NATIONAL INCOME           OF INDIA         POST REFORMS                Post-Graduate Diploma in Business ManagementSubmitt...
STUDENT CERTIFICATEI hereby declare that the project work entitled “ NATIONAL OF INDIA POST REFORMS ”submitted to the IMS,...
FACULTY CERTIFICATE  This is to certify that a report on “ NATIONAL OF INDIA POST REFORMS ” is prepared by  VINEET KUMAR D...
ACKNOWLEGEMENTI have had considerable help and support in making this project report a reality. First and foremost,gratitu...
TABLE OF CONTENTS                           INDEXSR.NO                 PARTICULARS                  PAGE NO.  1           ...
The 1990s saw an era of globalization, liberalization and privatization. There were reforms in allsectors including health...
INTRODUCTIONNational income is defined as the value of all final goods and services produced by the residents ofthe countr...
There are various methods for calculating the national income such as production method, incomemethod, expenditure method ...
This method is popular in U.S.A and is called as Total Product method or Goods Flow Method. InIndia , it is known as inven...
1) Economic Reforms in India since 1991: Has Gradualism Worked?by Montek S. Ahluwalia*India was a latecomer to economic re...
Growth Of National Income In India    Sector                              1950-1980                    1980-2010    GDP To...
From 1980-81 to 2008-09 there has been a GDP growth of 5.7% per annum compared to 6.3 %growth from 1990-91 to 2008-09. Par...
1999-00 prices         GDP            At current prices (2004-05)                                         growth          ...
grown at a modest rate of 4.6% per annum in the period of economic planning and stood at Rs.2941971 crores in 2008-09. Dur...
1996.03.31                         100            26.49          27.83            45.681997.03.31                         ...
India was predominantly a rural economy at the time of independence in 1947, with agricultureaccounting for approximately ...
Percentage wise contribution of each service sector towards GDPYear         GD        Trade,   Transpor    Banking     Rea...
2003.03.31    100         13.85        7.21       5.53      7.42      6.13      7.60        47.742004.03.31    100        ...
percent per annum. Hence, the acceleration or break in the trend during the 1980s seemed to belarge, when in reality there...
deposit rates at high double digit levels, and inflation collapsing, the RBI ensured that real ratesreached double digit l...
Mar-91    -17369    14839   2178Mar-92     -2237    11890   2077Mar-93    -12764    15490   3363Mar-94     -3636    28492 ...
Interest rates were also very high during that time and had reached double digits. This also led tobreak down in the econo...
These high borrowing rates caused government interest payments to rise, which caused the fiscaldeficit to rise. In the mid...
rose to double digit levels in the mid-1990s and growth collapsed.   3.) What caused the growth rate to sharply accelerate...
RELATION BETWEEN NATIONAL INCOME & AGRICULTURE                                                           Linear Regression...
ANALYSIS:             National Income is the dependent variable and agriculture is the independent variable.. The         ...
National Income depends heavily upon the secondary sector and is also justified by the             regression model.      ...
ANALYSIS:             Under this regression model here it is also seen that national income is heavily dependent          ...
From the data collected between 99-00 to 09-10 it is seen that national income has a high                      correlation...
This suggests that over the years post reforms national income has co-related with the               population. As the po...
ANALYSIS:National Income and Net Exports go together hand in hand. As it can be seen from theregression model that the two...
Levels              1950-60   1961-70   1971-80   1981-89   1990-2002   2003-07   2006-2008 Share of agriculture (% GDP)  ...
Firstly, in India, agriculture still remains the predominant economic activity and nay fluctuations init have serious impa...
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Eep national income final

  1. 1. NATIONAL INCOME OF INDIA POST REFORMS Post-Graduate Diploma in Business ManagementSubmitted to: Submitted by:Dr. Tapan Kumar Nayak Varun Rai Sood (010162)(Associate Professor of Economics) Vibhav Gupta (010163) Vijay Sharma (010164) Vineet Dubey (010165) INSTITUTE OF MANAGEMENT STUDIES LAL QUAN, GHAZIABAD – 201009
  2. 2. STUDENT CERTIFICATEI hereby declare that the project work entitled “ NATIONAL OF INDIA POST REFORMS ”submitted to the IMS, GHAZIABAD, is the record of the original work done by me under theguidance of DR. TAPAN KUMAR NAYAK , faculty member, IMS Ghaziabad, and this projectwork has not performed on the basis for the award of any Degree or diploma/associateship/fellowship and similar project if any.VARUN RAI SOODBM-010163VIBHAV GUPTABM-010164VIJAY KUMAR SHARMABM-010164VINEET KUMAR DUBEYBM-010165
  3. 3. FACULTY CERTIFICATE This is to certify that a report on “ NATIONAL OF INDIA POST REFORMS ” is prepared by VINEET KUMAR DUBEY and Group of PGDM 3RDTrisemester , IMS GHAZIABAD ,under my supervision. DATE:DR. TAPAN KUMAR NAYAKECONOMIC ENVIRONMENT AND POLICY (EEP)
  4. 4. ACKNOWLEGEMENTI have had considerable help and support in making this project report a reality. First and foremost,gratitude goes to DR. TAPAN KUMAR NAYAK , faculty member ECONOMICS , IMS Ghaziabadwho provided me all the guidance and support in realizing the report and helping me in each andevery step where I needed their help.I am especially indebted to DR. TAPAN KUMAR NAYAK, my guide who assisted me incompleting the project.We all thank all those people who have directly or indirectly helped us during the course of thisproject. Last but not the least we would like to thank our parents for their support and cooperation.VARUN RAI SOODVIBHAV GUPTAVIJAY KUMAR SHARMAVINEET KUMAR DUBEY
  5. 5. TABLE OF CONTENTS INDEXSR.NO PARTICULARS PAGE NO. 1 CHAPTER 1 : INTRODUCTION 07 2 CHAPTER 2 : LITERATURE REVIEW 11 3 Chapter 3:OBJECTIVE 20 4 CHAPTER 4: METHODOLOGICAL SPECIFICATIONS 45 5 CHAPTER 5: INTREPRETATION OF RESULTS 46 6 CHAPTER 6 : CONCLUSION 89 7 Chapter 7: references 89 ABSTRACT
  6. 6. The 1990s saw an era of globalization, liberalization and privatization. There were reforms in allsectors including health, insurance and infrastructure. India became happy hunting ground forforeign investors. GDP saw a steady growth. There was increased competitiveness in the market,creation of new jobs, improvisation of products and services. But it created a concern for whetherthe growth in economy was percolating to the poorest section. The present paper is an effort to findout the extent to which income inequity is being affected by various macroeconomic, political,cultural and technological factors.Keywords and Phrases: Multiple Regression Model, Correlation Coefficient.National Income Post Reforms
