Economics Notes: Changes in the Sectoral Composition of National Income - PDF

Okay, here's the conversion of the document/image into a structured markdown format. I've focused on extracting the text, preserving formatting where possible, and describing the images where necessary. # S.Y. B.Com/S.Y.B.A. Sem-H ## 1.4 Changes in the Sectoral Composition of National Income The...

Okay, here's the conversion of the document/image into a structured markdown format. I've focused on extracting the text, preserving formatting where possible, and describing the images where necessary. # S.Y. B.Com/S.Y.B.A. Sem-H ## 1.4 Changes in the Sectoral Composition of National Income The contribution of different producing sectors of the economy brings out the sectoral composition of national income of the economy. The different sectors have been grouped under three heads, namely, Agriculture and allied activities, Industry and Services. The sectoral composition of national income in India has changed substantially on account of the growth in the economy. This is shown in Table 1.7. The share of national income originating from agriculture and allied activities has steadily declined, while that originating from industry and services sectors has increased. These changes show that Indian economy has transformed from the production structure of a backward economy to that of developing economy. **Table 1.7: Percentage Share of Different Sectors in Gross Value Added (GVA) at Factor Cost (At Constant 2004-05 Prices)** | | 1950-51 | 2011-12 | | :-------------------- | :------: | :------: | | Agriculture and Allied Activities | 56.1 | 16.5 | | Industry | 14.4 | 26.1 | | Services | 29.5 | 57.4 | | Total | 100.0 | 100.0 | *Source: Computed from Government of India Economic Survey, 2014-15, A-5.* **Changes in the Sectoral Composition:** We can observe the following broad trends in the sectoral composition of GDP. **1. Declining Share of Agriculture and Allied Activities:** Agriculture and allied activities include agriculture, forestry and fishing, mining and quarrying. The share of agriculture and allied activities in GVA at factor cost has declined from about 56 percent in 1950-51 to 16.5 percent in 2011-12. Agriculture is the major constituent of this sector. Agriculture has been a way of life and continuous to be the single most important livelihood of the masses. The continuous fall in the share of agriculture and allied activities in the GVA is partly due to the high growth in other sectors in the economy and partly to the low growth in this sector especially agriculture. The gap between the growth of agriculture and non-agriculture sector started to widen since 1996-97 because of acceleration in the growth of industry and service sectors. Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system, low post harvest value addition and erratic rainfall continued to affect the performance of agricultural sector. During the Ninth a Tenth Five Year Plans agricultural sectoral growth rate was 2.44 percent and 2.30 percent respectively compared to 4.72 percent during the Eight Five Year Plan. During the Eleventh Plan agricultural growth is estimated at 3.6 percent against the target of 4 percent. With more than half the population directly depending on this sector, low agricultural growth has serious implications for the "inclusiveness" of growth. Achieving minimum agricultural growth is a pre-requisite for inclusive growth, reduction of poverty levels, development of the rural economy and enhancing of farm increases. ¹ Economic Survey 2012-13, P. 173. **2. Rising share of Industry**: Industrial sector is composed of manufacturing, construction, electricity, gas and water supply. The share of industry comprising manufacturing, construction, electricity, gas and water supply has steadily increased from 14.4 percent of GVA in 1950-51 to 26.1 percent in 2011-12 (see table 1.7). Manufacturing is the most dominant sector within industry. The share of manufacturing in national income remained in the range of 14-16 percent during the post-reform period between 1991-92 ad 2011-12. This share is modest when compared to that of China (above 40 percent) and some of the East Asian Countries above 30 percent.¹ The industrial sector is open to international trade environment and rapid technological change. Thus this sector is required to be innovative and competitive. **3. Increasing Share of Services:** The services sector comprises of three components, i.e., (i) Trade, hotels, transport, and communication; (ii) Financing, insurance, real estate, and business services; and (iii) Public administration, defence and other services. The share of services increased steadily from 29.5 percent of GVA in 1950-51 to 57.4 percent in 2011-12. Services sector has acted as the important engine of overall growth of Indian economy for more than a decade. The Indian economy has successfully navigated the difficult years of the recent global economic crisis because of the vitality of this sector in the domestic economy. **4. Increasing Share of sub-sectors in the Services**: The services sector is composed of three components and their share in the GVA have increased. This is given in Table 1.9. We can observe the following trends in their behaviour: **a) Share of trade, hotels, transport and communication**: Their share in GVA have