Title unit-1 notes 2.pdf ✅

13 1.18 Price Stability 1.19 How is Price Stability Measured? 1.20 Why is Price Stability Important? 1.21 What are the Factors that Affect Price Stability? 1.22 How is Monetary Policy Used to Achieve Price Stability? 1.23 Question 1.24 Key Words 1.25 Suggested Readings 1.0 Introduction In this unit the learners will acquaint themselves with the trench of national income of Indian Economy. They will also learn the extent of employment and unemployment, the changing structure of Indian Economy, including various pertinent issues of Indian Economy. 1.1 Objectives The learning outcomes are:  National income  Trends in growth and structure, performance of different sectors.  Employment and unemployment: Recent trends and estimates  Changing structure and emerging issues  Labour market reforms  Inflation: recent trends in prices in India and its causes, price stability. 1.2 National Income National income of India constitutes total amount of income earned by the whole nation of our country and originated both within and outside its territory during a particular year. The National Income Committee in its first report wrote, “A national income estimate measures the volume of commodities and services turned out during a given period, without duplication”. The estimates of national income depict a clear picture about the standard of
14 living of the community. The national income statistics diagnose the economic ills of the country and at the same time suggest remedies. The rate of savings and investment in an economy also depends on the national income of the country. Moreover, the national income measures the flow of all commodities and services produced in an economy. Thus the national income is not a stock but a flow. Further, the National Income Committee has rightly observed, “National income statistics enable an overall view to be taken of the whole economy and of the relative positions and inter-relations among its various parts”. During the British period, several estimates of national income were made by Dadabhai Naoroji (1868), Willium Digby (1899), Findlay Shirras (1911, 1922 and 1934), Shah and Khambatta (1921), V.K.R.V. Rao (1925-29) and R.C. Desai (1931-40). Among all these pre-independence estimates of national income in India, the estimates of Naoroji, Findlay Shirras and Shaw and Khambatta have computed the value of the output raised by the agricultural sector and then added some portion of the income earned by the non-agricultural sector. But these estimates were having no scientific basis of its own. After that Dr. V.K.R.V. Rao applied a combination of census of output and census of income methods. While dividing the whole economy into two separate categories he included agriculture, pastures, forests, fishing, hunting and mines in the first category and applied output method to derive the value of output of these sectors. The other activities like industry, trade, transport, administrative and public services, professions, liberal arts and domestic services were included in second category and applied income method to derive the amount of income raised from all these services. He also added income from house property and other internal incomes along-with the total income earned from abroad to these two sub-totals mentioned above. Although pre-independence estimates of national income in India suffered from various difficulties and limitations but it provided considerable light and insight about the economic conditions of the country prevailing during those period. After independence, the Government of India appointed the National Income Committee in August, 1949 with Prof. P.C. Mahalnobis as its chairman and Prof. D.R. Gadgil and Dr. V.K.R.V. Rao as its two members so as to compile a national income estimates rationally on scientific basis. The first report of this committee was prepared in 1951. In its report, the total national income of the year 1948-49 was estimated at Rs. 8,830 crore and the per capita income of the year was calculated at Rs. 265 per annum. The committee continued its estimation works for another three years and the final report was published in 1954. For the estimation of national income in India the National Income Committee applied a mixture
15 of both ‘Product Method’ and the ‘Income Method’. This Committee divided the entire economy into 13 sectors. Income from the six sectors, viz., agriculture, animal husbandry, forestry, Fishery, mining and factory establishments was estimated by the output method. But the income from the remaining seven sectors consisting of small enterprises, commerce, transport and communications, banking and insurance, professions, liberal arts, domestic services, house property, public authorities and rest of the world was estimated by the income methods. During the post-independence period, the estimate of national income was primarily conducted by the National Income Committee. Later on, it was carried over by the Central Statistical Organisation. The National Income Unit of C.S.O. estimated the major part of national income from the various sectors like agriculture, forestry, animal husbandry, fishing, mining and factory establishments with the help of product method. The unit of C.S.O. is also applying the income method for the estimation of the remaining part of national income raised from the other sectors. 1.3 Trends in National Income in India A study, of the trend of the national income in India over the last 60 years, in detail, is very much essential for attaining a clear understanding about the impact of planning on the Indian economy. Both the national income and per capita income are first collected at current prices and then at constant prices for eliminating the effect of any change of price level during that period. This trend in national income also reflects on the standard of living of the people of India. Thus the national income at current prices is influenced by both the increase in production of goods and services and the rise in prices. In order to make the national income figures comparable, these figures are deflated at constant prices just for eliminating the effect of any change in the price level of the country.
16 Table 7.1 Trend of Net National Income and Per Capita Net National Income Year Net national income( In crore) Per capita net national income (Rs) 2004-05 Series Current Price Constant Price Current Price Constant Price 1951-52 9829 269724 274 7513 1970-71 44550 596470 823 11025 1990-91 526017 1342031 6270 15996 2000-01 1947788 2401875 19115 23095 2004-05 2899944 2899944 26629 26629 2005-06 3303532 3167455 29869 28639 2006-07 3842743 3456274 34249 30805 2007-08 4481882 3806140 39384 33446 2008-09 5031943 3922062 43604 33987 2009-10 5780028 4241183 49402 36249 2010-11 6942089 4657438 58534 39270 2011-12 8052996 4958849 66997 41255 2011-12 Series Current Price Constant Price Current Price Constant Price 2011-12 7742330 7742330 63462 63462 2012-13 8766345 8094001 70983 65538 2013-14 9897663 8578417 79118 68572 2014-15 10953761 9231556 86454 72862 2015-16 12076882 9982112 94130 77803 2016-17(PE) 13408211 10686776 103219 82269 2017-18(FAE) 14710563 11404413 111782 86660 Source: Economic Survey 2017-18. Table.1.1 reveals the estimates of 2004-05 and 2011-12 based net national Income series since 1950-51 both at constant and at current prices. It is observed that NNI of India at constant prices increased from Rs 269724 crore in 1950-51 to Rs 2899944 crore in 2004-05 and then to Rs 4958849 crore in 2011-12 . Again the national income (NNI) of India at current prices increased from Rs 9829 crore in 1950-51 to Rs 2899944 crore in 2004-05 and then to Rs 4958849 crore in 2011-12 . Again the per capita income figure at constant (2004- 05) prices increased from 7513 in 1950-51 to Rs 26629 in 2004-05 and then to Rs 41255 in 2011-12 registering a growth rate of 560 per cent during the last 64 years. Moreover, the per capita income at current prices also increased from Rs 274 in 1950- 51 to Rs 26629 in 2004- 05 and then to Rs 66997 in 2011-12 registering growth of more than 200 times during the last 64 years. The NNI of India at 2011-12 prices increased from Rs 7742330 crore in 2011-12 to Rs 8578417 crore in 2013-14 and then to Rs 11404413 in 2017-18(FAE) registering a growth rate of around 20 per cent over the last 7 years. Again the Net national income of India at current prices increased from Rs 7742330 crore in 2011-12 to Rs 9897663 crore in 2013-14 and then to Rs 14710563 crore in 2017-18 registering growth of 90 per cent during