Eep national income final

NATIONAL INCOME
OF INDIA
POST REFORMS

Post-Graduate Diploma in Business Management

Submitted to: Submitted by:

Dr. Tapan Kumar Nayak Varun Rai Sood (010162)
(Associate Professor of Economics) Vibhav Gupta (010163)
Vijay Sharma (010164)
Vineet Dubey (010165)

INSTITUTE OF MANAGEMENT STUDIES

LAL QUAN, GHAZIABAD – 201009

STUDENT CERTIFICATE

I hereby declare that the project work entitled “ NATIONAL OF INDIA POST REFORMS ”
submitted to the IMS, GHAZIABAD, is the record of the original work done by me under the
guidance of DR. TAPAN KUMAR NAYAK , faculty member, IMS Ghaziabad, and this project
work has not performed on the basis for the award of any Degree or diploma/associate
ship/fellowship and similar project if any.

VARUN RAI SOOD

BM-010163

VIBHAV GUPTA

BM-010164

VIJAY KUMAR SHARMA

BM-010164

VINEET KUMAR DUBEY

BM-010165

FACULTY CERTIFICATE

This is to certify that a report on “ NATIONAL OF INDIA POST REFORMS ” is prepared by
VINEET KUMAR DUBEY and Group of PGDM 3RDTrisemester , IMS GHAZIABAD ,under my
supervision.

DATE:

DR. TAPAN KUMAR NAYAK

ECONOMIC ENVIRONMENT AND POLICY (EEP)

ACKNOWLEGEMENT

I have had considerable help and support in making this project report a reality. First and foremost,
gratitude goes to DR. TAPAN KUMAR NAYAK , faculty member ECONOMICS , IMS Ghaziabad
who provided me all the guidance and support in realizing the report and helping me in each and
every step where I needed their help.

I am especially indebted to DR. TAPAN KUMAR NAYAK, my guide who assisted me in
completing the project.

We all thank all those people who have directly or indirectly helped us during the course of this
project. Last but not the least we would like to thank our parents for their support and cooperation.

VARUN RAI SOOD

VIBHAV GUPTA

VIJAY KUMAR SHARMA

VINEET KUMAR DUBEY

TABLE OF CONTENTS

INDEX
SR.NO PARTICULARS PAGE NO.

1 CHAPTER 1 : INTRODUCTION 07

2 CHAPTER 2 : LITERATURE REVIEW 11

3

Chapter 3:OBJECTIVE 20

4 CHAPTER 4: METHODOLOGICAL SPECIFICATIONS 45

5 CHAPTER 5: INTREPRETATION OF RESULTS 46

6 CHAPTER 6 : CONCLUSION 89

7 Chapter 7: references 89

ABSTRACT

The 1990's saw an era of globalization, liberalization and privatization. There were reforms in all
sectors including health, insurance and infrastructure. India became happy hunting ground for
foreign investors. GDP saw a steady growth. There was increased competitiveness in the market,
creation of new jobs, improvisation of products and services. But it created a concern for whether
the growth in economy was percolating to the poorest section. The present paper is an effort to find
out the extent to which income inequity is being affected by various macroeconomic, political,
cultural and technological factors.

Keywords and Phrases: Multiple Regression Model, Correlation Coefficient.

National Income Post Reforms

INTRODUCTION

National income is defined as the value of all final goods and services produced by the residents of
the country, whether operating within the domestic territory of the country, or outside, in a year.
National income is thus, a momentary expression of the current achievements of the people of the
country expressed through their production activities. National income measures the volume of
commodities and services turned out during a given period, counted without duplication. It is also
referred to as NET NATIONAL PRODUCT (NNP). Thus, a total of national income measures the
flow of goods and services in an economy and reflects the progress of the country the country.
Alternatively, national income may be defined as “the aggregate factor income (i.e., earning of
labour and property) which arises from the current production of goods and services by the nation’s
economy”.

Income can be measured by:-

• Gross National Product (GNP),

• Gross Domestic Product (GDP),

• Gross National Income (GNI),

• Net National Product (NNP) and

• Net National Income (NNI)

Internationally some countries are wealthy, some countries are not wealthy and some countries are
in-between. Under such circumstances, it would be difficult to evaluate the performance of an
economy. Performance of an economy is directly proportionate to the amount of goods and services
produced in an economy. Measuring national income is also important to chalk out the future course
of the economy. It also broadly indicates people’s standard of living.

Calculating National Income

There are various methods for calculating the national income such as production method, income
method, expenditure method etc.

 Production Method:
The production method gives us national income or national product based on the final value
of the produce and the origin of the produce in terms of the industry.

All producing units are classified sector wise.
• Primary sector is divided into agriculture, fisheries, animal husbandry.
• Secondary sector consists of manufacturing.
• Tertiary sector is divided into trade, transport, communication, banking,
insurance etc.

