1) National income of India constitutes the total amount of income earned by the whole nation and originated both within and outside its territory during a particular year. 2) Estimates of national income are made using various methods including output, income, and expenditure. Data is provided by government agencies and surveys. 3) India's national income has grown significantly since independence, with the economy experiencing periods of modest growth, recovery, and higher growth during the post-reform period from 1992 onward.

1. Trends of
national
income in
India
Vaibhav

2. Why study National Income?
The basic economic processes in any society
are carried out through numerous
transactions every day. Buying and selling of
food, cloth, cars and houses, sale and resale of
shares and other financial assets, as well as
services like schools, doctors, domestic help,
restaurants and social security benefits given
by the government like old age pension are all
part of these transactions.

3. Meaning of National Income:
• National income of India constitutes the total amount of income
earned by the whole nation and originated both within and
outside its territory during a particular year. 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 estimates of national income depict a clear picture of the
standard of living of the community. The national income
statistics diagnose the economic ills of the country and at the
same time suggest remedies. The rate of savings and investment
in an economy also depends on the national income of the
country.

4. National income reflects the macro flows of goods and services, and the
economic structure of the economy. To quote National Income
Committee, 1951, "National Income statistics provide a wide view of
the country's entire economy, as well as of the various groups in the
population who participate as producers and income receivers, and
that, if available over a substantial period, they reveal clearly the
basic changes in the country's economy in the past and suggest, if not
fully reveal, trends for the future." A total of national income measures
the flow of final goods and services in an economy over a particular
period of time, usually a year. Contrary to the national wealth that
measures the stock of commodities held by the nationals of a country,
national income measures the productive power of economy. It is
defined as the sum of incomes accruing to factors of production, supplied
by normal residents of the country before deduction of direct taxes. It is
identically equal to net national product at factor cost.

5. Gross Product
The Gross Domestic Product (GDP) is the measure in
monetary terms, of all goods and services produced in the
economy. The GDP at constant prices, which is also termed as
the real GDP, depicts the growth of the economy in real
terms, as it excludes the effect of price changes over the
years. It is also considered to be the most comprehensive
single measure of aggregate economic output of the
country, since it encompasses the performance of all
economic activities during the period of reference. Gross
National Product (GNP) measures the total domestic and
foreign output claimed by residents of a country.

6. Net Product
Net Domestic Product (NDP) is the GDP minus depreciation,
i.e. reduction in the value of assets through wear and tear. Net
National Product (NNP) is GNP minus depreciation. NNP,
when calculated at factor cost, is called National Income.
Estimates of NDP and NNP are made at market prices. The
market prices constitute costs of production, indirect taxes
and subsidies. While the indirect taxes are added to the
costs of production, the subsidies are subtracted from them.
When the indirect taxes are deducted and subsidies added
to the various estimates, the resulting value will equal the
cost of producing goods and services. Thus, there are two
types of estimates: at market prices and at factor cost.

7. Estimation of National Product
In order to estimate the national product, the producing sectors are identified
and then the products of such sectors are evaluated at market prices. To the
value of products of these sectors is added the net income from abroad to
get at the estimate of national product. Both the output and the income
methods are applied for the valuation of the products. While the output
method has been used largely in the commodity producing sectors like
manufacturing and agriculture, the income method is used in the
tertiary or service sector like trade, public administration and defense,
etc. Besides, this method is also applied to those segments of commodity
sectors where there is absence of output data. The third method—
experimental method—is used in a very limited way to such sectors like
construction. The output method involves "value-added" approach. The
term "value-added" implies the value of goods minus the cost of production.
The output method determines the net contribution of a producing unit to
national income.

8. The sum total of value added by all the producing units in the
commodity sector is the value of this sector's contribution to national
income. The estimation is made by evaluating the value of goods at ex-
factory prices and deducting from it the value or the costs of inputs
supplied by other enterprises, and the estimated value of depreciation
(or capital consumption).
The income method involves the procedure of finding out the number
of people working or the workforce in a profession as well as average
per head earnings. Thereafter, both the figures so derived are multiplied
and its product is the value of income contributed by the profession.
The expenditure method involves estimation of spending or disposition
of income on final goods and services.