  7. 7. INTRODUCTIONNational income is defined as the value of all final goods and services produced by the residents ofthe country, whether operating within the domestic territory of the country, or outside, in a year.National income is thus, a momentary expression of the current achievements of the people of thecountry expressed through their production activities. National income measures the volume ofcommodities and services turned out during a given period, counted without duplication. It is alsoreferred to as NET NATIONAL PRODUCT (NNP). Thus, a total of national income measures theflow of goods and services in an economy and reflects the progress of the country the country.Alternatively, national income may be defined as “the aggregate factor income (i.e., earning oflabour and property) which arises from the current production of goods and services by the nation’seconomy”.Income can be measured by:- • Gross National Product (GNP), • Gross Domestic Product (GDP), • Gross National Income (GNI), • Net National Product (NNP) and • Net National Income (NNI)Internationally some countries are wealthy, some countries are not wealthy and some countries arein-between. Under such circumstances, it would be difficult to evaluate the performance of aneconomy. Performance of an economy is directly proportionate to the amount of goods and servicesproduced in an economy. Measuring national income is also important to chalk out the future courseof the economy. It also broadly indicates people’s standard of living.Calculating National Income
  8. 8. There are various methods for calculating the national income such as production method, incomemethod, expenditure method etc.  Production Method: The production method gives us national income or national product based on the final valueof the produce and the origin of the produce in terms of the industry.All producing units are classified sector wise.• Primary sector is divided into agriculture, fisheries, animal husbandry.• Secondary sector consists of manufacturing.• Tertiary sector is divided into trade, transport, communication, banking, insurance etc.  Income Method: Different factors of production are paid for their productive services rendered to anorganization. The various incomes that includes in these methods are wages, income of selfemployed, interest, profit, dividend, rents, and surplus of public sector and net flow of income fromabroad.  Expenditure Method:The various sectors – the household sector, the government sector, the business sector, either spendtheir income on consumer goods and services or they save a part of their income. These can becategorized as private consumption expenditure, private investment, public consumption, publicinvestment etc.  Product method:
  9. 9. This method is popular in U.S.A and is called as Total Product method or Goods Flow Method. InIndia , it is known as inventory or Product method .In this method, the economy is divided intothree transaction sector like industrial, services and foreign transaction sector where internationalpayments are considered.Difficulties in Calculation of National IncomeIn India there are various difficulties in calculating the national incomes .The most severe one is thefinding of reliable data. Most of the time, it is based on assumptions. Soon after independence theNational Income Committee was formed to collect data and estimate National Income. The twomajor problems which remain in the calculation of National Income are: • Most of the data is not from the current year. • Even if current data are available then values are underreported.LITERATURE REVIEW
  10. 10. 1) Economic Reforms in India since 1991: Has Gradualism Worked?by Montek S. Ahluwalia*India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, inthe wake of an exceptionally severe balance of payments crisis. The need for a policy shift hadbecome evident much earlier, as many countries in east Asia achieved high growth and povertyreduction through policies which emphasized greater export orientation and encouragement of theprivate sector. India took some steps in this direction in the 1980s, but it was not until 1991 that thegovernment signaled a systemic shift to a more open economy with greater reliance upon marketforces, a larger role for the private sector including foreign investment, and a restructuring of therole of government.India’s economic performance in the post-reforms period has many positive features. The averagegrowth rate in the ten year period from 1992-93 to 2001-02 was around 6.0 percent, as shown inTable 1, which puts India among the fastest growing developing countries in the 1990s. This growthrecord is only slightly better than the annual average of 5.7 percent in the 1980s, but it can beargued that the 1980s growth was unsustainable, fuelled by a buildup of external debt whichculminated in the crisis of 1991. In sharp contrast, growth in the 1990s was accompanied byremarkable external stability despite the east Asian crisis. Poverty also declined significantly in thepost-reform period, and at a faster rate than in the 1980s according to some studies (as Ravallionand Datt discuss in this issue).2) Obstacles in High Growth of National Income of IndiaEven if the Indian economy grows faster than the BRIC countries and G 6, the benefits of thegrowth would not be evenly distributed. India’s progress in education cannot be termed assatisfactory. In terms of higher education it has achieved tremendous success, but its unsatisfactoryperformance in primary education and secondary education has been a major obstacle to growth.Similarly India’s healthcare system is in a less than desirable state. Governments’ spending onpublic health has not been up to the required levels.*
  11. 11. Growth Of National Income In India Sector 1950-1980 1980-2010 GDP Total 3.5 5.6 GDP Per capita 1.4 3.6Sectorial Composition Of National Income (in percent) Year Primary Secondary Tertiary Total GDP 1950-51 59 13 28 100 1980-81 42 22 36 100 2009-10 18 29 53 100OBJECTIVEThe study of National Income is important because of the following reasons:• To see the economic development of the country.• To assess the developmental objectives.• To know the contribution of the various sectors to National Income. NATIONAL INCOME OF INDIAHow well the economy is performing is a matter of concern to all the citizens of India. But how dothey judge its performance? This document analyses the economic data of India over the past yearsand thus determines the performance of the economy during certain decades/eras.
