ECONOMICS II RESEARCH PAPER

TRENDS IN NATIONAL INCOME OF INDIA

FROM 1990-91 TO 2010-11

BA LLB (HONS) [2018-2019]

SUBMITTED TO: SUBMITTED BY:

MR. SAPTARSHI MITRA SARIKA VENKATESH

RAVINDRA S

DATE: SURYA TEJA MP

PRIYANKA RAJA REDDY

SIGN:
CONTENTS

1. ABSTRACT
2. INTRODUCTION
3. OBJECTIVES
4. METHODOLOGY
5. ESTIMATION
6. ANALYSIS
7. CONCLUSION
8. REFERENCES
ABSTRACT

The National Income Committee in its first report wrote, “A national income
estimate measures the volume of commodities and services turned out during
a given period, without duplication.” The national income thus comprises of all
firms and factories, shops and markets, banks and financial agencies, offices
and other institutions or in brief all the occupations where people work and
produce either goods or services and use the income thus earned for
consumption, saving and investment. The estimates of national income depict a
clear picture about the standard of living of the community, diagnose the
economic ills of the country and at the same time suggest remedies to overcome
those ills. The rate of savings and investment in an economy depends on the
national income of the country. The Noble Laureate Economist, Simon Kuznets,
observes that “National income is the end product of a country’s economic
activity”. It is a barometer of measuring a country’s economic progress. For
this reason, economist Frederic Charles Courtenay Benham remarks, “The best
way to get a general picture of the economic life of a country is to study
detailed estimates of its national income.”
INTRODUCTION

The economy of India is characterized as a developing market economy. It is

the world’s 5th largest economy by nominal GDP and the 3rd largest by
Purchasing Power Parity. From 2014 to 2019, India’s economy was the world’s
fastest growing major economy, surpassing China. The long-term growth
perspective of the Indian economy remains positive due to its young population,
corresponding low dependency ratio, health savings and investment rates and
increasing integration into the global economy. Despite previous reforms, the
growth of Indian economy is significantly slowed down by bureaucracy, poor
infrastructure, policy uncertainty agricultural mismanagement, inflexible labor
laws and complex land acquisition process. The Indian economy slowed down
in 2017, due the shocks of “Demonetization” in 2016 and introduction of
“Goods and Service Tax” in 2017. Thus, before analyzing further trends in the
national income, it would be apt to discuss certain underlying concepts and
definitions. Simon Kuznets defines national income as, “National Income is
the net output of commodities and services flowing during the year from
the countries productive system in the hands of the ultimate consumers.” It
is the total amount of goods and services within the nation during the given
period, which is normally taken to be 1 year. It is the total of factor income that
is wages, interest, rent, and profit, received by factors of production, that is,
labor, capital, land and entrepreneurship of a nation.
The rest of the paper is organized as follows:
Section 1 of the paper gives the objectives of research.
Section 2 of the paper discusses about the methodology used to conduct the
research.
Section 3 of the paper elaborates on the estimations used.
Section 4 of the paper deals with the analysis of National Income.
Section 5 of the paper mentions about the conclusion.
Section 6 of the paper points about the various sources of references referred to
in this research paper.

1. OBJECTIVES

National economy is a comprehensive index of economy of a country, which

helps measure the economic welfare of the people inhabiting in that country. It
is very important to understand the trends in national income as it gives us a
easier understanding over the national policies, economic planning, economic
models and distribution of income. The foremost objective of the research is to
analyze the trends in national income of India by using economic based
analysis. A detailed study of the trends in national income of India is very much
essential. Analyzing the economic trends helps us in attaining a clear
understanding about the impact of planning in Indian economy. It also reflects
on the standard of living of the people of India. It helps measure its growth and
development in the national economy of India from 1990-91 to 2010-11.
2. METHODOLOGY

By applying mathematical, statistical tools and techniques and by collecting

information from various sources and secondary data, this information was
tabulated and graphed.
 We collected information from various sources. We observed the changes
that have taken place in them over time.
 We are dealing with the national income of India from 1990-91 to 2010-
11.
 We compared the national income at constant and current prices from
1990-91 to 2010-11.
 We followed the graphical method of study. We used line diagrams and
bar diagrams for analyzing the trends in national economy and also to
determine the annual growth rate of national income.

