Trends of National Income

in India

Methods of National Income Accounting in India

United Nations for the sake of uniformity and comparison suggest methodology to nations. India follows the methodology suggested by UNO and divides the economy in 14 broad categories which are further organized in three groups A, B and C.

Methods of National Income Accounting in India

In Group A has 6 activities viz : 1. Agriculture2. forestry, 3.mining 4. finishing 5. quarrying and registered manufacturing and 6. construction. Production method is used for these activities The value addition is calculated by deducting value of raw material and inputs from the aggregate production commodity wise

Methods of National Income Accounting in India

In group B has Electricity , railways ,Air Transport ,water ,organized transportation ,Communication, banking , and insurance , real estate, public administration and defense. Income method is adopted for these activities. All types of factor income reported in the accounts of these organization are aggregated

Methods of National Income Accounting in India

In group C, gas and water supply , unorganized road and water transport, storage , trade , hotel and restaurants , ownership of dwelling and other services are included. For this group sample survey is done to find out average productivity of the workers. Estimates of the work force are interpolated and extrapolated and periodical computation of average productivity are carried forward and backward . The year to year productivity so

Trends of National Income

( Percent Per annum): The Hindu Growth rate
Period First Plan (1951-56) Second Plan (1956-61) Third Plan (1961-66) Forth Plan (1966-75) Fifth Plan (1974-79) Target 2.1 4.5 5.6 5.7 4.4 Actual 3.5 4.2 2.8 3.2 4.7

The Target of the growth rate in 1&t three plans was set with respect to national income. In 4th plan it was Net Domestic product & there after it has been GDP(at factor cost) Actual growth rates are in terms of National Income(NNP at factor cost at 1000-200price)

Trends of National Income

( Percent Per annum) The Hindu Growth rate
Period Sixth Plan Seventh Plan Eighth Plan Ninth Plan Tenth Plan 1951-1980 1981-1990 Target 5.2 5.0 5.6 6.5 8.0 Actual 5.5 5.6 6.5 5.5 7.8 3.6 5.6

1992-2007

6.1

The target growth is at GDP(at factor cost). Actual Growth rates are estimated in terms of National Income(NNP at factor cost at 1999-200 price)

National Product by Industry Origin

Industry group Primary of which Agricultural 21.3 19.5

Mining & Quarrying

Secondary of which Manufacturing Registered Manufacturing unregistered

1.8
22.2 8.6 4.5

Tertiary of which Transport & Communication & Trade of which

Railway Trade & Hostel Finance & real estate of which Financing & Insurance Community & Personal Services of which Public administrative & defense

56.4
28.0 1.1 16.9 14.4 7.3 14.0 5.5

The share of Primary sector was 75 percent in the first decade of twentieth century came down to 21.6 percent in 2006-07
Sub Sector 1970-71 Price At 1980-92 At 1999-2000 Price

1960-61 Agricultural & Allied 54.4

1970-71 1981-82 47.4 36.5

1991-92 2006-07 29.4 19.5

Mining & Quarrying Primary Sector

0.9

0.9

1.4

1.5

1.8

56.6

50.1

41.1

33.2

21.3

Rate of Growth of Agriculture 1951-52 to 2006-07

Period
Pre Green Revaluation 1951-52 to 1967-68 Green revaluation 1968-69 to 1980-81

Total economy
3.7

Agri. & Allied

2.5

Crops & Live stock

2.7

Nonagricultura l
4.9

3.5

2.4

2.7

4.4

Wider tech. Dissemination period1981-82 to 1990-91

Early Reform period 1991-92 to 1996-97

5.4

3.5

3.7

6.4

5.7

3.7

3.7

6.6

1997-98 to

6.6

2.5

2.5

7.9

Declining share of Agriculture Progress of stagnation

This decline is more because of rate of growth has been less than other sector. The rate of agriculture growth has been less than the overall growth of the economy Agriculture still is the single largest contributor is GDP

Deceleration in Agriculture Growth Rate

1. The rate of Growth of Agriculture (1951-52 to 2006-07) about 2.7 percent is much less than other sector, but on an average higher than the growth rate of population 2.1 percent

2. The rate of growth of food grain production in 1990-2007 deceleration to 1.2 percent, lower than the growth rate of population 1.9 percent per annum

14 Structural Change in Manufacturing 1. The share of registered manufacturing 12 12

10
8 6.3

9.3

8.6
7.7

over the period of time has grown and that 6 of unregistered has 4 declined . 2. Although the growth 2 rate of 0 industrial production has been less than stipulated in plan , but the industrial growth rate of impressive vis-vis agriculture

5.1

4.5

1951-52 1971-72 1981-82 1991-92 to 1970- to 1981- to 1991- to 200671 82 92 07

Regestred Manufacturing Unregistred Manufacturing

Annual Compounds Growth rate of Index of Industrial Production (1951 to 1979)

