Worked example 8 — Reading the sector-shares table of the Economic Survey

Half of Module 2 is the reading of official tables. A student who can recite that services are more than half of GDP but cannot say whether the figure is nominal or real, provisional or advance, output share or employment share, has not learned the module. This example takes the single most examinable table in the paper and reads it properly.

Shares of Gross Value Added by sector, as a percentage of nominal GDP, production approach:

| Sector | FY25 (provisional) | FY26 (first advance estimate) | |---|---|---| | Agriculture, livestock, forestry and fishing | 16.3 | 15.2 | | Industry | 24.6 | 24.3 | | — Mining and quarrying | 1.6 | 1.4 | | — Manufacturing | 12.6 | 12.8 | | — Electricity, gas, water supply and other utility services | 2.4 | 2.3 | | — Construction | 7.9 | 7.8 | | Services | 49.9 | 51.1 | | — Trade, hotels, transport, communication and broadcasting-related services | 15.9 | 15.8 | | — Financial, real estate and professional services | 20.8 | 21.4 | | — Public administration, defence and other services | 13.2 | 13.8 |

And the demand side of the same table, as a share of GDP for FY26: private final consumption expenditure 61.5 per cent, government final consumption expenditure 9.9, gross fixed capital formation 30.0, exports 21.5. The Survey notes that the private consumption share rose to its highest level since FY12.

Always add the columns. FY26: 15.2 + 24.3 + 51.1 = 90.6, not 100. FY25: 16.3 + 24.6 + 49.9 = 90.8.

The residual is not a misprint and it is not yours to explain away. These are shares of GDP, while the sectoral entries are shares of gross value added — and GDP is arrived at by summing all the GVAs and adding taxes on products and subtracting subsidies on products. The gap between the three sectoral shares and 100 is, in substance, the net taxes on products that separate GVA from GDP.

That is worked example 6's identity showing itself in an official table, and noticing it is exactly the sort of thing that distinguishes a good answer. Never rescale the rows to make them sum to 100.

Similarly, on the demand side: 61.5 + 9.9 + 30.0 + 21.5 = 122.9. Consumption, government, investment and exports over-count because imports have not been deducted. The expenditure identity is C + I + G + (X – M), and the M is missing from the list — which tells you, without any further figure, that India imports substantially more than the gap suggests.

(a) Nominal or real? These are shares of nominal GDP. A sector whose prices rise faster than others will gain share without producing one unit more. So a rise in a sector's share is not by itself evidence that the sector grew in volume, and any comparison across years must say whether it is at current or at constant prices.

(b) Which estimate stage? The table mixes a provisional estimate with a first advance estimate. Indian national income figures come in stages — advance estimates, then provisional, then revised. Never present an advance estimate as a settled fact, and never compare an advance estimate with a revised one as though the difference were economic rather than statistical.

(c) Output share or employment share? This is the theme of the whole chapter, and step 5 below.

Set the current shares against the long sequence the module records:

| Period | Services as share of GDP | |---|---| | 1950s | about 30 per cent | | 1980s | 38 per cent | | 1990s | 43 per cent | | 2012–13 | about 56.5 per cent | | FY26 (advance estimate) | 51.1 per cent |

Do not read the last two rows as a fall. The 56.5 per cent figure and the 51.1 per cent figure come from different series with different definitions and different base years, and the second is an advance estimate of GVA shares within GDP that does not sum to 100 (step 2). Comparing them directly is the commonest error available on this table. The honest statement is that services have exceeded half of the economy for over a decade on every series.

The pattern that does hold across all of them: the rise in services came with a decline in the share of the primary sector and a more or less constant share of the secondary sector over the years. India's structural change is not the classical one. In the textbook sequence a country moves from agriculture to industry and only then to services, with manufacturing absorbing the workers leaving the land. India's industry share stayed roughly flat while services grew. The economy skipped a step — and the FY25-to-FY26 columns show it still doing so: industry 24.6 to 24.3, services 49.9 to 51.1.

Now put the output shares beside the employment shares.

| | Share in GDP | Share in employment | |---|---|---| | Services, early period | 34 per cent (1970s) | 15 per cent (1972–73) | | Services, later period | 54 per cent (2010–11) | about 26.67 per cent (2009–10) |

Output share rose by twenty percentage points; employment share by about twelve, from a far lower base. The consequence: a large proportion of workers remain in rural agriculture.

Confirm it from the other side. Agriculture and allied activities contribute nearly one-fifth of India's national income at current prices but account for 46.1 per cent of the workforce, on the Periodic Labour Force Survey of July 2023 to June 2024. Set 15.2 per cent of output against 46.1 per cent of workers and the defining feature of the Indian economy follows: a large gap in productivity between agricultural workers and workers in the services sector.

That single ratio organises the rest of Module 2. Low agricultural productivity, poverty, the pressure of population, the case for MSMEs and the design of food security are all either causes of it or responses to it.

Informality. Services employment is closely associated with the informal sector, not only because of the relatively large proportion of unprotected jobs, but also because a large proportion of domestic workers are counted as services sector workers. So the employment share of services understates neither the number of people nor the precariousness of their position — it conceals both inside one aggregate.

Producer services, and reclassification. Part of the measured growth of services is definitional. A combination of technological advances, global competitive cost-cutting pressures and fluctuating market demand led to a reorganisation of production, so producer services that contribute directly to manufacturing capacity are now seen as independent of manufacturing and counted under services. Work once done in-house within a manufacturing enterprise, and counted as manufacturing, is now bought in and counted as a service.

That is a genuinely important qualification: some of the fall in manufacturing's share and the rise in the services share is an accounting boundary moving, not activity moving.

The share of a sector in output is a rough measure of how much economic activity a body of law governs; the share in employment is a rough measure of how many lives it touches. Agriculture and the informal sector score low on the first and high on the second, and the mismatch explains a good deal about Indian law: why land and tenancy legislation matters far beyond its contribution to GDP, why labour statutes reach so small a fraction of workers, and why welfare law — food security, employment guarantee, rural credit — is directed at a population the output figures make look small.

The table is reproduced from the Survey and may be quoted with its year and estimate stage. Do not supply a current employment share for services or industry from memory. Nor is any real-terms growth rate for any sector stated here; the shares are nominal.

1. FY26 advance estimate: agriculture 15.2, industry 24.3, services 51.1 per cent of nominal GDP. FY25 provisional: 16.3, 24.6, 49.9.
2. The rows do not sum to 100 because they are GVA shares within GDP; the residual is net taxes on products. On the demand side the list omits imports.
3. Three questions of any share: nominal or real? which estimate stage? output or employment?
4. Services 30 → 38 → 43 → about 56.5 per cent over the long sequence, with a falling primary and a flat secondary share — India skipped the industrial stage.
5. The mismatch: services 34 → 54 per cent of GDP but 15 → about 26.67 per cent of employment; agriculture about one-fifth of income and 46.1 per cent of the workforce. Hence the productivity gap that organises the whole module.