In order to study the structural change in any economy, one have to analyse the contribution of various sectors to the national output.
We will study the trends in the distribution of national income by industrial origin at 1980-81 prices.
The analysis of the above table gives us the idea about the structure changes in Indian economy since 1950-51:
(i) Decreasing Share of Agriculture Sector:
The table shows that the share of agriculture sector to national income has been constantly decreasing. In 1950-51, the share of this sector was 55.4% and it decreased to 38.1 percent in 1980-81. In 1999-2000, the share come down to 25.2 percent. The history of economic development of advanced countries indicates that the contribution of agricultural sector to national income goes on decreasing as the country develops.
The contribution of agriculture sector to national income is 2 to 3 percent in advanced countries like U.S.A., U.K., Germany and Canada. The decreasing share of agriculture to national income in India indicates this broad trend. It shows that economy has been on the path of development. The decreasing share of agriculture shows the changes in the structure of production.
The share of agriculture to national income is quite high in relation to advanced countries. Above all 60% of work force is employed in agriculture while in U.K. and U.S.A. only 2% of their work force is employed in agriculture. This shows that the occupational structure in India could not match with the change in structure of production.
(ii) Increasing Share of Industries Sector:
In 1950-51, the share of this sector was 15 percent which increased to 24.4 percent in 1980-81. In 1999-2000, its share rose to 24.7 percent. The increasing share of industrial sector shows that Indian economy is on the way of development. The contribution of industrial sector is very high in developed countries like U.K. and U.S.A.
According to World Development Report 1995, the share of industrial sector to national income in the U.K. and the U.S.A. was 33 percent each and in Japan it was 41 percent. In India though the contribution of industrial sector is increasing, its progress is very slow. Specially the share of manufacturing within the industrial sector has been very slow since 1970-71. This is mainly responsible for the slow rate of economic growth in the country.
(iii) Increasing Share of Service Sector:
The tertiary sector or service sector has been constantly increasing its share in the national income. It includes transport, communication, trade and commerce, banking, insurance, community and personal services. In 1950-51, the share of service sector in national income was 25.8 percent. It increased to 36 percent in 1980-81 and in 1999-2000 it has gone up to 47.8%.
During the said period, transport, communication and trade have increased their share from 11 to 21.9 percent. It shows the development of infrastructure in the economy. In advanced countries, the contribution of service sector to national income is the highest.
According to World Development Report 1995, the contribution of service sector in the U.K. and the U.S.A was 65 percent each and in Japan 57 percent. The increase in share of tertiary sector in national income indicates the development of Indian economy.
(iv) Overall Assessment of Structural Change:
From the above discussion of India’s sector wise contribution to national income, one gets a clear idea regarding the extent of change in the structure of production in the process of development. The share of agriculture has declined and that of industry and service sectors has increased. This is the main structural change but this change is very slow. It has virtually given a fillip to traditional and stagnant economy. Now Indian economy is one of the most promising developing economies of the world.