Structural changes in the Indian Economy ( GDP and work force)

Structural changes in the Indian Economy

Change in composition of domestic product or change in national income by industry of origin refers to change in relative significance (share) of different sectors of the economy. Generally, an economy is divided into three major sectors viz. primary, secondary and tertiary sectors.

Primary sector includes agricultural and allied activities, secondary sector includes manufacturing industries and tertiary sector includes services. With the development process, significance of primary sector declines while that of secondary and tertiary sectors increases. After independence, Indian economy has also experienced such changes.

The share of primary sector in GDP at factor cost (at 1999-2000 prices) which was 56.5 per cent in 1950-51 declined to 34.6 per cent in 1990 91 and then to 19.7 per cent in 2007-08.

The secondary sector’s share in GDP was 13.6 per cent in 1950-51 increased to 23.2 per cent in 1990-91 and further to 24.7 per cent in 2007-08. Tertiary sector’s share in GDP increased from 29.9 per cent in 1950-51 to 55.6 per cent in 2007-08, and in 2009-10 it was over 7 per cent.

When country attained independence, the share of basic and capital goods industries in the total industrial production was roughly one-fourth.  Under the second plan, a high priority was accorded to capital goods industries, as their development was considered a pre-requisite to the overall growth of the economy. Consequently, a large number of basic industries which produce capital equipment and useful raw materials have been set up making the country’s industrial structure pretty strong.

Social overhead capital broadly includes transport facilities, irrigation systems, energy production, educational system and organisation and health facilities. Their development creates favourable conditions for growth and also for better human living. The transport system in India has grown both in terms of capacity and modernisation.  The railways route length increased by more than 9 thousand kms and the operation fleet practically doubled. The Indian road network is now one of the largest in the world as a result of spectacular development of roads under various plans. India has also seen growth in Life- lixpectancy and Literacy Rate but education has not expanded at a desired rate.

Since independence, significant progressive changes have taken place in the banking and financial structure of India. The growth of commercial banks and cooperative credit societies has been really spectacular and as a result of it the importance of indigenous bankers and money-lenders has declined.  Since nationalisation, these banks have radically changed their credit policy. Now more funds are made available to priority sectors such as agriculture, small-scale industries, transportation, etc.

Changing trends in work force in india

  • The analysis of recent census data 2011 reveals that overall rate of growth in workforce is 1.8% between 2001 and 2011 and it is observed to be marginally higher than that of the population. Further, the rate of growth in work force during the 2001-2011 is lower than that of previous two decades (1980s and 1990s) – a deceleration. The rate of growth in the workforce as well as population has decelerated between 2001 and 2011. However, the rate of growth in workforce has always been higher than that of population growth during the last three decades. It means that there must be increase in work participation rate (WPR).
  • In the context of economic reforms and a subsequent high rate of economic growth in the country, during 1990s and 2000s, one would have a reason to expect a high growth in workforce too in this period. But one has to note that there are two constrains in the growth of workforce. One is the growth of population, wherein at a given labour/workforce participation rate (a constant), labourforce or workforce cannot grow more than the rate at which population grow. The other constraint is the labourforce participation rate itself. Given the rate of growth in population, the rate of growth in labourforce depends on the change in the participation rate.
  • Census classifies workers into two categories i.e. main and marginal workers. The main workers are those who worked for more than six months in a year and the marginal workers are those who worked for less than six months. The analysis of Census data shows that during the last two decades (1991-2011) the rate of growth in marginal workers is higher than that of main workers . The rate of growth in main workers had decelerated during 1990s when compared with previous decade (1980s), whereas among marginal workers it accelerated during the same period. However, it appears that there is revival of growth in main workers during 2000s but the rate of growth is still less than that of 1980s. On the other hand there is a deceleration in the rate of growth in marginal workers between 2001 and 2011 but the rate is still higher than that of 1980s and higher than that of main workers. The analysis shows that marginal workers growing faster than main workers. Marginal workers have grown to account for one-fourth of the total workforce in India in 2011.
  • It is worth mentioning that unlike the NSSO’s recent estimates, Census data shows a marginal increase in the WPR between 2001 and 2011. As the rate of growth in total workforce is higher than that of population, the WPR is increasing, though it is a marginal increase. This marginal rise in overall WPR is, in fact, entirely due to increase in marginal workers’ WPR. Between main and marginal workers, the main workers’ WPR had in fact shown a decline since 1991 whereas there is a corresponding increase in marginal workers’ WPR during the same period. Thus, there is an increase of marginal workers’ share in the total workforce, particularly since 1991.
  • It is observed from the census data that the occupational distribution in the total workforce is still tilted towards agricultural activities – more than half of the workforce is concentrated in agriculture. However, a striking feature of the trend is Growth and Structure of Workforce in India – Venkatanarayana and Suresh Naik Page 10 that there is a sharp decline in the size of self-cultivators and at the same there is a bulging agricultural labour category.
  • It is observed that during the 2001-11, about 79 million is the net addition to the total workforce. Of the total net addition to the workforce, during 2001-11, one–third of it is absorbed in the agriculture and the rest in the non-agriculture. Thus, a large part of the increasing labour force is getting absorbed in non-agriculture. Relatively higher growth of workforce engaged in non-agriculture when compared with the agriculture is observed during the last three decades.
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