  12. 12. From 1980-81 to 2008-09 there has been a GDP growth of 5.7% per annum compared to 6.3 %growth from 1990-91 to 2008-09. Particular emphasis is given to growth rate during last 20 years, aperiod during which the GDP growth rate has averaged 6.2 percent per annum, a full 2.6 percentagepoints above the average growth during the previous 30 years (1950 to 1980). Growth during theyears from 2003-04 to 2007-08 has been marvelous.
  13. 13. 1999-00 prices GDP At current prices (2004-05) growth rate Mar-90 919626 6.08 Mar-90 390837 Mar-91 967773 5.24 Mar-91 456409 Mar-92 976319 0.88 Mar-92 522120 Mar-93 1028643 5.36 Mar-93 597744 Mar-94 1088897 5.86 Mar-94 699188 Mar-95 1159227 6.46 Mar-95 818334 Mar-96 1243724 7.29 Mar-96 958679 Mar-97 1346276 8.25 Mar-97 1119238 Mar-98 1404018 4.29 Mar-98 1244980 Mar-99 1497195 6.64 Mar-99 1438913 Mar-00 1589673 6.18 Mar-00 1589673 Mar-01 1648018 3.67 Mar-01 1700466 Mar-02 1743998 5.82 Mar-02 1849361 Mar-03 1806734 3.60 Mar-03 1994217 Mar-04 1961817 8.58 Mar-04 2237414 Mar-05 2105184 7.31 Mar-05 2526285 Mar-06 2308015 9.63 Mar-06 2875958 Mar-07 2533450 9.77 Mar-07 3312569 Mar-08 2764795 9.13 Mar-08 3787596 Mar-09 2941971 6.41 Mar-09 4326384Overall growth rate:The central statistical organization (CSO) has recently shifted the base year from 1999-00 to2004-05. But we will consider base year as 1999-00 to study the national income trend. We are notconsidering 2004-05 as base year because the new series is currently available only for five years.With the base year as 1999-2000, NNP of India was Rs. 204924 crores in 1950-51. Since then it has
  14. 14. grown at a modest rate of 4.6% per annum in the period of economic planning and stood at Rs.2941971 crores in 2008-09. During the period from 2002-03 to 2006-07 the NNP registered agrowth rate of 7.8 per annum.Sector wise break up of GDP:GDP is divided into three sectors: 1.) Agricultural 2.) Industry 3.) ServicesYear GDPfc Agriculture Industry Service as as 100% as % of as % of % of GDPfc GDPfc GDPfc1980.03.31 100 33.92 25.47 40.851981.03.31 100 35.70 24.69 39.611982.03.31 100 34.37 25.56 40.071983.03.31 100 33.17 25.62 41.211984.03.31 100 33.84 25.66 40.501985.03.31 100 32.49 26.00 41.511986.03.31 100 31.17 26.10 42.731987.03.31 100 30.00 26.28 43.711988.03.31 100 29.44 26.31 44.251989.03.31 100 30.47 26.18 43.351990.03.31 100 29.23 26.94 43.841991.03.31 100 29.28 26.88 43.841992.03.31 100 29.65 25.76 44.591993.03.31 100 28.99 26.13 44.881994.03.31 100 28.93 25.87 45.201995.03.31 100 28.52 26.80 44.68
  15. 15. 1996.03.31 100 26.49 27.83 45.681997.03.31 100 27.37 27.02 45.611998.03.31 100 26.12 26.78 47.111999.03.31 100 26.02 26.07 47.922000.03.31 100 24.99 25.31 49.692001.03.31 100 23.35 26.19 50.462002.03.31 100 23.20 25.34 51.462003.03.31 100 20.87 26.46 52.662004.03.31 100 20.97 26.24 52.792005.03.31 100 19.20 28.18 52.622006.03.31 100 19.06 28.76 52.182007.03.31 100 18.15 29.46 52.392008.03.31 100 18.11 29.51 52.382009.03.31 100 17.47 28.83 53.70In 1980, agricultural sector contributed 34% towards GDP, while industrial sector contributed to26% of GDP, and services sector contributed to 41% of GDP.But in 2009, agricultural sector contributed 17.5% towards GDP, while industrial sector contributed29% towards GDP, and services sector contributed 54% towards GDP. I.) Agricultural sector’s contribution towards GDP declined from 1980 to 2009. It was 34% in 1980 and came down to 17.5% in 2009 II.) Industrial sector remained more or less constant. Its contribution towards GDP during 1980 was 26% and increased to 29% in 2009 III.) Service sector’s contribution towards GDP increased from 1980 to 2009. It was 41% in 1980 and increased to 54% in 2009. SECTOR WISE BREAK UP OF GDP
  16. 16. India was predominantly a rural economy at the time of independence in 1947, with agricultureaccounting for approximately 75 percent of the work force and 55 percent of GDP.But during 1980’s there was shift from agricultural sector to other sectors. Extra growth that aneconomy receives is due to the reallocation of labor from the low productive agricultural sector tothe higher productive non-agricultural (industrial) sector.Service sector’s contribution towards GDP:We have seen a growth in the service sector for the past 30 years. Let’s see what has led this sectorto grow and which sector is contributing more towards GDP.We can see that trading and hotel services have contributed more and are increasing constantly.
