Relationship Between Private Final Consumption Expenses And National Income In India -A Comparative Study Between Pre And Post Economic Reform Period Dr. Ambigadevi P., Professor of Economics, Dr. Gandhimathi S., Assistant Professor of Economics (SG) Avinashilingam Institute for Home Science and Higher Education for Women, Coimbatore – 641043 Online published on 2 June, 2012. Abstract The Government of India introduced economic reforms in various sectors of the economy in July, 1991. The economic reforms were expected to influence the national income and the standard of living of the people. There by the consumption expenditure was expected to change after the reforms. The aggregate consumption in India, based on National Accounts Statistics (NAS) showed that there had been an increasing trend in income and expenditure of the households both in real and constant terms in the post reform period, when compared with the pre reform period. In India, in the pre reform period, the Net National Product (NNP) at factor cost was ranged between Rs.439975 crore and Rs.986461 crore at constant prices (1999–2000 prices), whereas at the beginning of the post-reform period, the amount of the Net National Product was Rs.991716 crore. It increased to Rs.2121245 crore in 2004–2005 at constant prices (1999–2000 prices) (NAS, various issues). The Private Final Consumption Expenditure was amounted to Rs.304183 crore at constant prices at the end of the pre reform period. It started to increase Rs.352494 crore in the beginning of the post reform period. It reached Rs.1730316 crore in 2004–2005 (NAS, various issues). The earlier studies, particularly in India, did not analyse the impact of economic reforms on aggregate consumption expenditure. Hence an attempt was made to analyse the relationship between private final consumption expenses and national income in the pre and post reform period. The ‘t’ test, Marginal Propensity to Consume, Average Propensity to Consume and Short Run Elasticity were estimated to fulfill the objectives. The ‘t’ test shows that the Private Final Consumption Expenditure and Per Capita Private Final Consumption Expenditure differed significantly between pre and post reform period. Though both Net National Product and Private Final Consumption Expenditure had increased, the Marginal Propensity to Consume had shown more than unity in some of the years in the pre and post reform period. It indicated that the increase in the Private Final Consumption Expenditure was higher than the increase in the Net National Product. Top |