ECONOMICS GROWTH & STRUCTURAL CHANGES IN INDIAN ECONOMY
Introduction
In this chapter you will study the growth of and structural change in the Indian economy in the
last fifty years since 1950 − 51 for which data on most of the macro aggregates are available on
an annual basis. We shall concentrate on the growth of gross domestic product at factor cost
valued at 1993 − 94 prices. We shall consider the growth of per capita national income, also
valued at 1993 − 94 prices, which can be taken as the simplest indicator of the level of living or
development.
In an earlier chapter, one of the notions of development was posed in terms of structural change
along with growth. What do we mean by structure? Most people mean by it production
structure, that is, composition of output produced by the economy. Some would like to find out
how and where our labour is absorbed. Other factors such as land and capital are not given
equal importance. Some would also like to find out how the production of output is divided
between rural and urban areas of the country or between public and private sectors of the
economy or between organised and unorganised sectors. We shall discuss all of them. But we
can appreciate developments since Independence better once we have a little hint about the
scene on the eve of Independence.
Economy on the Eve of Independence
We had inherited an economy, which was basically geared to the interest of our colonial
masters. The rate of growth of per capita income during the hundredyear period before
Independence, from whatever scanty information is available, was just 0.5 per cent per annum.
It has further been noted that there were long spells when the economy actually stagnated or
declined.
In the past, we were known for producing fine cotton fabric, handicrafts and other merchandise.
Even during the early British Raj, that is, before the onset of industrial revolution in Britain, our
economy was an industrial economy by the standards of those days whereas the European
economies had yet to usher in modern civilisation. Yet, by the time we got Independence, our
economy was primarily reduced to an agricultural economy and we used to export mainly raw
materials and minerals for the British industries and even foodgrains while we might have been
hungry ourselves.
In 1950 − 51, our per capita income was no more than Rs. 3, 700 at 1993 − 94 prices (while in
1999 − 2000, it is a little more than Rs. 10, 000). The contribution of agriculture sector
(including animal husbandry and livestock) to the GDP was around 54 per cent by current
