Structural Change and Economic Growth across Major States of India

The structural change in an economy is an important feature of the economic development process. Structural change becomes a potential source of growth in an economy as it induces reallocation of labour from low-productivity to high-productivity sectors, thus leading to fuller and better utilization of overall resources. This article studies the relationship between structural change and growth in 15 major states of India over the 30-year period from 1983-1984 to 2014-2015. The study aims at discovering whether structural changes have contributed to economic growth of these states or otherwise. This is achieved by decomposing the overall labour productivity growth of states into contribution by structural change and within sector change. The results show that in all the states under study structural changes have contributed positively to growth; however, contribution of within sector changes is found to be much more than structural change in all states except Maharashtra.