 Income Method:
Different factors of production are paid for their productive services rendered to an
organization. The various incomes that includes in these methods are wages, income of self
employed, interest, profit, dividend, rents, and surplus of public sector and net flow of income from
abroad.

 Expenditure Method:
The various sectors – the household sector, the government sector, the business sector, either spend
their income on consumer goods and services or they save a part of their income. These can be
categorized as private consumption expenditure, private investment, public consumption, public
investment etc.

 Product method:

This method is popular in U.S.A and is called as Total Product method or Goods Flow Method. In
India , it is known as inventory or Product method .In this method, the economy is divided into
three transaction sector like industrial, services and foreign transaction sector where international
payments are considered.

Difficulties in Calculation of National Income

In India there are various difficulties in calculating the national incomes .The most severe one is the
finding of reliable data. Most of the time, it is based on assumptions. Soon after independence the
National Income Committee was formed to collect data and estimate National Income. The two
major problems which remain in the calculation of National Income are:

• Most of the data is not from the current year.
• Even if current data are available then values are underreported.

LITERATURE REVIEW

1) Economic Reforms in India since 1991: Has Gradualism Worked?

by Montek S. Ahluwalia*

India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in
the wake of an exceptionally severe balance of payments crisis. The need for a policy shift had
become evident much earlier, as many countries in east Asia achieved high growth and poverty
reduction through policies which emphasized greater export orientation and encouragement of the
private sector. India took some steps in this direction in the 1980s, but it was not until 1991 that the
government signaled a systemic shift to a more open economy with greater reliance upon market
forces, a larger role for the private sector including foreign investment, and a restructuring of the
role of government.

India’s economic performance in the post-reforms period has many positive features. The average
growth rate in the ten year period from 1992-93 to 2001-02 was around 6.0 percent, as shown in
Table 1, which puts India among the fastest growing developing countries in the 1990s. This growth
record is only slightly better than the annual average of 5.7 percent in the 1980s, but it can be
argued that the 1980s growth was unsustainable, fuelled by a buildup of external debt which
culminated in the crisis of 1991. In sharp contrast, growth in the 1990s was accompanied by
remarkable external stability despite the east Asian crisis. Poverty also declined significantly in the
post-reform period, and at a faster rate than in the 1980s according to some studies (as Ravallion
and Datt discuss in this issue).

2) Obstacles in High Growth of National Income of India

Even if the Indian economy grows faster than the BRIC countries and G 6, the benefits of the
growth would not be evenly distributed. India’s progress in education cannot be termed as
satisfactory. In terms of higher education it has achieved tremendous success, but its unsatisfactory
performance in primary education and secondary education has been a major obstacle to growth.
Similarly India’s healthcare system is in a less than desirable state. Governments’ spending on
public health has not been up to the required levels.

*

Growth Of National Income In India

Sector 1950-1980 1980-2010
GDP Total 3.5 5.6
GDP Per capita 1.4 3.6

Sectorial Composition Of National Income (in percent)

Year Primary Secondary Tertiary Total GDP
1950-51 59 13 28 100
1980-81 42 22 36 100
2009-10 18 29 53 100

OBJECTIVE

The study of National Income is important because of the following reasons:
• To see the economic development of the country.
• To assess the developmental objectives.
• To know the contribution of the various sectors to National Income.

NATIONAL INCOME OF INDIA

How well the economy is performing is a matter of concern to all the citizens of India. But how do
they judge its performance? This document analyses the economic data of India over the past years
and thus determines the performance of the economy during certain decades/eras.

From 1980-81 to 2008-09 there has been a GDP growth of 5.7% per annum compared to 6.3 %
growth from 1990-91 to 2008-09. Particular emphasis is given to growth rate during last 20 years, a
period during which the GDP growth rate has averaged 6.2 percent per annum, a full 2.6 percentage
points above the average growth during the previous 30 years (1950 to 1980). Growth during the
years from 2003-04 to 2007-08 has been marvelous.

1999-00 prices GDP At current prices (2004-05)
growth
rate

Mar-90 919626 6.08 Mar-90 390837

Mar-91 967773 5.24 Mar-91 456409

Mar-92 976319 0.88 Mar-92 522120

Mar-93 1028643 5.36 Mar-93 597744

Mar-94 1088897 5.86 Mar-94 699188

Mar-95 1159227 6.46 Mar-95 818334

Mar-96 1243724 7.29 Mar-96 958679

Mar-97 1346276 8.25 Mar-97 1119238

Mar-98 1404018 4.29 Mar-98 1244980

Mar-99 1497195 6.64 Mar-99 1438913

Mar-00 1589673 6.18 Mar-00 1589673

Mar-01 1648018 3.67 Mar-01 1700466

Mar-02 1743998 5.82 Mar-02 1849361

Mar-03 1806734 3.60 Mar-03 1994217

Mar-04 1961817 8.58 Mar-04 2237414

Mar-05 2105184 7.31 Mar-05 2526285

Mar-06 2308015 9.63 Mar-06 2875958

Mar-07 2533450 9.77 Mar-07 3312569

Mar-08 2764795 9.13 Mar-08 3787596

Mar-09 2941971 6.41 Mar-09 4326384

Overall growth rate:

