Economic Planning Of India-report

ECONOMIC PLANNING 2009 A PROJECT REPORT ON ECONOMIC PLANNING

SUBMITTED TO: Prof. Virendra Chavda Faculty Member, NSVKMS MBA College – Visnagar (Affiliated with Hem. North Gujarat University, Patan) In partial fulfillment of subject of Business environment in the Programme of MBA Sem II On April 20, 2009

SUBMITTED BY: PUNIT LIMBACHIYA (34) BHAVIN PANCHAL (45) TEJAS PANDYA (49)

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ECONOMIC PLANNING 2009

PREFACE

Life is full of efforts and struggles and, success and failures. But the sincere efforts done in right direction and at right time will give us fruits of success as a student of management faculty we are expected with something more organized specific and effective efforts with desire results towards the work entrusted to us. Now a day’s cut throat competition prevails in each and every area of management. So with the intension to teach the students how to merge the theoretical knowledge with the actual practice give to the students of M.B.A. Hemchandracharya north Gujarat university has compulsory for each group of student to prepare a report on some topic covered under circulation of Hemchandracharya north Gujarat university. So as per the requirements we the student of Nootan Sarva Vidhyalaya Kelvani Mandal Sanchalit MBA department have tried our level best to prepare the project report and submitting to the college. Our Report is on ECONOMIC PLANNING. First we have collected the information from books and internet and from that information we made the Project report. We are lucky because Nootan Sarva Vidhyalaya Kelvani Mandal Sanchalit MBA College has given us this type of project report. Date: April 20, 2009 Place: Visnagar

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Punit Limbachiya (34) Bhavin Panchal (45) Tejas Pandya (49)

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ECONOMIC PLANNING 2009 TABLE OF CONTENTS CHAPTER PAGE NO. • Preface…………………………………………………………………………...i • Acknowledgement……………………………………………………………….ii • Executive summary………………………………..…………………………....iii • Objectives…………………………………………………………………...…...iv • List of tables and graphs………………………………………………………..vi 1. Introduction………………………………………………………………..……01 1.1 What is Economic Planning?.........................................................................03 1.2 Planning in India and impact ……………………………………………....04 1.3 Role of Planning on GDP……………………………….. ………………….09 1.4 Role of Planning in Industry and Service………………………………..… 13 1.5 Role of Employment...………………………………………………...…… 20 1.6 Role of Education…………………………………………………………...25 1.7 Problems in backward countries…………………………………………….28 1.8 Advantages and Disadvantages of Planning……………………………….. 29 1.9 Characteristics……………………………………………………………… .35 1.10 Organization……………………………………………………………....3 7 1.11 Members of Planning Commission……………………………….……… 39 1.12 Types of Planning………………………………………………………… 41 1.13 Deficiencies in Planning…………………………………………………..43 1.14 Evolution………………………………………………….………….…… 46 1.15 Planning in Developing Countries………………………………….…. ….47 1.16 Objectives………………………………….……………………………… 51 NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 1.17

Growth……………………………………………………………………..

55 1.18 Functions…………………………………………………………. ……….57 2. Divisions…………………………………………………………….…………….59 2.1 Financial resource division………………………………………..……..........59 2.2 Perspective Planning Division……………………………………………..….61 2.3 Project Appraisal Management Division……………………………………...63 2.4 Women & Child Development Division………………………………………65 3. Five Year Plans…………………………………………….……….…………….69 3.1 Macro Economic Indicators……………………………………………………82 3.2 Socio Economic Indicator…………………………………..………………….83 • Conclusion…………………………………………………………………………84 • Bibliography………………………………………………………………………85

LIST OF TABLES NAMES:

PAGE NO.

1. Economy of India…………………………………………………………….08 2. Unemployment by the level of households…………………………………..22 3. Male and Female Population…………………………………………………24

4. Divisions……………………………………………………………………...38 5. Growth Rates…………………………………………………………………55 6. 10th Plan allocation…………………………………………………………...76 7. Scenarios of 11th Plan………………………………………………………...81 8. Macroeconomic Indicator……………………………………………………82 9. Socio-Economic Indicator…………………………………………………...83

LIST OF GRAPHS NAMES:

PAGE NO.