3. ESTIMATION

National income is the sum total of money value of all final goods and services
produced in a country during the period of one year. It is an aggregative
measure of the value of all goods and services produced in agriculture, industry,
trade and all other vocations in an economy without double counting. In other
words, it measures the net value added by the various sectors of economy
during one year.

National income is also called as the “Net National Product at Factor Cost”.
GROSS NATIONAL PRODUCT (GNP)

Gross Domestic Product (GDP) is the market value of the final goods and
services within the domestic territory of a country during one year without
depreciation.
Gross National Product (GNP) at factor cost is the difference between Gross
National Product and Net Indirect Taxes. This is also called as Gross National
Income.

NET NATIONAL PRODUCT (NNP)

In the process of production of goods and services, there will be some

depreciation of fixed capital which is also called as consumption of fixed
capital. If the value of depreciation is deducted from the value of Gross National
Product in a year, we obtain the value of Net National Product. Thus, NNP at
market price is GNP at market price minus depreciation.

Net National Product at factor cost which is also called as National Income
(NI) is equal to the sum total of value added at factor cost or Net Domestic
Product (NDP) at factor cost and Net Factor Income from Abroad (NFIA).
Factor cost is the measure of National Income based on the cost of factors of
production and not the market prices.

Therefore, Net National Product at factor cost is,

MEASUREMENT OF NATIONAL INCOME AT CURRENT AND

CONSTANT PRICES

National Income can be measured in terms of money in two ways –

 At current prices
 At constant prices.
(a)National Income at current prices:

If goods and services produced in a year are valued at current prices, that is,
prices prevailing in that particular year, we get National Income at current
prices. Current prices refer to the prices prevailing in the year in which the
goods and services are produced.

For example, when goods and services during the year 1995-96 are valued at
prices of the same year, that is 1995-96, it will be called as National Income at
current prices for the year 1995-96.

Clearly, in determining National Income at current prices, not only physical

output produced during the year is important, but also the prices prevailing in
that year are equally important.
National Income at current prices is called „Real National Income‟.

(b)National income at constant prices:

If goods and services produced in a year are valued at fixed prices, that is, prices
of the base year, we get national income at constant prices. Constant prices refer
to the prices prevailing in the base year. A base year is a carefully chosen year
which is a normal year free from price fluctuations.

For instance, if goods and services produced during the year 1995-96 are valued
at the prices of the base year that is, 2004-05. It will be called National Income
at constant prices for the year 1995-96.

Evidently, it is change in volume of physical output produced during the year

which affects national income at constant prices because prices remain fixed.

National Income at constant price is called „Nominal National Income‟.

 4. ANALYSIS OF TRENDS IN NATIONAL INCOME OF
INDIA FROM 1990-91 TO 2010-11

National Income of India, at 2004-05 prices, has grown from ₹ 2, 55, 405 crore
in 1950- 51 to ₹ 45,72, 075 crore in 2011-12. This indicates over sixty fold rise
in over sixty years. However, this growth has neither been uniform nor steady
during this period. Let us now understand the trends in National Income of India
from 1990-91 to 2010-11.

 The National Income at constant prices are valued at the prices of the base
year 2004-2005

TABLE 1: NATIONAL INCOME IN ₹ CRORE

FROM 1990-91 TO 2010-11

YEAR NATIONAL INCOME(₹ CRORE)

AT CURRENT PRICES AT CONSTANT PRICES

1990-91 526017 1342031

1991-92 599171 1348043

1992-93 688762 1422097

1993-94 796418 1492864

1994-95 935759 1592980

1995-96 1100655 1715639

 1996-97 1276347 1849226

1997-98 1411922 1920927

1998-99 1624669 2038124

1999-00 1821227 2220003

2000-01 1947788 2291795

2001-02 2106928 2401875

2002-03 2273456 2492931

2003-04 2548640 2682470

2004-05 2899944 2899944

2005-06 3303532 3167455

2006-07 3842743 3456274

2007-08 4481882 3806140

2008-09 5031943 3922062

2009-10 5780028 4241183

2010-11 6942089 4657438

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

We plot the above data in bar and line diagrams for separate and mutual
comparisons. the bar diagram helps us understand the differences in the trends
of National Income over the decades while the line graphs show the fluctuation
and direction in the movement of National Income.
 FIGURE 1: NATIONAL INCOME AT
CURRENT PRICES
2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02
YEARS

2000-01

1999-00

1998-99

1997-98

1996-97

1995-96

1994-95

1993-94

1992-93

1991-92

1990-91

0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000

NI AT CURRENT PRICES IN ₹ CRORE

NI AT CURRENT PRICES

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

 FIGURE 2: NATIONAL INCOME AT
CURRENT PRICES
8000000
NI AT CURRENT PRICES IN ₹ CRORE

7000000

6000000

5000000

4000000

NI AT CURRENT
3000000
PRICES
2000000

1000000

YEARS

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

FIGURE 1 represents the National Income at current prices in a bar diagram.

