture about the

standard of living of the community.

OBJECTIVES OF THE STUDY:

National Income is considered an important indicator of economic

development of a country. There is no doubt that if national income increases

over a long period of time, the economic conditions of the people improve. It

is, therefore, suggested that while estimating the economic growth in a

country, the level of income and the rate of increase in national income should

both be taken into account.

The study of National Income is important because of the following reasons:i) To measure the size of the economy and level of countrys economic

performance.

ii) To trace the trend or speed of the economic growth in relation to previous

year as well as to other countries.

iii) To know the structure and composition of national income in terms of

various sectors.


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iv) To make projection about the future development trend of the economy.

v) To assess and compare the economic progress achieved by a country over a

period of time.

vi) To know progress achieved by a country over a period of time

consideration.

CONCEPTS OF NATIONAL INCOME :

The various concepts of national income are given below;

1) Gross National Product (G.N.P): This is the basic social accountingmeasure of total output or aggregate supply of goods and services. Gross

National Product is defined as the total market value of all final goods and

services produced in a year.

2) Gross Domestic Product (G.D.P): Gross Domestic Product is the mostcomprehensive measure of economic activity and a broad measure of peoples

income and well-being. The growth in real GDP is hence a measure of the

growth of peoples real incomes and therefore the pace of improvement in

living standards.

3) Net National Product (N.N.P): In the production of gross nationalproduct of a year, we consume or use up some capital (equipment,

machinery). It is generally known as depreciation. When charges for

depreciation are deducted from the gross national product, we get net

national product.

NNP = GNP - DEPRECIATION

4) National Income at Factor cost : National Income at factor cost meansthe sum of all incomes earned by resources suppliers for their

contribution of land, labour, capital and entrepreneurial ability which go

into the years net production. In other words, it shows how much it

costs society in terms of economic resources to produce net product.

National Income at Factor Cost = NNP Indirect Taxes + Subsidies


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MEASUREMENT OF NATIONAL INCOME:

Before independence different economists like Dadabhai Naoroji, William

Digby, Findly Shirras, Dr. V.K.R.V. Rao, R.C. Desai and many others tried to

estimate the national income using various methods which suffered fromserious limitations and as such these estimates were highly unreliable.

It was only after independence, in Aug, 1949 that Government of India

appointed a formal committee called the National Income Committee to

compile authoritive estimates of national income. The first report of this

committee appeared in 1951 and the final report appeared in 1954. This report

is a landmark in the history of the country.

There are three possible measures of national income:

1) The Income Method: This method approaches national income from the

distribution side. According to this method, national income is obtained by

summing up of the incomes of all individuals in the country.

2) The Production or Output Method: This method approaches national

Income from the output side. According to this method, the economy is

divided into different sectors such as agriculture, mining, manufacturing, smallenterprises, commerce, transport, communication and other services. Then

the gross product is found out by adding up net values of all the production

that has taken place in these sectors during a given year.

3) The Expenditure Method: We can get national income by summing up

all the consumption expenditure and investment expenditure made by all

individuals as well as the government of a country during a year.

DIFFICULTIES IN CALCULATION OF NATIONAL INCOME:

In India there are various difficulties in calculating the national incomes .The

most severe one is the finding of reliable data. The major problems which

remain in the calculation of National Income are:

Most of the data is not from the current year. Even if current data are available then values are underreported. Unreported illegal income. Non-monetised output and its transactions.


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RESEARCH QUESTIONS

Q. What are the causes for slow growth rate of National Income in India?

The rate of growth of national income in India is very poor. A target of growthrate of national income remains all along unfulfilled.

The following are some of the causes of slow growth of national income in

India:

1. High growth rate of population: The population of India has been everincreasing. Whatever increase in national income has been taking place,

all these are eaten away by the growing population. Thus high rate of

growth of population is retarding the growth process and is responsible

for the slow growth of national income in India.

2. Excessive dependence on agriculture: Indian economy is characterisedby too much dependence on agriculture. Agriculture contributes a major

share of the nation income, i.e. nearly 34% and engages about 66% of

the total working population. Such excessive dependence on agricultureprevents quick rise in the level of national income as well as per capita

income as it is not a well organised sector.

3. Occupational structure: the peculiar occupational structure is alsoresponsible for the slow growth of national income. At present about

66% of the working force is engaged in agriculture and allied activities,

3% in industry and mining and the remaining 31% in the tertiary sector.