The central statistical organization (CSO) has recently shifted the base year from 1999-00 to
2004-05. But we will consider base year as 1999-00 to study the national income trend. We are not
considering 2004-05 as base year because the new series is currently available only for five years.
With the base year as 1999-2000, NNP of India was Rs. 204924 crores in 1950-51. Since then it has

grown at a modest rate of 4.6% per annum in the period of economic planning and stood at Rs.
2941971 crores in 2008-09. During the period from 2002-03 to 2006-07 the NNP registered a
growth rate of 7.8 per annum.

Sector wise break up of GDP:

GDP is divided into three sectors:
1.) Agricultural
2.) Industry
3.) Services

Year GDPfc Agriculture Industry Service as
as 100% as % of as % of % of
GDPfc GDPfc
GDPfc
1980.03.31 100 33.92 25.47 40.85
1981.03.31 100 35.70 24.69 39.61
1982.03.31 100 34.37 25.56 40.07
1983.03.31 100 33.17 25.62 41.21
1984.03.31 100 33.84 25.66 40.50
1985.03.31 100 32.49 26.00 41.51
1986.03.31 100 31.17 26.10 42.73
1987.03.31 100 30.00 26.28 43.71
1988.03.31 100 29.44 26.31 44.25
1989.03.31 100 30.47 26.18 43.35
1990.03.31 100 29.23 26.94 43.84
1991.03.31 100 29.28 26.88 43.84
1992.03.31 100 29.65 25.76 44.59
1993.03.31 100 28.99 26.13 44.88
1994.03.31 100 28.93 25.87 45.20
1995.03.31 100 28.52 26.80 44.68

1996.03.31 100 26.49 27.83 45.68
1997.03.31 100 27.37 27.02 45.61
1998.03.31 100 26.12 26.78 47.11
1999.03.31 100 26.02 26.07 47.92
2000.03.31 100 24.99 25.31 49.69
2001.03.31 100 23.35 26.19 50.46
2002.03.31 100 23.20 25.34 51.46
2003.03.31 100 20.87 26.46 52.66
2004.03.31 100 20.97 26.24 52.79
2005.03.31 100 19.20 28.18 52.62
2006.03.31 100 19.06 28.76 52.18
2007.03.31 100 18.15 29.46 52.39
2008.03.31 100 18.11 29.51 52.38
2009.03.31 100 17.47 28.83 53.70

In 1980, agricultural sector contributed 34% towards GDP, while industrial sector contributed to
26% of GDP, and services sector contributed to 41% of GDP.
But in 2009, agricultural sector contributed 17.5% towards GDP, while industrial sector contributed
29% towards GDP, and services sector contributed 54% towards GDP.
I.) Agricultural sector’s contribution towards GDP declined from 1980 to 2009. It was 34%
in 1980 and came down to 17.5% in 2009
II.) Industrial sector remained more or less constant. Its contribution towards GDP during
1980 was 26% and increased to 29% in 2009
III.) Service sector’s contribution towards GDP increased from 1980 to 2009. It was 41% in
1980 and increased to 54% in 2009.

SECTOR WISE BREAK UP OF GDP

India was predominantly a rural economy at the time of independence in 1947, with agriculture
accounting for approximately 75 percent of the work force and 55 percent of GDP.
But during 1980’s there was shift from agricultural sector to other sectors. Extra growth that an
economy receives is due to the reallocation of labor from the low productive agricultural sector to
the higher productive non-agricultural (industrial) sector.

Service sector’s contribution towards GDP:

We have seen a growth in the service sector for the past 30 years. Let’s see what has led this sector
to grow and which sector is contributing more towards GDP.
We can see that trading and hotel services have contributed more and are increasing constantly.