  17. 17. Percentage wise contribution of each service sector towards GDPYear GD Trade, Transpor Banking Real Public Other Total Pfc hotel & t, & estate, admin. service contributio restauran storage busines & s n from ts (GDPfc) & comm. insuranc s defens (GDPfc service (GDPfc) e service e ) sector (GDPfc) s (GDPfc (GDPfc) )1981.03.31 100 9.42 4.19 2.51 7.01 4.56 6.52 34.211982.03.31 100 9.91 3.82 2.60 6.43 4.50 6.57 33.831983.03.31 100 10.84 4.23 2.96 6.57 4.64 6.63 35.871984.03.31 100 10.32 4.39 2.92 6.43 4.69 6.48 35.231985.03.31 100 10.62 4.59 2.86 6.66 4.83 6.50 36.071986.03.31 100 11.04 4.63 2.99 6.81 5.04 6.63 37.151987.03.31 100 11.53 4.89 3.05 7.02 5.20 6.64 38.321988.03.31 100 11.28 5.09 3.07 7.12 5.43 6.58 38.561989.03.31 100 10.52 5.14 2.95 6.80 5.42 6.24 37.081990.03.31 100 10.78 5.27 3.05 6.78 5.45 6.29 37.631991.03.31 100 10.85 5.27 3.28 6.67 5.39 6.17 37.631992.03.31 100 11.00 5.38 3.40 6.67 5.25 6.29 38.001993.03.31 100 10.92 5.53 4.04 6.69 5.31 6.39 38.881994.03.31 100 10.96 5.73 3.61 6.62 5.26 6.43 38.611995.03.31 100 11.02 5.87 4.05 6.53 4.95 6.29 38.701996.03.31 100 11.26 5.95 4.12 6.10 4.71 6.02 38.161997.03.31 100 11.90 5.89 4.72 5.85 4.77 6.13 39.251998.03.31 100 12.62 6.28 4.64 5.85 4.88 6.75 41.021999.03.31 100 12.41 6.39 4.66 5.69 5.19 6.52 40.872000.03.31 100 12.76 6.71 4.85 6.08 5.84 7.11 43.342001.03.31 100 13.20 6.93 5.49 6.64 6.36 7.50 46.122002.03.31 100 13.39 7.05 5.04 7.11 6.16 7.56 46.30
  18. 18. 2003.03.31 100 13.85 7.21 5.53 7.42 6.13 7.60 47.742004.03.31 100 13.68 7.04 5.70 7.32 5.78 7.39 46.922005.03.31 100 13.74 7.28 5.63 7.28 5.42 7.22 46.562006.03.31 100 14.05 7.46 5.11 7.23 5.29 6.99 46.132007.03.31 100 14.16 7.27 4.78 7.20 5.03 6.89 45.322008.03.31 100 14.49 7.43 4.92 7.21 4.88 6.90 45.822009.03.31 100 14.58 7.53 4.89 7.15 4.74 6.99 45.88We can see that there is a growth in every sector of the service industry. Thus the service sector’scontribution towards GDP has increased and this has happened due to an increase in all the sectorswithin the service industry. 1.) What caused India’s growth to accelerate in the 1980s??During the Seventh Plan period, gross domestic product was projected to increase at the rate of 5percent per annum. However, the economy performed extremely well and the national income roseat the rate of 5.5 percent. The point which most of the analysts might have missed is that there was aglobal slowdown in the 1970s, a period when Indian growth collapsed to an average of only 2.9
  19. 19. percent per annum. Hence, the acceleration or break in the trend during the 1980s seemed to belarge, when in reality there was only a gradual, and minor acceleration to the existing growth trend.India was predominantly a rural economy at the time of independence in 1947, with agricultureaccounting for approximately 75 percent of the work force and 55 percent of GDP.The trend has shifted from 1947 to 1980 from the lesser productive agriculture to theservice/industrial sector (higher productivity) which resulted in the extra growth of the economy.Thus there was an acceleration of national income growth in the decade starting from 1980 and thethree factors which allowed the economy to register higher growth in the 1980s as compared to1960s and 1970s are: • The increased government expenditure provided fiscal stimulus to the economy. • Liberalization of imports, especially of capital goods and components of manufacturing induced production of luxury articles • Associated with the above two factors, there was an increased reliance on external commercial borrowing by the State • The most important factor behind the observed acceleration of GDP growth in the 1980s was the reallocation of labor from agriculture to industrial sector. 2.) What prevented India’s growth from accelerating in the nineties as would have been forecast by the magnitude of the 1991 economic reforms??During the period from 1985-1990, the rate of increase in national income of the 1980s could not besustained. During these years, the country passed through a phase of major economic crisis.Responding to economic reforms, GDP growth did accelerate and averaged above 7.4 percent ineach of the three years from 1994 to 1996. But this acceleration had some unintended consequences.The RBI panicked because this acceleration coincided with global and domestic inflation. RBItightened monetary policy to an unprecedented degree. Further, the RBI did not cut interest rates inresponse to the decline in worldwide and domestic inflation in the mid to late 1990s. By keeping
