Structural Changes and the Role of Services Sector in Indian Economy

Topics: Economy, Economics, Input-output model Pages: 17 (3649 words) Published: August 6, 2012
inter Linkages between agriculture and others
sector in India : A Post Reform Scenario
Mandeep Singh
The present study is an attempt to calculate the sector wise linkages in a post reform period for the Indian economy. To do such analysis, the whole economy is aggregated into three main sectors such as agriculture, industry and services. All the linkages have been calculated for two points of time by utilizing data on two input-output transaction tables for the period 1993/94 and 2006/07. The overall analysis reveals the services sector expansion over the years. The highest linkages of the industrial sector also stress to increase the amount of investment in this sector to expand other sectors as well. 1. Introduction

Agriculture plays an essential role in the process of economic development of less developed countries like India. Besides providing food to nation, agriculture was the main source of national income and occupation at the time of independence. Agriculture and allied activities contributed nearly 50 percent to India’s national income. Around 72 percent of total working population was engaged in agriculture. This confirms that Indian economy was a backward and agriculture based economy at the time of independence. After 64 years of independence, the share of agriculture in total national income declined from 50 percent in 1950 to 14.2 percent in 2010-11 (Economic Survey, 2011). But even today more than 60 percent of workforce is engaged in agriculture. In spite of this, it is also an important feature of agriculture that is to be noted that growth of other sectors and overall economy depends on the performance of agriculture to a considerable extent. Because of these reasons agriculture continues to be the dominant sector in Indian Economy. Since Independence India has made much progress in agriculture. Indian agriculture, which grew at the rate of about 1 percent per annum during the fifty years before independence, has grown at the rate of about 2.6 percent per annum in the post-independence era. Another important facet of progress in agriculture is its success in eradication of its dependence on imported food grains. Indian agriculture has progressed not only in output and yield terms but the structural changes have also contributed (Prasad. A. & Tripathi. A. R., 2009). An economy may be divided into a number of sectors according to the type of output produced. Three major sectors namely, primary, secondary and tertiary sectors are distinguished. Over time the structure of an economy surely changes as the economic activities expand. From the development experiences of the developed economies it has been observed that there is a definite relationship between economic development and structural changes of an economy. As the economy is on the development path, the structure of the economy shifts away from agriculture to industry and then from industry to services (Pal, Biswas 2007). India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in the wake of an exceptionally severe balance of payments crisis. The need for a policy shift had become evident much earlier. India’s economic performance in the post-reforms period has many positive features which puts India among the fastest growing developing countries in the 1990s. The economic reforms have led to a substantial increase in the degree of openness in the Indian economy. Over the years, the sectoral composition of the Indian economy has undergone a structural shift. The shift is perhaps best exemplified in terms of the changes in the shares of agricultural, industrial and services sector in the GDP. Table 1 presents the year wise shares of three broad sectors of the economy in the country’s GDP.

| Table 1: Sectoral Shares in GDP (In %) | |Years...
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