The Journal of income and wealth, Vol. 31, No.

2, June-December, 2009

GROWTH AND VOLATILITY OF INDIAN ECONOMY

Ratan kumar Ghosal Dept of Commerce, University of Calcutta
JEL Classification Nos: E01; O47; R11. This study examines the nature of growth and volatility both at the aggregate and at the sectoral level experienced by the economy, since independence. It is found that the post reform period has witnessed relatively faster rates of growth rates of GDP and also of the NSDP (at the state level) including its sectoral composition excepting for agricultural sector and also a sharp reduction in the cross state volatility in the growth rate of NSDP as compared to pre-reform period. The cusum test reveals that the structural break in the behavior of GDP and it sectoral composition has actually occurred in various years since 1997. Further the falling pattern of volatilities in the behavior of GDP and its sectoral composition have started around the mid sixties.
I. INTRODUCTION

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One cannot deny the fact that Indian Economy since independence has gradually been moving towards the achievements of faster rate of growth of GDP after surpassing the long term (1950 75) persistence of Hindu Growth rate. In fact, it has been found that our economy continued to achieve the trajectory of high growth between 1975 and 1990, which eventually culminated in the crisis of 1990 caused by high fiscal deficit vis--vis the current account deficit. Obviously the fall out of the crisis was the switching of the economy from plan to market. Of course during the post reform period and especially during the first five years of new millennium, the growth rate of GDP has reached such a conspicuous level (i.e. 8% - 9% per annum) that India has been recognized as one of the fastest growing economies in the world and India and China together have been treated as an engine of growth of the world economy. Interestingly during the period of half a century, the economy has also experienced remarkable structural transformation in respect of composition of GDP. However, the growth of GDP seems to have not revealed a smooth upward trend over a long period. Rather the growth of economy has been accompanied by tremendous volatility and instability not only at the national level but at the cross state level also. In parallel, it has also been found that in course of structural transformation of our economy the service sector enjoyed a comparative advantage in playing a leading role towards the achievements of remarkable growth rate such that the service sector driven growth has been christened as service sector revolution in our economy (Rakshit, 2007, 2009, Bhaduri, 2008). Given this Macroeconomic scenario of Indian Economy one has to probe deeper into the nature of the growth and its sectoral composition both at national and cross state level since independence. There is a common perception that the overall growth trajectory reveals a divergent pattern. Further since our economy has experienced a remarkable structural transformation, one has to have some idea about the period exactly when this structural transformation has occurred. Moreover it is imperative to examine the nature of the structural break experienced by all the three major sectors of our economy.

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Under this backdrop this study examines the nature of growth and volatility both at the aggregative and as well as the sectoral level experienced by the economy since independence. Further, we also examine whether the conventional perception of divergence holds both at the aggregative as well as sectoral level during the pre and post reform period. In addition to this attempt has been made to determine the exact period when the structural transformation not only at the aggregative level but also at the sectoral level occurred in our economy. This paper is organized as follows. Section II gives data and methodology used in this study; Section III highlights the nature of the growth and its sectoral composition both at the national and cross state level; section IV examine the nature of volatility of growth of GDP and its sectoral composition; Section V presents an analysis of the structural break of GDP and its sectoral composition; Finally section VI gives the concluding observations. II. Data and Methodology.
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This paper is exclusively based on secondary data available from EPW Research Foundation, Various publications of CSO and Reserve Bank of India. To convert the series of data on GDP and SDP and its sectoral composition at constant prices we have used implicit GDP as well as SDP deflators. For computing annual growth rates of GDP and SDP across states we have used the following exponential equation: Yn = Y0 (1 + r)n Where, Yn = GDP/SDP at the terminal period. Y0 GDP/SDP at the base period. = r = Rate of Growth. n = Number of Years

To examine the nature of growth of GDP and its sectoral composition both at national and cross state level we have divided the whole of the period of our study into several phases and computed the phase wise growth rates and volatilities. Further to examine the nature of volatility of growth of GDP, SDP and their sectoral compositions we have used the conventional measure i.e. the Coefficient of Variation (C.V). For determining the period of structural change of GDP and its sectoral composition we have applied a conventional measure i.e. the Cusum Test (Greene, 2006).
III. GROWTH PeRFORMANCe OF OUR eCONOMY AND ITS STATeS.

