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Structural Changes In The State Economy Of Rajasthan |
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| Paper Id :
19610 Submission Date :
2025-01-11 Acceptance Date :
2025-01-22 Publication Date :
2025-01-23
This is an open-access research paper/article distributed under the terms of the Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. DOI:10.5281/zenodo.14739870 For verification of this paper, please visit on
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| Abstract |
Rajasthan is the
largest state in India with area of 342239 square kilometers. As per 2011
census, it is 8th largest state in population in India. Being such a large
state, it has a major role in the overall growth and development of the
country. So the current paper wants to study the growth and development
perspective of Rajasthan state through the lenses of structural changes in last
two decades. This paper analyzes the structural change in the composition of
state |
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| Keywords | Rajasthan, Structural Changes, GSDP, Employment, Economy. | ||||||||||||||||||||||||
| Introduction | The ultimate objective
of every science or social science is to achieve maximum welfare of mankind.
The materialistic welfare of society can be achieved by increasing the
availability of goods and services to every individual along with ensuring sufficient
purchasing power in his hands. In order to produce different types of goods and
services which are necessary to fulfill human needs and wants, every economy is
required to diversify its production and therefore required to distribute its
productive resources among primary, secondary and tertiary sectors efficiently.
But, the problem with backward or less developed countries is; majority of
their labour-force and productive resources are engaged in primary sector.
That's why their secondary and tertiary sectors are not growing to their full
potential, causing lack of secondary goods and tertiary services in those economies.
This type of imbalance in different sectors, give rise to poverty and economic
disparity. So, in order to eradicate poverty and promote economic equality, the
economy needs to balance the distribution of productive resources in three
sectors of the economy. In this paper it is analyzed that how the GSDP
contribution and employment shares of primary, secondary and tertiary sectors in
the state economy of Rajasthan has changed during 1984-85 to 2021-22. What
changes has been observed? Whether there have been any structural changes in
the economy? Is there has been any movement of resources from primary to
secondary and secondary to tertiary sector? In order to verify the structural
changes in the state economy, structural change indexes- Norm of Absolute Value
and Modified Lilien Index have been calculated which were used by Dietrich
(2012). |
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| Objective of study | Rajasthan is the
largest state in India with area of 342239 square kilometers. As per 2011
census, it is 8th largest state in population in India. Being such a large
state, it has a major role in the overall growth and development of the
country. So the current paper wants to study the growth and development
perspective of Rajasthan state through the lenses of structural changes in last
two decades. Thus the objectives of this paper are-to study whether there has
been any structural change in the employment space and composition of state |
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| Review of Literature | Sharma et.al (2022)
have studied about the economic growth and structural changes in Rajasthan
economy and found that the income of the state has increased on an average at
the rate of 13.47% per annum at current prices and 3.75% at constant prices
during 1955-56 to 2019-20. The trajectory of growth of the state economy has registered
ups and downs during this period. The share of primary sector has gone down and
that of tertiary sector has increased. Singariya (2014) in
his paper analyzed the trends of economic growth and structural changes in
Rajasthan and found that during 2004-05 to 2012-13 the economic growth of the
state economy has been positive and fairly stable contrary to sharp ups and
downs in previous decades. The growth pattern had also shown that half of NSDP
was coming from tertiary sector and more than one fourth of the NSDP was
contributed by the secondary sector and primary sector was contributing the
least. State Finances Audit Report
for the year ended on 31 March 2020 by Controller and Auditor General (CAG) of
India indicated that the GSDP of Rajasthan had grown at higher rates compared
to National GDP in 2015-16, 2016-17, 2018-19 and 2019-20 with lowest growth
rate of 8.32% during 2019-20. The report also mentions that during 2015-16 to
2019-20 share of agriculture sector in Gross State Value Added (GSVA) at
current prices decreased from 26.08% to 25.56% and similarly of industries from
30.96% to 27.81% but the share of services increased from 42.96% to 46.63%. The
report concluded that during these four years contribution of agriculture and
industries have declined but share of services has increased. |
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| Hypothesis | "The structural change was taken as a change in the sectoral shares of primary, secondary and tertiary sectors in output and employment in the economy. To measure and evaluate the structural changes happened in the state economy, two Structural Change Indices (SCIs) namely - Norm of Absolute Value (NAV) index and Modified Lilien Index (MLI) have been calculated using the formulas used by the Dietrich (2012) and described in the next section. The null hypothesis taken was that the mean value of the Structural Change Index (SCI) - NAV and MLI for the entire study period was equal to zero both in output and employment space, while the alternative hypothesis taken was that the mean value of the Structural Change Index (SCI) - NAV and MLI for the entire study period was greater than zero both in output and employment; symbolically- H0 : SCI = 0 (Both in output and employment) H1 : SCI > 0 (Both in output and employment) |
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| Methodology | For the study of structural changes happened in economy of Rajasthan data has been obtained from the reports published by Directorate of Economics and Statistics (DES), Government of Rajasthan regarding gross state domestic product at constant prices as well as current prices. Sectoral contributions of primary, secondary and tertiary sectors in percentage are obtained from the data published by DES. To evaluate the structural changes happened in the state economy, two indices of structural changes have been calculated using the formulas used by the Dietrich (2012). The first one is norm of absolute value and the second one is modified Lilien index. Formula for Norm of Absolute Value (NAV) is as follow-
Where xit
is the share of the sector i= 1,2,3,4…n at time s= 1,2,3,4…n and t=2,3,4…t. Similarly formula for
Modified Lilien Index (MLI) is as follows –
Where xit
is the share of the sector i= 1,2,3,4…n at time s= 1,2,3,4…n and t=2,3,4…t. Then 5 year moving
averages has been calculated using the original index values. In order to use
t-test for original index value as well as 5 year moving averages of index
values, the Kolmogorov-Smirnov test and the Shapiro-Wilk normality test has
been used to verify normality of the data. Thereafter the t test results have
been estimated and inferences have been made accordingly using the p values.