9. Data for these methods
Data for these methods are concerned, they are furnished by government
agencies like those of ministries, departments and directorates. The National
Sample Survey Organizations (NSSO), set up in 1950, is responsible for
conducting large scale sample surveys to meet the data needs of the
country for the estimation of national income and other aggregates.
Reports of the Rural Credit Survey, Indian Rural Debt and Investment and the
like also form the sources of data for the calculation of national income.
Similarly, censuses of population have also been made use of to estimate the
workforce in the absence of comprehensive employment statistics in various
professions. Arbitrary imputations are made in respect of certain goods and
services if there is need of data related to those goods and services. Data for
the income method are made available through various indicators. For
instance, the index of trading activity is indicator for trade while the index
number of average daily wages of rural skilled labour in agriculture is used as
an indicator for the non-agricultural sector.

10. India: Among the Largest Economies of the World
GDP is a significant yardstick to measure the size of an
economy. India is the world’s third largest economy in terms of
purchasing power parity (PPP), after China and the United
States. In fact the size of Indian economy is almost three
times the size of the UK economy and more than two times
the size of German economy. GDP comparisons using PPP are
better than that of nominal GDP when assessing a nation’s
economic strength because PPP takes into account the relative
cost of local goods, services, and inflation rates of the country,
rather than using international market exchange rates that
may distort the real differences in per capita income.

11. Estimates of National Income during Pre-Independence
Period:
• During the British period, several estimates of national income were made
by Dadabhai Naoroji (1868), William Digby (1899), Findlay Shirras, Shah
and Khambatta (1921), V.K.R.V. Rao (1925-29) and R.C. Desai (1931-40).
But these estimates were having no scientific basis of its own.
• They estimated the value of the output of the agricultural sector and
thereafter added a certain percentage as the income of the non-agricultural
sector. Since their assumptions were mostly arbitrary, the estimates were
devoid of any scientific basis. Besides, the estimates of national income
during the British rule were based on statistics from the agricultural sector
which were highly undependable. Growth rate of Indian economy for
the period 1860-1945 at 1970-71 prices is as give in Table.

12. The Table clearly indicates that during the British rule the
Indian economy was more or less stagnant over a long
period with a growth rate of 0.5 per cent for 1860-1945.

13. Estimates of National Income during the Post-Independence
Period:
After independence, the Government of India appointed the National Income
Committee in August 1949 with Prof. P.C. Mahalanobis as its chairman and Prof.
D.R. Gadgil and Dr. V.K.R.V. Rao as its two members to compile national income
estimates rationally on a scientific basis. The first report of this committee was
prepared in 1951.
• (1) Agriculture, including animal husbandry, forestry and fisheries, contributed
nearly 50 per cent of the national income during 1950-51.
• (2) One-sixth of the total national income was contributed by the mining,
manufacturing and hand trades.
• (3) Commerce, transport and communications also accounted for more than one-
sixth of the total national income.
• (4) Fifteen per cent of national income was contributed by the other services
such as professions and liberal arts, administrative services, domestic services,
house property, etc.

14. •(5) Two-thirds of the national income was contributed
by the commodity production that included material
production derived from agriculture, mining, factory
establishments, etc.
•(6) Services sector comprising commerce, transport
and communications, administrative services, liberal
arts, etc., accounted for about one-third of the total
national income.
•(7) The share of government sector in net domestic
product and in national expenditure during 1950-51
was 7.6 per cent and 8.2 per cent, respectively.

15. National Income Committee and C.S.O. Estimates:
• During the post-independence period, the estimate of national
income was primarily conducted by the National Income
Committee. Later on, it was carried over by the Central Statistical
Organisation (CSO).
• For the estimation of national income in India, the National
Income Committee applied a mixture of both the ‘Product
Method’ and the ‘Income Method’. This Committee divided the
entire economy into 13 sectors. Income from the six sectors, viz.,
agriculture, animal husbandry, forestry, fishery, mining, and
factory establishments was estimated by the output method.
But the income from the remaining seven sectors was estimated
by the income method.