The dynamic behavior of the level of GDP and its sectoral composition reveal more or less an increasing trend over the period between 1950 51 and 2008 09. Figure 1 below gives an overview of this behavior. Interestingly because of the historical dominance of the primary sector in our economy, contribution of agriculture to GDP has been found to be much higher than that of industry or secondary sector up to 2005 06, beyond which the absolute share of industrial sector in the GDP has surpassed that of the primary sector. Astonishingly, the absolute share of the service sector in GDP lie between that of the two other sectors up to 1971 72 such that it was higher than the contribution of industry but lower than that of agriculture. It is surprising to note that since the mid 1980s, the service sector continued to experience a

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tremendous continuous increase in its absolute share in our real GDP. Obviously it is plausible to say that Indian experience of development goes against conventional theoretical perception of development (Lewis, 1954, Harris & Todaro, 1970). This can safely be ascribed to the faulty planning strategy, which has failed to bring about the mobilisation of resources from primary to secondary and then to the service sector. As a result we find an almost gloomy picture of industrialization process of our economy. The table: 1 gives us a clear overview of the relative shares of the three major sectors in GDP which would also give us an idea about the nature of the structural transformation of our economy since independence.
Figure 1
Components of GDP in India 4000000

GDP, Agriculture and allied activities, Industry, Services

3500000 3000000 2500000 2000000 1500000 1000000 500000 0 1940 1960 1980 Year 2000 2020
Services Agriculture and Allied Activities Industry

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GDP

Table:1 Sectoral Contribution to GDP (at factor cost at constant 1999 2000 Prices)
Period 1950 -1951 1960 -1961 1970 -1971 1980 -1981 1990 -1991 1999 - 2000 2008 - 2009 Agricultural and Allied Activities 55.28 50.81 44.31 37.92 31.37 24.99 16.95 Industry 10.65 13.18 15.46 17.45 19.80 19.60 18.50 Services 34.07 36.01 40.23 44.63 48.83 55.40 64.55

Source: Computed from EPW Research Foundation Data base.

It is evident that the agricultural sector has experienced a steady fall in its relative contribution to GDP from 55.28% in 1950-51 to 31.37% in 1990-91 and further to 16.95% in 2008-09 following the usual process of development. Conversely, the industrial sector has revealed a mild increasing trend in its relative contribution to GDP from 10.65% in 1950-51 to 19.8% in 1990-91 followed by a declining trend up to 2008-09, which obviously goes against the conventional theoretical wisdom of development. Now, if one looks at the service sector then it is really surprising to note that there has been a tremendous increase in its relative contribution

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from 34.07% in 1950-51 to 48.83% in 1990-91 and further to 64.55% in 2008-09. Surprisingly about 70% of this contribution is generated from informal service sector (Bhaduri, 2008). Now if we look at the dynamics of the sectoral contributions, the table -2 clearly brings out the fact that the period following the economic reforms (1991-2009) has given a boost to the service sector such that its relative contribution to our GDP has increased by 32.19 percentage point. Even in the first decade of the new millennium the relative contribution of the service sector to GDP has witnessed a higher rate of growth by 15.02-percentage point. Surprisingly the relative contribution of the agricultural sector to GDP has also witnessed a remarkable fall by 45.96-percentage point during the post reform period. So it is plausible to conclude that the reform process has made a major contribution towards bringing about a radical structural transformation of our economy so that we have been able to experience a service sector revolution. A detailed analysis of the demand and supply side factors which are responsible for the service sector revolution has been made by Rakshit (2007, 2008).
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Table:2 Percentage point change in relative contribution of the components of GDP of India
Period 1951-1961 1961-1971 1971-1981 1981-1991 1991-2000 2001-2009 1991-2009 Agrl & allied -8.08611 -12.7928 -14.4211 -17.2732 -20.3379 -29.0498 -45.9675 Industry 23.75587 17.29894 12.87193 13.46705 -1.0101 -7.45373 -6.56566 Services 5.69416 11.71897 10.93711 9.41071 13.45484 15.02138 32.19332

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Now as far as the annual growth rate of real GDP and its sectoral composition are concerned we have computed decadal growth rates also for the period preceding the reform process and for the post reform period. The computed annual growth rates of GDP and that of these major sectors are given in table: 3
Table: 3 Growth Rate of GDP and its components in India
Period 1951-1961 1961-1971 1951-1971 1971-1981 1981-1991 1951-1991 1991-2000 2001-2009 1991-2009 1951-2009 GDP 3.901 3.724 7.77 3.088 5.375 5.327 5.127 6.002 11.913 4.768 Agrl & allied 3.029 2.313 5.411 1.495 3.395 3.257 2.766 2.426 5.233 2.654 Industry 6.138 5.396 11.865 4.34 6.716 6.946 5.023 5.188 11.157 5.771 Services 4.478 4.879 9.575 4.165 6.327 6.615 6.463 7.495 15.079 5.928