1. Unemployment rates of Urban……………………………………………..23

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ECONOMIC PLANNING 2009

1.INTRODUCTION According to Lionel Robbins, “strictly speaking1, all economic life involves planning…. To plan is to act with a purpose, to choose and choice is the essence of economic activity”. In the words of Barbara Wooten, “Planning may be defined as the conscious and deliberate choice of economic priorities by some public authorities”. Laissez faire policy is a luxury for modern governments. So they have economic plans. In the developed nations of the world, they plan for economic stability. But in the underdeveloped nations, they plan for economic growth and development. The 20th century was an era of planning. Almost every country had some sort of planning. In socialist countries, planning is almost a religion. Even in countries like the U.S.A. and the U.K. with a capitalistic system, they have partial planning. The 19th century State was a Laissez faire state. It followed a policy of non – intervention in economic affairs. But the modern State is a Welfare State. The two World Wars, the Great Depression of 1930s and the success of planning in former Soviet Russia have underlined the need for planning. Planning is a gift of former

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http://www.textbooksonline.tn.nic.in/Books/11/Econ-EM/Chapter_05.pdf

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ECONOMIC PLANNING 2009 Soviet Russia to the world. For, it was the first country to practice economic planning on a national scale. Many economists today agree that planning is an organized, conscious and continuous attempt to select the basic available alternatives to achieve specific goals. Planning involves the economizing of scarce resources. Most of the underdeveloped countries of the world became independent only fifty or sixty years back and most of them were poor at that time. So it became the main business of the Governments of the newly emergent nations to provide food, clothing and shelter to their people. For that, first of all, they had to increase their national income. Since most of them were agricultural countries, they had to evolve some programmes for agricultural development. Not only that, they had to industrialize their economies. And they had to provide more jobs to their people. That means, they had to do something for expanding employment opportunities. Further, as most of them were wedded to some kind of socialism, they had to reduce inequalities of income and wealth. All these things, the poor countries attempted to do by means of economic planning. Another main reason for the emergence of planning in underdeveloped countries is the failure of the market mechanism. The capitalist economy is basically a market economy and price mechanism works through the market system. The price system is a basic institution of capitalism. The allocation of resources and distribution of rewards are done through the price system. All decisions of the businessmen, farmers, industrialists and so on are guided by the profit motive. If the market is perfect, price system is good. But if there is monopoly and other types of imperfect competition, the market system fails. And it calls for government intervention by way of planning. The dispute between planning and Laissez faire is essentially about efficiency. The case against Laissez faire rests on the following grounds: 1. Under Laissez faire, income is not fairly distributed. As a consequence, less important and less urgent goods are produced for the wealthy people while the poor lack basic goods like education, NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 health, housing, good food and ordinary comforts. Under such a situation, the State can control economic activity by means of planning and reduce inequalities of income and wealth. 2. The market economy is a victim of trade cycles. And there will be alternating periods of prosperity and depression. And during depression, there will be bad trade, falling prices and mass unemployment. So there is need for state intervention. By means of proper planning, the State can control trade cycles as they did in the case of former Soviet Russia. During the latter half of the 20th century, planning was popular in many underdeveloped countries, in addition to former Soviet Russia and Eastern European countries. It does not mean that they believed in complete central planning. The central issue in planning is not whether there shall be planning but what form it shall take. The debate, in fact, centered on whether the State shall operate through the price system or by getting rid of it.

1.1 WHAT IS ECONOMIC PLANNING?

Economic development of India over the last five decades in unique in several ways. In an innovative effort the founding fathers adopted the middle course of a mixed economy. Assigning a pivotal role to public sector & economy planning. The new approach to socioeconomic growth was set within a framework of Parliamentary Democracy Guarantying Universal Franchise. The board of Planning Commission’s formulation:  Formulation of Planning commission  Assessment of material Capital & Human Resources.  Most effective & balanced utilization  Determination of machinery for securing successful implementation of the plan.  Progress & recommending adjustment in policies and measure during the execution of the plan. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 The planning commissions prepare the blue print of the economic plans in consultation with the state and in accordance with the guide line provided by the National Development Council (NDC) which insists of the Prime Minister, Central Cabinet Ministers, Chief Ministers of the States and Member of planning commission. Successful execution of a plan presupposes co-operation between the central and states governments. The NDC was set up in August, 1952 with the following objectives.  To review the working of the National plan from time to time.  To consider important question of social and economic policies affecting national development and to recommend measure for the achievement of the aims & target of the national plan.