Moreover, prevalence of high degree of under-employment among the

agricultural labourers and also among the work force engaged in other

sectors is also responsible o this slow growth of national income.4. Poor industrial development: The industrial sector in India has failed to

maintain a consistent and sustainable growth rate during the planned

development period and more particularly in recent years. Moreover,

the development of basic industry is also lacking in the country. All these

have resulted to a poor growth of national income in the country.

5. Poor development of infrastructural facilities: In India, the infrastructuralfacilities viz., transport, communication, power, irrigation etc. have not

yet been developed satisfactorily as per the requirement. This is


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resulting as a major hurdle in the path of development of agricultural as

well as the agricultural sector.

6. Poor rate of saving and investment: the rate of savings and investmentin India is very poor as compared to that of the developed countries. In

1996-97 the rate of savings was restricted to 26.1% of GDP and that ofinvestment was 27.3% of GDP. such low rate of saving and investment

has resulted in a slow growth of national income.

7. Socio-political conditions: Socio-political conditions prevailing in thecountry is not very much conducive towards rapid development.

Peculiar social institutions like caste system, joint family system,

illiteracy, unstable political scenario, etc. are all responsible for the slow

growth of India.

Q. Is national income a reliable indicator of our economic well-being?

We know that national income of a country is considered as an indicator of the

standard of living of its people. The standard of living is a measure of the

material welfare of the inhabitants of a country. The measure of the standard of

living is real national output per head of population or real GDP per capita. Thisis the value of national output divided by the resident population. Other things

being equal, a sustained increase in real GDP increases a nations standard of

living providing that output rises faster than the total population.

However it should be noted that the real income per capita on its own is both an

inaccurate and insufficient indicator of true living standards both within and

between countries. Critics of economic growth often cite disparities between

the rich and the poor as an example of the misleading nature of figures of high

growth rate of Gross Domestic Product.

In order to assess the standard of living in India, certain factors like poverty and

life expectancy must also be taken into account.

Problems in using national income statistics to measure living standards

GDP data on its own is an insufficient indicator of our economic well-being. If


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one takes a look at the trend in the rise of national income in India, one would

find that it has grown at a lower rate since independence till the 80s. The rate of

growth of the GDP was higher in the 80s and the 90s and it had been growing at

a quicker rate since 2000.The following quote adapted from an article in the

Independent in December 2002 sums up the issue quite well.

Improving living standards is about poor families gaining access to what is

available at the time to make life comfortable, healthy and rewarding. In the

end, economic statistics only measure what they measure, which may not bear

much relation to how well off we are.

Source: Adapted from the Independent

The major problems faced in this regard are as follows:

Problems of accuracy:

A nations official GDP data tends to understate the true growth of real national

income per capita over time. This is due to fact that the income from shadow (or

underground) economy and also the value of unpaid workdone by millions of

volunteers and people caring for their family members is not included in its

computation.

The "shadow economy" usually embraces a range of illegal activities such asdrug production and distribution, prostitution, theft, fraud and concealed legal

activities such as tax evasion on otherwise-legitimate business activities such as

unreported self-employment income. The scale of the shadow economy varies

widely across countries at different stages of development. According to the

IMF, in developing countries it may be as high as 40% of GDP; while in developed

countries it may be anywhere around 15-30%.

The national income also does not include the services of the people or

organisations provided free of cost like the NGOs. Moreover, the values of theservices provided by the home makers to their family members are not taken

into account.

Thus, we see that the data so collected is not an accurate measure of the real

per capita income.

Problems of interpretation:

Many a times the GDP data may give a distorted picture of living standards in acountry. The main reason behind this being the regional variations in income
http://www.economist.com/finance/displayStory.cfm?story_id=5504103http://www.economist.com/finance/displayStory.cfm?story_id=5504103


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and spending of a nation. National GDP data can hide regional variations in

output, employment and income per head of the population. The Indian

economy is characterised by a highly skewed pattern of income distribution. It is

found that the top 20% of the population shares more than 80% of the total

national income; while the bottom 20% only shares about 2% of it. So a smallwealthy class can increase the measured per-capita income far above that of the

majority of the population. Thus this pattern of high income inequality in income

distribution is not reflected in our per capita income and as such it is quite

misleading as an indicator of the standard of living.

