Structural Changes of Indian

Economy

Introduction

To earn livelihood people

pursue different types of
activities based on their
education, skill, family
tradition etc. Normally we
classify them into three
different sectors of the
economy.

Three Major Sectors of Indian Economy

Primary Sector

How do the people, who are living in villages, earn their

livelihood?
Many of them work on the fields to raise crops, which is known
as cultivation. They are known as farmers and the occupation is
called agriculture. For Example: food items and non food items.
Food items include cereal, pulses, fruits and vegetables etc. and
non-food items include cotton, jute etc.
Similarly collection of forest products and selling them in the
market is called forestry. Forest products include- timber,
firewood, herbal medicines etc.

 Many people work in mining area to extract minerals.

There also people who are engaged in raising live stock such poultry and
dairy farming.
Finally fishery is another occupation in which people catch fish in ponds,
rivers or sea to sell them in the market.

All these activities i.e. agriculture, forestry, mining, livestock and fishery are
complementary to each other and come under primary sector.

Growth rate in Agriculture and

Allied Sector at
constant( 2004-05)Prices
Period

Total GDP growth

Agriculture and Allied

Sector

2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12

9.48
9.57
9.32
6.72
8.59
9.32
6.21

5.14
4.16
5.80
0.09
0.81
7.94
3.65

Secondary Sector

With progress of time human settlements have expanded beyond villages.

Towns and cities have come up in the process of development. These areas
are known for its non-agricultural occupation.

This sector includes the following production activities

(a) Manufacturing
(b) Construction
(c) Gas, water and electricity supply

Manufacturing
This implies production of goods by using raw materials in
manufacturing units called factories and industries.
There are small and large scale industries. Small scale units are:
shoe factory, textile unit, printing, glass making, furniture etc.
The large scale manufacturing includes steel, automobiles,
aluminium, etc. Skilled people work in manufacturing business.

Growth rate in Manufacturing

Sector at constant( 200405)Prices
Period
Total GDP growth
Manufacturing Sector
2005-06

9.48

10.10

2006-07
2007-08
2008-09
2009-10
2010-11
2011-12

9.57
9.32
6.72
8.59
9.32
6.21

14.32
10.38
4.33
11.30
9.73
2.69

Construction
This activity includes construction of residential and nonresidential buildings, roads, parks, bridges, dams, airports, bus
stops and so on. It is a regular activity seen in urban areas.
Another occupation people pursue in secondary sector is gas,
water and electricity supply. These are essential services.

Tertiary Sector

This sector is called service sector where following services are provided.

Trade, Hotels and Restaurants

Transport, Storage and Communication
Financial services such as Banking, Insurance etc.
Real estate and Business services
Public Administration

Others services.

Growth rate in Industry Sector at

constant( 2004-05)Prices
Period

Total GDP
growth

Industry
Sector

2005-06

9.48

9.72

2006-07

9.57

12.17

2007-08

9.32

9.67

2008-09

6.72

4.44

2009-10

8.59

9.16

2010-11

9.32

9.16

2011-12

6.21

3.49

Growth rate in Service Sector at constant( 200405)Prices

Period

Total GDP growth

Service Sector

2005-06

9.48

10.91

2006-07

9.57

10.06

2007-08

9.32

10.27

2008-09

6.72

9.98

2009-10

8.59

10.50

2010-11

9.32

9.75

2011-12

6.21

8.20

Changes in structure of Indian Economy shown by changes in GDP

As an economy grows, importance of Primary sector (mainly

agriculture)declines and the importance of secondary sector (mainly
Industry)and tertiary sector(all kinds of services)increases.

The structure of GDP at factor cost refers to the share of primary

,secondary and tertiary sectors in the GDP at factor cost. Structural changes
in output refer to the changes in relative contribution of the three sectors in
GDP (at factor cost) over the years.