  20. 20. deposit rates at high double digit levels, and inflation collapsing, the RBI ensured that real ratesreached double digit levels. This caused the growth to collapse.This is illustrated in the tables below:We can see that the inflation during the periods of 1991, 1992, 1993 was around 11% and washighest in 1992. In 1992 inflation was 13.78% and it is the highest in past 30 years. Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Mar-85 r-86 r-87 r-88 r-89 r-90 r-91 r-92 r-93 r-94 r-95 r-96 r-97 r-98 r-99 r-006.42 4.46 5.79 8.17 7.46 7.43 10.2 13.8 10.0 2.59 12.6 7.99 4.62 4.38 5.95 3.31Another reason for decline in economic growth was huge fiscal deficit. BOP: Current account balance BOP: Capital inflows, net BOP: IMF loans, net Rs. crore Rs. crore Rs. croreYear Ival Ival IvalMar-81 -2214 1708 265Mar-82 -2839 1310 635Mar-83 -3280 3476 1895Mar-84 -3316 4369 1351Mar-85 -2873 3469 59Mar-86 -5956 4658 -265Mar-87 -5830 5227 -672Mar-88 -6293 6284 -1209Mar-89 -11580 8757 -1547Mar-90 -11389 9318 -1460
  21. 21. Mar-91 -17369 14839 2178Mar-92 -2237 11890 2077Mar-93 -12764 15490 3363Mar-94 -3636 28492 587Mar-95 -10583 23108 -3585Mar-96 -19645 8561 -5749Mar-97 -16281 39154 -3461Mar-98 -20883 34319 -2286Mar-99 -16789 34230 -1652Mar-00 -20331 44206 -1122Mar-01 -11598 40495 -115Mar-02 16426 41080 0Mar-03 30660 52366 0Mar-04 63983 77227 0Mar-05 -12174 125367 0Mar-06 -43737 111965 0Mar-07 -44383 203673 0Mar-08 -63479 427926 0Mar-09 -131614 28490 0Mar-10 -180757 253058 0
  22. 22. Interest rates were also very high during that time and had reached double digits. This also led tobreak down in the economy.Bank rate Per centDate Ival1992.03.31 121993.03.31 121994.03.31 121995.03.31 121996.03.31 121997.03.31 121998.03.31 10.51999.03.31 82000.03.31 82001.03.31 72002.03.31 6.52003.03.31 6.252004.03.31 62005.03.31 62006.03.31 62007.03.31 62008.03.31 62009.03.31 62010.03.31 6
  23. 23. These high borrowing rates caused government interest payments to rise, which caused the fiscaldeficit to rise. In the mid to late nineties, interest payments accounted for more than 50 percent ofthe fiscal deficit. In the 1980s, interest payments were only 2 percent of GDP versus near 5 percentof GDP in the late 1990s. The share of interest payments in the consolidated fiscal deficit of Indiahas been higher than 60 percent in every year since the mid-1990s.The overnight lending rate of the central bank (the repo rate) was introduced in 2000.Real interest rates increased by 400 basis points from 3.4 percent in 1993 to 7.2 percent in 1996, andpeaked in 2000 at 7.3 percent. The growth rate declined from 7.8 percent in 1994 to 4.1 percent in1997, and bottomed at 4 percent in 2000. The acceleration in GDP growth (8.4 percent vs. 3.8percent the previous year) started in 2003/4, ostensibly because of good weather; agricultural growthtopped 10 percent that year. In the years 1999 to 2003, the government had proceeded to cutadministered interest rates on deposits from 12.5 percent to 8 percent. With inflation staying broadlyconstant at 4 percent, this meant a 400 to 500 basis point decline in real interest rates; and this hasbeen the major, and only identifiable, contributor to the growth accelerator of recent years.During the period from1985-1990, the rate of increase in national income of the 1980s could not besustained. During these years, the country passed through a phase of major economic crisis.Also, the 1991 reforms did lead to a sharp acceleration to 7.5 percent GDP growth but this growthrate was not sustained due to a mis-management of monetary policy. Real long-term interest rates
  24. 24. rose to double digit levels in the mid-1990s and growth collapsed. 3.) What caused the growth rate to sharply accelerate from 2003-04??The new Congress government came to power in May 2004, after agriculture induced robust growthof 8.4 percent in 2003-04. During the preceding five years (excluding 2003-04), GDP growthaveraged only 5.3 percent per annum, about 0.3 percent per year less than the long term 1980s and1990s average of 5.6 percent. With no growth friendly policy inputs during2004-2007, the economy continued to average 9 percent growth, a recordIn 1999, inflation had reached a low of 3.5 percent and the government took the first major steptowards interest rate reforms. Within a space of four years, government bond yields were at 5percent, down from double digit plus levels of the late 1990s. In “normal” economies, such a largedecline in long-term real interest rates is of great significance.This interest rate change is most likely a major cause for the marked increase in investment that isobserved for the post 2003 period. Savings rates had hovered around 25 percent the previous decade(1993 to 2002) and investment rates had averaged the same. Since 2002, in just five years, savingsand investment rates had increased by 11 and 12 percentage points respectively.And higher GDP growth leads to higher savings rates, and expectations of higher growth lead to anincrease in investment rates. This is what explains the jump in investment rates, savings rates, andGDP growth rates in the last five years.
