Reasons for Slow Growth of National and Per Capita Income in India

Introduction:

Raising the national and per capita income is any country’s basic goal. However, India has not been able to sustain said growth at a steady rate over the past few years. Erratic growth trends are becoming an increasingly large cause for concern with regard to the Indian economy. This paper aims to help better understand the reason for these fluctuations and discover potential solutions to the problem.

1. Unequal Distribution of Income:

India has a very clear problem of unequal distribution of income. This makes the problem of poverty a critical one and also renders human capital less efficient than its full potential. This underutilization of a vital resource contributes to the relative slow growth of national income in India.

2. High Growth Rate of Population:

The Indian population is one of the largest and fastest growing populations on the planet. To cope with the ever-growing numbers, resources that would normally be invested into productive sectors tend to be tapped into. While the growth of a population is usually an important determinant of national growth, this consequently reduces the standard of living in the country and eats away at the growth of national income, slowing it down by a large margin.

3. Excessive Dependence on Agriculture

Indian economy is characterized by too much dependence on agriculture and thus it is primary producing. The major share of national income usually comes from the agriculture sector, which is contributing nearly 34 per cent of the total national income and engages about 66 per cent of the total working population of the country (Pal, 2017). The occurrence of natural disasters could potentially have a relatively large effect on the growth of national or per capita income of the country due to its unhealthily strong dependence on agriculture. It would hence be in the best interest of the economy to liquidate this dependence in order to maintain a more stable growth rate and avoid wide fluctuations in the same.

4. Occupational Structure:

India indicates a high degree of backwardness prevailing in the society through its poor occupational structure. 66% of the working force is engaged in agriculture and allied activities, 3 per cent in industry and mining and the remaining 31 per cent in the tertiary sector (Dandekar, 1983). This failure can be attributed to bad land reforms, high growth rate of labour force, low scope of non-agricultural rural employment and a high degree of disguised employment, among other smaller factors that contribute to the overall slow growth of India’s national income.

5. Low Level of Technology:

In India, technology is not being developed at par with the rest of the world, which is a very crucial factor effecting its overall performance. Moreover, the poor utilization of said technology deprives the economy of increased labour productivity, supply and output increases, and a better standard of living. Hence, the growth of national and per capita income is also stunted in this process.

6. Poor Industrial Development:

Another important reason behind the slow growth of national income in India is the poor rate of development of its industrial sector. The industrial sector in India has failed to maintain a consistent and sustainable growth rate during the planned development period and more particularly in recent years. Moreover, the development of basic industry is also lacking in the country. All these have resulted a poor growth in the national income of the country.

7. Poor Development of infrastructural Facilities:

In India, the infrastructural facilities i.e. the transport, communication, power, irrigation etc. have not yet been developed to its full potential in the country. This ensures that the National Income cannot grow past a certain rate as the productivity of many sectors is hindered by the limitation in infrastructure. Moreover, this has resulted in more hindrances in the path of development of the agriculture and industrial sector of the country. Developing the infrastructure to its full potential is vital for bringing stability to India’s national and per capita income growth

8. Poor Rate of Saving and Investment:

The rate of savings and investment in India is also quite poor as compared to that of developed countries of the world. In 1996-97, the rate of gross domestic savings was restricted to 26.1 per cent of GDP and that of investment was 27.3 per cent of GDP in the same year (Shirras,1937). Such a low rate of saving and investment has resulted a poor growth of national income in the country. Hence, in order to stabilize the level of national income in the country, the capital output ratio should be brought down within the manageable limit and the rate of savings and investment should be raised and maintained to a considerable extent.

9. Socio-Political Conditions:

Rising inequality is a global concern and India is no exception to its effects. Socio political conditions hinder India’s march towards economic prosperity which is directly linked to national income. If the health of the economy is bad, the national income suffers, and the standard of living is jeopardized. Peculiar social constructs like caste system, joint family system, fatalism, illiteracy, unstable political scenario etc. are all responsible for slow growth of national income in the country.

Conclusion:
From the above, it can be concluded that the many problems faced by India can be corrected using measures only implementable by the government. The Government has taken various steps to attain a higher rate of growth in its national income by introducing various measures of economic reforms and structural measures. All these measures have started to create some impact on raising growth of national income of the country.

Citations:

Shirras, G. (1937). India’s National Income. Revue De L’Institut International De Statistique / Review of the International Statistical Institute, 4(4), 467-483. doi:10.2307/1401056
www.jstor.org/stable/1401056

Dandekar, V. (1983). Economic Growth and Change in India: As Seen through National Income Data. Economic and Political Weekly, 18(24), 1051-1056. Retrieved from http://www.jstor.org/stable/4372207

Deepali Pal (2017) Causes of Slow and Fluctuating Growth of National Income in India http://www.economicsdiscussion.net/national-income/causes-of-slow-and-fluctuating-growth-of-national-income-in-india/14156