A sustainable growth rate: At what level will India have no output gap?

Domestic commentators need to engage with the issue of growth rate at which India will have no "output gap" - is it really significantly lower than that achieved over two decades? - writes T N Ninan

T N Ninan
GDP growth

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In the past four decades and more, the structure of India’s economy has changed quite dramatically. Compared to 1980-81, using current prices, the share of “agriculture and allied activities” has dropped from 38 per cent of GDP to 21 per cent, while that of services has grown from 37 per cent to 53 per cent. That of industry (including construction and utilities) has remained more or less unchanged at 26 per cent. So agriculture, the slowest-growing segment of the economy, has shrunk relative to the others, while the services sector (the fastest-growing) has become the dominant one.
What does this structural change mean for overall economic growth? Assuming the sector-wise growth rates remain unchanged, the dominance acquired by the rapidly growing services sector means that economic growth as a whole should have accelerated. Given the shifts in weighting among the three sectors, what was 5.5 per cent average growth in the 1980s sh
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: May 19 2023 | 6:55 PM IST

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