  25. 25. RELATION BETWEEN NATIONAL INCOME & AGRICULTURE Linear RegressionRegression StatisticsR 0.98R Square 0.96Adjusted R Square 0.95Standard Error 145898.78Total Number Of Cases 18.00 1083572 =- 2417355.2900 + 9.8103 * 339893ANOVA p- d.f. SS MS F levelRegression 1.00 7599473793987.05 7599473793987.05 357.01 0.00Residual 16.00 340583274958.95 21286454684.93Total 17.00 7940057068946.00 p- H0 (5%) Coefficients Standard Error LCL UCL t Stat level rejected? -10.3 Intercept -2417355.29 233917.31 -2913237.84 -1921472.74 3 0.00 Yes 339893 9.81 0.52 8.71 10.91 18.89 0.00 YesT (5%) 2.12LCL - Lower value of a reliable interval (LCL)UCL - Upper value of a reliable interval (UCL)Residuals Observation Predicted Y Residual Standard Residuals 1.00 851996.22 247075.78 1.75 2.00 1069442.20 88582.80 0.63 3.00 1185302.20 38513.80 0.27 4.00 1355197.50 -53121.50 -0.38 5.00 1328964.68 68009.32 0.48 6.00 1700619.24 -192241.24 -1.36 7.00 1595452.50 -22189.50 -0.16 8.00 1849078.97 -170668.97 -1.21 9.00 1963104.44 -176578.44 -1.25 10.00 1952195.36 -87894.36 -0.62 11.00 2225373.82 -252765.82 -1.79 12.00 1889046.26 159239.74 1.13 13.00 2317855.81 -95097.81 -0.67 14.00 2320151.42 68616.58 0.48 15.00 2596841.99 19259.01 0.14 16.00 2795020.47 76097.53 0.54 17.00 3048195.67 81521.33 0.58 18.00 3135733.25 203641.75 1.44
  26. 26. ANALYSIS: National Income is the dependent variable and agriculture is the independent variable.. The two are highly co-related. Hence we can say that national income depends heavily upon the primary sector . RELATION BETWEEN NATIONAL INCOME AND SECONDARY SECTOR Linear RegressionRegression StatisticsR 1.00R Square 1.00Adjusted R Square 1.00Standard Error 38989.95Total Number Of Cases 18.00 1083572 = 47136.2160 + 3.7577 * 280882ANOVA p- d.f. SS MS F levelRegression 1.00 7915733607884.16 7915733607884.16 5206.98 0.00Residual 16.00 24323461061.84 1520216316.36Total 17.00 7940057068946.00 p- Coefficients Standard Error LCL UCL t Stat level H0 (5%) Intercept 47136.22 27983.62 -12186.41 106458.85 1.68 0.11 No 280882 3.76 0.05 3.65 3.87 72.16 0.00 YesT (5%) 2.12LCL - Lower value of a reliable interval (LCL)UCL - Upper value of a reliable interval (UCL)Residuals Observation Predicted Y Residual Standard Residuals 1.00 1105397.08 -6325.08 -0.17 2.00 1138356.29 19668.71 0.52 3.00 1203880.15 19935.85 0.53 4.00 1311265.33 -9189.33 -0.24 5.00 1457595.81 -60621.81 -1.60 6.00 1551832.62 -43454.62 -1.15 7.00 1607623.91 -34360.91 -0.91 8.00 1672283.49 6126.51 0.16 9.00 1746540.35 39985.65 1.06 10.00 1854466.65 9834.35 0.26 11.00 1903681.88 68926.12 1.82 12.00 2034707.05 13578.95 0.36 13.00 2181341.91 41416.09 1.09 14.00 2401978.10 -13210.10 -0.35 15.00 2641436.86 -25335.86 -0.67 16.00 2926766.46 -55648.46 -1.47 17.00 3159893.41 -30176.41 -0.80 18.00 3280524.65 58850.35 1.56 ANALYSIS:
  27. 27. National Income depends heavily upon the secondary sector and is also justified by the regression model. RELATION BETWEEN NATIONAL INCOME AND TERTIARY SECTOR Linear RegressionRegression StatisticsR 1.00R Square 1.00Adjusted R Square 1.00Standard Error 38989.95Total Number Of Cases 18.00 1083572 = 47136.2160 + 3.7577 * 280882ANOVA p- d.f. SS MS F levelRegression 1.00 7915733607884.16 7915733607884.16 5206.98 0.00Residual 16.00 24323461061.84 1520216316.36Total 17.00 7940057068946.00 p- Coefficients Standard Error LCL UCL t Stat level H0 (5%) Intercept 47136.22 27983.62 -12186.41 106458.85 1.68 0.11 No 280882 3.76 0.05 3.65 3.87 72.16 0.00 YesT (5%) 2.12LCL - Lower value of a reliable interval (LCL)UCL - Upper value of a reliable interval (UCL)Residuals Observation Predicted Y Residual Standard Residuals 1.00 1105397.08 -6325.08 -0.17 2.00 1138356.29 19668.71 0.52 3.00 1203880.15 19935.85 0.53 4.00 1311265.33 -9189.33 -0.24 5.00 1457595.81 -60621.81 -1.60 6.00 1551832.62 -43454.62 -1.15 7.00 1607623.91 -34360.91 -0.91 8.00 1672283.49 6126.51 0.16 9.00 1746540.35 39985.65 1.06 10.00 1854466.65 9834.35 0.26 11.00 1903681.88 68926.12 1.82 12.00 2034707.05 13578.95 0.36 13.00 2181341.91 41416.09 1.09 14.00 2401978.10 -13210.10 -0.35 15.00 2641436.86 -25335.86 -0.67 16.00 2926766.46 -55648.46 -1.47 17.00 3159893.41 -30176.41 -0.80 18.00 3280524.65 58850.35 1.56
