The composition of GDP in India and the changes in it over time. The composition of GDP in India has undergone substantial changes since 1950- 51. The share of agriculture has declined while that of industrial and service sectors has increased.
Economic activities can be divided into three categories: primary activities, secondary activities and tertiary activities.
Primary activities include (i) agriculture, (ii) forestry and logging, and iii) fishing.
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Secondary activities include (i) mining and quarrying, (ii) manufacturing, (iii) electricity, gas and water supply, and (iv) construction.
Tertiary activities include (i) trade, (ii) hotels and restaurant, (iii) transport (railways, road, air, and waterways), (iv) storage, (v) communication, (vi) banking and insurance, (vii) real estate, and (viii) public administration and defence. The tertiary activities are also called service activities.
On the basis we make the following observations:
i. Agriculture and allied activities (primary sector) contributed more than half of the GDP in 1950-51.
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ii. The share of agriculture and allied activities has continuously declined over the years and contributed only 24.2 per cent in the year 2000-01. Agriculture including allied activities, accounted for 14.5 per cent GDP in 2010-11. Agriculture alone accounted for 12.9 per cent, followed by forestry and logging at 1.4 per cent and fishing 0.7 per cent.
iii. The share of services sector has increased from 28 per cent in 1950-51 to 48.5 per cent in 2000-01. For the year 2005-06 the share of services sector is estimated to be 54 per cent of GDP. Thus services sector contributes more than half of the GDP at present.
iv. The share of secondary sector has increased from 14.3 per cent in 1950-51 to 27.3 per cent in 2000-01. Subsequently it declined to 26.1 per cent in 2005-06.
The decline in the share of the primary sector in GDP has taken place as the secondary and tertiary sectors have registered higher growth rate than the primary sector. In fact, the government has attempted to promote the secondary and tertiary sectors. If we look into the sectoral composition of GDP of the developed economies, we find that primary sector contributes less than 5 per cent of GDP.
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Most of the GDP comes from the service sector (about 70-80 per cent). So the developments in the Indian economy can be considered to be a positive aspect. A problem area, however, is the composition of employment.
It is worth mentioning that of the 27.3 per cent share in 2000-01 manufacturing sector contributes 17.2 per cent to the GDP. The remaining 10.1 per cent comes from mining and quarrying (2.3 per cent), electricity, gas and water supply (2.5 per cent) and construction (5.3 per cent). Remember that manufacturing, and electricity, gas and water supply constitute the industrial sector.
In the industrial sector we have both private sector and public sector on the basis of ownership. Very often another distinction is made: organised sector and unorganised sector. In fact, as per the Industrial Act 1951 all the industries employing more than 10 workers if production is through use of power (20 workers if production takes place without use of power) are required to register with the Registrar of Industries.
These industrial units fall under the category registered-sector or organised- sector. The remaining industrial units, mostly small scale, are termed unorganised sector. In the year 2000- 01 the unorganised sector contributed 6 per cent to GDP compared to 11.2 per cent by the organised sector. In the year 1950-51 both organised and unorganised sectors contributed almost equally to GDP at 4.5 per cent each.
The period 1950-75 the average annual growth rate of national income was quite low (around 3.5 per cent). On the other hand, during the period 1975-2000 the average annual growth rate has been around 5.5 per cent. A similar trend is observed in the per capita income of India. Per capita income is defined as national income divided by total population of the country.
It is obtained by subtracting population growth rate from growth rate of national income. Before 1975 growth rate in national income was relatively lower while population growth rate was higher. As a result, per capita income increased at a very low rate (a little over 1 per cent per annum).
On the other hand, after 1975 growth rate in national income was higher while population growth started slowing down. Consequently, per capita income increased at a relatively higher rate. During the period 1992-2002 per capita income has increased at around 4 per cent per annum.
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