Page 59 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 5: Trends and Structure of National Income Since 1951

in 1970-71 and that of the urban sector was ` 1,294. Thus urban-rural disparity ratio in per Notes
capita NDP was 2.45. However, this ratio declined marginally to 2.34 in 1993-94 since per capita
NDP for urban sector as ` 13,525 as against ` 5,783 for the rural sector.
However, between 1993-94 and 1999-00, the first phase after the introduction of economic
reforms, witnessed a further decline in the share of rural sector to NDP to about 48 per cent. Not
only this, per capita NDP in 1999-00 for rural areas was ` 10,683 and for urban areas stood at
` 30,183. The urban-rural disparity ratio increased to 2.82 in 1999-00 as against 2.34 in 1993-94.
This is not a healthy trend.
(vi) Changing Structure of Rural GDP
Dr. Rajesh Shukla and K.A. Siddiqui of the National Council of applied Economic Research
(NCAER) have studied the changing structure of Rural GDP. The main findings of the study
are :
1. Average annual growth rate of rural GDP which was 2.3 percent during 1970-80 improved
to 4.8 percent during 1980-93. It rose further to 5.0 percent in 2007-08 and declined to 4.3
percent in 2008-09 - a year in which recession adversely affected the growth rate.
2. Break-up of the sectoral shares of rural GDP reveals that whereas the share of agriculture
in 1970-71 was 73.8 percent and the combined share of industry and services was 26.2
percent in rural GDP, there is a continuous decline in the share of agriculture and it came
down to 42 percent in 2007-08. As against it, the share of both industry and services
indicated a continuous increase and their combined share was 58 percent in 2007-08.
These trends reveal that a structural transformation of the rural economy is taking place
and the nonfarm sector is emerging as the major contributor to rural GDP. This is also
borne out by the CSO’s Economic Census 2005, according to which, about a fifth of nonfarm
rural workforce is employed in agricultural establishments, while four-fifth worked in
non-agricultural establishments.
Such a transformation is a trend in the right direction and is very desirable because about
60 percent of India’s population cannot live on the 19 percent share of India’s GDP in
agriculture.
(vii) Share of Organised and Unorganised Sector in NOP
Organised enterprises are defined by the CSO as all enterprises which are either registered or
come under the purview of any of the Acts and/or maintain annual accounts and balance
sheets. Among the Unorganised enterprises are included all unincorporated enterprises and
household industries other than the Organised ones which are regulated by any of the Acts and
which do not maintain annual accounts and balance sheets.
From the data given in Table 10, it is evident that the share of the organised sector has risen
from 30 per cent in 1980-81 to 42.9 per cent in 2007-08. Consequently, the share of the unorganised
sector declined from 70 per cent to 57.1 per cent during the same period. It may also be noted
that the share of the organised sector in mining, manufacturing etc. improved from 56.8 per
cent to 70.2 per cent and that in the services sector improved from about 40 per cent in 1980-81
to 46 per cent in 2007-08. On the other hand, in agriculture, forestry and fishing, the contribution
of the unorganised sector slightly declined 95.2 per cent in 1980-81 to 91.2 per cent in 2007-08.
The shift in the composition of NDP from the unorganised to the organised sector is a
consequence of the process of development.
Limitations of National Income Estimation in India

“National income is nothing more than a simple linear aggregation of income accruing to the factors
of production supplied by the normal residents of the country in question.” Thus, while making an
estimate of national income millions of economic quantities have to be added up. For this purpose,
some basic judgements and social criteria based on the mores and traditions of a society are to be kept
in mind. “Incidentally, in the literature on the System of Material Production (SMP) used to be
employed by the erstwhile centrally-planned economies, the services were divided into two parts —

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