We have actually a mixed picture on the decadal annual growth rates of GDP and the three major sectors. While the annual growth rate of GDP hovers between 3.9% and 6.0%, that of agricultural sector lies between 1.5% and 3.03% per annum over the period of our study. Conversely the decadal annual growth rates of industry hovers between 3.34% and 6.95% and that of service sector lies between 4.123% and 7.5% over the six decades. But if we analyze

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growth rates of GDP and its major sectors during the pre and post reform period, then we find a tremendous increase in the growth rates during the post reform period (1991-2009) as compared with that in the pre reform period (1951-1991). The annual growth rate of GDP at factor cost was 5.33% followed by agricultural growth rate of 3.26% and the industry and service sector growth rates of 6.95% and 6.62% respectively. But during the post reform period the service sector has experienced a sharp increase in its annual growth rates to 15.08%, followed by industry (11.16%) and agriculture 5.23% respectively. The poor base level of GDP and its sectoral composition in 1991 might have vitiated the computed growth rate. However, one cannot deny the fact that the reform process has given a boost to the economy, the outcome of which has been reflected in terms of the break through in service sector growth during the post reform period. Cross state performance of growth of NSDP and its components We have also computed the growth rates of NSDP (at factor cost) and its sectoral compositions across the states for each decade and also for the pre and post reforms period, the estimates of which are given in the appendix tables 1-4. The decadal annual growth rates NSDP reveal a mixed picture over the period and it also reveals a tremendous inter-state variability measured in terms of the time profile of the values of coefficient of variation. Similarly the growth performance between the pre and post reform period also reveals a sharp contrasting scenario across the states. The appendix table 1 clearly reveals that the states excepting Bihar, UP, MP, AP, and Rajasthan have achieved an increasing trend in their rates of growth of NSDP during the five decades since 1961.In fact the above states have registered lower rates of growth of their NSDP during the first decade of economic reform. It seems these states could not initially adjust to reap the benefit of the market. Further the withdrawal of the public sector from development process as an implication of the IMF-World bank dictated policy of economic reform seems partly to be the explanation of the fall in growth rates of NSDP of the states. Another striking feature of the growth rates of NSDP as is discernable from the Appendix table- 1 is that during the post reform period almost all the states have registered very high growth rates in varying degrees as compared to the growth rates achieved during the pre-reform period and also to the overall period of our study. So, it is plausible to conclude that the reform process has given a tremendous boost to the growth performance of all the states such that the states have been able to reap the benefits of the market in varying degrees. It is no less note worthy that the cross state variability in the growth rates of the states as is revealed by the time profile of the C.Vs which were very high during the sixties and the seventies and have gradually reduced overtime. Surprisingly the in the post reform period this has witnessed sharp reduction in the cross state volatility in the growth rate of NSDP also. So, one can say that the reform process might have helped reducing the inter-state disparity in economic growth. As far as the growth rates of the major three sectors are concerned the Appendix Table 2 gives a mixed picture on the growth experienced by the states in their agriculture and allied sector. No definite conclusion on the performance of decadal as well as pre and post reform agricultural growth can be drawn. In fact, the states with high degree of application of new seed fertilizer technology during sixties have achieved higher growth rates in agriculture, but the states with delayed application of new technology have achieved higher growth rates during 1970s and 1980s. However, there has been sluggishness in the growth rates of agriculture in almost in all the states during the 1990s coupled with a bit improvement in the first decades of

