National Income of India

By V. K. R. V. RAO

S THE term &dquo;national income&dquo; is lion persons out of a total of 350 mil-
A used by the author, the national lions. There is no census of production
income of a country is the money value in India, nor is there a wage census.
of the flow of commodities and services, Unemployment and health-insurance
excluding imports, becoming available statistics of the type recently pressed
for sale (or capable of being sold) into service by Mr. Colin Clark for his
within the period, the value being reck- estimates of the British national income
oned at current prices, minus the sum are conspicuous by their absence in
of the following items: (1) the money India. On the positive side, we have
value of any diminution in stocks that official estimates of the production of
may have taken place during the pe- principal agricultural commodities; and
riod ; (2) the money value of the flow agriculture, it is well known, accounts
of goods and services used up in the for the income of more than 70 per
course of production; (3) the money cent of India’s population. Compre-
value of the flow of goods and services hensive statistics are available of the
used to maintain intact existing capi- production of minerals and forest prod-
tal equipment (value being reckoned at ucts. Some data are also available on
current prices in all these cases); (4) milk and milk products, incomes of gov-
receipts of the state from indirect taxa- ernment servants, and incomes of in-
tion ; ( 5 ) favorable balance of trade dustrial workers in certain parts of the
including transactions in treasure; (6) country. It should also be remembered
net increase in the country’s foreign in- that income tax statistics, while ac-
debtedness or the net decrease in the counting for a numerically negligible
holdings of balances and securities part of the population, yet cover the
abroad whether by individuals or the major portion of the income of the
government of the country. population engaged in organized indus-
DATA
try and commerce. The available data
AVAILABILITY OF
have been supplemented by the institu-
The writer of this paper knows that tion of a number of ad hoc inquiries on
his estimate of India’s income is not the part of the writer.
comparable in accuracy to those of METHOD
either the United States or Great Brit- OF CALCULATION
ain, and he is keenly aware of the large Owing to the
poverty of even the
element of guesswork that his calcula- available data for the whole of India,
tions contain; nevertheless he has ven- the calculations are confined to British
tured to attempt an estimate, on the India. Taking the occupational census
ground that with care and caution one of 1931-32 as a basis, I first estimate
can get something useful even from in- the number of earners in the country,
adequate data and that in any event, the total of whose incomes make up the
only by making use of such data as national income. This number is then
exist can it be possible to induce the divided into two sections-those whose
powers that be to furnish additional incomes I evaluate by the &dquo;inventory&dquo;
information. method and those by the &dquo;income&dquo;
Indian income tax statistics account method. The first section accounts for
for the income of no more than a mil- the income of 69 million workers, the
99

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100

TABLE 1-NUMBER OF INCOMES 1

(Figures in thousands)

occupations covered being agriculture, of the goods and services consumed in

pasture, mines, forests, and fishing and the course of production, e.g., seeds, raw
hunting. The second section deals with materials, and so forth, and that of the
the incomes of the remaining 28 million goods and services used to maintain in-
workers, the occupations covered being tact existing equipment, e.g., repairs, de-
industry, trade, transport, public force preciation, and so forth. By aggregat-
and administration, professions and the ing the net totals under the two heads
liberal arts, and domestic service. and deducting any net increase in the
Workers in these nonagricultural oc- country’s indebtedness, we get the en-
cupations are in turn divided into two tire national income.
sections-those who pay income tax and The year selected for study is 1931-
those who do not. Incomes of the for- 32, mainly on the ground that our cal-
mer are obtained from income tax sta- culations of the number of incomes and
tistics, while as regards the latter, I use their classification into various groups
figures of average earnings in each are based on the decennial census occu-
group, based on the results of ad hoc pational figures. Detailed census fig-
inquiries and a judicious use of pub- ures for 1941-42 are not yet published;
lished studies relating to the economic and even when published they will in-
condition of these classes. clude no occupational figures, the occu-
To these totals is added an estimate pational census having been discontin-
of income from house property and ued as a measure of war economy. I
other miscellaneous items which cannot have therefore to use the year 1931-32
be specifically identified with any par- for the account of Indian income that
ticular set of occupied persons. From follows.
these totals we deduct the money value
1 For details of the calculations behind these
~~INVENTORY&dquo; ESTIMATES
estimates and the others that follow, the reader Tables I and 2 give the statistics of
is referred to the author’s study of The Na- actual earners or number of incomes in
tional Income of British India, 1931-32 with
an introduction by Dr. A. L. Bowley, Toronto:
the country, and an estimated classi-
Macmillan, 1940. This is the latest estimate of fication of these into urban and rural
India’s national income. earners.