Some economists have felt that GNP as a measure of national income has

limitations since they exclude poverty, literacy, public health, gender equity and

other measures of human prosperity. Instead they formulated other measures

of welfare like Human Development Index (HDI) which is a better indicator of a

nations standard of living.Moreover GDP doesnt take into account nonmarket

activities ,leisure, improved product quality, black market, the detrimental

effects upon the environment, and the composition and distribution of output.

However, that despite such flaws, levels of most measures of well-being are

closely correlated to GDP per capital.

One more fact is that although India is showing a healthy GDP growth in the

last decade, still according to 2005 world bank estimate,41.6% of its total

population still lives below the international poverty line($1.25 a day).

Q. How has the economic reforms affected the distribution of national

income?

In 1991, India adopted the policy of economic liberalization in the wake ofbalance of payment crisis. The economic reforms introduced in that period led

to complete overhaul of the Indian economy in course of time. It opened new

avenues for investment and expansion while simultaneously bringing in new

technology and foreign capital. This was bound to have an impact on the

distribution of national income among different categories of people.

Prime Minister Narasimha Rao, along with his finance minister Manmohan

Singh, initiated the economic liberalization of 1991. The reforms did away with

the Licence Raj, reduced tariffs and interest rates and ended many publicmonopolies, allowing automatic approval offoreign direct investment in many
http://en.wikipedia.org/wiki/Narasimha_Raohttp://en.wikipedia.org/wiki/Manmohan_Singhhttp://en.wikipedia.org/wiki/Manmohan_Singhhttp://en.wikipedia.org/wiki/Economic_reforms_in_Indiahttp://en.wikipedia.org/wiki/Licence_Rajhttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Licence_Rajhttp://en.wikipedia.org/wiki/Economic_reforms_in_Indiahttp://en.wikipedia.org/wiki/Manmohan_Singhhttp://en.wikipedia.org/wiki/Manmohan_Singhhttp://en.wikipedia.org/wiki/Narasimha_Rao


9/23

sectors. Since then, the overall thrust of liberalisation has remained the same. By

the turn of the 20th century, India had progressed towards a free-market

economy, with a substantial reduction in state control of the economy and

increased financial liberalisation.This has been accompanied by increases in life

expectancy, literacy rates and food security, although the beneficiaries havelargely been urban residents.

The basic effect that globalization had on India was both positive as well as not

so positive.

Rajat Acharya, in his report, (Trade Liberalization, Poverty, and Income

Inequality, World Bank, 2006) in India interprets the trend in following words:

Poverty and income inequality in India, as measured by the head count ratio

(poverty gap ratio) and the Gini coefficient, respectively, show considerable

luctuations during the reform period 1985.97. The adjusted estimates of Deaton

and Drze (2002) show decline in both rural and urban poverty ratios in the

period

1993-94 to 1999-2000: from 33% to 26.3% for rural India and from 17.8% to 12%

or urban India.1 But statistically speaking, though urban poverty showed a

declining trend during this period, rural poverty showed no trend of decline or

increase.

On the other hand, the all-India Gini coefficient showed an increasing trend

during 1987.97, in a complete reversal of the trend of decline during 1960.73.

The inequality between the top and bottom 10% of the population was

disproportionately higher than that between the top and bottom 20% during

1994.2000. Thus, most of the income was still concentrated in the top 10% of the

population. There was also a general increase in inequality among wage-earners

of different skills (Marjit and Acharyya 2003).

In the subsequent section, Acharya seeks to clarify the role played by liberal

trade policies in increasing income inequalities in that same period.

According to him the strategies adopted to break trade barriers and increase

growth does not automatically translate welfare of the poor in the short run. He

emphasizes that though in the short term, trade liberalization acts more like an

indirect income distribution policy than a poverty alleviating policy, in the long

run the acceleration of growth of output, opportunities for upward incomemobility for the lower income groups increase.


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Below are few of the findings put forward by Acharya in his research paper

During the reform period most Indian states experienced high averagegrowth rates in real unskilled informal wage and real unskilled

agricultural wage. This may explain the fall in poverty rates.

Declining urban poverty and increasing income inequality were associatedwith growth in manufacturing exports and imports.

Among manufacturing exports, during the 1990s, there was aphenomenal growth in exports of skill-intensive high-technology goods.This change in the skill composition of Indian manufacturing export

basket offers a plausible explanation of the rise in income inequality

during the 1990s.

