STATE  INCOME

State Income and its Measurement

Like national income, the State income represents total amount of income originated within the territory of a particular state during a particular period. The estimation of state income provides the most comprehensive single indicator of the level of development of a particular state. Normally, income is deemed to originate in the territory on which the income-generating economic activity takes place. Thus any amount of income originating within the boundary of Assam is known as the State Domestic Product (SDP) or the State Income of Assam. The Directorate of Economics and Statistics, Assam is authorised to measure the state income for every year regularly. A combination of the income and inventory or product methods are generally applied by the department concerned for the measurement of state income in Assam with fair success. On different occasions, the product method and the income method have also been applied separately by the department concerned.

Sources or Sectoral Contribution of State Income in Assam

Sectoral contribution of state income reveals a clear idea about the contribution of various production sectors to the state income and its various sources. Among the various sectors, agricultural sector has been contributing the major portion of state income from the very beginning and earned a notable position in this regard. The following table shows the sectoral contribution of state income in Assam.

Table No. 5.1

Sectoral contribution of State Income or State Income by Industrial Origin

( in Crore of Rupees)

Sources : 1. Statistical Handbook, Assam, 1973,1995    2. Economic Survey, Assam, 1989-90

Note : Figures in brackets show percentage to total

The sectoral contribution of state income, which throws light on the state domestic product (SDP) by industry of origin, both at current and constant prices, shows that in 1950-51, the primary sector composed of agriculture, forestry fishery, mining and quarring accounted for 66.6 per cent (Rs. 136.0 crores) of the total state income. But the contribution of Agriculture alone was 52.6 per cent of the total state income in 1950-51. In the same year, the contribution of the secondary sector to the state income was 16.1 per cent (Rs. 31.3 crores) which constitutes, manufacturing (15.0 per cent), construction (0.3 per cent) and electricity, gas and water supply. Again the contribution of the tertiary sector to the state income was 17.3 per cent (Rs. 35.4 crores) in 1950-51 which is constituted by transport, communication and trade (10.1 per cent), Finance and Real Estate (0.7 per cent) and community and personal services (6.5 per cent).

In 1960-61, the share of agriculture and allied persuits at constant prices came down to just over 55 per cent and then to 45.2 per cent in 1969- 70. But the primary sector has been still playing an important role and has contributed 45.9 per cent of the total state income in 1970-71, out of which the contribution of agriculture alone was 32.1 per cent. In this year, the contribution of secondary and tertiary sector were 20.7 percent and 29.3 percent.

Again the net State Domestic product (SDP) at factor cost by industry of origin at constant (1980-81) prices in 1980-81 reveals that the primary sector still dominated the show accounting 52.0 per cent of total SDP. The share of other sectors, i.e., the secondary and tertiary sectors in 1980-81 was 11.8 per cent (Rs. 277 crores and 36.2 per cent (Rs. 810.2 crores) respectively. The share of other heads within these state income in 1980-81 were as follows : Manufacturing (6.9 per cent), Construction (4.4 per cent) ; Electricity, Gas and Water supply (0.5 per cent); Transport, Communication and Trade (13.4 per cent), Finance and Real Estate (11.2 per cent) and community and personal services (9.7 per cent).

Again in 1990-91, the sectoral contribution of state income in Assam has changed thoroughly and the share of primary sector in the state income was 40.3 per cent and the share of agricultural sector alone was only 35.7 per cent. This shows that contribution of agricultural sector to the state income has come down significantly. The share of secondary sector to the state income of Assam has increased to 19.5 per cent out of which the contribution of the manufacturing industry was 13.4 per cent, construction 5.1 per cent and that of electricity, gas and water supply was 1.0 per cent. The share of tertiary sector to the state income has increased considerably to 40.3 per cent (Rs. 1599.8 crores) in 1990-91 out of which, the contribution of transport, communication and trade was 14.3 per cent, finance and real estate 12.6 per cent and that of community and personal services -- 13.4 per cent.