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 101

TABLE 2-URBAN-RURAL DISTRIBUTION OF EARNERS

(Figures in thousands)

The estimate of &dquo;unemployables&dquo; in TABLE 3-AGRICULTURAL OUTPUT,

Table 1 allows for the old, the incapaci- 1931-32

tated, the ill, and the otherwise chroni- (Figures in millions)

cally unemployed. The percentage is
larger for India than it is in Mr. Colin
Clark’s calculations for Britain, partly
because our general health and nutri-
tion conditions are much worse and
partly because the Hindu joint family
system makes it easier for the unem-
ployables to live on the income of their
relatives. &dquo;Wholly unemployed&dquo; refers
only to the unemployed in organized in-
dustry and trade, and takes no note of
the vast millions of chronically under-
employed persons whose unemployment
is, however, taken into account in cal-
culating their average levels of earnings.
The volume and value of agricultural
output during the year 1931-32 are
given in Table 3. For purposes of com-
parison and particularly in view of the
variability of agricultural output from
year to year, I have also included in
the table figures of the decennial aver-
age output of agricultural goods for the
decade ending 1932-33. It must be
added that the value of agricultural
output shown in this table is below nor-
mal, because of the very low level of
agricultural prices prevailing during
that year.

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102

To the total shown in Table 3 must dominantly vegetarian character of the

be added our estimated value of the Indian diet. The poverty of the coun-
output of other food grains and food try is clearly reflected in its milk pro-
crops, other oilseeds, other fibers, fruits duction, which is estimated at only
and vegetables, condiments and spices, 37,534 million pounds (margin of error
and miscellaneous crops, which together -~--/- 25 per cent), or a daily average
account for 43 million acres of culti- of less than .4 pound per head of popu-
vated area. This means an addition of lation. To the value of livestock prod-
Rs.1,746.9 millions to the value of agri- ucts we must also add the other items
cultural goods detailed in Table 3, thus included in the inventory method, viz.:
giving a grand total of Rs.7,836.1 mil- Rs.120 millions for fishing and hunting,
lions as the value of agricultural output Rs.92 millions for forest products, and
in 1931-32. This excludes the value Rs.180 millions for minerals.
of fodder crops, stalks, and straw, the This gives us a total of Rs.9,003 mil-
same item also not being deducted from lions as representing the combined in-
the gross value of livestock products. come of 68.8 million principal workers,

Expenses of agricultural production are 9.7 million working dependents, and 5.4
calculated by us at Rs.1,909 millions, million subsidiary workers, all of whom
being made up of Rs.235 millions for are engaged in what the census terms

wastages, Rs.470 millions for seed, Rs. the &dquo;production of raw materials.&dquo; For
540 millions for interest, Rs.600 mil- estimating the income of the remaining
lions for maintenance and depreciation earners, resort is had to the income
of draft cattle, and Rs.64 millions for method.
repairs and depreciation of agricultural &dquo;INCOME METHOD&dquo; ESTIMATES
implements. That leaves Rs.5,927 mil-
lions as the net value of agricultural In order to take advantage of the
production, excluding fodder crops, available income tax statistics and also
stalks, and straw in 1931-32. reduce the working of the income
Table 4 contains my estimates of the method to manageable proportions, it
value of livestock products for 1931-32 is necessary to analyze the statistics of
and is based upon a series of elaborate income-tax earners and distribute them
calculations and ad hoc inquiries for over the various occupational groups.
which the interested reader is referred This has been done in Table 5. It must
to the author’s detailed study of Indian be added that the minimum taxable an-
income. nual income in 1931-32 was Rs.1,000/-
and that the total income of people pay-
TABLE 4-VALUE OF LIVESTOCK ing income tax was Rs.2,161 millions.
PRODUCTS, 1931-32 The reader must also be warned that in
India the income tax is levied only on
nonagricultural incomes, though the
number of large agricultural incomes is
so low that it will not make a tremen-
dous difference to the number of in-
come-tax payers.
For calculating the income of work-
ers engaged in organized industry, a

special survey was carried out by the

The comparatively negligible impor- author with fairly satisfactory results.
tance of meat is a reflection of the pre- For the incomes of workers in unor-

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 103

TABLE 5--OCCUPATIONAL DISTRIBUTION and liberal arts is not very satisfactory

OF INCOME-TAX PAYERS and contains a large element of guess-
(Figures in thousands) work. The incomes of domestic serv-
ants have been calculated on the basis
of a special inquiry conducted by the
author. The results of these calcula-
tions are given in Table 6, and relate
only to net income.
There now remain to be added the in-
come from house property and other
miscellaneous items. Details of these
are found in Table 7.

