Links between Structural Changes and Economic Growth in India

The structural changes of an economy that entail the dynamics of sector shares (industrial, agricultural and services) are related to each other and to economic growth as well. Using panel data collected from CSO for states and UTs of India for the period of 2004-05 to 2011-12 at the constant prices of 2004-05, the present paper highlights the effect of population change on economic growth in India. As statistical method we have used OLS and after panel diagnostics random effect was found unbiased. Further year dummies and state dummies have been used for an in-depth analysis.The growth pattern of different sectors of the economy shows an emergence of the service sector as the major contributor, decline in the share of agriculture sector and industry sector has seen a steep decline during this period. It indicates that some states were able to shift their labour force from low – productivity agriculture to higher productivity industry and service sectors, and to increase productivity within those sectors, despite the rapid growth of populations. Results of Random Effects Model suggest that states & UTs like Chandigarh, Delhi, Goa, Haryana, Maharashtra, A&N Islands and Pondicherry have statistically significant at the 5 % level positive association between a logarithm value of the population and logarithm value of per capita NSDP, while Assam, Bihar, Madhya Pradesh, Uttar Pradesh, Rajasthan, Orissa, Manipur, Chhattisgarh and Jharkhand have significant at the 5 % level negative association in this period. Thus the impact of population change is not automatic and homogenous throughout the Indian States during the study period. Whether India will be able to capitalize on its favorable age structure depends on how well the EAG states are able to reform their economies.