The formula for t statistic used is Data on workers
employed in the three sectors in Rajasthan has been obtained from the reports
of socio-economic surveys on employment and unemployment conducted by National
Statistical Office (NSO) and published in NSS Survey report Survekshana special
number report on 43rd round, 381, 386, 397, 400, 422, 455, 481,490, 515, 522,
531, KI 66/10 and 554, PLFS Annual Survey Reports 2017-18, 2018-19, 2019-20,
2020-21 and 2021-22. Most of the surveys on employment and unemployment
conducted by NSO have the reference period of July to June and some surveys
have the reference period of January to December. Similarly, in the reports
published by NSO, the data of working labour in the three sectors are presented
in the ratio of per thousand separately for males and females on the basis of
rural and urban areas. For estimating the working labour in the three sectors
at state level, it is necessary to sum per thousand data of rural and urban
areas for males and females. In order to add this
disaggregated data to get state level and national level data, an estimate of
population is required. Keeping in view the above requirement, the projected
populations of Rajasthan has been estimated for different survey periods as per
the procedure adopted by NSO. Population estimation for the period between 1981
and 2001 has been done using the data published in the Report of the Expert Committee
on Population Projections Census of India 1981, and for the period 2001 to
2011, the data presented in the Report of the Technical Group on Population
Projections 2006 has been used but for the estimation of the population for the
survey years after 2011, the data published in the Report of the Technical
Group on Population Projections July 2020 has been used. The interpolation
method used by the NSO for the estimation of population at the midpoint of the
survey period has been used without any change. On the basis of the population
data thus obtained, the number of workers employed in the primary, secondary
and tertiary sectors at the state level has been estimated. |
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| Result and Discussion |
The results of the
structural changes happened in the state economy of Rajasthan during the study
period are analyzed under two sub-headings of Output and Employment separately
for more detailed understanding. 1.
Structural Changes in Output space in
Rajasthan Observation of the sectoral distribution of Gross State Domestic Product at 2004-05 constant prices in Rajasthan obtained from the Report on Financial Structure and State Domestic Product (SDP) of Rajasthan 1980-81 to 2022-23 by DES Rajasthan Jaipur shown that from the year 1984-85 to the year 1987-88, the contribution of the primary sector continuously decreased and in turn the contribution of the secondary and tertiary sector continuously increased. After that, the contribution of primary sector increased slightly in the year 1988-89 and then continuously fell to 26.75% in the year 2002-03. In the same period, the contribution of secondary sector increased from 17.07 % to 27.34% and the contribution of tertiary sector increased from 37.42% to 45.91%. The above period was related to the period of economic reforms in India and shown the positive results of the policies of privatization, liberalization and globalization in the economy. Even after this, due to the policy reforms and industrial promotion policies adopted in the economy of the country as well as the state, till the year 2009-10, the contribution of primary sector declined and the contribution of secondary and tertiary sectors increased and reached a record high with secondary sector share of 29.95% and that of the tertiary sector share of 47.90%.
After the year 2009-10, due to various agricultural development schemes initiated by the Government of India, the contribution of the primary sector increased to 36.84% in the year 2016-17 and after that it decreased to 29.70% in the year 2018-19 but in the year 2019-20 and onwards due to the Covid-19 period, the contribution of the primary sector again increased to 33.34% in 2020-21. On the contrary, in the same period, the contribution of the secondary and tertiary sectors decreased to 22.75% and 40.41% respectively by the year 2016-17 and a slight increase was seen till 2018-19, but the contribution of both these sectors decreased during the Covid-19 period.