increased from 11.0 percent in 1950-51 to 26.7 percent in 2011-12. Trade, hotels, transport and communication services have been growing rapidly in the recent years. Impressive progress in expanding railway passenger network and production of commercial vehicles, and fast addition of existing stock of telephone connections, particularly mobiles, have played key roles in such growth. **b) Share of financing, insurance, real estate and business services**: Their share have grown from 8.3 percent of GVA in 1950-51 to about 18 percent in 2011-12. This is due to the growth in financial services (comprising banking, insurance and real estate services). The progressive maturing of Indian financial markets and the ongoing construction boom have contributed to this. **c) Share of public administration and defense and other services:** Their share have steadily increased from 10.2 percent of GVA in 1950-51 to 12.7 percent in 2010-11. The slow increase in the share of community, social, and personal services public administration and defense reflect the of fiscal consolidation and increasing efficiency of fiscal expenditure management. ¹ Economic Survey 2011-12, P. 202. **Table 1.8: Percentage Share of Different Components of Services in GVA at Factor Cost (At 2004-05 Prices)** | Components of Services | 1950-51 | 2011-12 | | :----------------------------------------- | :------: | :------: | | a) Trade, hotels, transport & communication | 11.0 | 26.7 | | b) Financing, insurance, real estate and business services | 8.3 | 18.0 | | c) Public administration and defence and other services | 10.2 | 12.7 | | Total share of services sector in GDP | 29.5 | 57.4 | Source: Computed from Government of India Economic Survey, 2014-15, A-5. Due to the revision of the national income aggregates by the Central Statistical Office (CSO) recently, the shares of different sectors are seen as part of GVA (Gross Value Added). This revision has shown that the contribution of agriculture and industry sectors to overall GVA at factor cost is higher and that of service sector lower than old approach. (see Table 1.9). **Table 1.9: Share of Different Sectors in GVA at Factor Cost at Current Prices (2011-12 series)** | | 2011-12 | 2014-15 | | :-------------------- | :------: | :------: | | Agriculture and Allied Activities | 18.9 | 17.6 | | Industry | 32.9 | 29.7 | | Services | 48.2 | 52.7 | Source: Economic Survey, 2014-15, P. 6. According to the revised estimates the share of agriculture and allied activities, industry and service sectors in the GVA at factor cost is 17.6 percent, 29.7 percent and 52.7 percent respectively in 2014-15. (see Table 1.9) The changes in the sectoral composition of national income bring out the effect of the process of economic development in India. According to the theory of as the process of economic development takes place, the share of secondary and tertiary sectors in the national income increases and that of primary sector declines. Such sectoral change is taking place in India, but at a slow pace. **Review Questions** 1. Explain the trends in national income and per capital income in India. 2. Examine the change in sectoral composition of national income in India. 3. Write Short notes on: a. Sectoral Shares of national income in India. b. Trends in national income 4. Analyse the nature of changes in the sectoral distribution of National in India. 5. Discuss the changes in the growth of national income and per capita income in India. ## 9 Role of Agriculture ### 9.1 Introduction Agriculture is a dominant sector of Indian economy. Since 1951, under the five-year plans, it has undergone many changes. Its contribution to the GDP has declined to 12.3 percent though along with allied activities the share in GDP goes up to 14.5 percent. The decline in its share in GDP does not indicate the decline in its imports. It only brings out the sector transformation of Indian economy. Its importance is revealed by the fact that it still supports about 58 percent of India's vast population. Thanks to technological and strategical changes we have become food surplus country. Traditionally agriculture has been a way of life but over the period there has been a change in attitude of farmers which has brought in the element of commercialisation. With the supporting services provided by the government agriculture is becoming an attractive occupation even for educated young people. ### 9.2 Role of Agriculture in the Indian Economy Agriculture in India contributes to the economic development of the country in a number of ways, we explain below the importance of agriculture and its role in promoting and supporting development of our economy. 1. Contribution to Gross Domestic Product (GDP): At the time of independence agriculture and allied activities contributed more than 50 percent of GDP. As industry and service actors progressed its contribution declined. In 2011-12 the share of agriculture and allied sector in GDP was about 14.1 percent at 2004-05 prices. There is nothing unusual about the declining shares is usually the case when an economy undergoes sectoral transformation. Agriculture alone contributed 12.3 percent of GDP in 2010-11. According to economic survey 2012-13, in the last decade agriculture contributed 8 percent overall growth of the economy, industry, and service sector contributing 27 percent and 65 percent respectively. The decline in contribution though is natural during the economic transition, yet the share or agriculture could have been more had the agricultural sector experienced a higher growth rate. With a few exceptional years, the growth rate of agriculture always remained less than 4 percent which is the target of agricultural policy 2000. this target agriculture and allied sector registered a growth of 1.2 percent in 2012-13. 