Page 217 - DECO405_MANAGERIAL_ECONOMICS

Managerial Economics

Notes

Case Study Marking a Significant Shift

n May 31, 2010, when the government announced GDP numbers for 2009-10, for
the first time, factories contributed more to the national income than the country's
Ofarmers, marking a significant shift in the structure of the India economy.
That does not, however, diminish the importance of the farm, fisheries and the forest
sector because of the disproportionately high percentage of people still engaged in these
activities. Neither does it take away the fact that the share of manufacturing is still below
desired levels.
As per the advance estimates of GDP growth in 2009-10 released by the Central Statistical
Organisation in February, the manufacturing sector was expected to contribute Rs 7,07,512
crore to the economy, overtaking the 6,49,370 crore from agriculture, forestry, and
fishing.

That would make manufacturing the second biggest contributor to the GDP among the
major sub-sector, but its relative share is well below that of many of India's peers. For
instance, in China, value add by industry has a near 48% share in the national income.

However, a recent CII-BCG report says that India, the 13th largest manufacturing economy
in the world, could emerge as the fourth largest manufacturer if the sector grows by 11%
in the next 15 years. "The share of manufacturing in the GDP has stuck at about 18%. It
should grow up to 30% in the next five to 10 years. Only then can the economy sustain a
growth of 9% to 10%," says Saumitra Chaudhuri, member, Planning Commission.

Experts are, however, unanimous in that the industrial sector needs to generate lot more
employment. "Its (manufacturing) share in GDP is going to be higher by about 15% to that
of agriculture, but dependency is too low compared to agriculture," says P K Joshi, Director,
National Academy of Agricultural Research Management, arguing for a greater
employment generation in manufacturing.
The real structural change in the Indian economy would occur only when lesser people are
employed in agriculture, says Suresh Tendulkar, former chairman of the Prime Minister's
Economic Advisory Council. In fact, India's structural transition has been different from
many other economies, with intermediate manufacturing stage not growing as desired.
"The Indian economy has jumped from an agrarian to a service centric economy. The
services sector has been unable to absorb the vast unskilled population," says Sunil Sinha,
senior economist and head of research at rating agency Crisil.
Question

Is it a real shift in the structure of the Indian economy or is it a temporary event? Give your
views.

Source: www.articles.economictimes.indiatimes.com
13.3 Summary

National income is the aggregate of money value of the annual flow of final goods and
services in the national economy during a given period.
GNP is the value of all final goods and services produced by domestically owned factors
of production within a given period. The production units, which produce goods and

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