Growth and Structural Changes in Indian Economy—An Analysis

Abstract

In this paper, we seek to look into the growth and structural changes in Indian economy and further in 17 major states. Initially, we are taking year-to-year growth rates since 1950–51 till 2011–12. Second, planwise growth rates have also been considered. Here, the structures we considered are the production structure mainly at the sectoral level and the employment structure among the three main sectors. We have also calculated the productivity relatives. The paper has also looked into the state level similar structure. An analysis has been made between the states with higher structural shifts and labour reforms. We have probed into the rural and urban composition of the population. We have also analysed the relationship between structural shifts in states and the nutrition level (calorie intake), the literacy level, monthly per capita consumption expenditure, per capita income in states (SGDP) and the inflation (consumer price index as proxy). Hence, we would try to test the following hypotheses: The paper highlights the growth pattern and the structural changes in the Indian economy and in its major states. It is observed from the analysis that the growth rates have been widely fluctuating on yearly basis. It has also been noted that the growth rates have been negative for 4 years. It has happened mainly due to the three wars we fought with China and Pakistan and another being the draught year. This has been true for the planwise growth rates. So far as the shares of GDP are concerned, it is changing faster from agriculture to industry and also to the services sector. This is also quite similar in the case of the states as has been observed. As against this, the share of employment is changing in a similar manner but relatively at a slower pace. Indeed, it is because of this reason that the productivity relatives have been keeping low in the agriculture and higher in the industry as well as the services sector. It is in fact the highest for the services sector. The correlation matrix shows that the agriculture is having negative relations with most of the variables and sectors while the other two sectors, i.e. industry and the services, are having the positive relation with most of the variables. So far as the story of urbanisation is concerned, it seems to have been faster in those states where industrialisation and literacy rates are higher. We have also made an effort to relate the sectoral shift with that of Labour reforms. It has been found that where the labour reforms have been accepted, the sectoral shifts are also higher. If we go further we may also say that in those states where urbanisation is higher the shifts in SGDP are also higher and they also followed the labour reforms. But the argument may be taken with some caution because there are some states where there are no labour reforms but shift in SGDP as well as the shifts in population structure is higher. These are Kerala and Tamil Nadu. Looking at the result above, we may suggest that urbanisation is good to boost the literacy rate in India. Hence, the urbanisation should be encouraged so as to achieve the higher literacy rate. Second, the labour reforms have also been found beneficial in those states where it has been followed. So it may be safe to say that the other states where labour reforms have not been accepted should implement labour reforms as suited to them. It is also beneficial in making the sectoral shifts faster.