1.2 PLANNING IN INDIA AND IMPACT The economy of India is the twelfth largest in the world by market exchange rates and the fourth largest in the world by GDP, measured on a purchasing power parity (PPP) basis. The country was under socialist-based policies for an entire generation from the 1950s until the 1980s. The economy was characterized by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. Since 1991, continuing economic liberalization has moved the economy towards a market-based system. Independence to 1991 Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Elaborate

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ECONOMIC PLANNING 2009 licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990. Jawaharlal Nehru, the first prime minister, along with the statistician Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated and oversaw economic policy. They expected favorable outcomes from this strategy, because it involved both public and private sectors and was based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage industries was criticized by economist Milton Friedman, who thought it would waste capital and labour, and retard the development of small manufacturers. India's low average growth rate from 1947–80 was derisively referred to as the Hindu rate of growth, because of the unfavorable comparison with growth rates in other Asian countries, especially the "East Asian Tigers". The Rockefeller Foundation's research in high-yielding varieties of seeds, their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution, which provided the increase in production needed to make India self-sufficient in food grains, thus improving agriculture in India. Famine in India, once accepted as inevitable, has not returned since the introduction of Green Revolution crops and the reduction of cashcrops that dominated India during the British Raj. After 1991 In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price controls and reduced corporate taxes. While this increased the rate of growth, it also led to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans. India asked for a $1.8 billion bailout loan from IMF, which in return demanded reforms.

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ECONOMIC PLANNING 2009 In response, Prime Minister Narasimha Rao along with his finance minister Manmohan Singh initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj (investment, industrial and import licensing) and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. Since 1990 India has emerged as one of the fastest-growing economies in the developing world; during this period, the economy has grown constantly, but with a few major setbacks. This has been accompanied by increases in life expectancy, literacy rates and food security. While the credit rating of India was hit by its nuclear tests in 1998, it has been raised to investment level in 2007 by S&P and Moody's. In 2003, Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind US and China.

Future predictions In the revised 2007 figures, based on increased and sustaining growth, more inflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India’s GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States (in US$) by 2043. Despite high growth rate, the report stated that India would continue to remain a lowincome country for several decades but can be a "motor for the world economy" if it fulfills its growth potential. Goldman Sachs has outlined 10 things that it needs to do in order to achieve its potential and grow 40 times by 2050. These are 1. improve governance 2. raise educational achievement 3. increase quality and quantity of universities 4. control inflation NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 5. introduce a credible fiscal policy 6. liberalize financial markets 7. increase trade with neighbours 8. increase agricultural productivity 9. improve infrastructure and 10. improve environmental quality.

AGRICULTURE: India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total workforce [7] and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. However, international comparisons reveal that the average yield in India is generally 30% to 50% of the highest average yield in the world. BANKING AND FINANCE: Prime Minister Indira Gandhi nationalized 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfill their social and developmental goals. Since then, the number of bank branches has increased from 10,120 in 1969 to 98,910 in 2003 and the population covered by a branch decreased from 63,800 to 15,000 during the same period. The total deposits increased 32.6 times between 1971 to 1991 compared NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 to 7 times between 1951 to 1971. Despite an increase of rural branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only 32,270 out of 5 lakh (500,000) villages are covered by a scheduled bank. NATURAL RESOURCES: India's total cultivable area is 1,269,219 km² (56.78% of total land area), which is decreasing due to constant pressure from an ever growing population and increased urbanisation.India has a total water surface area of 314,400 km² and receives an average annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water utilisation, and comprised 380 km² in 1974, and is expected to rise to 1,050 km² by 2025, with the balance accounted for by industrial and domestic consumers. India's inland water resources comprising rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world's third largest fishing industry. ECONOMY OF INDIA (Table 1)

PARTICULARS Currency Fiscal year Trade organisations GDP GDP growth GDP per capita GDP by sector Population below poverty line Labour force Labour force by occupation Unemployment Main industries

