National Income in India

National Income in India

A study of the national income in India over the last 60 years, it 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.

Here we detail about the eight features of national income in India.

1. Excessive Dependence on Agriculture

One striking feature of India’s national income is that a considerable proportion, i.e., 27.8 per cent of the national income is now being contributed by the agricultural sector. Naturally development of this sector is very important considering its employment potential, marketable surplus and necessary support to industry sector.

2. Poor Growth Rate of GDP and Per Capita Income

Poor growth rate of GDP and per capita income is another important feature of national income of the country. The annual average growth rate of GDP in India was 5.2 per cent during 1980-92 as compared to 9.1 per cent for China and 5.7 per cent of Indonesia. Again the annual average growth rate of per capita GNP in India was only 3.1 per cent during 1980-92 as compared to 7.6 per cent for China.

In 1994, the per capita income figure in Switzerland was nearly 119 times, in USA about 81 times, in Japan about 105 times the per capita income in India. This low per capita income is also resulted from lower growth rate of national income and higher growth rate of population. The growth rate of GDP at constant price was 6.8 per cent in 1996-97.

3. Unequal Distribution and Poor Standard of Living

The distribution of national income in India is most unequal. Human Development Report, 1994 shows that in 1993, richest 20 per cent of total population shared 84.7 per cent of the total income and the poorest 20 per cent of the total population shared only 1.4 per cent of the total income of the country. Due to highly skewed pattern of distribution of income, the standard of living of the majority of population of our country is very poor.

4. Growing Contribution of Tertiary Sector

Another striking feature of India’s national income is that the contribution of tertiary sector has been increasing continuously over the years, i.e. from 28.5 per cent of total national income in 1950-51 to 42.7 per cent in 1996-97.

5. Unequal Growth of Different Sectors

In India different sectors are growing at unequal rates. During the period 1951-97, while the primary sector has recorded a growth rate of 2.9 per cent but the secondary and tertiary sector have recorded a growth rate of 6.3 per cent and 7.1 per cent respectively.

6. Regional Disparity

Another striking feature of India’s national income is its regional disparity. Among all the states, only six states of the country have recorded a higher per capita income over the national figure. Out of this six states Punjab ranks highest and Bihar ranks lowest. In 2007-08, the per capita income of Bihar at the bottom was Rs. 12,643 as compared to that of Rs. 50,558 of Punjab at the top, reflecting the ratio at 1: 3.9.

7. Urban and Rural Disparity

Urban and rural disparity of income is another important feature of our national income. The All India Rural Household Survey shows that the level of income in urban areas is just twice that of the rural areas depicting a poor progress of rural economy.

8. Public and Private Sector

Another important feature of India’s national income is that the major portion of it is generated by the private sector (75.8 per cent) and the remaining 24.2 per cent of the national income is contributed by the public sector.