Contribution of agriculture, industry and services to

growth in GDP (% at factor cost)

Sectors

FY05

FY08

FY11

Q2FY12

Agriculture,
forestry and
fishing

19

16.8

14.4

11.06

Industry
(construction
included)

27.9

28.7

27.9

27.4

Services sector

53

54.5

57.7

61.3

Source: PHD Research Bureau, compiled from CSO

Indicators

200708

2008-09

200910

20102011

20112012

GDP Growth
(at constant
Prices, %)

9.32

6.72

8.39

8.39

6.48

Agriculture
and allied
Services

5.8

0.09

1.04

7.03

2.76

Industry

9.67

4.44

8.4

7.16

3.38

Services

10.32

9.98

10.45

9.35

8.91

April 2013 Source : CMIE, Economic outlook

Recent Changes
Union Finance Minister P. Chidambaram on 27 February presented the
Economic Survey 2012-13 in the Lok Sabha of the Parliament.
India's quarterly Gross Domestic Product grew at 4.8 percent in the first
quarter of 2013.

Manufacturing rose only 2.6 percent.

Electricity, gas and water supply increased 2.8 percent.

Agriculture, forestry and fishing were up 1.4 per cent and Mining and
quarrying declined 3.1 percent.
.

Registered Growth Rates

Q1 of 2013

Q1 of 2012

Mining

-4.2

-0.4

Manufacturing

2.6

0.3

Electricity

2.3

4.5

 Growth rates in various sectors are as follows: electricity, gas

and water supply (2.8 percent) construction (4.4 percent),
'trade, hotels, transport and communication' (6.2 percent),
'financing, insurance, real estate and business services' (9.1
percent), and 'community, social and personal services' (4.0
percent).

Agriculture Sector
The agriculture, forestry and fishing sector is likely to show a
growth of 1.8 per cent in its GDP during 2012-13, as against the
previous years growth rate of 3.6 per cent. According to the
information furnished by the Department of Agriculture and
Cooperation (DAC), which has been used in compiling the
estimate of GDP from agriculture in 2012-13,
Production of food grains is expected to decline by 2.8 per cent
as compared to growth of 5.2 per cent in the previous agriculture
year.
The production of cotton and sugarcane is also expected to
decline by 4.0 per cent and 6.5 per cent, respectively, in 201213. Among the horticultural crops, production of fruits and
vegetables is expected to increase by 3.5 per cent during the
year 2012-13 as against

Industrial Sector
After recovering to a growth of 9.2 percent in 2009-10 and 2010-11,
growth of value added in industrial sector, comprising manufacturing,
mining, electricity and construction sectors, slowed to 3.5 percent in
2011-12
and
to
3.1
percent
in
2012-13.
The manufacturing sector, the most dominant sector within industry,
also witnessed a decline in growth to 2.7 percent in 2011-12 and 1.9
percent in 2012-13 compared to 11.3 percent and 9.7 percent in 200910
and
2010-11,
respectively.
The growth in electricity sector in 2012-13 has also moderated. The
growth of the mining sector in 2012-13 is estimated at 0.4 percent,
though it showed an improvement over a negative growth of 0.63
percent
recorded
in
2011-12.

Services Sector

The estimated growth in GDP for the trade, hotels, transport and
communication sectors during 2012-13 is placed at 5.2 per cent as against
growth of 7.0 percent in the previous year.
This is mainly on account of decline of 3.4 per cent and 4.8 per cent
respectively in passengers and cargo handled in civil aviation and decline
of 3.1 per cent in cargo handled at major sea ports during April-November,
2012-13.
There has been an increase of 4.3 per cent in stock of telephone
connections as on November 2012. The sales of commercial vehicles
witnessed an increase of 0.74 per cent per cent in April-December 2012.
The sector, 'financing, insurance, real estate and business services', is
expected to show a growth rate of 8.6 per cent during 2012-13, on account
of 11.1 per cent growth in aggregate deposits and 15.2 per cent growth in
bank credit as on December 2012 (against the respective growth rates of
17.2 per cent and 16.0 per cent in the corresponding period of previous
year). The growth rate of 'community, social and personal services' during
2012-13 is estimated to be 6.8 per cent.