FIGURE 2 represents the National Income at current prices in a line diagram.

The above diagrams reveal the Net National Product at factor cost or National
Income calculated at current prices from 1990-91 to 2010-11. It can be observed
that the National Income has increased from ₹ 5, 26, 017 in 1990-91 to
₹ 69, 42, 089 by 2010-11. This shows a growth of nearly 13.2 times from
1990-91 to 2010-11. The diagram shows that the National Income is increasing
at an increasing rate. Though not a considerable increase, there exists a steady
and uniform growth in the Net National Product at factor cost.
 FIGURE 3: NATIONAL INCOME AT
CONSTANT PRICES
2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02
YERAS

2000-01

1999-00

1998-99

1997-98

1996-97

1995-96

1994-95

1993-94

1992-93

1991-92

1990-91

0 1000000 2000000 3000000 4000000 5000000

NI AT CONSTANT PRICES IN ₹ CRORE

NI AT CONSTANT PRICES
SOURCE: Economic Source of India 2018-19 (Statistical Appendix)
 FIGURE 4: NATIONAL INCOME AT
CONSTANT PRICES
5000000
NI AT CONSTANT PRICES IN ₹ CRORE

4500000

4000000

3500000

3000000

2500000

2000000 NI AT CONSTANT
PRICES
1500000

1000000

500000

YEARS

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

FIGURE 3 represents the National Income at constant prices in a bar diagram.

FIGURE 4 represents the National Income at constant prices in a line diagram.

The above diagrams reveal the Net National Product at factor cost or National
Income calculated at constant prices from 1990-91 to 2010-11. It can be seen
that the National Income has increased from ₹13, 42, 031 to ₹ 46, 57, 438 by
2010-11 considering 2004-05 values as the base year values. This shows that the
national income has been increased 3.5 times from 1990-91 to 2010-11. Though
the diagram shows the increased growth on National Income at constant price,
we can see that growth is not steady and uniform.
 COMPARATIVE ANALYSIS OF NATIONAL INCOME AT
CURRENT AND CONSTANT PRICES

FIGURE 5: COMPARISON OF NATIONAL

INCOME AT CURRENT AND CONSTANT
PRICES
NI AT CURRENT AND CONSTANT PRICES IN ₹ CRORE

8000000

7000000

6000000

5000000

4000000

3000000

2000000

1000000

0
2006-07
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06

2007-08
2008-09
2009-10
2010-11

YEARS

NI AT CURRENT PRICES NI AT CONSTANT PRICES

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

 FIGURE 6: NATIONAL INCOME AT CURRENT
PRICES VS. CONSTANT PRICES
2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02
YEARS

2000-01

1999-00

1998-99

1997-98

1996-97

1995-96

1994-95

1993-94

1992-93

1991-92

1990-91

0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000

NI AT CURRENT AND CONSTANT PRICE IN ₹ CRORE

NI AT CONSTANT PRICES NI AT CURRENT PRICES

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

FIGURE 5 represents the National Income at current and constant prices in a
line diagram.

FIGURE 6 represents the National Income at current and constant prices in a

bar diagram.

It is important to note that National Income at current prices (Nominal National

Income) is affected by two factors: (a) Change in prices and (b) Change in
physical output (amount of goods and services produced). If the current prices
rise rapidly, National Income at current prices will also inflate even if there is
no increase in the level of physical output. Consequently, national income at
current prices becomes deceptive and fails to reflect the growth in real national
output. For example, in 1979-80, India’s National Income at current prices
increased by 9.1% but at constant prices it decreased by 5.2%. National income
at constant prices Real National Income) is affected by only one factor, namely,
change in physical output. It can rise only when there is an increase in the level
of physical output because here prices are kept constant or fixed. Since a
country is interested in its physical output, it is considered proper and desirable
to estimate national income at constant prices because it reflects truly the real
change in physical output of a county. When there is continuous rise in national
income at constant prices for a number of years, it means there is economic
growth. However, the same increase in national income at current prices is not
an indicator of economic growth. National Income measured at constant prices
truly reflects the real change in physical output of a country whereas national
income at current prices does not. It is useful in finding out the real
development capacity of the economy. Real national income enables us to make
a year to year comparison of changes in the volume of output of goods and
services. Real national income is also helpful in making international
comparisons of economic performance of different countries.
 ANNUAL GROWTH RATES IN NATIONAL INCOME

