Growth of National Income and Per Capita Income

Growth of National Income and Per Capita Income

In India, the national income estimates are prepared by the Central Statistical Organisation (CSO) at 1993-94 prices which are now available for the period 1950-51 to 2003-04. Thus we have comparable data for a fairly long period spanning five decades. Now the CSO has introduced a new series with base year 1999-2000. However, in this series, estimates of national income are available only for six years (from 1999-2000 to 2004-05). According to the old series the net national product of India at 1993-94 prices was Rs. 1,32,379 crore in 1950-51. Since then it has grown at a modest rate of 4.35 per cent per annum in the five decades of the economic planning and stood at Rs. 12,66,005 crore in 2003-04.
Planwise study of growth of real income in India, however, does indicate an encouraging fact that although the annual rate of increase in national income was pretty low at 3.4 per cent per annum during the first three decades of economic planning, it has lately risen to 5.6 per cent per annum since 1980-81.
The target of growth in national income in the First Plan was very modest. As compared to target performance of the economy during the First Plan period might look extremely good (the national income had risen at a compound rate of 3.6 per cent per annum as against the target of 2.1 per cent per annum). An encouraging feature of growth during the First Plan period was that the increase in the national income was progressive and steady.
Bolder targets were fixed in the Second Plan in respect of national income. It was contemplated that national income would increase at the rate of 4.5 per cent per annum at constant prices. This, however, could not be realized and the rate of increase in national income was only 4.1 per cent per annum leaving a gap of 0.4 per cent per annum between the target and actual performance. Moreover rise in national income was not achieved at a steady rate.
The Third Plan was comparatively a bigger plan from the point of view of investments and targets. But the average increase in national income during the Third Plan period turned out to be only 2.5 per cent per annum. During the next three years long-term planning remained suspended and the national income trends were clearly influenced by the fluctuations in the harvest.
Though the approach to the Fifth Plan was claimed to be different from that of the earlier Plans, its basic framework was as much growth oriented as of the earlier Plans. Therefore, it is not unfair to judge the performance of the economy in this period also in terms of rise in national income. The Fifth Plan had contemplated an increase in the gross domestic product of the order of 4.4 per cent per annum. The national income, however, recorded a growth rate of 4.9 per cent per annum which was certainly impressive considering the past record. During the Fifth Plan period though national income target was surpassed.
The performance of the economy during the Sixth Plan period does not look at all satisfactory, as the national income rose in this period at a modest rate of 3.4 per cent per annum only. Further, even this growth was mainly the result of good agricultural performance and a rapid growth in the services sector. The rate of growth of income generated in manufacturing and mining sector was well below the target and was unstable from year to year.
During the Seventh Plan period gross domestic product was projected to increase at the rate of 5 per cent per annum. However, the economy performed extremely well and the national income rose at an annual rate of 5.8 per cent. During the Seventh Plan period almost all major sectors registered satisfactory growth rates.
There was acceleration of national income growth in the decade of 1980s. The economy had registered a low rate of growth during the late 1960s and 1970s. Therefore some economists characterise the decade of 1980s as the decade of economic, buoyancy and recovery.
In the first two years following the Seventh Plan period the rate of increase in national income of the 1980s could not be sustained. In these years the country passed through a phase of major economic crisis.
During the five years of the Eighth Plan, that is, from 1992-93 to 1996-97, the national income rose at the rate of 6.7 per cent per annum which is definitely encouraging. The average annual rate of increase in national income during the Ninth Five Year Plan (1997-2002) is estimated at 5.5 per cent which is significantly lower than the growth rate achieved during the Eighth Plan. The actual growth rate during the Ninth Plan is also lower than the Plan target of 6.5 per cent per annum.
Advocates of economic reform have repeatedly claimed that the decade of 1990s has witnessed India’s transition to a new higher growth trajectory. It has been argued that despite the fiscal compression, the Indian economy is firmly accomplishing a growth rate of over 6 per cent. Optimistic projections based on this perception have even suggested that the economy could easily achieve an 8 per cent rate of growth during the Tenth Plan period.