The norm of absolute value (NAV) was calculated using the prescribed formula for the reference period. The value of NAV increased to 10.91 in 1988-89 indicating very high structural changes there after it decreased to 1.61 in 1998-99 and again increased to 9.48 in 2003-04 there after it decreased to 1.59 in 2008-09 and again increased to 8.29 in 2011-12 there after it decrease to 0.47 in 2014-15 again increased to 5.65 in 2018-19 and decreased to 1.67 in 2021-22. The impact of government policies implemented in 1991 was experienced in early 2000s but due to worldwide recession in late 2000s the pace of structural changes again decreased.
The index values of NAV were not normally distributed, so five year moving averages were calculated which were normally distributed at 5% level of significance. This series of five year moving average of NAV was then used for t test. The t test resulted that the NAV sample mean was significantly different from zero at 5% level of significance, which clearly indicated that the state economy of Rajasthan does experienced structural changes during 1984-85 to 2021-22.
The second index used was
Modified Lilien index of structural change, which was calculated using the given
formula. For this calculation sector wise percentage data of primary, secondary
and tertiary sectors had been used. Values of modified Lilien index fluctuated
during 1986-87 to 2021-22. The index value was 7.37 in 1986-87 and increased to
13.43 in 1988-89, there after again decreased to 2.83 in 1992-93. Its value
again increased to 6.74 in the succeeding year 1993-94. The index value was
highest 11.65 in 2003-04 was lowest 0.59 in 2014-15. The arithmetic mean of
index value for these 37 years was calculated to be 4.459 with standard
deviation of 3.226. In order to apply t
test, firstly normal distribution of data was checked using two different tests
Lilliefors test and Shapiro-Wilk test. Both the tests indicated that the data
was not normally distributed at 5% level of significance. Therefore, five year
moving average of modified Lilien indices was calculated to transform the index
values. The five year moving averages of modified linear index were there after
tested again using the Lilliefors test and Shapiro-Wilk test, both tests result
that the values of five year moving averages of modified Lilien index were
normally distributed at 5% level of significance. On the values of 5 year moving average of modified Lilien index, one-tailed t test was applied because the value of modified Lilien index can be either zero or some positive number. Sample mean was calculated equal to 4.432 for 33 sample values of five year moving average values of modified Lilien index. With hypothesized mean equal to 0, one-tailed t test was applied and p value was calculated which is almost equal to 0 with degrees of freedom of 31. At 5% level of significance with this small p value the null hypothesis H0 which indicated that the value of modified Lilien index for the reference period is equal to zero was rejected and the alternative hypothesis H1, that is, the modified Lilien index is significantly different from zero was accepted. This analysis proved that the state economy of Rajasthan had experienced structural changes in sector wise composition of GSDP.
Structural changes in employment space in
Rajasthan Employment composition
is another way to look at the structural change in an Economy. There had been,
in 1987-88, 63.93% workers were employed in the primary sector in Rajasthan,
while 21.71% were employed in the secondary sector and 14.37% in the tertiary
sector. The share of workers employed in the primary sector increased to 67.18%
in the year 1993-94 and decreased to 61.81% till the year 1999-2000.After
2011-02, there was a continuous decline in the share of workers employed in the
primary sector and it fell to a minimum level of 48.20% in the year 2017-18.
Thereafter, in the year 2020-21, 53.90% workers and in 2021-22, 53.43% workers
were working in the primary sector. Thus, the share of workers employed in the
primary sector in Rajasthan decreased by 10 percentage points during the year
1987-88 to 2021-22. The share of workers employed in the secondary sector was 16.10% in the year 1993-94, which increased to 18.92% in 1999-2000 and reached its highest level of 28.68% in 2011-12 and it decreased to 26.45% in 2017-18, after which with continuous fluctuations, the share of workers working in the secondary sector was 22.63% in the year 2020-21 and 23.43% in 2021-22. Thus, during the year 1987-88 to 2021-22, an increase of 1.72 percentage points was seen in the share of workers employed in the secondary sector in Rajasthan, which shown very little expansion and progress of the secondary sector in Rajasthan.
On observing the share
of workers employed in the tertiary sector, it was found that the share of
workers employed in the tertiary sector was 16.73% in 1993-94, which increased
to 17.99% in 2004-05 and 20.15% in 2009-10, 19.90% in 2011-12, 25.35% in
2017-18 and 23.47% in 2020-21 and remained at 23.14% in 2021-22. Because
employment in the tertiary sector was affected most quickly by various
fluctuations at the national and international level, hence the share of
workers employed in the service sector had seen great fluctuations during the
reference period. An increase of 8.77 percentage points was observed in the
share of workers employed in the tertiary sector during the entire period. The decline in the
share of labourers working in the primary sector was seen starting from 2001-02
till 2017-18 and after this, an increase in the share of workers working in
this sector was recorded. Similarly, the share of workers working in the
secondary sector increased at a slow pace till 2007-08, but with a quick jump
till 2011-12 it again started declining with little fluctuations. The share of
the tertiary sector remained almost stable till 2011-12, afterwards it increased
till the year 2018-19 and after that a slight decline was seen in it. In
summary, more than half of the labour force in Rajasthan was working in the
primary sector and less than a quarter of the labour force was employed in the
secondary and tertiary sectors.