Moreover, in 1993-94, the contribution of primary sector to the state income at constant prices further declined to 33.5 per cent out of which agriculture alone has contributed only 29.4 per cent (Rs. 1501.6 crores) of total state domestic product of Assam. The share of secondary sector has further increased to 23.0 per cent out of which the contribution of manufacturing sector was 15.5 per cent, construction 5.8 per cent and that of electricity, gas and water supply 1.8 per cent. Again the sectoral contribution of the tertiary sector to the state domestic product in Assam has remained steady at 43.5 per cent in 1993-94, out of which the contribution of Transport, Communication and Trade to the SDP was 16.8 per cent, Finance and Real Estate 12.1 per cent and that of Community and Personal services was 14.5 per cent.

Thus, we have seen that sectoral contribution of state income has changed considerably in the mean time. At present the primary sector and the tertiary sector are playing the dominant role in determining the state income of Assam. Among these three sectors, tertiary sector is contributing the highest amount in the state income. But inspite of several initiatives, the contribution of secondary sector did not increase considerably and the share of the manufacturing sector to the state income of Assam remained very poor (15.5 per cent). Thus we find that the economy of the state is not yet diversified at a fair level.

Trends of State Income in Assam

Since the inception of planning in the state, the state income of Assam has started to show an increasing trend at varying rates during different years. The following table shows the trend of the state income in Assam.

Table No. 5.2

The Trend of State Income of Assam and per-capita income

(P) Provisional estimates, (Q) = Quick estimates.

Sources : (i) Statistical Handbook, 1967,1968,1982, 1990,1993,1995    (ii) Economic Survey, Assam, 1970, 1981-82, 1989-90        (iii) Economic Survey, Government of India, 1981-82, 1994-95

The above table reveals that the state income of Assam at current prices has more than doubled during the first fifteen years, i.e., from Rs. 236.5 crores in 1950-51 to Rs. 499.7 crores in 1965-66, whereas there is a ten-fold increase in the state income during the last thirty years, i.e., from Rs. 236.5 crores in 1950-51 to Rs. 2,356.1 crores in 1980-81. In 1985-86, the net SDP has reached Rs. 5117.6 crores.

Again, the net state domestic product at current prices has increased from Rs. 5117.6 crores in 1985-86 to Rs. 14034.0 crores (Q) in 1993-94 which shows a growth of 174.2 per cent during this period of eight years. Thus the state income at current prices has recorded a fifty nine fold increase during the last 43 years(1950-51 to 1993-94).

But the state income of Assam at prices (as shown in column no : 3 shows a little bit different picture although showing the same increasing trend. The state income at 1948-49 prices has increased from Rs. 204.4 crores in 1950-51 to Rs. 328.0 crores in 1965-66 and then to Rs. 366.7 crores in 1968-69, which shows a growth of 79.4 per cent during these 20 years. Further, the state income at 1970-71 prices has increased from Rs. 773.5 crores in 1970-71 to Rs. 968.7 crores in 1979-80 showing a growth of 25.2 per cent during these 9 years.

Further, the state income at 1980-81 (constant) prices has increased from Rs. 2356.1 crores in 1980-81 to Rs. 3281.9 crores in 1985-86 and then to Rs. 5116.3 crores (Q) in 1993-94, which shows an increase of 117.5 per cent over the figure of 1980-81, covering the period of 13 years. Thus it is found that during the last 43 years, the state income (NSDP) at constant price with different base has recorded about a twenty five-fold increase. Moreover, the state income at constant prices (at 1980-81 prices) in 1993-94 (Q) has recorded a growth rate of  about 9.20 per cent over the previous year as compared to that of only 3.86 per cent achieved in 1990-91 over the previous year.

Growth of State income of Assam in comparison with National income of India.

It would be better to look into the growth of state income in Assam in comparison to that of national income in India, which would provide a better idea about the pace of development attained in Assam as compared to that of all India. In order to make a better assessment of the situation, it would be important to make comparative estimate of Index number of both State Domestic Product (SDP) and Net National Product (NNP) on the one hand and also another comparative estimate of the rate of growth of state income and national income on the other.

Comparison between the Index Number of State Domestic Product of Assam and Net National Product of India

It will be better to throw more light on the growth of State Domestic Product (SDP) in Assam and Net National Product (NNP) of India if we can make a comparative estimate of index numbers of both SDP and NNP mentioned above.

