Research Paper Economics Volume : 5 | Issue : 12 | December 2015 | ISSN - 2249-555X

Trends in National Income of India

Keywords National Income, Per Capita Income, Economy & Trend

Dr. Samir Mazidbhai Vohra

Principal

ABSTRACT An economy is an organization of the processes of production and exchange through which people earn their
living. The national economy, thus, comprises all the farms and factories, the shops and markets, the banks
and financial agencies, the offices and the other institutions: or in brief all the occupations where people work and produce
either goods or services, and use the incomes thus earned, for consumption, saving and investment.
The current series of national income estimates records Indias national income since 1950-51 onwards. For the purpose of
comparing national income and per capita incomes over different years, the estimates of national and per capita income at
some constant base-year prices are taken. This is so, because the national income figures at current year prices value the
output of the year at the prices prevailing in that very year.
This article describes the major trends in national income in India since 1950-51. It also analyze the trend of national income
over sixty years.

Introduction during a year. This includes wages from employment and

National Income is defined as the sum total of all the self-employment, profits to firms, interest to lenders of
goods and services produced in a country, in a particular capital and rents to owners of land.
period of time. National Income is a composite measure of
all these economic activities taking placed in an economy The output method, which is the combined value of the
in the course of one year. It is a comprehensive index of new and final output produced in all sectors of the econ-
the state of an economy and a measure of its growth over omy, including manufacturing, financial services, transport,
time. leisure and agriculture.

Irving Fisher defined National Income as `` The National The Expenditure method, which adds up all spending in
dividend or income consists solely of services as received the economy by households and firms on new and final
by the ultimate consumers, whether from their material or goods and services by households and firms. The compo-
from human environments. Thus a piano or an overcoat nents of national output are valued according to their im-
made for me this year is not a part of this year`s income, portance to the overall economy. The weights used were
but an addition to capital. Only the services rendered to based on estimates made every five years but from 2003
me during this year by these things are income. `` an annual adjustment to the weightings was introduced to
improve the reliability of the weighting a process called
An economy is an organization of the processes of produc- annual chain linking. This allowed for a more up-to-date
tion and exchange through which people earn their living. and therefore a more accurate measure of changes to the
The national economy, thus, comprises all the farms and level of national income.
factories, the shops and markets, the banks and financial
agencies, the offices and the other institutions: or in brief Trends in National Income
all the occupations where people work and produce either National Income estimates are published annually by the
goods or services, and use the incomes thus earned, for Central Statistical Organization of the Government of India
consumption, saving and investment. (CSO) in its publication National Accounts Statistics. The
current series of national income estimates records Indias
National Income provides an objective measure of eco- national income since 1950-51 onwards. The estimates
nomic welfare of the people inhabiting a country. There- presented are of two types, viz.
fore, in all the nations, developed as well as underdevel-
oped national income estimates are prepared for each Those based on current prices, i.e. the prices prevailing
year, and efforts are made to develop a scientific method- in the year to which the estimates relate and
ology for the computation of national income so that the
figures of national income are, as far as possible close to Those based on specified base-year prices, popularly
reality. known as national income at constant prices.

The creation of National Income The base year for the current series is 2004-05 till the year
The simplest way to think about national income is to con- 2011-12. For years after 2011-12, as new series has been
sider what happens when one product is manufactured published and estimates for the later years are available
and sold. In short national income is the value of all the with 2011-12 as the base year.
final output of goods and services produced in one year.
There are three methods of calculating national income: For the purpose of comparing national income and per
capita incomes over different years, it is desirable to take
The income method, which adds up all incomes received into account only the estimates of national and per cap-
by the factors of production generated in the economy ita income at some constant base-year prices. This is so,

