National Income Trends and Occupational
Structure in India
By: Anuj Aggarwal
Phases of National Income Growth
• Modest Growth Rate Period (1951-1980)
The annual rate of increase in national income was abysmally
low at 3.5% p.a during the first three decades of economic
planning, it has gone up to 5.9% p.a since 1980-81. Bolder
targets were set in the five year plans but could’nt be achieved.
The national income had risen substantially only in the years of
exceptionally good harvests.
Growth Rate during the 1980’s
• There was acceleration of national income growth in 1980’s. This economic
buoyancy was attributed to state stimulus as exports continued to grow at a slow
pace and constraints blocking mass expansion were still operating.
• There were 3 factors that allowed the economy to register higher growth as
compared to 1960’s and 1970’s. First, increased government expenditure or fiscal
stimulus through external commercial borrowings. Second, import liberalization
particularly capital goods, manufacturing components etc. Thirdly export promotion
was encouraged to boost exports.
• According to various scholars and economists, the crisis situation in the early 1990’s
emanated from three factors: excessive government spending leading to fiscal
deficit, excessive interference by the government in private enterprise, export
shortfalls.
Growth Rate during Liberalization Phase and beyond
• During the 5 yrs of Eighth Plan from 1992-93 to 1996-97 ,national
income rose at the rate of 6.7% against the target of 5.6% p.a.
• However, during the Ninth Plan, the national income grew by merely
5.5% which was significantly lower than the previous plan. It was due
to the failure of both agriculture (2.5%) and manufacturing (3.3%).
• In the Tenth plan (2002-03 to 2006-07), India’s national income
registered 7.5% growth on average.
• During the 21 year period from 1991-92 to 2011-12, the rate of
increase in the national income has been 6.4% per annum.
Features of NNP Growth
• Erratic Growth – Out of 60+ years of economic planning, in 12 yrs NNP
has either declined or the rate of increase is lower than population growth.
• Growth rate fluctuates with fluctuations in agriculture – Even today weather
conditions particularly monsoon impact agriculture and affect the
performance of other sectors.
• Growth rate at best is modest – The rapid income growth is concentrated
in few regions which suggests that most of the states have recorded low
growth.
• Post-1991 reform growth less fragile – The studies in the context of “post
reform” period done by Arvind Virmani, Rodrik Dani and Arvind Panagariya
agreed that growth was higher but not significant. Panagariya’s study
indicated that “the variance of growth rates in 1980’s was statistically
significant as compared to 1990’s”.
Occupational Structure
• Primary Sector (Agriculture) – concerned with exploitation of natural
resources. For instance cultivation, animal husbandry, dairy farming,
fisheries, forests and mining.
• Secondary Sector (Industry) – activities related to production of
industrial goods which may be related to large or small scale units,
construction etc.
• Tertiary Sector (Services) – activities related to rendering of services
including both private and government services like trade, banking,
insurance, education, transport, communication etc.
Determinants of Occupational Structure
• Specialization – For example Germany specializes in production of
automobiles but have to import agricultural products to meet their
domestic requirements.
• Productivity – In countries with low productivity, large proportion of
population is engaged in agricultural and allied activities.
• Government Policy – If the objective of the government policy is rapid
industrialization, then it should announce a robust industrial policy
which provides various fiscal incentives and reliefs. The occupational
structure will be industry-oriented.
• Climate – Some countries have more suitable climate for agricultural
occupation, while other have industrial occupations. It also relates to
business and political climate.
Occupational Structure in India
Year Primary Sector Secondary Sector Tertiary Sector
1951 72.1% 10.7% 17.2%
1991 66.8% 12.7% 20.5%
2001 57.2% 17.6% 25.2%
2004 52.7% 18.8% 28.5%
According to 2011 Census, 24.6% (Cultivators), 30% (Agricultural Labor), 3.6%
(Household), 41.6% (Non-agricultural activities)
A sharp decline in cultivators
• More than half of the workforce is concentrated in agriculture.
However, around 8.9 million farmers, during 2001 and 2011,
moved away from self-cultivation in the total work force.
Around 14.9 million farmers of main workers category have
moved away from farming during the last two decades.
• The reasons include increased cost of cultivation, debt burden,
rapid urbanization attracting rural farmers to urban centers for
higher wages, acquisition of farmland for building SEZ’s etc.
Farmers becoming agricultural laborers !
• The workforce appears to be moving away from self-cultivation
to agriculture labor. It is evident from the fact that there is a
sizeable increase in the category of agricultural laborers. It is
about 38 million net additions to the size of agriculture laborers
during 2001-11.
• At this point one can say that most of those farmers who are
moving away from farming are becoming agricultural laborers.
Labor force absorption in non-agriculture
increasing
• 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 labor
force is getting absorbed in non-agriculture.
Workforce Participation Rate
• In determination of the size of the labor force, it is important
to exclude children below the age of 15 and old people
above the age of 60.
• The Workforce Participation Rate in India is defined as the
proportion of working population to total eligible working
age population.
• It depends on factors such as age, gender composition,
attitude to work, availability of work, education etc.
Fast decelerating rate of growth in female
workforce
• The analysis of recent census data 2011 reveals that overall rate of
growth in workforce is 1.8% between 2001-11 which is marginally
higher than that of the population.
• Further, the rate of growth in work force during the 2001-11 is lower
than that of previous two decades (1980s & 1990s).
• The rate of growth in female workforce and their population are
almost the same between 2001-11. The rate of growth in female
workforce during 1980s and 1990s was 1.75 times higher than of
its population.
Fast growing Marginal Workers Category
• 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 data shows that during the last two
decades (1991-2011), the rate of growth in marginal workers is higher
than that of main workers.
• Marginal workers have grown to account for one-fourth of the total
workforce in India in 2011.
• The share of female marginal workers, accounting for about 40% of the
total female workforce in 2011, is still considerably higher than that of
their male counterparts.
Improved Main Workers’ Sex Ratio
• Sex ratio of population is increasing since 1991 after a down fall
between 1981 and 1991.
• The improved sex ratio in main workers reflects the accelerated
rate of growth among female main workers and the deceleration
in the growth of female marginal workers.
No Decline in Work Participation Rate
(WPR)
• 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.
• This marginal rise is attributed to an increase of marginal
workers’ share in the total workforce, particularly since 1991.
• The WPR by gender shows that the males’ overall WPR
registered an increase in 2001 and 2011, whereas the females’
overall WPR had increased in 1991 and 2001 but remained
same in 2011.
Relationship b/w Economic Development & Occupational
Structure
• As a country develops, there is a shift of workers from
primary to secondary & tertiary sector.
• Rise in manufacturing employment absorbs excess labor
force released from agriculture.
• Within manufacturing, there is expected shift from
household to non-household activities as the latter uses
better technology.
• In the later stages of economic development, there is
increase in the % of population dependent on services. But
for a country like India that’s in the early stages of
industrialization, this increase is less than the increase in
manufacturing.
