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Indian Economy

Notes The share of the primary sector in GDP at factor cost declined from 54.56% in 1950-51 to 27.87%
in 1999-00 whereas share of the secondary sector was 16.11% in 1950-51 and raised to 25.98% in
1999-00. The share of the tertiary sector increased from about 29% to 46% during this period.
Indian economy also underwent a major structural change within the industrial sector as a
consequence of the major drive for industrial diversification in the mid-fifties. When the share
of the capital goods industries and the basic goods industries in the total industrial value added
increased more or less rapidly, the share of the consumer goods in total industrial value added
fell considerably over the years.
Nevertheless, the pace of transition of the Indian economy from an agricultural economy to an
industrial one was quite slow since 1951. It was in the decade of the eighties the economy
appeared from the phase of slow growth rate and deceleration. Ultimately, a major shift in the
macroeconomic policies in the decade of the nineties enhanced the pace of the structural
transformation of the Indian economy and set India on a high growth trajectory. In terms of
average growth rate, the performance in the nineties (6.5%) was better than that recorded in the
eighties (5.8%). While both the industrial and service sectors recorded relatively high growth
rates during recent period, agriculture and allied activities experienced a relatively low rate of
growth in comparison to the eighties. This underlines a major underlying shift in the Indian
economy in recent years, with economic growth turning more vulnerable to the performance of
industrial and service sectors and less to the performance of the agricultural sector. In order to
keep the momentum of the structural transformation of the Indian economy, investment should
be determined to those sectors which are strongly incorporated with the rest of the economy
and have a larger multiplier effect on growth and development. Put differently, the key or
priority sectors are those which can motivate greater economic activities in other sectors and
investment should be focussed to these sectors, particularly to attain the target rate of growth of
8% of real GDP as foreseen in the Tenth Five-year Plan.

2.1 National Income Estimate in India

Now, let us begin the unit with studying the national income estimates in India. National
income measures the total value of the goods and services (output) produced by an economy
over a period of time (usually a year). It is also a standard of the income flown from production,
and/or the sum total of all expenditure involved for the production of output. The study of
national income is essential because of the following reasons:
1. To measure the size of the economy and level of nation’s economic performance
2. To trace the trend or speed of the economic growth in relation to previous year(s) as well
as to other nations
3. To know the structure and composition of the national income in terms of several sectors
and the periodical variations in them

4. To make projection about the future development pattern of the economy
5. To measure the size of the economy and level of nation’s economic performance
6. To trace the trend or speed of the economic growth in relation to previous year(s) as well
as too their countries
7. To know the structure and arrangement of the national income in terms of various sectors
and the periodical variations in them

8. To make projection about the future development trend of the economy
You may already be aware that internationally some nations are wealthy, some nations are not
wealthy and some nations are in-between. Under such conditions, it would be difficult to assess

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