210 X INDIAN JOURNAL OF APPLIED RESEARCH

 Research Paper Volume : 5 | Issue : 12 | December 2015 | ISSN - 2249-555X

because the national income figures at current year prices Per Capita In-
NNP
value the output of the year at the prices prevailing in that come
very year. At At At
At
Year Current Constant Current Constant
Table - 1 Prices Prices
Prices Prices
National Income (Net National Product at Factor Cost)
& Per Capita Income Ninth Plan
10.6 5.4 8.5 3.4
in India 1950-51 to 2014-15 (1997-02)
National Income (Rs. Per Capita Income Tenth Plan
Crore) (Rupees) 12.8 7.6 11.1 5.9
(2002-07)
At Current At At Current At Eleventh Plan
Year Constant Constant 16.0 7.5 14.4 6.0
Prices Prices (2007-12)
Prices Prices
Base Year 2004-05 2012-13 12.7 4.4 11.3 3.2
2013-14 13.7 6.8 12.3 5.4
s1950-51 9829 269724 274 7513
1960-61 17062 411519 393 9482 2014-15 11.5 7.4 10.1 6.4

1970-71 44550 596470 823 11025 Source: Compiled from Economic Survey 2014-15.
1980-81 138565 795193 2041 11711
Table - 1 indicates that the national income of India, at
1990-91 526017 1342031 6270 15996 2004-05 prices, has grown form Rs. 2,55,405 crore in 1950-
2000-01 1947788 2291795 19115 22491 51 to Rs. 45,72,075 crore in 2011-12. This indicates over
2010-11 6942089 4657438 58534 39270 sixtyfold rise in over sixty years. However, this growth has
2011-12 8052996 4958849 66997 41255 neither been uniform nor steady during this period. Table
2 indicates that during the First Plan, the annual growth
Base Year 2011-12 rate was 4.6 percent. The Fifth Plan period saw a growth
2011-12 7846531 7846531 64316 64316 rate of 5.0 percent while during 1979-80, the national in-
2012-13 8841733 8193427 71593 66344 come had a negative growth rate, i.e., the national income
2013-14 10056523 8751834 80388 69959 was lower than the preceding year by 5.9 percent. Overall
growth in three decades, viz,. 1951-1981 was around 35
2014-15 11217079 9400266 88533 74193 percent. The Sixth Plan was a grand success and national
Source: Economic Survey 2014-15. income recorded a high growth rate of 6.5 pdecent, which
was the highest achievement in any of the Plans gone by.
Table - 2 The Eleventh Plan however showed a better performance
Average Annual Growth Rates of national and Per Capi- and achieved 7.5 percent annual growth. The Twelfth
ta Income (Percent) Plan(2012-17) seeks to achieve annual growth rate of over
Per Capita In- 8 percent.
NNP come
At At Trends in Per Capita Income
At At The per capita income in India has not grown at a pace
Year Current Constant Current Constant at which national income has risen over the past four dec-
Prices Prices
Prices Prices ades. At 2004-05 prices, the per capita income in 1950-51
First Plan was Rs. 7,513. It has gone up only to Rs. 41,255 by the
2.1 4.6 0.3 2.7 end of 2011-12. Under the new series per capita income
(1951-56)
increased from Rs. 64,316 in 2011-12 to Rs. 74,193 in
Second Plan
9.7 4.1 7.5 2.1 2014-15. There has, thus been only about six fold increase
(1956-61) in per capita income over this long period of over six dec-
Third Plan ades till 2011-12. The main reason for this slow growth is
10.0 3.3 7.6 1.0 population explosion in India during this period.
(1961-66)
Three Annual Plans
12.0 3.5 9.6 1.3 Trend in Sectoral Composition of National Income
(1966-69) Broad trends in the distribution of Gross Domestic Product
Fourth Plan (GDP) by industry of origin since 1950-51 are presented
11.0 3.0 8.5 0.7
(1969-74) below.
Fifth Plan
10.8 5.0 8.6 2.7 Table 3
(1974-79) Structure of GDP: Sectoral Distribution of GDP at Con-
Annual Plan stant Prices (Since 1950-51)
9.0 -5.9 6.4 -8.2
(1979-80) Manufactur- Services
Sixth Plan Agriculture & ing, Con- including
15.1 5.3 12.7 3.1 Year Allied Activi- struction, Trade, Trans-
(1980-85) ties Electricity, port, Storage,
Seventh Plan etc. etc.
14.0 5.8 11.6 3.6
(1985-90) At 2004-05 Prices
Two Annual Plans 1950-51 55.0 17.0 28.0
15.3 2.8 13.0 0.8
(1990-92) 1980-81 41.8 21.6 36.5
Eight Plan 1990-91 34.9 24.6 40.5
16.3 6.5 14.0 4.4 2000-01 25.8 23.8 50.4
(1992-97)

