Structural Change in Demand Side of Gdp

Structural change in demand side of GDP

In the first decade after independence, more than 80 percent of the GDP came from private consumption. We started off with very low government input and even private expenditure was fluctuating in the first decade. Contribution of internation trade was negative.

Contribution of Consumption came down to around 70 percent at the end of 1970’s. Share of government expenditure in GDP reached double digits, while private investment also increased slowly. Internation trade deficit was continuously hovering at around -2 percent of the GDP.

As the economic reforms started in 1980’s,  Consumption’s share in GDP kept on decreasing slowly, while government expenditure kept on increasing more and more to develop the infrastructure in the country.

We faced the balance of payment crisis in erly 1990’s and were forced to adopt bulk reforms. Trade deficit in this decade remained at 3 percent of the GDP. Government’s contribution to the economy was at its peak at around 12 percent in this decade.

2000-10 was a very good decade for Indian economy. Private investment’s contribution accounted for more than 30 percent of the GDP while consumption came down below 60 percent and government expenditure also came back to arount 10 percent of the total GDP.