16. Base years
• National income has been measured in current prices and base year prices to
arrive at real national income. For this, different years were selected as base
years, each selected year called a ‘series’. The following table shows different
series of years adopted as base years by CSO
• The Advisory Committee on National Accounts Statistics (ACNAS) has
recommended to the ministry of statistics and programme implementation to
consider 2020-21 as the next base year of National Income Accounting recently.
Though the MOSPI is considering 2017-18 as the new base year, no decision has
been taken, and the expert's committees are awaiting some more data before
finalising their opinion.
SN Selected year
as a series
From - to
1 1948-49 1948-1965
2 1960-61 1960-1976
3 1980-81 1980-1993
4 1993-94 1993-2004
5 2004-05 2004-2011
6 2011-12 2011 – till date

17. Trends in National Income in India:
Table 1.1. Gross National Income and Net National Income
Year
Gross national income(` crore) Net national income( ` crore) Per capita net national income(`)
Current
prices
Constant
prices
Current
prices
Constant
prices
Currentprices Constant
prices
(1) (2) (3) (4) (5) (6) (7)
1987-88 365592 1204856 332400 1097111 4218 13923
1988-89 432397 1317940 393546 1204380 4889 14961
1989-90 496197 1396154 450949 1275833 5486 15521
1990-91 578667 1470766 526017 1342031 6270 15996
1991-92 663798 1485707 599171 1348043 7000 15748
1992-93 762900 1567944 688762 1422097 7899 16308
1993-94 879275 1644886 796418 1492864 8928 16736
1994-95 1032507 1755272 935759 1592980 10283 17505
1995-96 1213241 1888228 1100655 1715639 11861 18487
1996-97 1406195 2032837 1276347 1849226 13492 19548
1997-98 1559189 2118975 1411922 1920927 14646 19927
1998-99 1788410 2250012 1624669 2038124 16528 20734
1999-00 2007699 2448654 1821227 2220003 18194 22178

18. 2000-01 2154680 2535911 1947788 2291795 19115 22491
2001-02 2335777 2661819 2106928 2401875 20259 23095
2002-03 2519637 2766298 2273456 2492931 21529 23607
2003-04 2820795 2983497 2548640 2692470 23775 25116
2004-05 3219835 3219835 2899944 2899944 26629 26629
2005-06 3667253 3518348 3303532 3167455 29869 28639
2006-07 4261472 3841974 3842743 3456274 34249 30805
2007-08 4966578 4233768 4481882 3806140 39384 33446
2008-09 5597140 4390966 5031943 3922062 43604 33987
2009-10 6439827 4763090 5780028 4241183 49402 36249
2010-11 7702308 5227739 6942089 4657438 58534 39270
2011-12 8932892 5586683 8052996 4958849 66997 41255

19. 2011-12 Series
2011-12 8659505 8659505 7742330 7742330 63462 63462
2012-13 9827250 9104662 8766345 8094001 70983 65538
2013-14 11093638 9679027 9897663 8578417 79118 68572
2014-15 12320529 10402987 10978238 9224343 86647 72805
2015-16 13612095 11234571 12162398 9963681 94797 77659
2016-17 15215269 12163619 13623937 10782092 104880 83003
2017-18 (2nd RE) 16913491 13029307 15149545 11540556 115293 87828
2018-19 (1st RE) 18768912 13829068 16789288 12219693 126521 92085
2019-20 (PE) 20118353 14405339 17999754 12733366 134226 94954
2020-21 (1st AE) 19239492 13269436 17209409 11718380 126968 86456
Source : National Statistical Office
Notes :
PE : Provisional Estimates, RE: Revised Estimates AE: Advance Estimates