Percentage wise contribution of each service sector towards GDP

Year GD Trade, Transpor Banking Real Public Other Total
Pfc hotel & t, & estate, admin. service contributio
restauran storage busines & s n from
ts (GDPfc) & comm. insuranc s defens (GDPfc service
(GDPfc) e service e ) sector
(GDPfc) s (GDPfc
(GDPfc) )

1981.03.31 100 9.42 4.19 2.51 7.01 4.56 6.52 34.21

1982.03.31 100 9.91 3.82 2.60 6.43 4.50 6.57 33.83

1983.03.31 100 10.84 4.23 2.96 6.57 4.64 6.63 35.87

1984.03.31 100 10.32 4.39 2.92 6.43 4.69 6.48 35.23

1985.03.31 100 10.62 4.59 2.86 6.66 4.83 6.50 36.07

1986.03.31 100 11.04 4.63 2.99 6.81 5.04 6.63 37.15

1987.03.31 100 11.53 4.89 3.05 7.02 5.20 6.64 38.32

1988.03.31 100 11.28 5.09 3.07 7.12 5.43 6.58 38.56

1989.03.31 100 10.52 5.14 2.95 6.80 5.42 6.24 37.08

1990.03.31 100 10.78 5.27 3.05 6.78 5.45 6.29 37.63

1991.03.31 100 10.85 5.27 3.28 6.67 5.39 6.17 37.63

1992.03.31 100 11.00 5.38 3.40 6.67 5.25 6.29 38.00

1993.03.31 100 10.92 5.53 4.04 6.69 5.31 6.39 38.88

1994.03.31 100 10.96 5.73 3.61 6.62 5.26 6.43 38.61

1995.03.31 100 11.02 5.87 4.05 6.53 4.95 6.29 38.70

1996.03.31 100 11.26 5.95 4.12 6.10 4.71 6.02 38.16

1997.03.31 100 11.90 5.89 4.72 5.85 4.77 6.13 39.25

1998.03.31 100 12.62 6.28 4.64 5.85 4.88 6.75 41.02

1999.03.31 100 12.41 6.39 4.66 5.69 5.19 6.52 40.87

2000.03.31 100 12.76 6.71 4.85 6.08 5.84 7.11 43.34

2001.03.31 100 13.20 6.93 5.49 6.64 6.36 7.50 46.12

2002.03.31 100 13.39 7.05 5.04 7.11 6.16 7.56 46.30

2003.03.31 100 13.85 7.21 5.53 7.42 6.13 7.60 47.74

2004.03.31 100 13.68 7.04 5.70 7.32 5.78 7.39 46.92

2005.03.31 100 13.74 7.28 5.63 7.28 5.42 7.22 46.56

2006.03.31 100 14.05 7.46 5.11 7.23 5.29 6.99 46.13

2007.03.31 100 14.16 7.27 4.78 7.20 5.03 6.89 45.32

2008.03.31 100 14.49 7.43 4.92 7.21 4.88 6.90 45.82

2009.03.31 100 14.58 7.53 4.89 7.15 4.74 6.99 45.88

We can see that there is a growth in every sector of the service industry. Thus the service sector’s
contribution towards GDP has increased and this has happened due to an increase in all the sectors
within the service industry.

1.) What caused India’s growth to accelerate in the 1980s??

During the Seventh Plan period, gross domestic product was projected to increase at the rate of 5
percent per annum. However, the economy performed extremely well and the national income rose
at the rate of 5.5 percent. The point which most of the analysts might have missed is that there was a
global slowdown in the 1970s, a period when Indian growth collapsed to an average of only 2.9

percent per annum. Hence, the acceleration or break in the trend during the 1980s seemed to be
large, when in reality there was only a gradual, and minor acceleration to the existing growth trend.

India was predominantly a rural economy at the time of independence in 1947, with agriculture
accounting for approximately 75 percent of the work force and 55 percent of GDP.

The trend has shifted from 1947 to 1980 from the lesser productive agriculture to the
service/industrial sector (higher productivity) which resulted in the extra growth of the economy.

Thus there was an acceleration of national income growth in the decade starting from 1980 and the
three factors which allowed the economy to register higher growth in the 1980s as compared to
1960s and 1970s are:

• The increased government expenditure provided fiscal stimulus to the economy.
• Liberalization of imports, especially of capital goods and components of manufacturing
induced production of luxury articles
• Associated with the above two factors, there was an increased reliance on external
commercial borrowing by the State
• The most important factor behind the observed acceleration of GDP growth in the 1980s was
the reallocation of labor from agriculture to industrial sector.

2.) What prevented India’s growth from accelerating in the nineties as would have been
forecast by the magnitude of the 1991 economic reforms??

During the period from 1985-1990, the rate of increase in national income of the 1980s could not be
sustained. During these years, the country passed through a phase of major economic crisis.
Responding to economic reforms, GDP growth did accelerate and averaged above 7.4 percent in
each of the three years from 1994 to 1996. But this acceleration had some unintended consequences.
The RBI panicked because this acceleration coincided with global and domestic inflation. RBI
tightened monetary policy to an unprecedented degree. Further, the RBI did not cut interest rates in
response to the decline in worldwide and domestic inflation in the mid to late 1990s. By keeping

deposit rates at high double digit levels, and inflation collapsing, the RBI ensured that real rates
reached double digit levels. This caused the growth to collapse.

