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 derived are then
multiplied to arrive at the estimates of value added.
 Trends of National Income
( Percent Per annum) : The Hindu Growth rate
Period Target Actual

First Plan 2.1 3.5

(1951-56)
Second Plan 4.5 4.2
(1956-61)

Third Plan 5.6 2.8

(1961-66)

Fourth Plan 5.7 3.2

(1966-75)

Fifth Plan 4.4 4.7

(1974-79)
The target growth rate in first three plans was set with respect to National Income .In fourth
Plan it was Net Domestic Product and thereafter it has been GDP( at factor cost) Actual
Growth rates are in terms of National Income ( NNP at factor cost at 1999-200 Price )
 Trends of National Income
( Percent Per annum) The Hindu Growth rate
Period Target Actual
Sixth Plan ((1980-85) 5.2 5.5
Seventh Plan (1985-90) 5.0 5.6
Eight Plan ( 1992-97) 5.6 6.5
Ninth Plan (1997-2002) 6.5 5.5
Tenth Plan (2002-07) 8.0 7.8
1951-1980 3.6
1981-1990 5.6
1992-2007 6.1
The target growth rate 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
1.Primary of which 21.3
Agriculture 19.5
Mining and quarrying 1.8
2.Secondary of which 22.2
Manufacturing Registered 8.6
Manufacturing unregistered 4.5
3..Tertiary of which 56.4
Transport and communication and Trade of 28.0
which
Railway 1.1
Trade and Hotel 16.9
Finance and Real Estate of which 14.4
Financing and Insurance 7.3
Community and Personal Services of which 14.0
public administration and defense 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 1980-81 price At 1999-

2000 prices
1960-61 1970-71 1981-82 1991-92 2006-07
Agriculture 54.4 47.4 36.5 29.4 19.5
and allied
Mining and 0.9 0.9 1.4 1.5 1.8
Quarrying
Primary 56.6 50.1 41.1. 33.2 21.3
Sector
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
 Rate of Growth of Agriculture 1951-52 to 2006-07

Deceleration in Period Total Agri. Crops Non

Econo and and agricul
Agriculture Growth
my Allied live ture
1. The rate of growth of stock
agriculture ( 1950-51 to Pre Green 3.7 2.5 2.7 4.9
2006-07) about 2.7 Revolution 1951-
percent is much less 52 to 1967-68
than other sectors, but Green revolution 3.5 2.4 2.7 4.4
on an average higher 1968-69 to 1980-
than the growth rate of 81
population 2.1percent Wider technology 5.4 3.5 3.7 6.4
Dissemination
2. The rate of growth of
period 181-82
food grain production in to -1990-91
1990-2007 decelerated
Early Reform 5.7 3.7 3.7 6.6
to 1.2 percent , lower Period 1991-92
than the growth rate of to 1996-97
population 1.9 percent 1997-98 to 6.6 2.5 2.5 7.9
per annum 2006-07
Govt of India – Economic Survey 2007-08 table 7.1
Structural Change in
Manufacturing
1. The share of registered
manufacturing over
the period of time has
grown and that of
unregistered has
declined .
2. Although the growth
rate of industrial
production has been
less than stipulated in
plan , but the industrial
growth rate of
impressive vis-à-vis
agriculture
 Annual Compounds Growth rate of Index of
Industrial Production (1951 to 1979)
Use Base Building Industrial Base Industrial deceleration
Classification 1951-55 1955-1960 1960-65 1965-1976 1974-79
Basic Goods 4.7 12.1 10.4 6.6 8.4
Capital Goods 9.8 13.1 19.6 2.6 5.7
Intermediate 7.8 6.3 6.9 3.0 4.3
Goods
Consumer Goods 4.8 4.4 4.9 3.4 5.5
(a) Durables 6.2 6.8
(b) Non durables 2.8 5.4
General Index of 5.7 7.2 9.0 4.1 6.1
Industrial
production
 Annual Compounds Growth rate of Index of
Industrial Production (1980 to1992)
Period of Industrial Recovery
Use Base 1981-85 1985-90 1990-91 1980-81 to
Classification 1991-92

Basic Goods 8.7 7.4 3.8 7.4

Capital Goods 6.2 14.8 17.4 9.4
Intermediate 6.0 6.4 6.1 4.9
Goods
Consumer 5.1 7.3 10.4 6.0
Goods
(a) Durables 14.3 11.6 14.8 10.8
(b) Non 3.8 6.4 9.4 5.3
durables
General Index 6.4 8.5 8.3 7.8
of Industrial
production
 Annual Compounds Growth rate of Index of
Industrial Production (1992-2006)
Use Base Pre reform PosttoReform
1992-93 1997-98 Period
2002-03 to 2005-06 2006-07
Classification period 1996-97 to 2001- 2006-07
(1980-81 to 02
1991-92)*
Basic Goods 7.4 6.8 4.1 6.6 6.7 10.3

Capital Goods 9.4 8.9 4.7 14.4 15.7 18.2

Intermediate 4.9 8.5 5.8 6.2 2.5 12.0
Goods
Consumer 6.0 6.6 5.5 9.6 12.0 10.1
Goods
(a) Durables 10.8 13.4 10.7 8.8 15.3 9.2

(b) Non 5.3 4.8 3.8 10.0 11.0 10.4

durables
General Index 7.8 7.4 5.0 8.2 8.2 11.5
of Industrial
production
 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 Tetriary sector
1. The tetriary 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
communication- IT 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 2006-07 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 India’s 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 tele-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 India’s Service

Led growth, Asian Development Bank,INRM
Policy Brief No. 2 . http://www.adb.org
Informal sector accounts for 58 percent of NDP
Ramesh Koli: The informal sector in the national Accounts of India
www.iaria.org/paper/2007

6.5 %finance,
14.5 % trade ,
18.7% agriculture insurance and real
hotel and
and allied activities estate, and
restaurant
business services

5.1% transport and 4.5 % from 4.4 from

storage manufacturing construction

4.4. percent from

community, social
and personal
services