TABLE 7-MISCELLANEOUS INCOME

(Figures in millions of rupees)

ganized industry and of artisans, some

special surveys were carried out and
information available in published vil-
lage studies and other relevant publica-
tions was also utilized. Information re-
garding the salaries of persons engaged
in the service of Government, railways, The inclusion of pensions and indi-
posts, and telegraphs was specially ob- rect taxes follows from our definition of
tained from the authorities concerned, national income. Part of the interest
or the salaries were calculated on the on agricultural debt is included because
basis of material obtained from them. it has either escaped inclusion in in-
The estimate of the incomes of people come tax statistics or/and is received

engaged in trade, transport, professions, by moneylenders who are also practic-

ing agriculturists and have not shown
TABLE 6-TAXABLE AND NONTAXABLE moneylending as their subsidiary occu-
INCOMES pation.
(Figures in millions of rupees) From the total of incomes arrived at
Description Income so far, certain deductions have to be
Incomes assessed to income tax....... 2,161 made which are shown in Table 8.
Income not assessed to income tax, of
TABLE 8-DEnucTiorrs
(Figures in millions of rupees)

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104

Interest on internal public debt is a British India for 1931-32 will lie be-
negative figure, because we have not tween Rs.16,651 millions and Rs.18,677
taken into account the income repre- millions, thus giving a per capita in-
sented by productive public debt. come of Rs.65 with a margin of error of
We can now proceed to give our esti- -~-/-6 per cent.
mate of the net national income of Table 10 contains estimates of the
British India, as shown in Table 9. distribution of these alternative figures
of Indian income between urban and
TABLE 9
rural populations.
INDIAN POVERTY
Even this bare recital of figures
should give the reader ample testimony
of the notorious poverty of the Indian
people. Conditions in the Indian states,
taken as a whole, are if anything a little
worse than those in British India; and
the figures given here can be taken as
broadly representing the economic con-
dition of the whole of India.
That this low figure of Indian income
is not merely a monetary estimate but
is a true reflection of conditions of real
income and standard of life in India is
seen from the fact that the estimated
~ ----~ --

food supply of India falls far short of

This gives us a net total income lying her minimum dietary requirements. In
between Rs.15,8fi8 millions and Rs.17,- a recent publication on Food Planning
904 millions, or a per capita income of for Four Hundred Millions, Dr. Ra-
Rs.62 with a margin of error of 6 per dhakamal Mukerjee has estimated the
cent. If we assume that the official deficiency in Indian food supply at 16
estimates of agricultural output are an per cent. The present writer, in a pa-
underestimate by 10 per cent and that per read before the Indian Statistical
there is an evasion of income tax by Conference, has estimated the deficiency
5 per cent, the net national dividend for in terms of calories at 17 per cent, and

TABLE 10

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 105

in terms of proteins and fats respec- I believe I have said enough to indi-
tively at 38 per cent and 64 per cent. cate the dark and somber background
The deficit in terms of the all-important of the economy against which the popu-
vitamins is even greater. Dietetic sur- lation of India lives and has its being.
veys made by Dr. Aykroyd,’ director of Whether this poverty is the inevitable
the Nutrition Research Institute, and result of the niggardliness of Nature de-
Mr. B. G. Krishnan in some South In- fying the most intelligent and organized
dian villages show that between one- application of human intelligence, or
third and one-half of the families sur- whether it is due to the failure of the
veyed were clearly underfed. human factor and can be remedied by
Housing conditions are even worse, a systematic and planned attempt at
not only in the towns but also in the economic reconstruction administered
villages; for as the census commissioner by a government responsible to the
of one of the Indian provinces has people, is a question outside the scope
pointed out, &dquo;if village densities were of this article. But I cannot help re-
calculated on the area of inhabited site cording the belief that Indian poverty
or sites and not on that of the site plus is not inevitable and that, given a na-
the village lands they would generally tional government and the adoption of
be greater than that of any town.&dquo; a planned economy, a substantial in-
If any further confirmation is re- crease can be brought about in Indian
quired of the reality of Indian poverty, income and considerable improvements
it can be found in Indian vital statistics. effected in India’s standard of life and
The Indian death rate is 24.3 per 1,000 conditions of real income. Reflecting
and the rate of infant mortality is 167 on what Indian income can be helps to

per 1,000, while that of maternity mor- dispel the gloom caused by the con-
tality is substantially above the corre- templation of what Indian income is
sponding figure for Western countries. today.
V. K. R. V. Rao, Ph.D. ), Cambridge holds the
(
University Chair of Economics in the University of
Delhi, is honorary secretary and treasurer of the In-
dian Economic Association, and is a member ofthe
Consultative Committee of Economists on postwar
reconstruction. He served for five years as principal
and professor of economics of a first-grade college in
Ahmedabad, and has also served as member-secretary
of the Bombay Economic and Industrial Survey Com-
mittee and as a member of the Provincial Rural De-
velopment Board and the Industrial Advisory Board
to the Government of Bombay. He is author of Tax-
ation of Income in India, An Essay on India’s Na-
tional Income, 1925-29, and The National Income of
British India, 1931-32, and other works.

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