Table No. 5.3

Index Number of State Domestic Product (Assam) and Net National Product (India) (At current prices)

Source : a) Economic Survey, 1981-82, 1995-96, Government of India.     b) Economic Survey, Assam, 1981-82,1988-89           c) Statistical Handbook, Assam 1995

The above table reveals that the index numbers of State Domestic Product of Assam at current prices could not keep pace with the index number of Net National Product of all India. Taking 1950-51 as base year, the index numbers of SDP of Assam and NNP of India reached the level of 142.5 and 166.1 respectively in 1960-61 showing marginal gap during the first decade of planning. But the same index number reached the level of 402.4 for Assam and 610.7 for all India during 1973-74, which showed  that the gap between two indices were increasing at a quicker rate. Again both the indices reached the level of 996.2 for Assam and 1290.9 for all India in 1980-81 which showed a wide gap between these two indices.

After that the index number of SDP of Assam and NNP of India reached the level of 2163.8 and 2404.2 respectively in 1985-86 which showed the gap between the two indices rose further to the level of 240.4 points. Again at the end of the Seventh Plan, i.e., in 1990-91, both the indices reached the level of 3670.8 for Assam and 4875.9 for all India which shows that the gap between the two indices has widened further to the range of 1205.9 point. Again in 1993-94, the two indices has widened significantly to the level of 1420.3 points as the index number of state income of Assam and Net National Product of India reached the level of 5934.0 and 7354.3 points respectively.

Thus, we find that the State Domestic Product of Assam are progressing at a slower pace than that of Net National Product of all India. This is a very bad trend for the economy of Assam as the gap between the index numbers of State income of Assam and National income is gradually becoming wider and wider.

Rate of Growth of State Income of Assam and National Income of India

The respective growth rates of the state income of Assam and National Income of India during the three Five Year Plans and ad-hoc Annual Plans are given below :

Table No. 5.4

Growth Rate of State Income of Assam and National Income of India

Source: 1. Economic Survey, Assam, 1970, 1989-90        2. Economic Survey, India, 1995-96    3. Statistical Handbook Assam, 1995

The table presents that during the first plan period, the rate of growth of State income was higher than that of National Income of India. But the rate of growth of state income during the Second Plan was much lower in comparison with the rate of growth of National income of India. During the Third Plan the state income at current prices increased by 54.3 per cent but at constant prices the rise was only 24.9 per cent. But the rates of growth of National income of India during the Third Plan were 46.3 and 15.5 per cent at current prices and at constant prices respectively which is slightly lower than that of Assam. During the three ad-hoc Annual plans the rate of growth of State income at current prices was 44.5 per cent in comparison with 34.9 per cent rate of growth of national income of India. But the rate of growth at constant prices for state income of Assam (13.4 per cent) was slightly lower than that of national income of India (15.0 per cent) during the Ad-hoc plan period. During the period of 23 years, from 1950-51 to 1973-74 the state domestic product in real terms increased by 109.4 per cent.

The State income at constant prices in 1973-74 showed an increase of only 2.1 per cent over 1972-73 against 4.9 per cent in 1972-73 over 1971-72. For the country as a whole, the net national product at constant prices in the year 1973-74 increased by 3.1 per cent over 1972-73.

The state income of Assam in 1975-76, at constant prices showed an increase of 89 per cent over 1974-75 as against a 9.5 per cent increase of national income of India during the same year.

In 1977-78, the state income at constant prices rose by 4 per cent as against 8.8 per cent increase in the national income. There were declining trend in SDP at constant prices from 1977-78 to 1979-80, there was also an appreciable negative growth rate estimated at 5.4 per cent in G.N.P. at 1970-71 prices, due to worst ever draught in the country.

In 1980-81, the State Domestic product at constant prices stood at Rs. 1095.1 crores as against Rs. 968.1 crores in 1979-80 showing a rise of 13.1 per cent over 1979-80. National income of India recorded a rise of 7.5 per cent in 1980-81 over 1979-80 showing an appreciable recovery in real terms.

In 1981-82, State income of Assam at constant prices, increased at a very poor rate of 1.1 per cent over 1980-81 whereas national income was estimated to have risen by about 4.5 per cent during the same year.

Again in 1985-86, the state income of Assam at constant prices achieved a growth rate of 4.0 per cent as compared to that of 3.9 per cent for net national product of India.