This is illustrated in the tables below:

We can see that the inflation during the periods of 1991, 1992, 1993 was around 11% and was
highest in 1992. In 1992 inflation was 13.78% and it is the highest in past 30 years.

Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma Ma
r-85 r-86 r-87 r-88 r-89 r-90 r-91 r-92 r-93 r-94 r-95 r-96 r-97 r-98 r-99 r-00
6.42 4.46 5.79 8.17 7.46 7.43 10.2 13.8 10.0 2.59 12.6 7.99 4.62 4.38 5.95 3.31

Another reason for decline in economic growth was huge fiscal deficit.

BOP: Current account balance BOP: Capital inflows, net BOP: IMF loans, net

Rs. crore Rs. crore Rs. crore

Year Ival Ival Ival

Mar-81 -2214 1708 265

Mar-82 -2839 1310 635

Mar-83 -3280 3476 1895

Mar-84 -3316 4369 1351

Mar-85 -2873 3469 59

Mar-86 -5956 4658 -265

Mar-87 -5830 5227 -672

Mar-88 -6293 6284 -1209

Mar-89 -11580 8757 -1547

Mar-90 -11389 9318 -1460

Mar-91 -17369 14839 2178

Mar-92 -2237 11890 2077

Mar-93 -12764 15490 3363

Mar-94 -3636 28492 587

Mar-95 -10583 23108 -3585

Mar-96 -19645 8561 -5749

Mar-97 -16281 39154 -3461

Mar-98 -20883 34319 -2286

Mar-99 -16789 34230 -1652

Mar-00 -20331 44206 -1122

Mar-01 -11598 40495 -115

Mar-02 16426 41080 0

Mar-03 30660 52366 0

Mar-04 63983 77227 0

Mar-05 -12174 125367 0

Mar-06 -43737 111965 0

Mar-07 -44383 203673 0

Mar-08 -63479 427926 0

Mar-09 -131614 28490 0

Mar-10 -180757 253058 0

Interest rates were also very high during that time and had reached double digits. This also led to
break down in the economy.

Bank rate Per cent

Date Ival

1992.03.31 12

1993.03.31 12

1994.03.31 12

1995.03.31 12

1996.03.31 12

1997.03.31 12

1998.03.31 10.5

1999.03.31 8

2000.03.31 8

2001.03.31 7

2002.03.31 6.5

2003.03.31 6.25

2004.03.31 6

2005.03.31 6

2006.03.31 6

2007.03.31 6

2008.03.31 6

2009.03.31 6

2010.03.31 6

These high borrowing rates caused government interest payments to rise, which caused the fiscal
deficit to rise. In the mid to late nineties, interest payments accounted for more than 50 percent of
the fiscal deficit. In the 1980s, interest payments were only 2 percent of GDP versus near 5 percent
of GDP in the late 1990s. The share of interest payments in the consolidated fiscal deficit of India
has been higher than 60 percent in every year since the mid-1990s.

The overnight lending rate of the central bank (the repo rate) was introduced in 2000.

Real interest rates increased by 400 basis points from 3.4 percent in 1993 to 7.2 percent in 1996, and
peaked in 2000 at 7.3 percent. The growth rate declined from 7.8 percent in 1994 to 4.1 percent in
1997, and bottomed at 4 percent in 2000. The acceleration in GDP growth (8.4 percent vs. 3.8
percent the previous year) started in 2003/4, ostensibly because of good weather; agricultural growth
topped 10 percent that year. In the years 1999 to 2003, the government had proceeded to cut
administered interest rates on deposits from 12.5 percent to 8 percent. With inflation staying broadly
constant at 4 percent, this meant a 400 to 500 basis point decline in real interest rates; and this has
been the major, and only identifiable, contributor to the growth accelerator of recent years.

During the period from1985-1990, the rate of increase in national income of the 1980s could not be
sustained. During these years, the country passed through a phase of major economic crisis.

Also, the 1991 reforms did lead to a sharp acceleration to 7.5 percent GDP growth but this growth
rate was not sustained due to a mis-management of monetary policy. Real long-term interest rates

rose to double digit levels in the mid-1990s and growth collapsed.

3.) What caused the growth rate to sharply accelerate from 2003-04??

The new Congress government came to power in May 2004, after agriculture induced robust growth
of 8.4 percent in 2003-04. During the preceding five years (excluding 2003-04), GDP growth
averaged only 5.3 percent per annum, about 0.3 percent per year less than the long term 1980s and
1990s average of 5.6 percent. With no growth friendly policy inputs during
2004-2007, the economy continued to average 9 percent growth, a record

In 1999, inflation had reached a low of 3.5 percent and the government took the first major step
towards interest rate reforms. Within a space of four years, government bond yields were at 5
percent, down from double digit plus levels of the late 1990s. In “normal” economies, such a large
decline in long-term real interest rates is of great significance.