Exports Export goods

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1 Indian Rupee (INR) (₨) = 100 Paise April 1–March 31 WTO, SAFTA $3.319 trillion (PPP) (2008 est.) 7.3% (2008) $2,900 (PPP) agriculture: 17.2%, industry: 29.1%, services: 53.7% (2008 est.) 27.5% (2008 est.) 523.5 million (2008 est.) agriculture: 60%, industry: 12%, services: 28% (2003) 6.8% (2008 est.) textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software $175.7 billion f.o.b (2008 est.) petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures

ECONOMIC PLANNING 2009 Main export partners

US 15%, the People's Republic of China 8.7%, UAE 8.7%, UK 4.4% (2007) $287.5 billion f.o.b. (2008 est.) crude oil, machinery, gems, fertilizer, chemicals People's Republic of China 10.6%, US 7.8%, Germany 4.4%, Singapore 4.4% $163.8 billion (2008) $153.5 billion (2008 est.) $205.3 billion (2008 est.)

Imports Import goods Main import partners Public Debt Revenues Expenses 2

1.3 ROLE OF ECONOMIC PLANNING ON GDP Gross Domestic Product (GDP) is one of the several measures of the size of the economy. It is defined as the market value of all final goods and services produced within the geographical boundaries of a country during a given period of time. It does not include the value of intermediate goods and eliminates the possibility of double counting. GDP does not include depreciation of capital stock. Depreciation deducted from GDP gives Net Domestic Product (NDP).

India moved from the “Hindu Rate of Growth (HRG)” during the sixties and seventies to a “Bharatriya Rate of Growth (BRG)” of 5.8 per cent during the eighties and nineties. A number of eminent economists have asserted that the growth of the economy during the second half of the nineties was propped up by pay commission related increases in the pay of government/public servants and this artificial increase is unsustainable. Thus the real growth rate of the economy is currently not 5.8 per cent but closer to 5 per cent. Other commentators have gone even further to assert that services growth during the entire nineties, which has kept average growth during the nineties at 5.8 per cent is unsustainable and that the underlying growth rate is currently as low as 4.5 per cent. In this article I address these and other related questions by looking a little deeper into the underlying sector growth rates, particularly the role of

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Main data source: CIA World Fact Book

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ECONOMIC PLANNING 2009 services. Such assertions based on short-term movements, are shown to have little relevance to long-term growth trends and prospects.

Role of Administration & Pay Commission Because of the way in which GDP from administration is measured, it is quite legitimate to question its role in long-term growth. The productive sectors of the economy meet the market test in that the consumer is willing to pay for the goods or services purchased. Thus their value is determined by market prices. As there is no market price for the administrative services supplied by the government, their contribution to GDP is measured by wages etc. incurred in the sector. Thus a rise in the real wages paid raises the value added as measured by the GDP statistics. As long as these services are not produced at rates determined through competitive bidding, there is no other way in which they can be valued. We can, however, get a better fix on the sustainable rate of growth by excluding GDP from administration from our growth estimates. During the eighties and nineties, average rate of growth of GDP (adj.) i.e. excluding the GDP from administration, was only 0.04 per cent point lower than the growth of conventionally measured GDP. This leaves the Bharatiya rate of growth unchanged at 5.8 per cent. This is not, however, true of the Hindu rate of growth. During the sixties and seventies the average rate of growth of GDP (adj) was 0.13 per cent point lower than for GDP as a whole, so that the HRG is reduced from 3.4 per cent to 3.3 per cent. The picture is quite similar if we take the HRG as applying to three decades including the fifties. In this case the growth rate of GDP (adj.) at 3.4 per cent is lower by 0.11 per cent point than the GDP growth rate of 3.5 per cent. Therefore, if we exclude GDP from administration from our growth estimates, the rate of growth accelerated from 3.4 per cent per annum (HRG) to 5.8 per cent per annum (BRG). Thus there is little factual basis for the statement that the excessive rise in pay of government servants during the nineties distorts the observed growth performance so much that the underlying rate of growth was since 1996-97 (or currently is) between 5 per cent and 5.5 per cent per annum.