Three unskilled labour-intensive manufacturing goods, clothing, textiles,and leather still account for around 40% of manufacturing exports.

Expectedly, their growth had a favourable impact on urban poverty

through increase in the unskilled money wage.

Growth in aggregate output. Both in per capita net state domesticproduct (PCNSDP) and gross domestic product (GDP) appears to be

another source of lower urban poverty and higher income inequality.

Exports found to be (Granger) causing GDP growth means that the growth

impact of trade may be an important factor underlying the observed

changes in poverty and inequality.

Growth in exports of high-technology goods seems to be one majorsource of such trade growth nexus.Reference:

http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdf

www.google.co.in
http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdfhttp://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdfhttp://www.google.co.in/http://www.google.co.in/http://www.google.co.in/http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdf


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ARGUMENTS FOR THE QUESTIONS PUT FOWARD

Is national income a reliable indicator of our economic wellbeing?We have raised this question because although national income or GDP is

considered as a measure of economy around the world it doesnt reflect many

factors that an economy consists of. To ascertain the actual economic growth

and development of any country certain indicator are require which are

reliable and accurate. Without a reliable indicator the economic wellbeing of a

country cannot be correctly measured so we need to ascertain if national

income is a reliable indicator.

What are the reasons behind the slow rate of growth in national incomein India?

The reason behind inclusion of this question is that we need information on

how much spending, income and output is being created in an economy over a

period of time. National income data gives us this information. Without

knowing the causes behind the slow growth rate of national income of Indiawe cannot conclusively ascertain the real scenario behind the growth of

national income in India and hence cannot present anyconclusion toward the

remedies.

How has the economic reforms effected the distribution of nationalincome?

The analysis regarding this question shows that economic reforms are one of

the key factors of the countrys growth of national income. Without

understanding the effects of the economic reform on the distribution of

national income the basic concepts of the topic cannot be understood and it is

very important to know the details of effects of the economic reforms.


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ANALYSIS

TRENDS IN NATIONAL INCOME

As noted already, national income is a rough indicator to measure the

economic growth performance of a country. The outcome of Indias

development effort can be seen, to some extent, in terms of the size, growth

and the composition of our national income.

The following data shows growth of national income in India (in percent). The

data given below provides the trend of the GDP growth from the year 1950 to

2005.

PERIOD GDP TOTAL GDP PER CAPITA

1950-1980 3.5 1.4

1980-2005 5.6 3.6

source: computed from central statistical organization

The size of the national income at constant prices has increased by about 15

percent during this period. The growth rate of national income has increased

from 3.5 percent during 1950-80 to 5.6 percent during 1980- 2005.

SECTORAL CONTRIBUTION OF NATIONAL INCOME

Sectoral contribution of national depicts a clear picture about the composition

or distribution of national income by industrial origin. In India, among the

different sectors, the primary sector and more particularly agriculture still

plays a dominant role in contributing the major portion of the national income

of the country.

Trends of the contribution of various sectors to the GDP is briefly shown

below:

Primary sector: the contribution of primary sector which is composed of

agriculture, forestry, fishery and mining has gradually declined from 56.4% of

GDP in 1950-51 to 45.8% in 1970-71 and then finally to 20.5% in 2006-07. The


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agricultural sector contributed about 48.6% of GDP in 1950-51 and then its

share declined to 39.7% in 1970-71 and then to 29.5% in 1990-91 and then

finally to around 24.0% in 1996-97.

Secondary sector: The secondary sector which is composed of manufacturingindustries, construction, electricity, gas and water supply has increased its

share of GDP from 15% in 1950-51 to 22.3% in 1970-71 and then to 24.7% in

2006-07. The share of manufacturing industries to GDP has also increased from

11.4% in 1950-51 to 22.5% in 1996-97.

Tertiary sector: The share of tertiary sector which is constituted by trade,

transport, storage, communications, banking, insurance, real estate ,etc. has

gradually increased from 28.5% in1950-51 to 31.8% in 1970-71 and then finally

to 54.8% in 2006-07. The share of transport, communication and trade has alsoincreased from 11% in 1950-51 to 26.8% in 2006-07.