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the new millennium. So, one can plausibly conclude that liberalization of agricultural sector after the formation of WTO has not produced favorable impact on the growth of agriculture across the states of India. The time profile of C.V also reveals that the cross state variability in the growth rates of agriculture was very high during the pre-reform period and it has fallen during post reform period albeit it is still very high. On the other hand as far as the industrial sector is concerned the Appendix Table 3 clearly brings out the fact that all the states have achieved growth of NSDP originating from industry in varying degrees with some states like AP, HP, Gujarat, Karnataka etc. achieving high growth rates and some achieving moderate growth rates and very few states like WB Orissa, achieving lower growth rates. We also find that the first decades of reform has registered sluggishness in the growth rates of industrial production across all the states excepting Assam Gujarat and to some extent WB. However, it is worth noting that our economy has experienced industrial stagnation during 1965-1979. The estimates of industrial growth rates during pre and post reform period also reveal (see appendix Table 3) that some states have performed better during the post reform period and some have performed better during the entire pre-reform period. It seems to be the outcome of the variability in the access to market economy on the part of the states. The time profile of C.V of the growth rates of NSDP originating from the industrial sector reveal a very striking feature that the cross-state variability in the growth rates of the industrial; sector have been increased remarkably during the post reform period. On the other hand as far as the cross-state growth of service sector in concerned Appendix Table 4 clearly brings out the fact that almost all the states have experienced tremendous increase in the growth of service sector in varying degrees. Surprisingly the post reform period has witnessed a tremendous break through in the growth rates of the service sector in almost all the states as compared to their growth performance of service sector during the pre-reform period. It is further no less noteworthy that the cross state variability in the growth rates of service sector as is evident from the time profile of C.V has declined remarkably during the post reform period. So it is plausible to conclude that the reform process in India has not only helped bring about the service sector revolution that we have experienced but also reducing inter-state disparity in the growth rates of service sector tremendously. Further one can also say that the reform process has led to the faster structural transforming our economy in favour of the service sector through the increase in the service intensity in production and the demand for and supply of services.
IV. NATURe OF STRUCTURAL CHANge AND VOLATILITY OF INDIAN ECONOMY

It is well known that any economy whether it is a mixed or a capitalistic economy is always subject to the volatility of its real GDP, employment, price level etc caused not only by the endogenous disturbances created out of the imbalances between the aggregate demand and supply of goods and services but also by the exogenous shocks generated from out side the economy and the erratic natural calamities etc. The trajectory of the growth experience of our economy not only at the national level but at the cross-state level also reveals a high degree of volatilities. In this section we examine the nature of the volatilities in the level of real GDP and the real NSDP at the cross-state level for all the three major sectors in terms of the computed cross-time C.Vs and try to explain the proximate factors behind the same. The Table 4 gives the values of C.V of GDP and its sectoral

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composition for the three phases. It is interesting to note that the volatility of GDP over the entire period of our study was very high (C.V. =82.95%) but it was relatively much lower during the pre reform period (C.V=43.95%). Surprisingly the post reform period during which we have switched over to market economy witnesses a sharp fall in the volatility of our GDP. If we look at the sectoral composition of our GDP then also we find the same scenario to persist. Astonishingly, the GDP generated from the Industry and service sectors have experienced very high degree of volatility both for the overall period and for the pre reform period.
Table 4 Coefficient of variation of GDP and its components in India
Period 1950-512008-09 1950-511989-90 1990-912008-09 GDP 82.95 43.95 36.34 Agriculture&Allied 45.29 27.48 16.03 Industry 90.52 58.64 34.17 Services 102.63 54.48 45.48

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However it is once again surprising that both of these two sectors have experienced a tremendous fall in the degree of volatility in respect of their performance during the post reform period where the susceptibility towards fluctuation of output is very high. Interestingly enough the degree of volatility of the performance of the service sector is found to be much higher (C.V=45.48%) than that of the other two sectors viz industry (C.V=34.17%) and agriculture (C.V=16.03%) during the post reform period. It seems that the persistence of the high degree of volatility of the service sector during the post reform period may be due to the cross time fluctuation of the process of outsourcing of the demand for service by the industrial and agricultural enterprises. Further it might be the result of the volatility of domestic demand for services generated out of the government consumption expenditure and the private consumption expenditure. It is no less important that the sluggishness in the growth of the agriculture and the industrial sectors in our economy might have produced tremendous adverse impact on the demand for services.
Table 5 Volatility of NSDP at factor cost at the state level
Period Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Karnataka Kerala M.P. Maharashtra Orissa Punjab Rajasthan Tamil Nadu U.P. West Bengal 1960-61 to 2007-2008 74.99 67.20 58.48 81.25 87.34 77.51 106.23 71.16 65.48 83.59 48.99 72.22 77.75 74.11 62.92 77.04 1960-61 to 1990-91 48.39 40.60 34.10 58.22 61.62 46.66 90.53 33.87 43.36 51 17.19 54.69 51.09 41.64 41.21 32.77 1990-91 to 2007-2008 36.04 33.06 37.16 45.94 43.52 39.96 45.19 41.73 29.56 41.3 32.36 31.16 36.53 36.69 32.37 44.27

If we look at the state level then the Table 5 clearly brings out the fact that almost all the states have experienced very high volatility of their NSDP over the period between 1960-61 and