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ECONOMIC PLANNING 2009 Role of Service Sector As per broad globally accepted definition of goods and services, Agriculture & allied sectors, mining & quarrying and manufacturing sectors produce goods while the output of all other sectors constitutes services. The former are traditionally classified as tradable and the latter as non-tradable, though this is rapidly changing. We can define GDP from Services (adj) by excluding the GDP from administration. A comparison of the growth rate in this with the unadjusted GDP completely contradicts the common assertion that much of services growth was due to the government pay rise. On the contrary the rate of growth of services (adj) during the last two decades was marginally (0.05 per cent point) higher than that for Services as a whole (unadjusted). In fact, the GDP from administration grew much faster during the sixties and seventies than it grew during the eighties and nineties. Consequently, the growth of GDP services (adj.) is lower than the growth of Services GDP by 0.2 per cent points during the former period and by 0.16 per cent points during 1950-1980. With this background we can re-evaluate the contribution of acceleration in the rate of growth of services to the acceleration in GDP growth between 19501980 (HRG period) and 1980-2000 (BRG period). The contribution of acceleration in growth of Services (adj) to overall GDP (adj) growth acceleration (2.4 per cent / 2.5 per cent) was even higher than apparent from the conventional (unadjusted) numbers (2.1 per cent / 2.4 per cent). It is, however, wrong to conclude, as some have done, that the nineties is the first instance in which services have grown faster than other sectors of the economy. On the contrary in each of the five decades since independence, GDP from Services has grown faster than GDP from the tradable goods sectors of the economy. The gap averaged about 2.2 per cent points in the first four decades but has expanded to 3.1 per cent points in the nineties. If we exclude GDP from administration from our GDP calculations, the gap shows much greater fluctuations; It was 0.8 per cent point in the fifties, rose to 1.3 per cent point in sixties and seventies, fell back to 0.7 per cent point in the eighties and then rose to a peak of 1.7 per cent point in the nineties. Though in absolute terms the last is unprecedented it is worth noting that it is only 30 per cent higher than the GDP (adj) growth rate for the nineties. The 1.3 per cent point gap in the seventies & sixties was respectively 46 per cent & 34 per cent higher than GDP (adj) growth rate. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 There are two broad reasons for the higher contribution of non-tradable services to GDP growth during the nineties. The decline in protection for non-tradable sectors arising from the elimination of QRs and reduction in tariffs for mining and manufacturing sectors. This has tended to raise (lower) the relative price of non-tradable services (tradable goods). This coupled with liberalisation of private entry into modern service sectors like communications and finance (banking etc.) has resulted in faster growth of these services. The reduction of public monopoly and more effective competition may also have increased overall productivity in these sectors. Other traditional services like trade, hotels & restaurants and community services have also grown at unprecedented rates, because of combination of rising incomes (restaurants), globalisation (tourism/business travel, hotels) and fall in relative prices & increased variety of consumer durables (trade) and a combination of government failure and democratic initiative (community services). The measurement of community services, however, suffers from valuation problems whenever it is provided free, whether by the government or by nongovernmental organisations. As “Other community services” include education and health services, it is contaminated by the pay commission related wage increases for government teachers and doctors. The effect on overall trends is, however, likely to be even less than for administration. In conclusion, we find that though the pay commission related pay increases may have distorted estimates of GDP for a few years they do not affect the trend rate of growth of GDP. The “Bharatiya rate of growth” remains at 5.8% per annum even if government administration is excluded altogether. A similar adjustment of services also contradicts the assertion that this factor is responsible for higher service growth. Further, services (adjusted) have always grown faster than overall GDP growth, though their contribution has fluctuated. The contribution of services during the nineties is high only in comparison to the eighties, when their contribution was unusually low.

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ECONOMIC PLANNING 2009

1.4 ROLE OF ECONOMIC PLANNING IN INDUSTRY AND SERVICE

India has one of the world's fastest growing automobile industries and is global leader of auto industry. Shown here is Tata Motors' Nano, world's least expensive car in production. Industry accounts for 27.6% of the GDP and employ 17% of the total workforce. However, about one-third of the industrial labour force is engaged in simple household manufacturing only. In absolute terms, India is 16th in the world in terms of nominal factory output. India's small industry makes up 5% of carbon dioxide emissions in the world. Economic reforms brought foreign competition, led to privatization of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods. Post-liberalization, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It

