Trends of national income in india?

Question

Accepted Answer

A detail study of the trend of the national income in India over the last 40 years is very much essential for attaining a clear understanding about the impact of planning on the Indian economy. Both the national income and per capita income are first collected at current prices and then at constant prices for eliminating the effect of any change of price level during that period.

This trend in national income also reflects on the standard of living of the people of India. Thus, the national income at current prices is influenced by both the increase in production of goods and services and the rise in prices. In order to make the national income figures comparable, these figures are deflated at constant prices just for eliminating the effect of any change in the price level of the country. Let us now look into the trends in the national income figures and per capita income figures of India both at current prices and at constant prices obtained through C.S.O.’s new series with 1980-81 as base year.

The Table reveals estimates of national income and per capita income of last 46 years both at current prices and at 1980-81 prices. It can be seen that the national income of India at 1980- 81 prices has increased from Rs. 40,454 crore in 1950-51 to Rs. 2,58.465 crore in 1996-97 registering a growth rate of 538.9 per cent during last 46 years.

Moreover, the national income in India at current prices has increased from Rs. 9,142 crore in 1950-51 to Rs. 10,93,962 crore in 1996-97 which shows a growth of 119 times during this period of 46 years. Again the per capita income figure at constant prices (1980-81) has increased from Rs. 1,127 in 1950-51 to Rs. 2.761 in 1996-97 registering a growth rate of 144.9 per cent during these last 46 years. Further, the per capita income of India at current prices has increased from Rs. 255 in 1950- 51 to Rs. 11,564 in 1996-97 showing a growth of 45 times during the same period.

Answer

Recent income growth in India has been dominated by sectors that do not reflect real physical output increases — such as finance, insurance, real estate and defence

In India, we tend to obsess a lot about the growth rate of national income, worrying if it drops even a tenth of a percentage point below market expectations, and checking fiscal and monetary indicators with respect to the value of the national product.

By contrast, we worry much less about the quality of that growth, or even its sectoral distribution. But surely the latter is more important, both for the conditions of people and the overall health of the economy now and in the future.

Consider how the different productive sectors have grown in terms of real value added (that is, in constant price terms) since 2011-12, since when the new series of national income data are available. Chart 1 shows that the service-led trajectory of the Indian economy continues, while some of the more significant sectors from the point of view of employment and infrastructure have lagged behind.

The FIRE sector (finance, insurance, real estate along with other professional services) increased by 22 per cent over this 7-year period (referring to the total increase between 2011-12 and 2017-18), while trade, hotels, transport, communication and services related to broadcasting increased by 19 per cent.

By contrast, value added in agriculture, forestry and fishing went up by only 14 per cent and core and basic industries like electricity, gas, water supply and other utility services increased by only 2 per cent over the entire period. Value added in manufacturing rose by nearly 18 per cent, based on data from corporate industry rather than the industrial production index

Answer

Trends of National Income in India

The national income of India has undergone significant changes over the years. Some of the notable trends are:

Period of low growth: In the years following independence, India experienced low growth rates, with the national income growing at an average annual rate of around 3.5% till the 1970s.

Period of high growth: The 1980s and 1990s saw a period of high growth, with the national income growing at an average annual rate of around 6%.

Period of rapid growth: The 2000s and early 2010s saw a period of rapid growth, with the national income growing at an average annual rate of around 8%. This was largely driven by the growth of the IT and service sectors.

Recent slowdown: In recent years, the growth rate of the national income has slowed down, with an average annual growth rate of around 4.5% in the last five years. This is due to a combination of factors such as global economic slowdown, domestic policy uncertainties, and structural issues in the economy.

Despite these fluctuations, India's national income has seen a steady increase over the years. This has been aided by various factors such as:

Demographic dividend: India has a large and growing population, with a significant proportion of young people. This has led to a larger workforce and increased productivity.

Policy reforms: Over the years, the Indian government has implemented various policy reforms such as liberalization, privatization, and globalization, which have helped to boost the economy.

Advancements in technology and infrastructure: The growth of the IT and service sectors, as well as improvements in infrastructure such as roads, ports, and airports, have helped to drive economic growth.

Overall, the trends of national income in India reflect the country's journey towards becoming a major player in the global economy. While there have been fluctuations in growth rates, the long-term trend has been one of steady improvement.

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