This interest rate change is most likely a major cause for the marked increase in investment that is
observed for the post 2003 period. Savings rates had hovered around 25 percent the previous decade
(1993 to 2002) and investment rates had averaged the same. Since 2002, in just five years, savings
and investment rates had increased by 11 and 12 percentage points respectively.

And higher GDP growth leads to higher savings rates, and expectations of higher growth lead to an
increase in investment rates. This is what explains the jump in investment rates, savings rates, and
GDP growth rates in the last five years.

RELATION BETWEEN NATIONAL INCOME & AGRICULTURE

Linear Regression

Regression Statistics
R 0.98
R Square 0.96
Adjusted R Square 0.95
Standard Error 145898.78
Total Number Of Cases 18.00
1083572 =- 2417355.2900 + 9.8103 * 339893

ANOVA
p-
d.f. SS MS F level
Regression 1.00 7599473793987.05 7599473793987.05 357.01 0.00
Residual 16.00 340583274958.95 21286454684.93
Total 17.00 7940057068946.00

p- H0 (5%)
Coefficients Standard Error LCL UCL t Stat level rejected?
-10.3
Intercept -2417355.29 233917.31 -2913237.84 -1921472.74 3 0.00 Yes
339893 9.81 0.52 8.71 10.91 18.89 0.00 Yes
T (5%) 2.12
LCL - Lower value of a reliable interval (LCL)
UCL - Upper value of a reliable interval (UCL)

Residuals
Observation Predicted Y Residual Standard Residuals
1.00 851996.22 247075.78 1.75
2.00 1069442.20 88582.80 0.63
3.00 1185302.20 38513.80 0.27
4.00 1355197.50 -53121.50 -0.38
5.00 1328964.68 68009.32 0.48
6.00 1700619.24 -192241.24 -1.36
7.00 1595452.50 -22189.50 -0.16
8.00 1849078.97 -170668.97 -1.21
9.00 1963104.44 -176578.44 -1.25
10.00 1952195.36 -87894.36 -0.62
11.00 2225373.82 -252765.82 -1.79
12.00 1889046.26 159239.74 1.13
13.00 2317855.81 -95097.81 -0.67
14.00 2320151.42 68616.58 0.48
15.00 2596841.99 19259.01 0.14
16.00 2795020.47 76097.53 0.54
17.00 3048195.67 81521.33 0.58
18.00 3135733.25 203641.75 1.44

ANALYSIS:
National Income is the dependent variable and agriculture is the independent variable.. The
two are highly co-related. Hence we can say that national income depends heavily upon the
primary sector .

RELATION BETWEEN NATIONAL INCOME AND SECONDARY SECTOR
Linear Regression

R 1.00
R Square 1.00
1083572 = 47136.2160 + 3.7577 * 280882

ANOVA
p-
d.f. SS MS F level
Regression 1.00 7915733607884.16 7915733607884.16 5206.98 0.00
Residual 16.00 24323461061.84 1520216316.36
Total 17.00 7940057068946.00

p-
Coefficients Standard Error LCL UCL t Stat level H0 (5%)
Intercept 47136.22 27983.62 -12186.41 106458.85 1.68 0.11 No
280882 3.76 0.05 3.65 3.87 72.16 0.00 Yes
T (5%) 2.12

Residuals
1.00 1105397.08 -6325.08 -0.17
2.00 1138356.29 19668.71 0.52
3.00 1203880.15 19935.85 0.53
4.00 1311265.33 -9189.33 -0.24
5.00 1457595.81 -60621.81 -1.60
6.00 1551832.62 -43454.62 -1.15
7.00 1607623.91 -34360.91 -0.91
8.00 1672283.49 6126.51 0.16
9.00 1746540.35 39985.65 1.06
10.00 1854466.65 9834.35 0.26
11.00 1903681.88 68926.12 1.82
12.00 2034707.05 13578.95 0.36
13.00 2181341.91 41416.09 1.09
14.00 2401978.10 -13210.10 -0.35
15.00 2641436.86 -25335.86 -0.67
16.00 2926766.46 -55648.46 -1.47
17.00 3159893.41 -30176.41 -0.80
18.00 3280524.65 58850.35 1.56
ANALYSIS:

National Income depends heavily upon the secondary sector and is also justified by the
regression model.