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Table : Sectoral distribution of GDP

Sector 1950-51 1970-71

1990-91

1996-97 2006-07

A. Primary sector 56.4 45.8 33.4 27.8 20.51. Agriculture 48.6 39.7 29.5 24.0

2. Forestry 6.0 4.0 1.42.13. Fishing 0.7 0.8 0.8

4. Mining 1.1 1.3 1.7 1.7B. Secondary sector 15.0 22.3 27.0 29.3 24.7

5. Manufacturing 11.4 16.1 20.6 22.56. Construction 3.3 5.0 4.1 4.3

7. Electricity, gas&water supply 0.3 1.2 2.3 2.5C. Tertiary sector 28.5 31.8 39.6 42.7 54.8

8. Trade, transportetc.

11.0 14.2 18.1 20.2

9. Finance and realestate

9.0 8.0 10.3 12.2

10.Community andpersonal services

8.5 9.2 11.2 10.4

Gross Domestic Product 100.0 100.0 100.0 100.0 100.0

Source: National Accounts Statistics


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Inequalities of Income Distribution in India:

The distribution of national income in India totally remained inequal althoughits volume has grown sizeably, more particularly during the last two decades.

Rather with this growth of national income over the last two decades,

inequality in the distribution of income has been accentuated.

Table : Pattern of distribution of Income

Fractile

Group

Estimates of the RBI

1953-54 to 1956-57

Estimates of Iyengar

& Mukherjee 1952-

53 to 1956-57

Estimates of

NCAER 1960

Rural Urban Rural Urban Rural Urban

Top 5% 17.0 26.0 14.0 17.5 - 31.0

Top 10% 25.0 37.0 34.0 25.0 33.6 42.4

Top 50% 69.0 75.0 - - 79.3 83.0

Bottom

20%

9.0 7.0 7.5 8.5 4.0 4.0

(Source: Report of Mahalnobis committee on distribution of income)

From the above table, the estimates of RBI shows that the top 5% of the rural

population enjoyed 17% of the income while the bottom 20% of the rural

population enjoyed only 9% of the aggregate income. The top 50% of the rural

population has 69% of the income while bottom 50% has only 31% of it. Again

in the urban areas, the top 5% of the urban population enjoyed 26% of the

total income while the bottom 20% received only 7% of it. Moreover, the top

50% of the urban population enjoyed only 25% of the income leading to a

situation where few rich become richer and a few poor become poorer.


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FINDINGS

Social democratic policies governed India's economy from 1947 to 1991. The

economy was characterised by extensive regulation, protectionism, public

ownership , pervasive corruption and slow growth. The policy reforms at the

start of the 1990s has been a major factor in the acceleration of economic

growth rate of India. The announcement of sweeping liberalization by the

minority government of P.V. Narasimha Rao in July 1991 opened the economy.

With dismantled import controls, lowered customs duties, devalued currency,

abolishment of licensing controls on private investment, dropped tax rates,

India became an attractive venture for the foreign countries to invest leading

to the rapid growth of Indian economy.

Since 1991, continuing economic liberalisation has moved the country towards

a market-based economy. A revival of economic reforms and better economic

policy in first decade of the 21st century accelerated the economic growth

rate. In recent years, Indian cities have continued to liberalise business

regulations. By 2008, India had established itself as the world's second-fastest

growing major economy.

Yet the aggregate growth data tells us that the acceleration of economic

growth began earlier, in the early or mid-1980s, long before the exchange crisis

of 1991.Thus apparently the policy changes in the early and mid-1980s under

the last governments of the Nehru dynasty were sufficient to start the

acceleration of growth, small as those policy reforms appear in retrospect.

However, in the absence of the second wave of reforms in the 1990s it is

unlikely that the rapid growth of the second half of the 1980s could be

sustained. But hard evidence to support such a strong counterfactual judgment

is lacking.

During the first decade of planning (1950-51 to 1960-61) the national income

and the per capita income increased at the average annual rate of 3.8% and

1.8% respectively .After that the performance of the economy started to show

a decline. During the second decade of planning (1960-61 to 1970-71) the

annual rate of growth of national income declined to 3.4% and that of per
http://en.wikipedia.org/wiki/Social_democratichttp://en.wikipedia.org/wiki/Protectionismhttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_ratehttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_ratehttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_ratehttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_ratehttp://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/Economic_liberalisation_in_Indiahttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Public_ownershiphttp://en.wikipedia.org/wiki/Protectionismhttp://en.wikipedia.org/wiki/Social_democratic


17/23

capita income to 1.2%.