In order to evaluate
the structural change in the labour force in the economy of Rajasthan, two
indices of structural change, Norm of Absolute Value and Modified Lilien Index were
calculated. The Norm of Absolute Value Index score was 8.16 for the period 1987-88 to 1989-90 and the index score for the period 1992 to 2001-2002 lay in the range of 2 to 6. The index value for the period 2001-02 to 2003 was 3.28 and for the period 2007-08 to 2009-10 it was 7.05. Along with that the index score for the period 2011-12 to 2017-18 was 5.45 and for the subsequent period the index value continuously decreased to 0.79 for the period 2021-22. The average value of the index for the entire period 1987-88 to 2021-22 was 3.72. Since the scores of the index followed a normal distribution, t-test was used to test the hypothesis whether the index value is different from zero or not. The result of the t-test shows that at the 5% level of significance, the null hypothesis that the value of the index is equal to zero was rejected and the alternative hypothesis that the value of the index is greater than zero was accepted. Thus, the norm of absolute value index proved that structural changes had occurred in the labour force in the economy of Rajasthan.
The value of Modified
Lilien Index, another index of structural change, had also been calculated. The
value of this index was 9.96 for the period 1987-88 to 1989-90 and thereafter
in 1992 its score was 7.98 and 6.57 in 1999-2000. The value of the index in
2003 was 4.32. Thereafter, the value of the index for the year 2009-10
calculated as 9.32. In the earlier period, the value of the index remained around
2. The value of the index for the year 2017-18 to 2018-19 remained at the level
of 5.99, after which it saw a decline and it fell to 0.98 for 2021-22. The
average of this index for the entire period was 4.68. Because the scores of the
Modified Lilien Index followed a normal distribution, so on testing by t test,
the null hypothesis that the index score is equal to zero was rejected at 5%
level of significance and the alternative hypothesis that the index score is
more than zero was accepted. Thus, this index once again proved the occurrence
of structural change in the labor force in the economy of Rajasthan.
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| Conclusion |
This paper has
analyzed the sectoral composition of state GDP of Rajasthan and found that
contribution of primary sector in GSDP has been 49.04% in 1984-85 and it has
gone down to 22.15% in 2009-10 but again increased to 31.68% in 2021-22, with
almost 18 percentage point decrease. This fall in primary sector share has been
distributed with 8 percentage point increase in secondary sector contribution
and 10 percentage point increase in tertiary sector contribution. The two
structural change indices used in this paper namely the norm of absolute value
index and the modified Lilien index; both indices indicated with t test that
there has been a structural change in the sectoral composition of GSDP. The
null hypothesis that is the value of structural change index is equal to zero
has been rejected at 5% level of significance. Likewise, the
structural change analysis in employment space also provided the similar
results. The share of workers employed in the primary sector in Rajasthan
decreased by 10.5 percentage points during 1987-88 to 2021-22. But an increase
of 1.72 percentage points was seen in the share of workers employed in the
secondary sector in Rajasthan during 1987-88 to 2021-22, which shown very
little expansion and progress of the secondary sector in Rajasthan. The share
of workers employed in the Tertiary sector had seen fluctuations during 1987-88
to 2021-22. An increase of 8.77 percentage points had been observed in the
share of workers employed in the tertiary sector during the above period. For
the entire period 1987-88 to 2021-22, the average value of the NAV index was
3.72 and the average value of MLI was 4.68. The results of the t-test for both
the indices, shown that at the 5% level of significance, the null hypothesis
that the value of the index is equal to zero was rejected and the alternative
hypothesis that the value of the index is greater than zero was accepted. Thus,
both the NAV index and MLI proved that structural changes have occurred in the
labour force in the economy of Rajasthan. Thus, the analysis
clearly indicates that the value of output and labour-force both have shifted
from primary sector to secondary and tertiary sectors but the magnitude of
shift was greater in output compared to the employment in economy of Rajasthan.
Increase in the shares of secondary and tertiary sectors in GSDP simply imply
that the availability of secondary sector products and tertiary services in the
state economy has increased but to assess what exact impact has been of the
increased supply of these goods and services on the welfare of the society at
large, a further research can be carried out. |
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| References |
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