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2007-08 in varying degrees. The values of C.V are found to be very high for some states like Karnataka, Maharastra, A.P etc and for some states like Bihar, Orissa, U.P it is relatively low. The phase wise values of C.V clearly reveal that the volatilities of NSDP across states are lower in the pre reform period as compared to the values for the overall period. It is again interesting to note that during the post reform period almost all the states excepting W.B; Kerala; Bihar and Orissa have experienced tremendous fall in the volatility of their NSDP and the rate fall is much faster in the post reform period. However there is substantial inter-state variability of the degree of volatilities of NSDP and its rate of reduction both for the pre and post reform periods. So one can plausibly conclude that the gradual switchover to the market i.e the policy of liberalisation has immensely helped reducing the degree of volatility of the growth of our economy and its states. The estimates of the sectoral volatility across the states are given in the appendix tables 5, 6, and 7. As far as the agricultural sector is concerned the appendix table -5 clearly reveals that the degree of volatility of its performance is relatively much higher in some states like Gujarat, Rajasthan, Harayana, Punjab, West Bengal and very low in some states Orissa, Bihar and Kerala over the period of our study. However if we consider the phase wise C.Vs then the values are found to be relatively lower during the pre reform period as compared to the overall period and it is much lower in almost all the states excepting W.B and Orissa during the post reforms period. So we find that the agricultural sector has also experienced lower degree of volatility during the post reforms period and the rate of fall in the same is also much faster during the same period. The volatility of the performance of the industrial sector across the states also reveal almost same scenario both for the overall period and in the pre and post reform period (see appendix table -6). As far as the service sector is concerned we once again find the same scenario including the faster rates of decline of the volatilities of it s performance across the states during the post reforms period. Surprisingly, in case of service sector the degrees of volatility remain very high during the post reforms period as compared to other two sectors. This clearly indicates variability of the access to the market economy on the part of the states. One can therefore conclude that the reform process has been able to bring about a reduction in the volatilities of GDP and its sectoral composition not only at the national level but also at the cross-state level.
V. STRUCTURAL CHANge OF GDP AND ITS COMpONeNTS

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It has already been found in the previous sections that Indian economy has experienced a tremendous structural transformation over the period of our study. So one has to determine the period exactly when the structural break in the trend in GDP ant its sectoral composition has taken place. We have tested this by using a very simple test known as cusum test. The econometric results of this test especially the estimated trend equations are given in the Appendix. The trend equations for GDP and its three sectors which are given in terms of the regression results-1-4 in the appendix indicate that both the constant and the regression coefficients are positive and highly significant. The respective F values are also highly significant indicating the good fit of the model. Now as far as the structural change of GDP is concerned we have applied the cusum test on the basis of the assumption that the timing of the break is unknown. The plotting of the cusum values as is given in the figure -2 clearly indicates that the trend line of cusums crosses the upper error bound at the scale value of 54

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which corresponds to the year 2003. So we can say that the structural break of our GDP has occurred in 2003 i.e. since the inception of the reform process.
Figure 2 Structural Change of GDP
Cusum

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Observ.# Plot of Cumulative Sum of Residuals

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Now as far as the structural break in the agricultural and allied sector is concerned the figure-3 clearly exhibits that the plot (red marked) showing the cumulative sum values of the residuals crosses the upper error bound at the scale value of 48 which corresponds to the year 1997.So we can say that the structural change in the agricultural sector has occurred in 1997. On the other hand figure -4 shows the nature of the structural change in the industrial sector. .It is evident from figure -4 that the plot of the cumulative sum of the residuals crosses the upper error bound at the scale value of 52 which corresponds to the year 2001. So we can say that the structural break in the industrial sector has actually occurred in 2001.
Figure 3 Structural Change in Agricultural and Allied Sectors
Cusum

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Figure 4 Structural Change in Industry

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Finally as far as the service sector is concerned it is discernable from Figure 5 that the line showing the plot of the cumulative sum of the residuals crosses the upper error bound at the scale value of 55 which corresponds to the year 2004. So we can say that the structural break in the service sector has occurred in 2004.Further the Appendix Figures I-IV give the plot of the cumulative sum of the squared of residuals for showing the nature of the volatilities of the behavior of GDP and its sectoral composition. It follows from App. figure-I that the line showing the plotting of the cumulative sum of squared residuals stray outside the lower error bound between the scale values 14 (1963) and (2006) which indicates that the degree of volatility/instability of GDP has fallen between 1963 and 2006. Similarly appendix Figure II indicates that for the agricultural sector the same has happened between 1964 and 2005. For industry and service sector the same pattern of fall in the degree of volatility /instability have been found to happen between 1963and 2006 and between 1963 and 2007 respectively. On the whole we find that the volatilities in the behavior of GDP and its sectoral composition has been started falling since the mid 60s which is also confirmed be the time profile of C.Vs of the variables.
Figure 5 Structural Change in Service
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VI. CONCLUDINg OBSeRvATIONS