20. 0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
18000000
20000000
1987-88
1988-89
1989-90
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
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
(2nd
RE)
2018-19
(1st
RE)
2019-20
(PE)
2020-21
(1st
AE)
Net National Product (Current Prices)

21. • 1951–1980: The Phase of Modest Growth Rate
• 1980–90: The Phase of Economic Buoyancy and Recovery
• 1992 Onwards: Post-Reform Period: During the eighth plan period, that is, from 1992–
1997, the national income growth was 6.5% as compared to the target of 5.6%. The
major reason of high growth rate in eighth plan was acceleration in the inflow of
foreign capital, which is the direct fallout of new economic policy of 1991. The 10th
plan (2002–2007) witnessed a great turnaround with 7.6% growth rate and major
reason for this reversal was accelerated growth of services, construction, and
manufacturing sectors. In fact, during 2002–2003 to 2006–2007, India recorded GDP
growth rate of 8.6%, making it world’s second fastest growing economy after China.
The target growth rate for 12th five-year plan (2012–2017) was 8% but the actual
growth rate was 6.8%. India’s GDP growth has averaged 7.3% for the period from
2014–2015 to 2017–2018, which is the highest among the major economies of the
world.

22. Targeted and achieved
growth rates during Five Year
Plans

23. First Plan (1951-56)
During the First Plan period, the national income
at constant (1980-81) prices has increased from
Rs. 41,443 crore in 1951-52 to Rs. 48,288 crore in
1955-56 showing an annual average, growth rate
of 3.6 per cent. Again the per capita income at
1980-81 prices has also increased from Rs. 1,135.4
in 1951-52 to Rs. 1,228.7 in 1955-56 showing an
average growth rate of only 1.7 per cent during
the same plan period.

24. Second Plan (1956-61)
During the Second Plan period, the national
income at constant (1980- 81) prices has increased
from Rs. 50,955 in 1956-57 to Rs. 58,602 crore in
1960-61 showing an annual average growth rate
of 3.9 per cent during the plan period. Moreover,
the per capita income at 1980- 81 prices has also
reached the level from Rs. 1,270.7 in 1956-57 to
Rs. 1,285.8 in 1960-61 showing an annual average
growth rate of 1.9 per cent during the plan period.

25. Third Plan (1961-66)
During the Third Plan, the net national product at
constant (1980-81) prices has increased from Rs. 60,168
crore in 1961-62 to Rs. 65,734 crore in 1965-66 showing
an annual average growth rate of only 2.3 per cent
during the plan period. Again, the per capita income at
1980-81 prices has also increased insignificantly from
Rs. 1,355.1 in 1961- 62 to Rs. 1,355.3 in 1965-66
showing an annual average growth rate of only 0.1 per
cent during the plan period.

26. Fourth Plan (1969-74)
During the Fourth Plan, the national income at constant
(1980-81) prices has increased from Rs. 78,177 crore
in 1969-70 to Rs. 86,010 crore in 1973-74 which
revealed the annual average growth rate of only 3.3 per
cent during the plan period. Again the per capita
income at 1980-81 prices has also increased
marginally from Rs. 1,478 in 1969- 70 to Rs. 1,483
in 1973-74 showing an annual average growth of
only 0.9 per cent during the same period.

27. Fifth Plan (1974-78)
During the Fifth Plan period, the net national product
at constant (1980- 81) prices has increased from Rs.
87,116 crore in 1974-75 to Rs. 1,03,670 crore in
1977-78 showing an annual average growth rate
4.9 per cent during the plan period. Again the per
capita income at 1980-81 prices has also increased
from Rs. 1,469 in 1974- 75 to Rs. 1,635 in 1977-78
showing an annual average growth rate of 2.6 per
cent during the plan period.

28. Sixth Plan (1980-85)
During the Sixth Plan period, the net national product
at constant (1980- 81) prices has increased from Rs.
1,10,685 crore in 1980-81 to Rs. 1,33,808 crore in
1984-85 showing an annual average growth rate of
5.4 per cent during the plan period. Similarly, the per
capita income at 1980-81 prices has also increased
from Rs. 1,630 in 1980-81 to Rs. 1,811 in 1984-85
showing an annual average growth of 3.2 per cent
during the plan period.

