Sectoral Composition of GDP in India

The sectoral composition of GDP in India has undergone substantial changes since 1950-51. The share of agriculture has declined while that of industrial and service sectors has increased. Economic activities can be divided into three categories primary activities, secondary activities and tertiary activities.

Primary activities include( i) agriculture, ii) forestry and logging, and (iii) fishing. Secondary. activities include (i) mining and quarrying, (ii) manufacturing, (iii) electricity, gas and water supply, and (iv) construction. Tertiary activities include (i) trade, (ii) hotels and restaurant, (iii) transport (railways, road, air, waterways), (iv) storage, (v) communication, (vi) banking and insurance, (vii) real estate, and (viii) public administration and defense. The tertiary activities are also called-sir-vice activities.

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On the basis of Table :

  • Agriculture and allied activities (primary sector) contributed more than half the GDP in 1950-51.
  • The share of agriculture and allied activities has continuously declined over the years and contributed only 24.2 per cent in the year 2000-01 of this, agriculture contributed 22.2 per cent while forestry and logging, and fishing contributed about I per cent.
  • The share of services sector has increased from 28 per cent in 1950-51 to 48.5 per cent in 2000-01. For the year 2005-06 the share of services sector is estimated to be 54 per cent of GDP. Thus services sector contributes more than half of the GDP at present.
  • The share of secondary sector has increased from 14.3 per cent in 1950-51 to 27.3 per cent in 2000-01. Subsequently it declined to 26.1 per cent in 2005-06.

The decline in the share of the pprimary sector in GDP has taken place as the secondary and tertiary sectors have registered higher growth rate than the primary sector. In fact, the government has attempted to promote the secondary and tertiary sectors.

If we look into the sectoral composition, of GDP of the developed economies, we find that primary sector contributes lees than 5 per cent of GDP. Most of the GDP comes from the service sector (about 70-80 percent). So the developments in the Indian economy can be considered to be a positive aspect.

It is worth mentioning that of the 27.3 percent share in 2000-01 manufacturing sector contributes 17.2 per cent to the GDP. The remaining 10.1 per cent comes from mining and quarrying (2.3 percent), electricity, gas and water supply (2.5 per cent) and construction (5.3 per cent). Remember that manufacturing electricity, gas and water supply constitute the industrial sector. In the industrial sector we have both private sector and public sector on the basis of ownership.

Very often another distinction is made : organised sector and unorganized sector. In fact, as per the Industrial Act 1951 all the ‘ industries employing more .that 10 workers if production is through use of power ( 20 workers if production takes place without use of power) are required to register with the Registrar of Industries.

These industrial units fall under the category registered-sector or organised sector. The remaining industrial units, mostly small scale, are termed unorganized sector. In the year 2000-01 the unorganized sector contributed 6 per cent to GDP compared to 11.2 per cent by the organised sector. In the. year 1950-51 both organised and unorganized sectors contributed almost equally to GDP at 4.5 per cent each.

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A similar trend is observed in the per capital income of India. Per capital income is defined as national income divided by total population of the country. It is obtained by subtracting population growth rate from growth rate of national income.

We should mention that before 1975 growth rate in national income was relatively lower while population growth rate was higher. As a result, per capital income increased at a very low rate (a little over 1 per cent per annum). On the other hand, after 1975 growth rate in national income was higher while population growth started slowing down. Consequently, per capital income increased at a relatively higher rate. During the period 1992-2002 per capital income has increased at around 4 per cent per annum.

Tags: Ba Economics

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