This study examines the nature of growth and volatility both at the aggregative and as well as the sectoral level experienced by our economy since independence. We have also tried to examine the exact period when the structural transformation not only at the aggregative level but also at the sectoral level occurred in our economy. This study is based on the secondary data available from the EPW research foundation, C.S.O and Reserve Bank of India. We find that Indian Economy has undergone a tremendous structural transformation over the period of our study. It is found that the post reform period has witnessed relatively faster rates of growth rates of GDP and also of the NSDP (at the cross-sate level)including its sectoral composition excepting for agricultural sector and also a sharp reduction in the cross state volatility in the growth rate of NSDP as compared to pre-reform period. We also find that the reform process has not only given a tremendous boost to the growth performance of our economy at the aggregative level as well as at the cross-state level but it has also helped reducing the interstate disparity in economic growth. Moreover we find a radical structural transformation of our economy towards a service sector revolution to take place during the post reforms period. The cusum test reveals that the structural break in the behavior of GDP and it sectoral composition has actually occurred in various years since 1997.Further the falling pattern of volatilities in the behavior of GDP and its sectoral composition have started around the mid sixties. The analysis of the behavior of the GDP, NSDP and its sectoral composition at the national as well as at the cross-state level clearly indicates that our economy has been able to reap the benefits of the market economy. References
Bhaduri, Amit (2008): Predatory Growth, Lecture delivered at the Dept. of Economics, University of Calcutta, Kolkata, and March28. Greene, William H (2006) : Econometric Analysis, Pearson Education, Dorling Kindersley(India) Pvt Ltd, New Delhi. Rakshit,Mihir (2007): Services- led Growth: Indian Experience Money and Finance,February. (2009): Macroeconomics of Post Reform India,Oxford University Press,New Delhi.

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Table 1 Annual Compound Growth rate of NSDP (at factor cost) (%)
States Andhra Pr Assam Bihar Gujrat Hariyana Himachal Pr Karnatak Kerala Madhya Pr Maharashtra Orrisa Punjab Rajastan Tamilnadu Uttaar Pr West Bengal C.V Period 1961-71 1971-81 1981-91 1991-01 2001-08 1961-91 1971-91 1991-08 1961-08 2.92 3.13 7.06 3.80 7.65 4.35 5.08 5.37 4.72 3.07 3.36 4.78 5.89 2.22 3.73 4.07 4.36 3.96 1.94 2.74 4.26 2.39 8.18 2.98 3.50 4.74 3.61 4.53 10.26 0.99 5.80 9.25 5.19 5.53 7.20 5.92 5.94 4.53 6.58 4.75 8.71 5.68 5.55 6.36 5.93 5.81 3.04 5.60 5.14 6.92 4.81 4.31 5.87 5.19 4.22 3.12 13.69 7.62 6.67 6.91 8.27 7.23 7.02 3.98 2.28 3.73 5.07 8.27 3.32 3.00 6.38 4.42 1.70 3.34 6.01 3.65 5.36 3.67 4.66 4.35 3.91 2.92 4.40 6.26 5.64 7.75 4.51 5.32 6.50 5.23 -1.72 1.88 2.48 3.94 6.46 0.86 2.18 4.97 2.33 5.13 4.60 5.73 4.64 4.94 5.15 5.17 4.76 5.01 4.96 0.90 7.85 4.61 6.66 4.53 4.32 5.45 4.86 2.51 1.72 6.31 6.11 5.65 3.49 3.99 5.92 4.36 2.51 2.95 5.30 2.75 7.18 3.58 4.12 4.55 3.93 2.19 3.13 3.82 7.01 6.97 3.04 3.47 6.99 4.45 58.03 59.89 48.96 28.93 25.03 33.23 30.26 17.76 23.30