Moreover, in 1990-91, the state income of Assam at constant prices rose by 4.0 per cent over 1989-90. But the net national product of India at constant prices rose by 5.2 per cent in 1990-91 over the previous year.

But in 1993-94, the situation has changed totally as the state income (SDP) has recorded a growth rate of 9.4 per cent over the previous years whereas, the net national product in India has recorded a growth rate of 4.2 per cent in 1993-94 over the previous year.

We find that there have been wide fluctuations in the rate of growth of national income as well as of state income of Assam, as our economy, in general, is dominated by agricultural sector which is greatly vulnerable to the changes in the natural factors. Further, we find there is lack of correlation between the rate of growth of national income of India and state income of Assam.

Moreover, the study further reveals that the rate of growth of state income (SDP) at constant prices since 1977-77 remained lower in most of the year as compared to that of net national product of India excepting 1980-81 and 1991-94 where the growth rates of net national product for all India remained lower as compared to that state income in Assam and even it faced a negative growth rate of (-) 0.1 per cent in 1991-92 over the previous year as compared to that 9.0 per cent for Assam.

Per Capita income in Assam

Trends of Per Capita Income in Assam

Per capita income is an alternative analysis of income in connection with the size of population which provides a rough idea about the average income and standard of living of the people of the country. In the early stages of planning, per capita income figure of Assam was comparatively better in comparison to that of India. But thereafter as  size of population of the state increases at a faster rate and the state income increases at a poorer rate than that of all India,  the per capita income of Assam could not keep pace with that of India. The growth of per capita income from the early period of planning is not at all encouraging. The rate of growth of per capita income during the First Plan (1951-56) was 3.3 per cent, and during the Second Plan (1956-61) it declined to 2.2 per cent. But during the Third Plan (1961-66) it increased to 4.1 per cent and again there was a decline in the rate of growth of per capita income to 3.4 per cent during the Fourth Plan period.

The per capita income figure of Assam, as available from table 5.2, shows fluctuations in its movement. The per capita income at constant prices (1948-49 prices) in Assam rose from Rs. 258.6 in 1950-51 to Rs. 262.1 in 1955-56 and then declined to Rs. 251.3 in 1960-61. The per capita income being Rs. 264.9 in 1965-66, reached to Rs. 270.9 in 1968-69.

The per capita income calculated at constant (1970-71) prices gradually increased from Rs. 538.6 in 1970-71 to Rs. 550.1 in 1973-74 showing an increase of 2.1 per cent only. Then it gradually increased to Rs. 559.4 in 1975-76 and then declined to Rs. 544.2 in 1976-77 and then reached to Rs. 573.5 in 1977-78 showing an increase of 6.4 per cent over 1970-71. The per capita income then declined to Rs. 554.6 in 1978-79 and then to Rs. 509.1 in 1979-80 showing a decline of 9.0 per cent over 1975-76.

Again the per capita income in Assam at constant (1980-81) prices increased from Rs. 1317.0 in 1980-81 to Rs. 1483.0 in 1985-86 and then to Rs. 1799.0 in 1990-91 and then finally to Rs. 2157.0 (Q) in 1993-94 showing an increase of 63.8 per cent over 1980-81.

If we look into the per capita income figures of Assam at current prices then we find (from Table 5.2) that there was a gradual increasing trend with some marginal fall in it during some particulars years. In 1950-51, per capita income at current prices in Assam stood at Rs. 299.2 as against Rs. 238.8 for all India. But in 1955-56, the per capita income figure then declined to Rs. 277.6 and then started to increase at a fair rate from Rs. 315.3 in 1960-61 to Rs. 398.7 in 1965-66 showing an increase of 26.4 per cent. The figure then rose to Rs. 513.4 in 1968-69 showing an increase of 28.8 per cent over 1965-66. There were slow growth in the per capita income of Assam in 1970-71 and in 1971-72 at Rs. 538.6 and Rs. 549.7 respectively. But the figure again started to jump from Rs. 577.3 in 1972-73 to Rs. 650.1 in 1973-74 and then to Rs. 826.5 in 1974-75 due to increased spiral in price level showing an increase of 60.9 per cent over 1968-69. Then the per capita income, being declined at Rs. 783.3 in 1975-76, showed an increasing trend from Rs. 1003.5 in 1979-80 to Rs. 1317.0 in 1980-81 and then to Rs. 2313.0 in 1985-86 and finally reached Rs. 5916.0 in 1993-94 showing an increase of 349.2 per cent over 1980-81.

