Sectoral Change in India’s National Income

Let us make an in-depth study of the sectoral change in India’s national income.

Colin Clark had pointed out in the 1930s that as the pace of economic development quick­ens, the importance of primary sector in terms of contribution to national income diminishes.

This sort of change in the sectoral distribution of na­tional income has occurred in India during the plan period, thereby indicating economic devel­opment.

In 1950-51, the share of the primary sec­tor in GDP was as high as 55.8%, while that of the secondary sector was only 15.2%. There has been a steady decline in the share of primary sector since then. It fell to 26% in 2000-01. On the other hand, over the entire plan period, as the industrial sector expanded, its contribution to GDP had been in­creasing and it rose to 22% in 2000-01.

Along with the growth of the secondary sector, the terti­ary sector has also registered a higher growth dur­ing the last 50 years of planning. In 2000-01 its contribution was 52%. Table 1.3 indicates the sectoral distribution of GDP (at factor cost) during the period between 1950-51 and 2000-01.

Table 1.3 shows that, compared to the sec­ondary sector, the share of the tertiary sector (com­prising mainly the service sector) improved much, from 29% in 1950-51 to 52% in 2000-01. -The increase in contribution has been shared equally by the sub-sectors like transport, communication, trade, finance and real estate, community and per­sonal services.

The changing structure of national income, therefore, indicates industrialisation, though at a slow pace. Furthermore, one also notices struc­tural changes within the industrial sector. During the plan period, India’s industrial structure tilted heavily in favour of capital goods industries.

This, of course, is a sign of industrialisation. But since then, industrial structure has become heavily bi­ased in favour of consumer goods industries. It is the organised manufacturing and mining indus­tries that have fared well as compared with unor­ganised small enterprises. Yet, unregistered small and tiny sectors occupy a dominant position in the Indian economy as necessary supports to these industries are given by the Government.

The tertiary sector is not a homogeneous cat­egory. It indicates trade, transport and communi­cations, banking and insurance, real estate and dwellings, public administration, community and personal services. The combined share of these heterogeneous activities rose from 29% in 1950- 51 at 1993-94 prices to 52% in 2000-01. As a re­sult of a better growth recorded in the tertiary sec­tor one sees a significant change—a “change from a subsistence to a market-oriented economy”.

This is an indication of modernisation of the economy. Modernisation is marked by the increasing use of industrial inputs (like chemicals, machinery, elec­trical and transport equipment) for agricultural sector, particularly after the Green Revolution in agriculture in the late 1960s. Thus, it is clear that all the sectors in an economy do not grow uni­formly; some grow at a higher rate than others.

Another aspect of India’s national income growth is the contribution of the public sector in GDR. The contribution of the public sector in GDP rose from 10.7% in 1960-61 to 20.8% in 1981-82 and to 28.6% in 1993-94. But it fell to 22.1% in 1999-00 mainly due to privatisation of several pub­lic sector units.

In India, a clear trend is also observable in recent years, viz., a slow growth of the commod­ity (i.e., primary and secondary sector) and a rapid growth of the services sector shown in Table 1.4.

The above table shows that the rate of growth of the non-commodity sector, i.e., the services sec­tor, is much more faster than the commodity sec­tor. This also reflects structural change of the In­dian economy in respect of the distribution of GDP between the commodity sector and non-commodity sectors.

On the basis of these national income trends and structural changes, we can conclude that the Indian economy can no longer be described as a typical under-developed country. Definitely, some developments have taken place.

Nevertheless, black spots are there. Growth is still inadequate and much of its increase is eaten away by the grow­ing mouths, despite some favourable structural changes. It is hoped that by the turn of the cen­tury sectoral composition of India’s national in­come will move further in favour of secondary and tertiary sectors.