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Annual Compound Growth rate of Agriculture and Allied Activities (at factor cost) (%)
States Andhra Pr Assam Bihar Gujrat Hariyana Himachal Pr Karnatak Kerala Madhya Pr Maharashtra Orrisa Punjab Rajastan Tamilnadu Uttaar Pr West Bengal C.V 1961-71 1971-81 1981-91 1991-01 2.10 1.32 3.49 2.59 1.63 2.83 1.16 2.64 0.94 1.14 2.45 -0.85 5.12 8.74 -2.48 0.69 5.33 3.17 5.20 1.33 5.70 2.19 2.81 -0.14 3.83 0.38 10.87 6.62 1.93 0.99 2.52 -0.90 1.06 1.05 5.09 -1.13 -1.28 3.96 4.31 3.01 -3.06 1.28 -2.09 1.68 4.70 4.23 5.36 3.17 6.09 -1.28 7.18 -1.45 0.13 -1.88 3.95 3.85 1.61 1.94 2.78 1.66 1.62 4.39 0.39 5.85 111.66 116.04 99.27 134.85 Period 2001-08 1961-91 1971-91 1991-08 1961-08 4.77 2.30 2.40 3.48 2.72 0.80 1.87 1.99 1.88 1.87 3.76 1.51 1.79 1.02 1.33 15.57 3.69 2.98 6.57 4.72 3.43 4.56 4.18 2.19 3.70 2.88 3.56 2.50 1.09 2.66 -3.92 4.94 5.49 2.15 3.92 2.07 1.81 1.75 0.31 1.27 5.31 2.38 3.05 1.47 2.05 3.68 2.30 4.14 3.28 2.65 4.59 -1.31 -0.42 2.87 0.18 2.52 4.76 4.79 2.90 4.09 6.60 3.93 2.86 1.79 3.15 0.02 0.71 1.00 2.25 1.26 2.62 2.11 2.36 2.05 2.09 3.85 2.12 2.37 5.02 3.16 109.27 63.18 53.95 61.61 47.86

Table 2

Growth and Volatility of Indian Economy

25

Annual Compound Growth rate of Industry (at factor cost) (%)

States Andhra Pr Assam Bihar Gujrat Hariyana Himachal Pr Karnatak Kerala Madhya Pr Maharashtra Orrisa Punjab Rajastan Tamilnadu Uttaar Pradesh West Bengal C.V Period 1961-71 1971-81 1981-91 1991-01 2001-08 1961-91 1971-91 1991-08 1961-08 5.58 5.60 11.06 2.98 6.69 7.38 8.30 4.49 6.33 6.73 3.00 3.75 11.57 1.55 4.48 3.37 7.33 5.50 6.25 3.81 4.13 -1.07 2.96 4.72 3.97 0.57 3.20 4.24 10.27 5.07 5.40 9.55 6.49 7.63 7.09 6.71 8.69 4.55 9.85 3.36 8.52 7.67 7.17 5.45 6.86 14.07 -3.01 17.44 8.37 11.38 9.12 6.73 9.60 9.29 5.62 10.41 11.86 4.93 7.77 9.26 11.13 6.09 8.10 6.97 1.41 3.91 2.64 6.34 4.07 2.65 4.15 4.10 7.71 6.06 8.70 3.71 2.34 7.48 7.37 3.14 5.89 5.65 5.17 5.63 2.60 6.06 5.48 5.40 4.01 4.95 2.85 1.44 8.24 3.94 4.91 4.14 4.78 4.34 4.21 6.36 4.71 10.29 2.99 4.68 7.10 7.46 3.68 5.85 1.88 4.50 9.38 8.23 6.01 5.21 6.91 7.31 5.97 6.19 4.11 5.52 5.32 2.28 5.27 4.81 4.06 4.83 5.50 5.93 8.19 0.57 6.24 6.53 7.05 2.86 5.19 1.61 0.99 4.59 5.83 3.46 2.38 2.77 4.85 3.27 48.53 76.79 46.50 69.17 48.94 31.54 37.39 43.84 28.99

Table 3

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Annual Compound Growth rate of Services (at factor cost) (%)

States Andhra Pr Assam Bihar Gujrat Hariyana Himachal Pradesh Karnatak Kerala Madhya Pr Maharashtra Orrisa Punjab Rajastan Tamilnadu Uttaar Pr West Bengal C.V Period 1961-71 1971-81 1981-91 1991-01 2001-08 1961-91 1971-91 1991-08 1961-08 3.71 4.97 9.03 4.88 9.39 5.88 6.98 6.72 6.18 5.60 4.64 9.83 6.71 3.20 6.67 7.21 5.25 6.15 2.26 5.08 6.58 5.85 11.03 4.63 5.83 7.96 5.82 4.01 11.93 1.26 8.44 6.64 5.64 6.47 7.69 6.38 5.95 7.21 6.82 8.86 11.42 6.66 7.01 9.91 7.82 4.61 5.34 6.28 7.41 7.23 5.41 5.81 7.33 6.10 4.48 3.86 17.69 9.27 10.56 8.50 10.56 9.80 8.97 5.75 4.03 4.67 8.70 10.11 4.82 4.35 9.28 6.41 1.10 6.39 5.82 7.99 6.33 4.41 6.11 7.30 5.45 4.87 4.12 7.73 8.06 9.29 5.56 5.91 8.56 6.64 1.07 3.51 7.01 5.64 7.86 3.84 5.25 6.55 4.81 5.36 5.09 4.32 7.22 7.06 4.92 4.70 7.15 5.73 3.78 3.59 8.21 8.20 7.03 5.17 5.88 7.72 6.09 3.74 3.40 8.11 7.37 8.31 5.06 5.73 7.76 6.03 3.63 3.75 7.54 4.54 10.14 4.96 5.63 6.81 5.62 3.12 2.91 6.43 8.05 9.11 4.14 4.65 8.49 5.69 38.02 43.56 46.72 19.52 25.43 21.22 23.56 15.87 15.49