3. 7 percent in 2013 - 14 and 1. 1 percent in 2014 - 15 at 2011 - 12 prices. As per economic survey, 2014-15, the share of agriculture sector in total GDP was 18.4 percent in 2013-14. Shelters large population: About 58 percent of India's more than 1,250 million people that is about 725,000,000 depend on agriculture. That it absorbs such a large population and provides them with livelihood is significant. However what is required is to increase labor and land productivity so that the contribution of 58% of the population could be more than what it is now. It is essential for rapid growth of economy, and more so Indian economy, that the agricultural sector must be dynamic and strong enough to support the progress of other sectors. Source of supply of wage goods: Wage goods include all the essential items for living including food items. Many of the developing countries specially Africa and Asia find that their development is restrained due to insufficient supply of wage goods. Supply constraint from agricultural goods leads to inflation as is the case in India at present. Scarce foreign exchange reserves are used to import these essential items when economy fails to produce enough quantity. Strength of agricultural sector is the base on which the rest of the strength to a country with the stand international political and economic crisis including sanctions from powerful countries. India did realize its mistake of neglecting agriculture in its second five-year plan. There after attempts were made to correct the mistake by according priority to agriculture in the third and subsequent five year plans. However the government was not serious enough in its approach thus resulting in frequent shortages of wage goods, support. Supply of raw material: The agricultural sector is the source of supply of raw materials. In broad sense, the term agricultural sector comprises the primary sector. It provides manuals, crude oil, and inputs for agro based industries. In the absence of such rural materials a country requires depend on others for industrialization, into depend mainly from the service sector. A balanced development of economy is not possible in the absence of well developed agricultural sector. India is forced into have a good supply of many minerals and also other agricultural products. Industries like textiles, jute, sugar, iron and steel, metal products, chemicals, would products, paper and paper products, rubber, plastic, machinery, and equipment and transport are some of the important examples from the primary sector based industries. Capital formation: Agricultural sector is the source of surplus in food supply and labor. Since a large population of developing countries live in the agricultural sector, substantial portion of it can be mobilized and used for building physical capital. Raener Nurse would have his theory of capital formation home labor from disguise unemployment of agriculture can be implanted faithfully. Similarly Arthur Lewis' model of developing brings out the availability of excess labor for promoting development. The process of using excess label leads to an increase in the productivity of the remaining workforce in agriculture resulting in increase in the total output. Through appropriate fiscal and directed measures part of the increase output can be made available for capital formation. We do not expect the entire increase agricultural output to be available for adding up of the capital stock because of higher propensity to consume amount the agricultural population for various theories capital formation it is evident that excess labor sector can be utilized to build up rural capital assets and industries. The share of agriculture in total gross capital formation has remained about percent since 2007-08.To inventive the steps increase the share of investment in agriculture through state plans game known as Rashtriya Krishi Vikas Yojana was launched with an allocation of 25,000 crores for a period of the 11th 5-year plan scheme aims at holistic development of agriculture and allied sector to enable to achieve the 4 percent annual growth in the agriculture sector.Rural Development: Rural population constitutes about 68 percent of the population of india. As state and 50% of the population depends on agriculture.In most of the development countries, agriculture shelters less than 10% of the population in all countries. This small percentage of the population produces for agricultural products.In India there there are too many people engaged in agriculture thus making it suffering disguised and seasonal unemployment. Production the agricultural population substantially is necessary to make agriculture more progressive dynamic or and productive from transforming the excess people to urban create urban areas while creates more problems and benefits and the answer in rural development.Rural development