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ECONOMIC PLANNING 2009 has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology. Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output. Tirupur has gained universal recognition as the leading source of hosiery, knitted garments, casual wear and sportswear. Dharavi slum in Mumbai has gained fame for leather products. Tata Motors' Nano attempts to be the world's cheapest car. India is fifteenth in services output. It provides employment to 23% of work force, and it is growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It has the largest share in the GDP, accounting for 55% in 2007 up from 15% in 1950. Business services (information technology, information technology enabled services, business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000. The growth in the IT sector is attributed to increased specialization, and an availability of a large pool of low cost, but highly skilled, educated and fluent Englishspeaking workers, on the supply side, matched on the demand side by an increased demand from foreign consumers interested in India's service exports, or those looking to outsource their operations. India's IT industry, despite contributing significantly to its balance of payments, accounted for only about 1% of the total GDP or 1/50th of the total services in 2001 However the contribution of IT to GDP increased to 4.8 % in 2005-06 and is projected to increase to 7% of GDP in 2008. Most Indian shopping takes place in open markets and millions of independent grocery shops called kirana. Organized retail such supermarkets accounts for just 4% of the market as of 2008. Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors. There are taxes for moving goods to states, from states, and even within states. Tourism in India is relatively undeveloped, but growing at double digits. Some hospitals woo medical tourism.

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ECONOMIC PLANNING 2009 The Industry Division deals with the industrialisation issues including policies and programmes relating to large and medium industries. It handles matters concerning formulation, implementation, monitoring and evaluation of Plans and programmes for the larger and medium industries for the Annual and Five Year Plans in respect of both the Central Sector and States /UT's . The industry groups /industries being dealt with by the Division include engineering industries like capital goods industry, steel, non-ferrous metals, ship building, fertilizers, chemicals and petrochemicals, drugs and pharmaceuticals, textiles including jute, electronics, paper and paper board, cement, sugar, leather, alcohol; other consumer industries, etc. The division also deals with issues such as economic reforms, liberalisation, disinvestment, technology policies, public sector, foreign direct investment, exports, productivity, consumer protection, weights & measures, Patent/IPR/Trademark and similar other matters which have a bearing on industrial development of the country. The matters relating to public sector enterprises and industrial finance are also handled by the Division, Reference to the Planning Commission in these areas in the form of Cabinet Notes, Parliament question and other miscellaneous forms of communication are dealt with in the Division. The broad functions of the Division are: •

To handle all matters relating to industrial policy and other associated policy issues relating to industrial development including industrial incentives framework, investment promotion, infrastructure development, foreign direct investment and technology transfer.

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To deal with policies relating to the public sector enterprises including public enterprise reforms and privatization programmes as well as private sector development.

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To handle matters relating to industrial finance, financial institutions and capital markets as also policies towards sick industries, industrial restructuring and industrial relations policies.

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To study and analyse industrial statistics and undertake special studies relating to industrial development and sickness.

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To undertake appraisal and evaluation of industrial projects in the public sector and to examine physical progress of projects and schemes of public sector enterprises including

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ECONOMIC PLANNING 2009 infrastructural development programmes and also review of financial performance of these undertakings. •

To undertake appraisal and evaluation of industrial projects related to development of export infrastructure and allied activities.

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To undertake appraisal of export promotion efforts and market access initiatives in the wake of WTO regime.

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h) To implement policy issues relating to Disinvestment of PSUs. The Division provides technical support to officers representing Planning Commission in core Group of Secretaries on Disinvestment.

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To study and analyse industrial production trends and to make forecast of the demand estimates and to conduct studies regarding technological and economic aspect of industrial units, capital formation in the organized industrial sector and source of supply of funds, problems of allocation of institutional finance, regional and backward area development, etc.

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j) To undertake coordination and review of industrial development programmes with related sectors like power and transport and to inter-act with various Ministries on these and other related subjects.

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To formulate plans and programmes for development of various industrial sub-sectors and industries, their financing and re-viewing the targets of capacity and production.

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To study scientific and technical advances and technology transfer issues having bearing on the development in various industrial fields.

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To study factors inhibiting or accelerating growth in particular sectors for industries and analyse the causes of various problems being faced by individual industries and industry groups.

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Monitoring the programmes and progress of Centrally Sponsored Schemes relating to industrial sector export promotion and allied activities.

