Changes in the Contribution of the Primary Sector to India's National Income
Economic development is often marked by shifts in the composition of national income, with shifts from primary to secondary and tertiary sectors being a hallmark of growth. India, like many developing nations, has experienced significant changes in the relative importance of its primary sector over the past seven decades. This article delves into the patterns and size of the contributions of the primary sector to India's national income, examining the trends and shifts that have occurred since independence.
Structural Changes in National Income in India
The composition of national income, often referred to as structural changes, refers to the changes in the relative significance of different sectors of an economy. India's economy is traditionally divided into three broad sectors: the primary, the secondary, and the tertiary. The primary sector primarily includes agriculture, forestry, and fishing, while the secondary sector encompasses industries such as manufacturing, and the tertiary sector includes services ranging from trade and transportation to finance and education.
The Decline of the Primary Sector
After India's independence, there was a marked decline in the share of the primary sector in GDP. From 59% in 1950-51, the primary sector's share dropped to around 17% by 2009-10. Within the primary sector, the share of agriculture and allied activities has similarly declined, from 57% to around 15% over the same period. It's important to note that while the percentage share of agriculture in the national income has decreased, the total volume of agricultural production has actually increased. This growth has slowed proportionally due to faster industrial output and service sector growth.
Growth in the Secondary and Tertiary Sectors
The secondary sector, which includes both registered manufacturing and construction, has doubled its share of GDP, rising from 13% in 1950-51 to 24.5% in 1990-91. However, this increase has largely been maintained around 24 to 26% since 2000-01. The share of registered manufacturing specifically has increased from about 4% in 1950-51 to over 12% in 2009-10. Within the secondary sector, the percentage share of manufacturing, especially registered manufacturing, has been rising, while that of gas, electricity, and water supply has remained almost constant.
The tertiary sector, which includes services like trade, hotels, transport, and communication, has grown substantially since 1950-51, with its share in GDP increasing from 28% to over 57% in 2009-10. Trade, hotels, transport, and communication are the largest sector contributing about 22.5% to GDP. The financial sector has been the fastest-growing sector since independence, especially after the nationalisation of banks in 1969 and 1980.
Economic Patterns and Phases
The economic development of India can be divided into phases, each characterized by changes in workforce distribution among the primary, secondary, and tertiary sectors. The first phase, representing traditional civilizations, saw the primary sector as dominant with about 65% of the workforce. The second phase, the transitional period, entered with more machinery in the primary sector, increasing the workforce requirements in the secondary sector, and also marked the emergence of the tertiary sector. The third phase, the tertiary civilization, saw the primary and secondary sectors dominated by automation, reducing workforce numbers, and increasing the demands of the tertiary sector, which now represents 70% of the workforce.
Public and Private Sectors
Following independence, India adopted a mixed economy with a substantial role for the public sector. Over time, the public sector's share in GDP has risen, peaking at around one quarter by 1990-91 and standing at 23.0% in 2004-05. Since the introduction of the New Economic Policy in the 1990s, the share of the public sector has remained largely stagnant and is expected to decrease as the government pursues privatization and globalization policies.
Conclusion
The shift in the contribution of the primary sector to India's national income reflects broader economic and social changes. While the primary sector's share has declined, it continues to play a crucial role in the economy, especially with an increasing focus on sustainable agricultural practices, the green economy, and the integration of new technologies. The growth of the secondary and tertiary sectors has been robust, but challenges remain in effective labor reallocation, especially in the face of slower growth in the secondary sector.
Understanding these changes is crucial for policymakers, businesses, and investors to make informed decisions that align with the evolving economic landscape. As India continues to grow and develop, it's imperative to chart a course that maximizes the benefits across all sectors, ensuring a balanced and sustainable economic trajectory.