29. Seventh Plan (1985-90)
During the Seventh Plan period, the national income of
India at constant (1980-81) prices has increased from
Rs. 1,39,025 crore in 1985-86 to Rs. 1,77,315 crore in
1989-90 showing an annual average growth rate of 5.8
per cent during the plan period. Again the per capita
income at 1980- 81 prices has also increased from Rs.
1,841 in 1985-86 to Rs. 2,157 in 1989-90 showing an
annual average growth rate of 3.6 per cent during the
plan period.

30. Eighth Plan (1992-97)
During the Eighth Plan period, the national income at
constant (1980- 81) prices has increased considerably
from Rs. 1,95,602 crore in 1992-93 to Rs. 2,58,465
crore in 1996-97 showing an annual average growth of
6.8 per cent during the plan period. Again the per
capita income at 1980-81 prices, has also increased
from Rs. 2,243 in 1992-93 to Rs. 2,761 in 1996-97
showing an annual average growth rate of 4.9 per cent
during the plan period.

31. Ninth Plan (1997-2002):
The Ninth Plan which has started from 1st
April, 1997 continued till 31st March, 2002.
The draft of the Ninth Plan approved by the
National Development Council (NDC) on
19th February, 1999 has projected a GDP
growth rate of 6.5 per cent during the plan
period. But the achievement is estimated at
5.5 per cent during the plan period.

32. During the Ninth Plan period, the national income
at constant prices (1993-94) has increased
considerably from Rs. 8,90,890 crore in 1997-98
to Rs. 11,15,157 crore in 2001-02, showing an
annual average growth rate of 5.5 per cent during
the plan period. Again the per capita income at
1993- 94 prices has also increased from Rs.
9,243.6 in 1997-98 to Rs. 10,753.7 in 2001-02,
showing an annual average growth rate of 3.6 per
cent during the plan period.

33. Tenth Plan (2002-2007):
The Tenth Plan which started in 1st April. 2002
continued till 31st March, 2007. The draft of the Tenth
Plan approved by NDC on 1st September, 2001 has set
a target of achieving growth rate of 8.0 per cent in GDP
during the plan period. During the Tenth Plan period,
the national income at constant prices (1999-2000) has
increased considerably from Rs. 18,05,830 crore in
2002-03 to Rs. 25,30,494 crore in 2006-07, showing the
annual growth rate of 3.9 per cent in the first year
(2002-03) and 9.7 per cent in 2006-07.

34. Eleventh Plan (2007-2012)
The Eleventh plan which started in 1st April, 2007 and
continue till 31st March 2012. The draft of the
Eleventh Plan approved by NDC on 9th December,
2006 has set a target of achieving growth rate of 9.0
per cent of GDP during the plan period. During the
Eleventh Plan period, the national income at constant
prices (2004-05) has increased from Rs. 3,449,970
crore in 2007-08 to Rs. 3,672,192 crore in 2008-09 (Q),
showing the annual growth of rate of 6.4 per cent.

35. Twelfth Plan (2012-2017)
This plan was started from 1st april 2012 and
continued till 31st march 2017. The growth rate
was showcased as 8.2% but the National
Development Council (NDC) approved 8% growth
for the period. 2012- 2013, 2013- 2014, 2014-
2015, 2015- 2016, 2016- 2017, 2017- 2018
National Income 88.41 lakh cr, 100.56 lakh cr,
106.57 Lakh cr, 113.81 lakh cr, 121.65 lakh cr,
129.85 lakh cr.

