Question

Explain the trends in national income and per capita income in indian

Answer 1

The First Plan (1951-56) experienced an annual growth rate of 3-7 p.c. while it marginally increased to 4.1 p.c. in the Second Plan. But there was a downturn in the growth rate during the Third Plan because of two wars and severe drought.

The growth rate achieved during the Third Plan period stood at 2.8 p.c. Though the three Annual Plans registered a somewhat better growth rate (3.9 p.c.), the Fourth Plan witnessed a growth rate of 3.4. p.c. per annum due to sharp price rise, power crisis and under-utilisation of capacity of the industrial sector.

Seen against this, in the Sixth Plan the growth rate was more than 5.5 p.c. The Seventh Plan contemplated a rise in the growth rate of national income by 5 p.c. annually. The actual growth rate has been of the order of 5.5 p.c. for the entire plan.

The Eighth Plan recorded a growth rate of 5.5 p.c. The growth rate slipped to 5.5 p.c. in the Ninth Plan. However, a record breaking growth rate of national income was struck (7.8 p.c.) in the Tenth plan (2002-07) (See Table 12.5).

Growth Rates

In absolute terms, the net national product at factor cost, i.e., national income at 1999-2000 prices was Rs 2,06,493 crore in 1950-51. National income has risen from Rs 5,66,931 crore in 1980- 81 to Rs 27,60,325 crore in 2007-08. Between 1950-51 and 2007-08, the Indian economy registered rate of growth of 4.8 p.c. per annum.

However, in the 1980s and 1990s, we have been able to grow at the rate of about 6 p.c. It is a welcome development. The growth rate of GDP achieved in the 2000s (i.e., 2000-01—2007-08) came to more than 8 p.c. This higher growth path seems sustainable on a long-term basis.

We see an encouraging spot i.e., higher growth rate in national income in the growth profile of the country. However, the better measure of economic development is the per capita income which is obtained by dividing national income by the population of the country. Remember that per capita national income is equivalent to per capita net national product at factor cost.

The growth rate of per capita income since the First Plan has been of the order of around 1.3 to 1.5 p.c. Actually, in the First Plan, it was 2.6 per cent. But we achieved a higher growth rate of per capita income above the trend rate during the Fifth (2.7 p.c.), Sixth (3.1 p.c.), Seventh (3.3 p.c.), Eighth (4.5 p.c.), Ninth (3.5 p.c.), and the Tenth Plan (6.1 p.c.)