Again in 1993-94, the per capita income of Assam at current prices increased to Rs. 5916.0 (Q) showing an increase of 11.4 per cent over the previous year.

Thus, we have seen that at both current and constant prices, the rise in per capita income in Assam has not been continuous. Whenever the increase in income was less than projected increase in population, the level of the per capita income of the state went down. In terms of constant prices such falls in the per capita income occurred in the years 1951-52, 1953-54, 1956-57, 1957-58, 1959-60, 1962-63, 1965-66, 1966-67, 1969-70, 1976-77, 1978-80 and 1981-82. Again in terms of current prices such falls in the per capita income were recorded in 1952-53, 1955-56, 1957-58, 1959-60, 1962-63, 1968-69, 1969-70,1970-71 and in 1975-76.

Comparison of the State Per Capita Income (Assam) and National Per Capita Income or Capita Income Gap between Assam and India

Since the beginning of planning era, the per capita income of Assam are trailing behind the per capita income of India. But the gap was marginal in the early period. Although the per capita income at current prices of Assam was higher than that of India in the early period but the per capita income at constant prices of Assam was all along lower than that of all India. What is more important that the gap between the per capita income of Assam and national per capita income has been gradually increasing, i.e., in terms of constant prices, there were gaps of Rs. 9.00 only in 1950-51 which increased to Rs. 71.10 in 1973-74 and the gap finally reached Rs. 106.50 in 1980-81.

The divergence in the per capita income at constant (1980-81) prices between Assam and all India has been increasing at a considerable proportions since 1980-81. The following table will clarify the position.

Table No. 5.5

Divergence or Gap in Per Capita Income at constant (1980-81) prices between Assam and all India since 1980-81

Source : 1. Statistical Handbook, Assam 1995          2. Economic Survey, Assam, 1989-90.    3. Economic Survey, India, 1995-96

The table given above reveals that the divergence in per capita income at constant (1980- 81) prices between Assam and India has been increasing considerably from Rs. 313.1 in 1980-81 to Rs. 358.4 in 1985-86 and then to Rs. 581.1 in 1989-90. This type of situation has been resulted from the fact that the growth of per capita income in Assam could not keep pace with that of per capita income in all India leading to a huge negative gap between these two.

But in 1990-91, the negative gap between the per capita income of Assam and all India declined to Rs. 423.5 and then it further declined to Rs. 177.0 in 1993-94. This declining trend in the gap between the per capita income in Assam and India has mostly resulted from relatively slow growth of per capita income in India in 1990-91 and a negative growth of per capita income in India to the extent of (-) 2.1 per cent in 1991-92 over the previous year.

The gap between the per capita income in Assam and all India measured at current prices are much higher which can be estimated by finding the difference between Col. No. 5 and 6 of Table no. 5.2 as shown in col. no. 7.

In terms of current prices, the gap between the per capita income of Assam and national per capita income was much higher in the later period of planning. In 1950-51, the per capita income of Assam was higher by Rs. 60.4 than that of all India and maintained that positive gap till 1955-56 to the extent of Rs. 44.50 only. In 1970-71, the per capita income of Assam become lower than that of all India by Rs. 161.30 only and the same negative gap reached the level of Rs. 430.10 in 1980-81.

Again in 1985-86, the per capita income of Assam became lower than that of all India by Rs. 417.2 and then the same negative gap increased significantly to Rs. 1050.8 in 1990-91 and to Rs. 1144.0 in 1993.94.

Thus the per capita income of Assam at current prices continued to be much poorer in recent years than that of national per capita income.

The following table reflects the differences in the rate of growth of per capita income between Assam and all India during different plan periods.