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To inter-act with various Ministries, Industry Associations and other Governmental and non-Governmental bodies on industrial matters and participate in the deliberations of inter-agency committees and groups dealing with these subjects.

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ECONOMIC PLANNING 2009 •

To inter-act with the State Governments and Union Territories on industrial development issues and to participate in the formulation of Annual and Five year development programmes for the industrial sector in the State and Union Territory plans.

SERVICE: The major items of work handled by the Division and activities undertaken include: •

The work relating to formulation of policies, Five Year Plans, Annual Plans, Mid-term Appraisal of Plans pertaining to Telecommunications, Posts, Information Technology and Information & Broadcasting sectors of the Economy.

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Examination of the Plan schemes / projects of the above mentioned sectors including the PSUs / Organizations under them.

•

(iii)Examination of various policy documents / papers and preparation of comments as required by the Commission and Government from time to time.

•

Participation in various Inter-Ministerial Committees and Commissions set up by the Government for these sectors.

•

Maintenance and updation of Planning Commission Website : http: //planningcommission.nic.in

•

Printing and distribution of 'Plan Documents' and other reports of the Planning Commission.

•

Preparation and circulation of 'Daily News Digest'.

2. The details of organisations and the major programme areas with which the Division is associated for various aspects of policy formulation, monitoring and evaluation include: (A) Telecommunications I. Department of Telecom •

Department of Telecommunications ( DOT )

•

Telecom Commission

•

Wireless Monitoring Organization ( WMO )

•

Wireless Planning & Co-ordination Wing(WPC)

II. Regulatory Bodies •

Telecom Regulatory Authority of India (TRAI)

•

Telecom Dispute Settlement and Appellate Tribunal (TDSAT)

III PSUs Providing Telecom Services •

Bharat Sanchar Nigam Ltd. ( BSNL )

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ECONOMIC PLANNING 2009 •

Mahanagar Telephone Nigam Ltd. ( MTNL )

IV Development and Manufacturing of Telecom Equipment •

Indian Telephone Industries (ITI)

•

Telecom Engineering Centre (TEC)

•

Centre for Development of Telematics (C-DOT)

(B) Postal Sector : Department of Posts •

Expansion of Postal Network

•

Computerisation of post offices (installation of MPCMs), Accounts and Administrative offices and Software Development.

•

Computerisation and networking of Mail Offices

•

Upgradation of Customer Care Centres

•

Modernization & upgradation of VSAT system

•

Modernization of operative / working systems (improving ergonomics)

•

AMPCs

•

Mechanization / upgradation of mail movement

•

Modernization / upgradation of premium products

•

Upgradation and promotion of philately

•

Training

•

Construction of buildings

•

Modernization of circle stamp depots

•

Computerization of international mail processing

•

National data centre

•

Research and development / studies / surveys

•

Establishment of express parcel post centres

•

e-Post

•

e-Bill Post

•

New products and services including development of financial products and services.

(C) Information Technology I. Department of Information Technology •

Centre for Development of Advanced Computing (C-DAC).

•

Department of Electronics Accredited Course on Computer (DDEACC).

•

Society for Applied Microwave Electronics Engineering & Research (SAMEER).

•

Centre for Material for Electronics (CMET).

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ECONOMIC PLANNING 2009 •

Education & Research Network (ERNET) India,

•

Software Technology Park of India (STPI).

•

Technology Development Council (TDC).

•

National Microelectronics Council (NMC).

•

Industrial Electronics Promotion Programme (IEPP).

•

Standardization Testing & Quality Control Programme (STQC).

•

Electronics & Computer Software Export Promotion Council (ESC).

•

Semiconductor Complex Limited (SCL).

•

National Informatics Centre.

II. Strengthening of IT infrastructure in States / UTs •

E-governance

•

Community Information Centres (CICs).

(D) Information and Broadcasting I. Ministry of Information & Broadcasting II. Prasar Bharati Corporation •

All India Radio

•

Doordarshan

III. Information Sector •

Press Information Bureau (PIB).