INDIAN JOURNAL OF APPLIED RESEARCH X 211

 Research Paper Volume : 5 | Issue : 12 | December 2015 | ISSN - 2249-555X

Manufactur- Services Defence, civil administration, economic and Social

Agriculture & ing, Con- including service like health, education, etc., too have made a
Year Allied Activi- struction, Trade, Trans-
ties Electricity, port, Storage, huge contribution to the service sector.
etc. etc. Due to increase in the income of the people has in-
2010-11 16.7 26.0 57.3 creased demand for services like hotels and restau-
rants, transport, communication and many other kinds
2011-12 16.5 26.1 57.4
of services.
At 2011-12 Prices
2011-12 21.6 29.9 48.5 Conclusion
2012-13 20.8 29.3 50.0 Indian economy has witnessed a rapid growth of the ter-
2013-14 20.2 28.7 51.1 tiary sector while relative contribution of industry has not
shown the expected change that has been seen in the
2014-15 19.0 28.4 52.5
development process of the contemporary advanced
Source: Compiled from Economic Survey 2014-15. countries, though share of agriculture has undergone the
changes on expected lines. One thing that clearly emerges
Table 3 Indicates that there is substantial decline in the from the growth trend in national income is that whereas
share of primary sector in GDP over the last six decades. during the first three decades of development, viz., 1951-
The primary sector (agriculture, forestry, fishing, mining, 81, the growth rate was low and revolved around 3.5 per-
etc.) under the new series with the base year 2011-12, cent, from 1981 onward the economy has entered a rela-
share of agriculture and allied sector was revised upwards tively higher growth phase.
to 21.6 percent in 2011-12 that declined to 19 percent in
2014-15. The contribution of the secondary sector (manu- There has, thus been only about six fold increase in per
facturing industry, construction, electricity, gas and water capita income over this long period of over six decades till
supply etc.) under the new series with the base year 2011- 2011-12. The main reason for this slow growth is popula-
12 was 30 percent in 2011-12. In 2014-15, the secondary tion explosion in India during this period. Indian economy
sector contributes over 28 percent of GDP. had a major structural change and rapid growth of the
service sector. This sector contributed a mere 28 percent
Reasons for Rapid Growth of Service Sector share of GDP in 1950-51 which had more than doubled by
The factors responsible for the rapid growth of the tertiary the year 2011-12.
sector are :
To sum up, the trends in national income reflect the
With the economic growth and industrial develop- growth of Indian economy, which has been sometimes
ment, demand for services like transport, communi- slow and erratic, but is moving ahead gradually in a
cation, electricity, storage, finance etc, increased tre- planned manner. Decline in the share of primary sector, in-
mendously and that led to the expansion of tertiary creased contribution of territory sector and growing share
sector. of secondary sector are the trends in the direction of de-
Rapid Development of Information Technology service velopment and progress.
has proved to be a great source of expansion of ter-
tiary sector.

REFERENCE 1. Kapila Uma (2008-09): Indias Economic Development Since 1947, 3rd Edition: 2008-09 2. Sivasubramonian, S. (2000): The National Income
of India in the Twentieth Century, Oxford University Press, New Delhi 3. Report on National Statistical Commission, New Delhi, and Government
of India 2011. 4. www.econlib.org/library/Enc/NationalIncomeAccounts.html 5. https://www.rbi.org.in/.../AnnualPublications.aspx?...Handbook%20of%...

212 X INDIAN JOURNAL OF APPLIED RESEARCH