But during the 1980s, the economy registered a spectacular improvement in

achieving its growth rate. During the period 1980-81 to 1990-91 the national

income registered a growth rate of 5.3% and the per capita income showed a

growth rate of 3.1% per annum.

The average Indian's income in 2007-08 has nearly doubled since the turn of

the millennium. The estimates of per capita income for 2007-08, put out by the

Central Statistical Organisation (CSO), peg per capita income for that year at Rs

33,283 in current prices. In 2000-01, the per capita income was only Rs 16,688

or roughly half of the 2007-08 figure.

A sharp rise in average income levels has happened in the five years starting

2003-04. The 2007-08 figures were 76% higher than those of 2002-03 in

nominal terms and 42% higher in inflation-adjusted terms. That's because the

economy grew at 12% plus rates in nominal terms for each of these five years

or 7.5% plus rates in real terms.

The Indian economy is the 12th largest in USD exchange rate terms. India is the

second fastest growing economy in the world. Indias GDP has touchedUS$1.25 trillion. The crossing of Indian GDP over a trillion dollar mark in 2007

puts India in the elite group of 12 countries with trillion dollar economy. The

tremendous growth rate has coincided with better macroeconomic stability.

India has made remarkable progress in information technology, high end

services and knowledge process services.

However, cause for concern would be this rapid growth has not been an

inclusive in nature, in the sense it has not been accompanied by a just and

equitable distribution of wealth among all sections of the population. This

economic growth has been location specific and sector specific. For e.g. it has

not percolated to sectors were labour is intensive (agriculture) and in states

where poverty is acute (Bihar, Orissa, Madhya Pradesh and Uttar Pradesh).

Though India has the second highest growth rate in the world, its rank in terms

of human development index (which is broadly used has a measure of life

expectancy, adult literacy and standard of living) has gone down to 128 among

177 countries in 2007 compared to 126 in 2006.


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TABLE INDEX:

TABLE 1 : MACRO-ECONOMIC AGGREGATES (At Current Prices) (Concld.)

(Amount in ` crore)

Year NDP ofPublic

Sector

GrossDomestic

CapitalFormation

NetDomestic

CapitalFormation

GrossDomestic

Saving

NetDomestic

Saving

PerCapita

GNP atFactor

Cost

(Rupees)

PerCapita

NNP atFactor

Cost

(Rupees)

1 16 17 18 19 20 21 22(Base Year : 1999-2000 )

