Page 54 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy

Notes were arbitrary and hence devoid of any scientific basis. Dr. V.K.R.V. Rao made use of a combination
of census of output and census of income methods. He divided the economy of India into two
categories. In the first category were included agriculture, pastures, mines, forests, fishing and hunting.
Output method was to be used to evaluate the product derived from these sectors. In the second
category were included industry, trade, transport, public services and administration, professions,
liberal arts and domestic service. For these occupations, census of income method was used. To these
two sub-totals was added the income from house property and other items which could not be covered
under the above categories. From the gross aggregate income so obtained were excluded the values
of goods and services consumed in the process of production. By adding the net income earned from
abroad, an estimate of national income was computed.
Most of these estimates were the results of the efforts of individuals and as such they suffered from
serious limitations. The arbitrary assumptions of the authors undermined the reliability of the
estimates. Besides, these estimates were based on statistics from the agricultural sector which were
highly undependable.
Post-Independence Period Estimates

Soon after Independence, the Government of India appointed the National Income Committee in
August, 1949, so as to compile authoritative estimates of national income. The Committee consisted
of Professor P.C. Mahalanobis. Professor D.R. Gadgil and Professor V.K.R.V. Rao. The final report of
the National Income Committee appeared in 1954. The report was a landmark in the history of this
country because for the first time, it provided comprehensive data of national income for the whole
of India. The principal features of the National Income Committee report were as under :
1. During 1950-51, agriculture which also included animal husbandry, forestry and fisheries
contributed nearly half of the national income.
2. Mining, manufacturing and hand trades contributed about one-sixth of the total income.
3. Commerce, transport and communications accounted for a little more than one-sixth of the
total national income.
4. Other services such as professions and liberal arts, administrative services, domestic services,
house property accounted for about 15 per cent of national income.
5. The share of commodity production was about two-third of the national income. The term
commodity production includes material production derived from agriculture, mining, factory
establishments, hand trades, etc.
6. Services accounted for about one-third of total national income. Services sector includes commerce,
transport and communications, administrative services, liberal arts, domestic services etc.
7. The share of the government sector in net domestic product was 7.6 per cent in 1950-51. Along
with it, the share of the government in national expenditure was 8.2 per cent.
8. The margin of error in the calculation of national income estimates worked out at about 10 per
cent.
National Income Committee and C.S.O. Estimates
For the post-independence period, we have five series in national income estimates.
(1) Conventional Series : provided national income data at current prices and at 1948-49 prices for
the period 1948-49 to 1964-65.
The conventional series divided the economy into 13 sectors. Income from six sectors i.e.,
agriculture, animal husbandry, forestry, fishery, mining and factory establishments is calculated
by the output method and income from the remaining seven sectors, i.e., small enterprises,
organised banking and insurance, commerce and transport, professions, liberal arts and domestic
service, public authorities, house property and rest of the world is computed by census of income
method.
Net Output Method : In agriculture, the output of each crop is estimated by multiplying the
area sown by the yield per hectare. For obtaining the average yield crop cutting experiments

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