TABLE 2: ANNUAL GROWTH RATES IN NATIONAL

INCOME IN % FROM 1990-91 TO 2010-11

YEAR ANNUAL GROWTH RATE IN NI IN%

AT CURRENT PRICES AT CONSTANT PRICES
1990-91 16.6 5.2
1991-92 13.9 0.4
1992-93 15 5.5
1993-94 15.6 5
1994-95 17.5 6.7
1995-96 17.6 7.7
1996-97 16 7.8
1997-98 10.6 3.9
1998-99 15.1 6.1
1999-00 12.1 8.9
2000-01 6.9 3.2
2001-02 8.2 4.8
2002-03 7.9 3.8
2003-04 12.1 8
2004-05 13.8 7.7
2005-06 13.9 9.2
2006-07 16.3 9.1
2007-08 16.6 10.1
 2008-09 12.3 3
2009-10 14.9 8.1
2010-11 20.1 9.8

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

Using the data from Table 2, a line diagram FIGURE 7 is obtained, which
depicts the annual growth rates of National Income at current and constant
prices.

FIGURE 7: ANNUAL GROWTH RATES OF

NATIONAL INCOME
25
ANNUAL GROWTH RATES OF NI IN %

20

15

10

YEAR
CURRENT PRICES CONSTANT PRICES
SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

FIGURE 8 represents the annual growth rates of National Income in a line

diagram.
Annual growth rate refers to the percentage change in National Income over a
period of a year. From the previous diagrams and discussions, we saw that
National Income has kept increasing over the years. But, from FIGURE 8 we
can infer that the annual growth rates of National Income are not subjected to
the same increase. In other words, there is no steady increase in the annual
growth rates. In order to understand the reason for this unsteady behaviour in
annual growth rates, let us first discuss the trends of national income during
different plan periods.

TRENDS IN NATIONAL INCOME DURING DIFFERENT PLAN

PERIODS

TABLE 3: NATIONAL INCOME DURING THE PLAN

PERIODS FROM 1990-91 TO 2010-11

PLAN NATIONAL INCOME

PERIODS (IN ₹ CRORE)

CURRENT PRICES CONSTANT PRICES

EIGHTH PLAN:
1992-93 546023 195602
1996-97 1008188 258465
NINTH PLAN:
1997-98 1224946 890890
2001-02 1864292 1115157
TENTH PLAN:
2002-03 1992846 1801430
2005-06 2846762 2295243
ELEVENTH PLAN:
2007-08 4031881 3449970
2008-09 4632304 3672192

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

 FIGURE 8: NATIONAL INCOME DURING
DIFFERENT PLAN PERIODS
5000000
NI AT CURRENT AND CONSTANT

4500000
4000000
PRICES IN ₹ CRORE

3500000
3000000
2500000
2000000
1500000
1000000
500000
0
1992-93 1996-97 1997-98 2001-02 2002-03 2005-06 2007-08 2008-09

PLAN PERIODS

CURRENT PRICES CONSTANT PRICES

SOURCE: Economic Source of India 2018-19 (Statistical Appendix)

FIGURE 8 represents the National Income during different plan periods in a

line diagram. FIGURE 8 is based on the data given in Table 3 about the
National Income during the plan periods from 1990-91 to 2010-11.

Let us now deduce the trends in National Incomes during the eighth, ninth, tenth
and eleventh plan periods.

During the Eighth plan period, the National Income at constant prices has
increased considerably from ₹ 1, 95, 602 crore in 1992-93 to ₹ 2, 58, 465 crore
in 1996-97 showing an annual average growth of 6.6 % during the plan period.