RELATION BETWEEN NATIONAL INCOME AND TERTIARY SECTOR

Linear Regression

R 1.00
R Square 1.00
1083572 = 47136.2160 + 3.7577 * 280882

ANOVA
p-
d.f. SS MS F level
Regression 1.00 7915733607884.16 7915733607884.16 5206.98 0.00
Residual 16.00 24323461061.84 1520216316.36
Total 17.00 7940057068946.00

p-
Intercept 47136.22 27983.62 -12186.41 106458.85 1.68 0.11 No
280882 3.76 0.05 3.65 3.87 72.16 0.00 Yes
T (5%) 2.12

Residuals
1.00 1105397.08 -6325.08 -0.17
2.00 1138356.29 19668.71 0.52
3.00 1203880.15 19935.85 0.53
4.00 1311265.33 -9189.33 -0.24
5.00 1457595.81 -60621.81 -1.60
6.00 1551832.62 -43454.62 -1.15
7.00 1607623.91 -34360.91 -0.91
8.00 1672283.49 6126.51 0.16
9.00 1746540.35 39985.65 1.06
10.00 1854466.65 9834.35 0.26
11.00 1903681.88 68926.12 1.82
12.00 2034707.05 13578.95 0.36
13.00 2181341.91 41416.09 1.09
14.00 2401978.10 -13210.10 -0.35
15.00 2641436.86 -25335.86 -0.67
16.00 2926766.46 -55648.46 -1.47
17.00 3159893.41 -30176.41 -0.80
18.00 3280524.65 58850.35 1.56

ANALYSIS:
Under this regression model here it is also seen that national income is heavily dependent
upon the tertiary sector.

RELATION BETWEEN NATIONAL INCOME AND EXPENDITURE

Linear Regression

R 0.95
R Square 0.91
419759 = 403304.1351 + 0.5340 * 58895.85

ANOVA
p-
d.f. SS MS F level
Regression 1.00 25512351374.75 25512351374.75 100.32 0.00
Residual 10.00 2543023430.92 254302343.09
Total 11.00 28055374805.67

p-
Intercept 403304.14 9072.10 383090.24 423518.03 44.46 0.00 Yes
58895.85 0.53 0.05 0.42 0.65 10.02 0.00 Yes
T (5%) 2.23

Residuals
1.00 438379.30 -29340.30 -1.93
2.00 442455.14 -7563.14 -0.50
3.00 444222.37 2292.63 0.15
4.00 447048.16 -1645.16 -0.11
5.00 449812.67 23436.33 1.54
6.00 453983.54 -15017.54 -0.99
7.00 463445.40 19230.60 1.26
8.00 479222.84 3687.16 0.24
9.00 502902.66 8211.34 0.54
10.00 522384.82 8930.18 0.59
11.00 552348.58 4773.42 0.31
12.00 583040.50 -16995.50 -1.12

ANALYSIS:

From the data collected between 99-00 to 09-10 it is seen that national income has a high
correlation with the expenditure.

RELATION BETWEEN NATIONAL INCOME AND POPULATION
Linear Regression

R 0.97
are 0.94
1083572 =- 5088886.4910 + 69858.6780 * 83.9

ANOVA
p-
d.f. SS MS F level
Regression 1.00 7439191480420.96 7439191480420.96 237.64 0.00
Residual 16.00 500865588525.04 31304099282.81
Total 17.00 7940057068946.00

p-
-11.0
Intercept -5088886.49 458792.11 -6061482.31 -4116290.67 9 0.00 Yes
83.9 69858.68 4531.67 60251.97 79465.39 15.42 0.00 Yes
T (5%) 2.12

Residuals
1.00 891016.35 208055.65 1.21
2.00 1002790.23 155234.77 0.90
3.00 1142507.59 81308.41 0.47
4.00 1268253.21 33822.79 0.20
5.00 1393998.83 2975.17 0.02
6.00 1519744.45 -11366.45 -0.07
7.00 1645490.07 -72227.07 -0.42
8.00 1778221.56 -99811.56 -0.58
9.00 1903967.18 -117441.18 -0.68
10.00 2029712.80 -165411.80 -0.96
11.00 2176416.02 -203808.02 -1.19
12.00 2288189.91 -239903.91 -1.40
13.00 2399963.79 -177205.79 -1.03
14.00 2518723.54 -129955.54 -0.76
15.00 2637483.30 -21382.30 -0.12
16.00 2749257.18 121860.82 0.71
17.00 2861031.07 268685.93 1.57
18.00 2972804.95 366570.05 2.14

ANALYSIS:

This suggests that over the years post reforms national income has co-related with the
population. As the population increases so will the national income.

