National and Per-Capita Income

National income is the total value of a country’s final output of all new goods and
services produced in a year. There are various ways to calculate it:

 The income method, which adds up all incomes received by the factors of
production generated in the economy during a year. This includes wages
from employment and self-employment, profits to firms, interest to
lenders of capital and rents to owners of land

 The output method, which is the combined value of the new and final
output produced in all sectors of the economy, including manufacturing,
financial services, transport, leisure and agriculture

 The expenditure method, which adds up all spending in the economy by

households and firms on new and final goods and services by households
and firms

Patterns, trends, aggregate and sectoral composition and changes therein

Rates of economic growth in India during the 20th century (CSO data):

1950- 2002- 2007-

1960s 1970s 1980s 1990s 2000s
2004 07 12
Agriculture 2.5 2.5 1.3 4.4 3.2 2.5 2.4 3.3
Industry* 5.3 6.3 3.6 5.9 5.7 7.7 9.2 6.7
Services 5.4 4.8 4.4 6.5 7.3 8.6 8.8 9.9

GDP 4.2 4 3 5.6 5.8 7.2 7.6 7.9

Population
2.2 2.2 2.2 2 1.6
growth rate
GDP per
2.1 1.8 0.9 3.4 3.8
capita

* For industry, no need to remember decadal; just remember the broad phases:
1900-1947: 1%; 1951-1965: 6.3%; 1965-1980: 4.1%; 1981-1990: 7%; 1991-
2000: 5.7%; 2001-10: 7.8%)

** Decadal population growth rates taken from:

http://iipsenvis.nic.in/Database/Population_4074.aspx

Trends of sectoral shares in GDP:

Sector 1951 1961 1971 1981 1991 2013

Primary 53 48 42 36 30 14
Secondary 17 21 24 26 28 26
Manufacturing (part 7 13.5 14.5 15.4
 of secondary) (check)
Tertiary 30 31 34 38 42 60

Trends of employment shares:

Sector 1951 1961 1971 1981 1991 2001 2013

Primary 73% 74% 69% 64% 56% 49%
Secondary 9% 11% 14% 15% 19% 24%
Manufacturing
(part of
secondary)
Tertiary 19% 15% 18% 21% 25% 27%

* In 1951, Large scale (or ‘modern’) industry only accounted for 7% of national
income and 2.3% of employment. Small-scale industry, on the other hand,
accounted for 10% of national income, and 7% of employment.

Broad factors that determine national income: availability of natural

resources and raw materials, stock of factors of production, state of technology,
connectivity, political stability, state of education and technical know-how etc.

Period 1950-1980 1991-2011

GDP growth rate 3% 7%
Population growth rate 2.5% <2%

As seen above, during 1950-1980 there was very little growth in per-capita
income, because of low GDP growth rate and high population growth rate. This
hasn’t been the case since the 1980s.