1952-

53

. 811 177 845 211 271 254

1953-

54

. 862 215 875 228 290 273

1954-

55

. 1004 327 988 311 267 250

1955-

56

. 1395 914 1356 875 267 255

1956-57 . 1921 1375 1561 1015 313 299

1957-

58

. 1829 1208 1356 735 313 298

1958-

59

. 1755 1070 1379 694 343 326

1959-

60

. 1951 1186 1720 955 353 335

1960-

61

1352 2433 1586 1952 1105 379 359

1961-

62

1520 2419 1474 2074 1129 390 369

1962-

63

1758 2880 1834 2440 1394 408 385

1963-

64

2038 3143 2094 2703 1654 456 434

1964-

65

2271 3677 2472 3077 1872 522 496

1965-

66

2586 4432 3028 3833 2429 534 505

1966-

67

2882 5251 3599 4328 2676 594 561

1967- 3268 5130 3234 4293 2397 683 646


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68

1968-

69

3859 5073 3138 4657 2722 704 667

1969-

70

4397 6285 4067 6044 3826 759 717

1970-71

4909 6965 4403 6571 4009 789 742

1971-

72

5458 7759 4840 7281 4362 820 768

1972-

73

5979 8085 4737 7788 4440 882 823

1973-

74

6995 11304 7245 10912 6853 1057 987

1974-

75

9027 12951 7675 12298 7022 1219 1130

1975-76 10735 14079 7999 14196 8116 1265 1165

1976-

77

12661 16011 9457 17320 10766 1332 1227

1977-

78

13930 18530 11299 19995 12764 1488 1374

1978-

79

15408 23729 15529 23601 15401 1566 1439

1979-

80

17491 24793 14780 24213 14200 1672 1521

1980-

81

20472 28975 17239 26881 15145 1957 1784

1981-

82

25436 33507 19422 30896 16811 2243 2039

1982-

83

31315 36353 20048 33787 17482 2439 2209

1983-

84

36976 40608 22075 38091 19558 2791 2535

1984-

85

42119 48745 27348 45453 24056 3062 2772

1985-

86

49013 59623 34328 53389 28094 3351 3016

1986-

87

58154 64391 35456 58036 29101 3656 3281

1987-

88

67571 79089 46110 72264 39285 4048 3629

1988-

89

80550 99470 60836 87166 48532 4712 4232

1989-

90

93380 118371 72804 106092 60525 5309 4755

1990-

91

105835 148206 97128 130010 78932 6049 5440

1991-92

125983 144466 82495 141089 79118 6823 6100


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1992-

93

143386 173498 101369 159682 87553 7682 6855

1993-

94

164453 194724 113842 189933 109050 8745 7838

1994-

95

191718 259355 165533 247462 153640 10024 8993

1995-

96

226628 311782 200656 291002 179876 11528 10331

1996-

97

245414 330806 202415 313068 184677 13188 11831

1997-

98

292533 385808 242059 363506 219757 14406 12915

1998-

99

337584 408109 245907 389747 227545 16288 14638

1999-

00

383305 506244 324823 484256 302835 17693 15881

2000-

01

403526 511788 309970 499033 297215 18668 16688

2001-

02

439414 520656 292359 534885 306588 19977 17782

2002-

03

486584 618035 367528 646521 396014 17693 18885

2003-

04

517139 759325 479277 820685 540637 23484 20871

2004-

05

560533 1011212 682171 997873 668832 26220 23198

(Base Year : 2004-05 )2004-

05

571514 1064041 744150 1050703 730812 27081 24143

2005-

06

609665 1279891 916178 1235288 871575 30411 27123

2006-

07

687429 1531568 1112957 1486044 1067433 34929 31198

2007-

08

768687 1901928 1417370 1837498 1352940 40078 35820

2008-

09

911021 1927107 1363817 1798347 1235057 45487 40605

2009-

10

1107264 2389213 1733540 2207423 1551750 52096 46492

2010-

11

. . . . . 61054 54835

Note: 1. Data for 2008-09 are Provisional, 2009-10 are based on Quick Estimates and data for

2010-11are based on Revised Estimates.

2. Population data relates to mid-financial year.

3. Regarding Personal Disposable Income, separate data on fees, fines, etc., paid by producers

are not available and to that extent, personal disposable income is underestimated.

Also see Notes on Tables.

Source: Central Statistics Office (CSO).


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Table 2 : Trends in the Growth Rates of Real GDP

Period Agriculture Industry Services Non-Agri. GDP1950-51 to 1960-61 3.03% 6.18% 4.14% 4.85% 3.85%

1960-61 to 1970-71 2.31% 5.44% 4.62% 4.93% 3.63%

1970-71 to 1980-81 1.50% 4.02% 4.34% 4.22% 3.04%

1950-51 to 1980-81 2.28% 5.21% 4.36% 4.66% 3.50%

1980-81 to 1990-91 3.48% 7.22% 6.50% 6.79% 5.58%

1990-91 to 2000-01 2.79% 6.03% 7.70% 7.06% 5.83%

1980-81 to 2000-01 3.13% 6.62% 7.10% 6.92% 5.71%


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CONCLUSION:

To conclude, if India wants to sustain and raise even higher its current growth,the main bottlenecks in the Indian economy will need to be addressed.

In addition, the current erratic and low growth pattern of the agricultural

sector, and the rising inequalitybetween, states, between rural and urban

areas, and within urban and within rural areas .Of these numerous factors, we

have addressed only a few. Each of these factors deserves inquiry and

research.

Greater income inequality which results in higher povertyis a serious

problem for India. This could lead to political tensions and could destabilize the

otherwise optimistic growth scenario.Indias trajectory over the last 15 years has been remarkable, but there

will truly be reason to celebrate this when the overall gains filter down to the

poorest and the most deprived sections of Indias vast population.


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Bibliography:

Oxford Review of Economic Policy, Volume 23, Number 2, 2007, pp.143167

World Development Indicators database, World Bank, 1 July 2011

Srinivasan, T. N. (2000), Eight Lectures on Indias Economic Reforms, New Delhi, Oxford University Press.

(2005),

http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdf

www.google.co.in

Central Statistics Office (CSO).

Indian economy by P.K. DHAR; ISBN 978-81-272-4695-2; 16th

edition.
http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdfhttp://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdfhttp://www.google.co.in/http://www.google.co.in/http://www.google.co.in/http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm10.pdf