RELATION BETWEEN NATIONAL INCOME AND NET EXPORTS

Linear Regression

0.98
R Square 0.95
1083572 = 1182797.3022 + 2.9159 * 32558

ANOVA
p-
d.f. SS MS F level
Regression 1.00 7582078006386.70 7582078006386.70 338.88 0.00
Residual 16.00 357979062559.30 22373691409.96
Total 17.00 7940057068946.00

p-
Coefficients Standard Error LCL UCL t Stat level H0 (5%) re
Intercept 1182797.30 54771.67 1066686.55 1298908.06 21.60 0.00 Yes
32558 2.92 0.16 2.58 3.25 18.41 0.00 Yes
T (5%) 2.12

Residuals
1.00 1311217.95 -212145.95 -1.46
2.00 1339345.84 -181320.84 -1.25
3.00 1386176.60 -162360.60 -1.12
4.00 1423863.04 -121787.04 -0.84
5.00 1492906.53 -95932.53 -0.66
6.00 1529254.38 -20876.38 -0.14
7.00 1562155.22 11107.78 0.08
8.00 1590296.73 88113.27 0.61
9.00 1646699.85 139826.15 0.96
10.00 1769928.60 94372.40 0.65
11.00 1792268.67 180339.33 1.24
12.00 1926747.06 121538.94 0.84
13.00 2038219.61 184538.39 1.27
14.00 2277242.42 111525.58 0.77
15.00 2513657.12 102443.88 0.71
16.00 2850037.24 21080.76 0.15
17.00 3095216.78 34500.22 0.24
18.00 3634338.37 -294963.37 -2.03

ANALYSIS:
National Income and Net Exports go together hand in hand. As it can be seen from the
regression model that the two are very highly co-related.

Regression analysis of GDP with respect to Savings and Investment:

Regression of Saving with respect to GDP:

Multiple R 0.98251576
0.96533721
R Square 9
Adjusted R 0.96461507
Square 8
204107.798
Standard Error 7
Observations 50

ANOVA
Significanc
df SS MS F eF
Regression 1 5.57E+13 5.57E+13 1336.771 1.05E-36
Residual 48 2E+12 4.17E+10
Total 49 5.77E+13

Standard Upper
Coefficients Error t Stat P-value Lower 95% 95%
134946.582
Intercept 5 33368.85 4.044089 0.00019 67854.02 202039.1
2.67849986
X Variable 1 8 0.073259 36.56187 1.05E-36 2.531202 2.825798

Levels 1950-60 1961-70 1971-80 1981-89 1990-2002 2003-07 2006-2008

Share of agriculture (% GDP) 51 43.9 37 32.2 26.4 19 18.1

Savings (% GDP) 8.3 13.11 18.68 20.6 25.2 33 35.8

Investment (% GDP) 9.1 12.4 16.6 21.7 25 33 36.7

GDP growth - Actual 3.9 3.8 2.7 5.7 5.2 8.5 8.9

GDP growth shows a clear acceleration from an average of 2.8 percent in the 1970s to a level
double that in the 1980s – 5.7 percent per annum

When savings and investment have increased we can see that GDP growth is significant. In the
above table savings was mere 8.3% during 1950s. But gradually savings have increased and this led
to a significant change in GDP growth rate.

Growth in investment has an important role to play in GDP growth rate. Investments have grown
from 9.1% in 1950-60 to 36.7% currently.

INTERPRETATION OF THE RESULTS

Thus from the above analysis through regression models we have seen that the parameters
deciding upon the national income are substantially impacting the national income. It would
not be wise to eliminate any of the parameters as all the parameters have a high co-relation
with national income exceeding more than .9 going up to exact 1 at times.

CONCLUSION:

Firstly, in India, agriculture still remains the predominant economic activity and nay fluctuations in
it have serious impact on the whole of the economy. However, the importance of agriculture appears
to be slowly declining. In the early years of the 1970s, its share in the net domestic product used to
be around 50 percent, it has now come down to less than 20 percent.

Secondly, not only the country has gradually moved towards industrialization, but the industrial
sector has also undergone a structural change. However, during the past six decades, the rapid
growth of modern industries has clearly undermined the relative importance of the unorganized
small sector.

Thirdly, the growing shares of transport, communications, energy and banking and insurance to the
net domestic product reflect the expansion of economic infrastructure in the country.

To sum up, since independence the Indian economy has become less geared to the primary sector
and its dominant component—agriculture. It is now more attuned to the secondary and tertiary
sectors. This may be regarded from the development point of view a progressive change in the
structure of the economy during the last six decades.

REFERENCES:

• Ahluwalia, Isher J., “Productivity and Growth in Indian Manufacturing,” Oxford
University Press, New Delhi 1991.

• Ahluwalia, Isher J., “Industrial Growth in India: Stagnation since the mid-sixties,” Oxford
University Press, New Delhi, 1995.

• http://www.tradechakra.com/indian-economy/national-income.html
• http://www.finmin.nic.in/
• http://www.icai.org/resource_file/16788National_Income_india.pdf
• Business Beacon
• www.planningcommission.gov.in/

Eep national income final

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