Sectoral Change in

India’s National Income

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Let us make an in-depth study of the sectoral
change in India’s national income.
Colin Clark had pointed out in the 1930s that as the
pace of economic development quickens, the
importance of primary sector in terms of contribution
to national income diminishes.
This sort of change in the sectoral distribution of na-
tional income has occurred in India during the plan
period, thereby indicating economic development.
In 1950-51, the share of the primary sector in GDP was
as high as 55.8%, while that of the secondary sector
was only 15.2%. There has been a steady decline in the
share of primary sector since then. It fell to 26% in
2000-01. On the other hand, over the entire plan
period, as the industrial sector expanded, its
contribution to GDP had been increasing and it rose to
22% in 2000-01.
Along with the growth of the secondary sector, the
tertiary sector has also registered a higher growth dur-
ing the last 50 years of planning. In 2000-01 its
contribution was 52%. Table 1.3 indicates the sectoral
distribution of GDP (at factor cost) during the period
between 1950-51 and 2000-01.
Table 1.3 shows that, compared to the secondary
sector, the share of the tertiary sector (comprising
mainly the service sector) improved much, from 29%
in 1950-51 to 52% in 2000-01. -The increase in
contribution has been shared equally by the sub-
sectors like transport, communication, trade, finance
and real estate, community and personal services.
The changing structure of national income, therefore,
indicates industrialisation, though at a slow pace.
Furthermore, one also notices structural changes
within the industrial sector. During the plan period,
India’s industrial structure tilted heavily in favour of
capital goods industries.
This, of course, is a sign of industrialisation. But since
then, industrial structure has become heavily biased in
favour of consumer goods industries. It is the
organised manufacturing and mining industries that
have fared well as compared with unorganised small
enterprises. Yet, unregistered small and tiny sectors
occupy a dominant position in the Indian economy as
necessary supports to these industries are given by the
Government.
The tertiary sector is not a homogeneous category. It
indicates trade, transport and communications,
banking and insurance, real estate and dwellings,
public administration, community and personal
services. The combined share of these heterogeneous
activities rose from 29% in 1950- 51 at 1993-94 prices
to 52% in 2000-01. As a result of a better growth
recorded in the tertiary sector one sees a significant
change—a “change from a subsistence to a
market-oriented economy”.
This is an indication of modernisation of the economy.
Modernisation is marked by the increasing use of
industrial inputs (like chemicals, machinery, electrical
and transport equipment) for agricultural sector,
particularly after the Green Revolution in agriculture
in the late 1960s. Thus, it is clear that all the sectors in
an economy do not grow uniformly; some grow at a
higher rate than others.
Another aspect of India’s national income growth is
the contribution of the public sector in GDR. The
contribution of the public sector in GDP rose from
10.7% in 1960-61 to 20.8% in 1981-82 and to 28.6% in
1993-94. But it fell to 22.1% in 1999-00 mainly due to
privatisation of several public sector units.
In India, a clear trend is also observable in recent
years, viz., a slow growth of the commodity (i.e.,
primary and secondary sector) and a rapid growth of
the services sector shown in Table 1.4.
The above table shows that the rate of growth of the
non-commodity sector, i.e., the services sector, is
much more faster than the commodity sector. This
also reflects structural change of the Indian economy
in respect of the distribution of GDP between the
commodity sector and non-commodity sectors.
On the basis of these national income trends and
structural changes, we can conclude that the Indian
economy can no longer be described as a typical
under-developed country. Definitely, some
developments have taken place.
Nevertheless, black spots are there. Growth is still
inadequate and much of its increase is eaten away by
the growing mouths, despite some favourable
structural changes. It is hoped that by the turn of the
century sectoral composition of India’s national in-
come will move further in favour of secondary and
tertiary sector