During the Ninth plan period, the National Income at constant prices has
increased considerably from ₹ 8,90,890 crore in 1997-98 to ₹ 11,15,157 crore in
2001-02, showing an annual average growth rate of 5.5% during the plan
period. The target which was set for the National Income to achieve was 6.5%,
which was not accomplished.
During the Tenth plan period, the National Income at constant prices has
increased considerably from ₹ 18,05,830 crore in 2002-03 to ₹ 25,30,494 crore
in 2006-07, showing an annual growth rate of 7.6% during the plan period. This
plan aimed to achieve a growth rate of 8% which was again unaccomplished.

During the Eleventh plan period, the National Income at constant prices has
increased from ₹ 3,449,970 crore in 2007-08 to ₹ 3,672,192 crore in 2008-09,
showing an annual growth of rate of 6.4% during this plan period. The
milestone for the National Income to reach was set at 9% which was not
achieved.

TABLE 4: GROWTH RATE IN NATIONAL INCOME

DURING THE DIFFERENT PLAN PERIODS

Therefore, we can clearly observe that though the National Income was
increasing form 1990-91 to 2010-11, the growth rate of the National income
was not increasing. It rather kept fluctuating, that is, increasing and decreasing.
We can thus say that was not a steady growth in the annual National Income
though it increased year by year.
 5. CONCLUSION

In this paper, an attempt has been made to analyze the trends in the National
Income or the Net National Product at factor cost in India from 1990-91 to
2010-11. The findings may be summarized as follows:

 There is an increase in the National income at current prices and constant

prices from 1990-91 to 2010-2011.
 National Income at current prices shows the National Income deducted
using the prevailing market prices in that very year the goods and services
are produced.
 National Income at constant prices indicates the National Income
calculated by valuing the goods and services produces at fixed prices of a
base year, which is 2004-05 in this paper.
 The growth rate of National Income in India is very poor.
 The different plan periods were not able to meet the targets set, which
leaves them all long unfulfilled.

High growth rate of population, excessive dependence on agriculture, peculiar

occupational structure, low level of technology, poor industrial development,
poor developmental infrastructural facilities, poor rate of saving and investment
and socio- political conditions like caste system, joint family system, fatalism,
illiteracy, unstable political scenario are few of the many causes for the slow
growth of National income in India.

Development in agricultural sector and industrial sector, raising the rate of

savings and investment, development of infrastructure, utilization of natural
resources, controlling the growth of population, improving foreign trade and
economic liberalization are few suggestions to raise the size and growth of
National Income of India.

A rigorous and sincere attempt should be made by both public and private
sectors in a more realistic path. In the meantime, the Government of India has
undertaken various steps to attain a higher rate of growth in its National Income
by introducing various measures of economic reforms and structural measures.
All these measures have begun to create some impact on the raising growth of
National Income of the country.

“India’s rate of progress is pity-fully meagre as against her actual needs. At her
present pace, India would remain a very poor nation at the end of the century
and many segments of her population would undoubtedly still be living in
conditions of desperate poverty.”

Richard T Gill

American economist

Higher the National Income higher will be the average incomes which enable
the consumers to enjoy more goods and services and better standard of living
alongside reducing poverty, lowering unemployment, lowering government
borrowing. Therefore, increasing National Income should be considered as the
need of the hour, if India needs to convert into a developed country.
 6. REFERENCES

i. Seema Goyal (2015), “Analysis of National Income in India”,

International Journal of Applied Research, 1:4 (286-289)
ii. CMA Newsletter, The Institute of Cost Accountants of India- Academics
Department (Board of Studies)
iii. Thorme D. Agrarian Prospect of India, University of Delhi, 1954.
iv. Gupta RK, Gupta RJ. “Indian Economy”, Atlantic Publisher
v. Planning Commission, Government of India, Five Years Plans
vi. Bagchi, Amiya Kumar. (Ed.) Economy Society and Polity: Essays in the
Political Economy of Indian Planning, Oxford University Press, 1988
vii. Krishna Raj. Cooperative Farming: Some Critical Reflections, New
Delhi
viii. Bagchi, Ameeresh, Sen, Tapan, Tularidhar VB. Issues before Ninth
Finance Commission, Economic and Political weekly May 7, 1988.
ix. http://www.economicsdiscussion.net/national-income/growth-of-indias-
national-income-during-the-plan-period-and-its-features
x. http://www.economicsdiscussion.net/national-income/measurement-of-
national-income-at-current-prices-and-constant-prices
xi. http://www.economicsdiscussion.net/essays/national-income-
essays/essay-on-the-national-income-of-india
xii. https://www.economicshelp.org/macroeconomics/economic-
growth/benefits-growth/