Use Base Classification Basic Goods Capital Goods Intermediate Goods Consumer Goods (a) Durables (b) Non durable General Index of Industrial Production 5.7 7.2 9.0 Building Industrial Base 1951-55 4.7 9.8 7.8 4.8 1955-60 12.1 13.1 6.3 4.4 Industrial deceleration 1960-65 1965-1976 10.4 6.6 19.6 6.9 4.9 2.6 3.0 3.4 6.2 2.8 4.1 1974-79 8.4 5.7 4.3 5.5 6.8 5.4 6.1

Annual Compounds Growth rate of Index of Industrial Production (1980 to1992) Period of Industrial Recovery
Use Base Classification 1981-85 1985-90 1990-91 1980-81 to 1991-92 7.4 9.4 4.9

8.7 Basic Goods Capital Goods Intermediate Goods 6.2 6.0

7.4 14.8 6.4

3.8 17.4 6.1

Consumer Goods
(a) Durables (b) Non durable General Index of Industrial Production

5.1
14.3 3.8 6.4

73.
11.6 6.4 8.5

10.4
14.8 9.4 8.3

6.0
10.8 5.3 7.8

Annual Compounds Growth rate of Index of Industrial Production (1992-2006)

Use Base Classifica tion Pre reform (1980-81 to 199192)* 7.4 1992-93 to 1997-98 to 2002-03 to 2005-06 1996-97 2001-02 2006-07 2006-07

Basic Goods Capital Goods Intermedia te Goods Consumer Goods (a) Durabl e (b) Non

6.8

4.1

6.6

6.7

10.3

9.4

8.9

4.7

14.4

15.7

18.2

4.9

8.5

5.8

6.2

2.5

12.0

6.0

6.6

5.5

9.6

12.0

10.1

10.8

13.4

10.7

8.8

15.3

9.2

5.3

4.8

3.8

10.0

11.0

10.4

Other trends in Secondary sector

The growth of water gas and electricity services has been quite less. The share of construction has risen from 4 percent in 1950-51 to 6.2 percent and thereafter it increased to about 7.4 percent in the year 2005-6

Change in Tertiary sector 1. The tertiary sector has registered significant growth, as its share in GDP has gone up from one fourth to close to sixty percent 2. All the groups and sub groups of this sector have grown substantially 3. Among transport trade and communication the share of trade , hotel and restaurant has grown from 13 percent in 1960-61 to 16.9 percent in 2006-07. The share of communicationIT enable services in to the GDP has gone up to 7 percent (2007-08)

Changes in Tertiary Sector

The share of financial and insurance sector has gone up from 1.3 percent of GDP in 1960-61 to 7.3 percent in 2006-07 The share of real estate has also gone up from 3 percent of GDP in 1970-71 to 7.1 percent in 2006-07 The share of services has gone up from 9 percent in GDP in 1960-61 to 14 percent in 200607 and in the share of government services has gone up from 3.2 percent of GDP to 5.5 percent in the said period .

Growth of Service Sector ( in percent )

Some Implication
Though these trends are in line with global trends, two features are distinctive to India's services sector. First ; The share of agriculture in GDP has declined by about 25 percentage points, while industry and services gained equally. The share of industry has stabilized since 1990 and consequently, the entire subsequent decline in the share of agriculture in GDP has been picked up by the services sector. This trend (rising share of services in GDP and corresponding)decline in the share of agriculture and manufacturing sector) is seen in the growth process of high-income countries and not in general in developing countries.

Some Implication
Secondly, Employment in services has not been in proportion to their rising share in GDP and trade in India, unlike in the rest of the world. In 1999-2000, services contributed around 24% of employment in India, in contrast to 30% in middle-income countries, 70% in Singapore, and around 35% in Thailand. These features of Indias services-led growth cast doubts on its sustainability in the long run

Some Implication
sectors that have large potential for generating employment, e.g. construction ,transport and professional services, have grown slowly. Faster growing sectors, e.g. services and Communications and financial business services, have a low potential for employment generation. In addition, employment elasticity has declined in the fast growing services like financial and community services.

Some Implication
software services have the highest productivity levels, followed by tale-communication, banking, and construction. These are also services that are growing faster and have high shares in GDP and employment. Higher labor productivity in these segments may have slowed down growth in employment in services.

Some Implication
Services that have very high forward and backward linkage- transportation has slow growth rate. As it is the most crucial component of Infrastructure its slow growth hampers the growth of all sectors Rashmi Banga :Critical issues in Indias Service Led growth, Asian Development Bank,INRM Policy Brief No. 2 .

Informal sector accounts for 58 percent of NDP

18.7% agricultural & allied activities

14.5% trade, hotel & restaurant

6.5% finance, insurance & real estate & business services

4.4% from construction

5.1% transport & storage

4.5% from manufacturing

4.4% community, social & personal services