  28. 28. ANALYSIS: Under this regression model here it is also seen that national income is heavily dependent upon the tertiary sector. RELATION BETWEEN NATIONAL INCOME AND EXPENDITURE Linear RegressionRegression StatisticsR 0.95R Square 0.91Adjusted R Square 0.90Standard Error 15946.86Total Number Of Cases 12.00 419759 = 403304.1351 + 0.5340 * 58895.85ANOVA p- d.f. SS MS F levelRegression 1.00 25512351374.75 25512351374.75 100.32 0.00Residual 10.00 2543023430.92 254302343.09Total 11.00 28055374805.67 p- Coefficients Standard Error LCL UCL t Stat level H0 (5%) Intercept 403304.14 9072.10 383090.24 423518.03 44.46 0.00 Yes 58895.85 0.53 0.05 0.42 0.65 10.02 0.00 YesT (5%) 2.23LCL - Lower value of a reliable interval (LCL)UCL - Upper value of a reliable interval (UCL)Residuals Observation Predicted Y Residual Standard Residuals 1.00 438379.30 -29340.30 -1.93 2.00 442455.14 -7563.14 -0.50 3.00 444222.37 2292.63 0.15 4.00 447048.16 -1645.16 -0.11 5.00 449812.67 23436.33 1.54 6.00 453983.54 -15017.54 -0.99 7.00 463445.40 19230.60 1.26 8.00 479222.84 3687.16 0.24 9.00 502902.66 8211.34 0.54 10.00 522384.82 8930.18 0.59 11.00 552348.58 4773.42 0.31 12.00 583040.50 -16995.50 -1.12 ANALYSIS:
  29. 29. From the data collected between 99-00 to 09-10 it is seen that national income has a high correlation with the expenditure. RELATION BETWEEN NATIONAL INCOME AND POPULATION Linear Regression Regression Statistics R 0.97are 0.94 Adjusted R Square 0.93 Standard Error 176929.65 Total Number Of Cases 18.00 1083572 =- 5088886.4910 + 69858.6780 * 83.9 ANOVA p- d.f. SS MS F level Regression 1.00 7439191480420.96 7439191480420.96 237.64 0.00 Residual 16.00 500865588525.04 31304099282.81 Total 17.00 7940057068946.00 p- Coefficients Standard Error LCL UCL t Stat level H0 (5%) -11.0 Intercept -5088886.49 458792.11 -6061482.31 -4116290.67 9 0.00 Yes 83.9 69858.68 4531.67 60251.97 79465.39 15.42 0.00 Yes T (5%) 2.12 LCL - Lower value of a reliable interval (LCL) UCL - Upper value of a reliable interval (UCL) Residuals Observation Predicted Y Residual Standard Residuals 1.00 891016.35 208055.65 1.21 2.00 1002790.23 155234.77 0.90 3.00 1142507.59 81308.41 0.47 4.00 1268253.21 33822.79 0.20 5.00 1393998.83 2975.17 0.02 6.00 1519744.45 -11366.45 -0.07 7.00 1645490.07 -72227.07 -0.42 8.00 1778221.56 -99811.56 -0.58 9.00 1903967.18 -117441.18 -0.68 10.00 2029712.80 -165411.80 -0.96 11.00 2176416.02 -203808.02 -1.19 12.00 2288189.91 -239903.91 -1.40 13.00 2399963.79 -177205.79 -1.03 14.00 2518723.54 -129955.54 -0.76 15.00 2637483.30 -21382.30 -0.12 16.00 2749257.18 121860.82 0.71 17.00 2861031.07 268685.93 1.57 18.00 2972804.95 366570.05 2.14 ANALYSIS:
  30. 30. This suggests that over the years post reforms national income has co-related with the population. As the population increases so will the national income. RELATION BETWEEN NATIONAL INCOME AND NET EXPORTS Linear RegressionRegression Statistics 0.98R Square 0.95Adjusted R Square 0.95Standard Error 149578.38Total Number Of Cases 18.00 1083572 = 1182797.3022 + 2.9159 * 32558ANOVA p- d.f. SS MS F levelRegression 1.00 7582078006386.70 7582078006386.70 338.88 0.00Residual 16.00 357979062559.30 22373691409.96Total 17.00 7940057068946.00 p- Coefficients Standard Error LCL UCL t Stat level H0 (5%) re Intercept 1182797.30 54771.67 1066686.55 1298908.06 21.60 0.00 Yes 32558 2.92 0.16 2.58 3.25 18.41 0.00 YesT (5%) 2.12LCL - Lower value of a reliable interval (LCL)UCL - Upper value of a reliable interval (UCL)Residuals Observation Predicted Y Residual Standard Residuals 1.00 1311217.95 -212145.95 -1.46 2.00 1339345.84 -181320.84 -1.25 3.00 1386176.60 -162360.60 -1.12 4.00 1423863.04 -121787.04 -0.84 5.00 1492906.53 -95932.53 -0.66 6.00 1529254.38 -20876.38 -0.14 7.00 1562155.22 11107.78 0.08 8.00 1590296.73 88113.27 0.61 9.00 1646699.85 139826.15 0.96 10.00 1769928.60 94372.40 0.65 11.00 1792268.67 180339.33 1.24 12.00 1926747.06 121538.94 0.84 13.00 2038219.61 184538.39 1.27 14.00 2277242.42 111525.58 0.77 15.00 2513657.12 102443.88 0.71 16.00 2850037.24 21080.76 0.15 17.00 3095216.78 34500.22 0.24 18.00 3634338.37 -294963.37 -2.03