involves buildings in physical activities such as schools and hospitals and besides their organization provides an answer many products of agricultural center agri based in industries such as food processing, fisheries, forest, and wood related industries like carbon try helps solve rural unemployment.Technological improvement and commercialization of agriculture along the mentioned industries in rare areas will cover into a progressing and a changing and the mentioned is used for education, health, related development in terms of schools, technical institute college dispensaries.All together make the rural area attractive.Foreign exchange earnings because the developed countries enjoy a comparative advantage in the production of rural communities along with the technological and other performance many developing countries have acquired community with advantages in rural international trade in agriculture products is becoming more liberal, share and agricultural of India with international for trade with more with international trade in agricultural products is becoming more liberal. The share of Indian agricultural imports and exports in the world trade 2013-14 . 1.31% respectively Agricultural exports as a percentage share from 9.10% increase from 8-9 to 14.05% in 2013-14 and the India is within the limits support by the O leaving scope for Further support for the measurement and if a other countries support production if the developed countries reduce industrial policy and liberal lies with better trade and trade will independent the sports Industries and service agricultural industrial and service the each # Trends in Agricultural Production and Productivity ## 8 Trends in Agricultural Production and Productivity ### 8.1 Agricultural Production The pre-dominance of agriculture has made India known as an agricultural country. It is casually remarked that India's culture is agriculture. The significance of agriculture in India's economy can be understood from the fact it supports about 58 percent of our population. Agriculture and allied sector now contributes 13.9 percent of the GDP. It absorbs 54.6 percent of total employees of the economy. The number of cultivators have declined from 127.3 million (2001) to 118.7 million (2011). The changes indicate structural transformation of Indian economy. Agricultural pro mainly refers to the total output in major items like rice, wheat, other cereals, pulses, oil seeds, sugarcane, cotton, jute and mesta plantation crops, potatoes, etc. ### Table 8.1: Foodgrains Production |Items|Year|1960-61|1999-2000|2010-11|2013-14| |---|---|---|---|---|---| |Rice|34.6 | 89.7| 96.0| 106.3| | |Wheat|11.0|76.4|86.9|95.8| |Coarse Cereals|23.7|30.3|43.4|42.7| |Pulses|12.7|13.4|18.2|19.6| |Total|82.0|209.8|244.5|264.4| *Source: Economic Survey* Food grains are important agricultural products as they are the basic requirements of the people. These items include rice, wheat, coarse cereals and pulses. The total production increased from 80 to 82 in 1960 - 1961 to 264.4 million tons in 2013-14. Total protection increased more than three times since 1960 the progresses were more remarkable after the Green Revolution experienced by of the country late in the 1960 still despite there been a right increase population the country has become self-sufficient in food grains. The per capita the availability of food grains per day has increased from 394.9 grams in 1951 to 510.1 91 but declined to 441 day in the year 2010 but increase to 510.8 in 2013. Commercial Crops increase oilseeds cotton you to end most of the sugar came and these Items are part of the daily consumption. The trend impact to the in table .2 ### Table 8.2: Commercial Crop Production Million Tonnes |Item/Year|1960-61|1999-2000|2005-06|2009-10|2013-14| |---|---|---|---|---|---| |Groundnut|4.8|5.3|8.0|5.4|9.5 |Rapeseed/Mustard|1.4|5.8|8.1|6.6|7.8| |Total Oil Seed|7.0|20.7|28.0|24.9|32.4| |Cotton|5.6|11.5|18.5|24.0|36.5| |Jute/Mesta|5.3|10.6|10.8|11.8|11.4| |Sugarcane|110.0|299.3|270.0|292.3|348.0| Consist production of coffee and natural rubber to find some type and one of the India is important agricultural productions the plantation top on coffee India we take the distinction largest produced concept is that the in the world for 28% of the coffee India ### Trends in Agricultural Production and Productivity International comparison India is only a far from achieving and putting together the potential land productivity by also I went to India in all the all community in all together except with sugar can and in lowest the worlds. Not is still that the in first productivity is the bananas cash Labour Productivity in India is lower in country is low in India is a lot of school to increase with the India's with 4770 of the #### 8.3 Causes of Low Agricultural productivity Too much people depends on agricultural rendering many improve this situation is resultant in you With the method of new better is out you **Review Questions** 1. Explain the change in the protection of a major Agricultural crops in India 2. Discuss the learn to label and productivity 3. Suggest measures to improve your products in 4. Why does you like a. Production b. Reasons c. The main things to ### State with the following and *A*. It can happen *false* with *the right questions* B .Selct the correct answers and rewrite the