Table 4

26

THE JOURNAL OF INCOME AND WEALtH

Table 5 Coefficient of Variation of NSDP in Agriculture and Allied Activities at factor cost
Period Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Karnataka Kerala M.P. Maharashtra Orissa Punjab Rajasthan Tamil Nadu U.P. West Bengal 1960-61 to 2007-08 42.25 31.64 20.66 66.93 54.36 34.97 72.76 21.68 37.07 47.66 16.61 58.14 47.31 31.89 34.28 51.56 1960-61 to 1990-91 21.92 21.68 17.74 52.49 49.88 32.27 61.14 18.89 28.17 30.35 16.5 50.95 42.67 14.82 24.35 27.91 1990-91 to 2007-08 23.84 14.82 14.63 49.97 14.08 10.89 24.35 8.96 14.15 21.87 18.73 18.86 17.03 14.73 13.89 30.62

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Table 6 Coefficient of Variation of NSDP in Industry at factor cost

Period Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Karnataka Kerala M.P. Maharashtra Orissa Punjab Rajasthan Tamil Nadu U.P. West Bengal 1960-61 to 2007-08 84.95 87.19 39.34 90.29 90.8 124.95 104.92 57.44 74.77 67.98 69.63 80.36 95.81 67.51 68.94 60.93 1960-61 to 1990-91 82.88 47.04 45.15 66.3 80.61 101.32 104.49 39.7 75.14 56.91 48.16 81.1 63.46 54.49 73.3 25.42 1990-91 to 2007-08 28.1 52.65 12.37 43.75 38.15 62.28 42.12 27.71 19.1 24.63 27.65 21.73 43.84 25.34 21.61 32.89

Growth and Volatility of Indian Economy

27

Table 7 Coefficient of Variation of NSDP in Services at factor cost

Period Andhra Pradesh Assam Bihar Gujarat Haryana Himachal Pradesh Karnataka Kerala M.P. Maharashtra Orissa Punjab Rajasthan Tamil Nadu U.P. West Bengal 1960-61 to 2007-08 94.58 91.66 95.84 86.77 115.92 92.86 128.9 100.57 91.17 103.28 84.24 87.55 99.54 95.48 89.97 97.41 1960-61 to 1990-91 69.07 73.12 54.98 62.53 71.53 57.39 119.55 47.98 54.11 60.86 48.52 52.04 61.43 59.04 57.1 46.33 1990-91 to 2007-08 45.13 38.54 55.75 47.5 64.27 47.64 61.26 57.71 47.97 53.04 42.6 48.06 49.63 49.01 48.38 53.85

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Appendix Figure 1 Nature of volatility of GDP During 1950-51to 2008-09

1.2 .9 .6 .4 .1 -.2 CusumSqd

12 24 Observ.# Plot of Cumulative Sum of Squared Residuals

36

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Appendix Figure 2 Nature of volatility of GDP originating from Agriculture and Allied During 1950-51to 2008-09
1.2 .9 .6 .4 .1 -.2 CusumSqd

12 24 Observ.# Plot of Cumulative Sum of Squared Residuals

36

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28

THE JOURNAL OF INCOME AND WEALtH

Appendix Figure 3 Nature of volatility of GDP originating from Industry During 1950-51 to 2008-09
1.2 .9 .6 .4 .1 -.2 CusumSqd

12 24 Observ.# Plot of Cumulative Sum of Squared Residuals

36

48

60

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Appendix Figure 4 Nature of volatility of GDP originating from Services During 1950-51 to 2008-09
CusumSqd

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1.2 .9 .6 .4 .1 -.2

12 24 Observ.# Plot of Cumulative Sum of Squared Residuals

36

48

60