36. SN Plan Period Target Actual
1 I 1951-56 2.1 3.6
2 II 1956-61 4.5 4.3
3 III 1961-66 5.6 2.8
4 IV 1969-74 5.7 3.3
5 V 1974-79 4.4 4.8
6 VI 1980-85 5.2 5.7
7 VII 1985-90 5.0 6.0
8 VIII 1992-97 5.6 6.8
9 IX 1997-02 6.5 5.4
10 X 2002-07 8.0 7.6
11 XI 2007-12 9.0 8.0
12 XII 2012-17 8.2 --

37. After observing the cited table, the trends in Indian national income
and per capita incomes can be analysed in the following way.
• Targeted growth rates not achieved: The Indian growth rate is not
that satisfactory. For most of the years and plans, the achieved
growth rates are much less than what the planners targeted to
achieve. For example, during the third and fourth Five Year Plans,
the targeted rates are 5.6 and 5.7, whereas, actually achieved rates
are merely 2.5 and 3.3% respectively. Even during the tenth plan,
the targeted rate was 8.0 and the actual rate is only 6%. Owing to a
strict nationwide lockdown due to the novel coronavirus (COVID-19)
during the bulk of the first quarter of the financial year 2020-21,
India’s Gross Domestic Product (GDP) for the April-June quarter
(Q1) slipped by a sharp 23.9 per cent. Whereas, its contraction
narrows from -23.9 to 7.5% during second quarter.

38. • Difference between nominal and real percapita income: Even though
the nominal national income of India increased considerably, the real
percapita income is not moving at the same pace. This is because the
Indian population is still increasing very fast, which offset the growth of
the nominal percapita growth rate.
• Insufficient growth rate: Keeping the sociological, economic conditions,
poverty, etc., economists suggested at least 10 annual growth rates for
the Indian economy. But even after 72 years of independence, India
couldn’t achieve a stable growth rate of around 10%.
• Agricultural domination: Even now there is a clear domination of
agriculture on Indian national income. In terms of its contribution or in
terms of providing employment opportunities, the agriculture sector
plays a crucial role. Though the share of agriculture in national income is
decreasing rapidly, still it is very consistent when compared with other
advanced countries.

39. • Irregularity in growth: The rate of growth in national income is not regular and
study when we observe it during different plan periods. The growth rate is
fluctuating and crossing the estimations some time and lagging quite behind the
target many times.
• Huge gap between national income in current and base year prices: There
existed a huge gap between the growth rate of national income in current year
prices and in base-year prices which are called real national income. For example,
national income for 2019-20 in current year prices is 1.81 lakh crores, whereas, it
is only 1.29 lakh crores as per base year prices of 2011-12. This is because of
inflationary pressures on the economy.
• Changes in the sectoral distribution of national income: It is observed that the
share of the agricultural sector is falling rapidly and that of the service sector is
increasing in Indian national income. The share of the primary sector which was
around 56.5 % at the beginning of the First Plan, drop down to less than 13% by
the end of XII Plan. There is no much difference in the case of the industrial
sector. But in the case of the tertiary sector, the contribution has increased from
28.5% to more than 60% recently. This trend is an indication of economic
development as is explained by the economist, Colin Clark.

40. • Increased share of the public sector in national income: Another notifiable
issue is that the share of the public sector is increasing in Indian national
income. The share of the public sector was only 8% during the First Plan but
climbed to 23% by 2013-14. It indicates that the public sector is playing a
crucial role in achieving economic development.
• Unequal Distribution and Poor Standard of Living: The distribution of
national income in India is most unequal. Human Development Report, 1994
shows that in 1993, richest 20 per cent of total population shared 84.7 per cent
of the total income and the poorest 20 per cent of the total population shared
only 1.4 per cent of the total income of the country. Due to highly skewed
pattern of distribution of income, the standard of living of the majority of
population of our country is very poor.
• Regional Disparity: Another striking feature of India’s national income is its
regional disparity. Among all the states, only six states of the country have
recorded a higher per capita income over the national figure. Among all states
Punjab ranks highest and Bihar ranks lowest.

41. Urban and rural disparity of income is
another important feature of our national income. The
All-India Rural Household Survey shows that the level
of income in urban areas is just twice that of the rural
areas depicting a poor progress of rural economy.