  31. 31. ANALYSIS:National Income and Net Exports go together hand in hand. As it can be seen from theregression model that the two are very highly co-related.Regression analysis of GDP with respect to Savings and Investment:Regression of Saving with respect to GDP: Regression StatisticsMultiple R 0.98251576 0.96533721R Square 9Adjusted R 0.96461507Square 8 204107.798Standard Error 7Observations 50ANOVA Significanc df SS MS F eFRegression 1 5.57E+13 5.57E+13 1336.771 1.05E-36Residual 48 2E+12 4.17E+10Total 49 5.77E+13 Standard Upper Coefficients Error t Stat P-value Lower 95% 95% 134946.582Intercept 5 33368.85 4.044089 0.00019 67854.02 202039.1 2.67849986X Variable 1 8 0.073259 36.56187 1.05E-36 2.531202 2.825798
  32. 32. Levels 1950-60 1961-70 1971-80 1981-89 1990-2002 2003-07 2006-2008 Share of agriculture (% GDP) 51 43.9 37 32.2 26.4 19 18.1 Savings (% GDP) 8.3 13.11 18.68 20.6 25.2 33 35.8 Investment (% GDP) 9.1 12.4 16.6 21.7 25 33 36.7 GDP growth - Actual 3.9 3.8 2.7 5.7 5.2 8.5 8.9GDP growth shows a clear acceleration from an average of 2.8 percent in the 1970s to a leveldouble that in the 1980s – 5.7 percent per annumWhen savings and investment have increased we can see that GDP growth is significant. In theabove table savings was mere 8.3% during 1950s. But gradually savings have increased and this ledto a significant change in GDP growth rate.Growth in investment has an important role to play in GDP growth rate. Investments have grownfrom 9.1% in 1950-60 to 36.7% currently.INTERPRETATION OF THE RESULTSThus from the above analysis through regression models we have seen that the parametersdeciding upon the national income are substantially impacting the national income. It wouldnot be wise to eliminate any of the parameters as all the parameters have a high co-relationwith national income exceeding more than .9 going up to exact 1 at times.CONCLUSION:
  33. 33. Firstly, in India, agriculture still remains the predominant economic activity and nay fluctuations init have serious impact on the whole of the economy. However, the importance of agriculture appearsto be slowly declining. In the early years of the 1970s, its share in the net domestic product used tobe around 50 percent, it has now come down to less than 20 percent.Secondly, not only the country has gradually moved towards industrialization, but the industrialsector has also undergone a structural change. However, during the past six decades, the rapidgrowth of modern industries has clearly undermined the relative importance of the unorganizedsmall sector.Thirdly, the growing shares of transport, communications, energy and banking and insurance to thenet domestic product reflect the expansion of economic infrastructure in the country.To sum up, since independence the Indian economy has become less geared to the primary sectorand its dominant component—agriculture. It is now more attuned to the secondary and tertiarysectors. This may be regarded from the development point of view a progressive change in thestructure of the economy during the last six decades.REFERENCES: • Ahluwalia, Isher J., “Productivity and Growth in Indian Manufacturing,” Oxford University Press, New Delhi 1991. • Ahluwalia, Isher J., “Industrial Growth in India: Stagnation since the mid-sixties,” Oxford University Press, New Delhi, 1995. • http://www.tradechakra.com/indian-economy/national-income.html • http://www.finmin.nic.in/ • http://www.icai.org/resource_file/16788National_Income_india.pdf • Business Beacon • www.planningcommission.gov.in/

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