Table No. 5.6

Annual Rate of Growth of per Capita Income in Assam and India

(at constant prices)

Source :  (a) Third Five Year Plan,Vol. I, P&D Department, Assam           (b) Economic Survey, Assam 1981-81, 1989-90     (c) Economic Survey, Government of India, 1981-82, 1995-96       (d) Staistical Handbook, Assam, 1995

The above table reveals that during the Second Plan (1956-61) period the rate of growth of per capita income for India was 9.3 per cent whereas it was (-) 4.1 per cent for Assam, showing a negative growth. During the Third Plan (1961-66), Assam registered a spectacular 19.8 per cent in its rate of growth of per capita income in comparison to that of all India’s 13.7 per cent. During the Annual Plans and the Fourth Plan period the growth rate of per capita income of Assam maintained a slightly lower rate than of all India. But during Fifth Plan and thereafter (1974-78), Assam again registered a growth rate of 3.0 per cent as against all India rate of growth of 3.1 per cent in its per capita income.

But in recent years, the rate of growth of per capita income at constant price in Assam remained comparatively better than that of India as the rate of growth of per capita income in Assam as 3.3 per cent in 1985-86 as against all India rate of growth of per capita income to the extent of 1.7 per cent. Again in 1993-94, the rate of growth of per capita income (at constant prices) in Assam was 6.9 per cent as compared to that of 2.3 per cent for all India. But the per capita income of Assam in real terms has grown by 3.6 per cent per annum in 1989-90 over 1980-81 while for the country as a whole the corresponding growth rate was 3.3 per cent per annum.

The economic growth in Assam has been entirely inadequate and incommensurate as against its high demographic growth rate. Because of the inadequate growth rate compared to its population growth, the per capita income in Assam since 1950-51 at constant prices. shows a very sluggish growth even compared to all India. Unless the domestic product rise faster than the population of the State, a stagnant or backward trend will continue. If we think in terms of price level differences when price level in Assam is all along 20 per cent higher than that of all India, the level of real per capita income in Assam would be much lower than that of all India. Thus the per capita state income compares very unfavorably with the per capita national income much more so when viewed against the higher price level in Assam. This sort of inequality between per capita income of Assam and the rest of India is a cause for social tensions militating against the cohesion of society and integrity of the country.

Factors Responsible for growing Divergence or Gap between Per Capita Income of Assam and India :

It has been observed that the divergence or gap between the per capita income of Assam and India has been growing year after year excepting a few slippage in certain years. The per capita net domestic product of Assam was much higher than the all India average during the period covering 1950-51 to 1955-56 whereas it is much below the all India average at the moment. There are several factors which are responsible for this growing divergence or gap between the per capita income of Assam and all India in recent years. Following are some of the important factors responsible for such growing divergence :

1.Higher growth rate of population : The most important factor which is responsible for such growing divergence or gap between the per capita income in Assam and all India is that the rate of growth of population in Assam is all along higher than that of all India.   The rate of growth of population in Assam is one of the highest in the country. The decadal growth rates of population in Assam in 1951-61 and 1961-71 were 34.97 per cent and 34.95 per cent respectively as compared to that of 21.64 per cent and 24.8 per cent for all India. Again in 1971-81, the decadal rate of growth of population in Assam was 36.1 per cent as compared to that of 24.9 per cent for all India. Thus whatever increase in state income has been achieved in the state, it is being swallowed up by the increased population, leading to a growing divergence between the per capita income in Assam and all India.

2. Slow growth of State Income : Another important factor responsible for the growing gap between state per capita income and national per capita income is the slow growth of state income in Assam as compared to that of national income. Moreover, from the very beginning, the existing base of the state income in Assam remained all along poor leading to a wide gap between the per capita income in Assam and all India.

3. Excessive dependence on Agriculture : The state’s economy is depending too much on agriculture. Of the total working population of the state, about 77 per cent were engaged in agriculture and allied activities. As non-agricultural occupations could not grow sufficiently due to lack of sufficient investment in other sectors, the agricultural productivity per worker in Assam has been declining gradually leading to a slow growth of per capita income in Assam as compared to that of all India.

4. Lack of industrial development : The growing divergence between the per capita income in Assam and India has also resulted from lack of industrial development in the state. This is mostly due to absence of large investments in industry during the preceding plans, Assam’s geographical isolation, transport bottlenecks and lack of industrial friendly socio-political climate in the state.

Thus, all these factors has resulted widening gap between the per capita income in Assam and India. Thus under the present circumstances there is the urgency to raise the rate of development in Assam to check this widening gap, not to speak of catching all India per capita income.