•

Publications Division

•

Directorate of Advertising and Visual Publicity (DAVP)

•

Song and Drama Division

•

Directorate of Field Publicity

•

Photo Division

•

Registrar of Newspapers for India (RNI)

•

Indian Institute of Mass Communication (IIMC)

•

Press Council of India (PCI)

IV. Film Sector •

Films Division

•

National Film Archives of India (NFAI)

•

Satyajit Ray Film and Television Institute, Kolkata

•

Film and Television Institute of India, Pune (FTTI, Pune).

•

Childrens' Film Society of India

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ECONOMIC PLANNING 2009 •

National Film Development Corporation, Ltd.

•

Directorate of Film Festivals

•

Central Board of Film Certification

(V) Public Sector Units (PSUs) •

National Film Development Corporation (NFDC)

•

Broadcast Engineering Consultants India Ltd. (BECIL)

(E) Planning Commission Website Address: http://planningcommission.gov.in// •

Maintaining and updating Planning Commission website

•

Web-page making, formatting and uploading published Planning Commission documents,

•

Attending e-mails received through website.

1.5 ROLE OF EMPLOYMENT 1.A quantitative scenario of the population, labour force and work force is the starting point of the plan exercise on employment and unemployment. It also serves as a baseline, with reference to which, the impact of the various plan initiatives, policies and programmes can be articulated in a quantitative manner. 2. The Eleventh Five Year Plan is being evolved as an ‗Education Plan‘, and a novel feature of the exercise on projections of labour force is the explicit treatment of the influence of the levels of education on participation in labour force. The concerns of employment strategy for the Eleventh Five Year Plan differ from the earlier Plans, in that now there is an explicit focus at the quality of employment, and not merely at the aggregate unemployment. Of course, it also poses NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 the technical issue(s) as to what is the most appropriate measure of labour force and employment. This issue has been examined at some length in this Report, and suggestions put forward. 3. Besides the focus on growth in output, the strategy for creation of employment opportunities should carefully look at the institutional environment that governs the exchange of labour for wages received in the labour market. The issues pertaining to different types of employing establishments – ranging from proprietory (i.e., the unorganized) to the corporate and the public sector (organized), as also the nature of self employment have been examined in proposing the strategy for creation of employment opportunities. 4. The Eleventh Plan aims to address many economic and social problems, such as inadequate physical infrastructure, in the rural areas, in particular – roads, housing, drinking water, sanitation, housing, and access to electricity; urban renewal; care of the child and adolescent girls; children out of school; improving productivity and income from agriculture; and unemployment among the rural labour households. The Plan therefore envisages a large step-up in outlays for about 15 main flagship programmes. When implemented properly, these programmes can yield substantial outcomes by way of creation of new employment opportunities.. 5. In its recommendations the Working Group has emphasized on measurement of ‗Quality of employment‘. There is a need to supplement the existing methodology for measurement of labour force and employment. Many technical issues have to be contended with in determining the right approach to measurement of employment and unemployment, if the quality of employment is also to be accounted for. Accordingly, the Working Group has underlined the need for further work on the same lines as was done nearly four decades earlier by the Committee of Experts on Unemployment Estimates constituted by the Planning Commission in 1969, popularly referred to as the Dantawala Committee (1970). 6. The Working Group has looked at the employment and unemployment situation for the Country as a whole. However, in dealing with the planning issues pertaining to labour and employment, a differential approach across regions is required. While the elements of such an NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 approach are perceptible in the region-specific programmes and policies, including the districtspecific programmes such as the NREGA, the Working Group underlines the need for more intensive work. Best use of the data that already exists, and a new approach to collect locationspecific employment data through more frequent surveys / census of households and establishments, than once in 5 to 10 years as is done now, are required.

(Table

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ECONOMIC PLANNING 2009 3

3

PLANNING COMMISSION OF INDIA

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ECONOMIC PLANNING 2009 (Graph 1)

The choice between the alternative basis of measurement Thus, for the purpose of making estimates of labour force, employment and unemployment, for the entire economy, current daily status, is a better measure, because: (iii)

in contrast with the usual status measures, it does not count ‗the underemployed‘ as ‗the employed‘,

(ii) it is a better measure of gainful employment, and (iii) it captures the quality of employment better than the UPSS basis, by exhibiting a higher incidence of unemployment among the poor than the rich. One of the purposes of making an assessment of the developments in employment situation is to understand the response of employment to output at the aggregate level of a State, a Sector of production (agriculture etc.), or the Nation as a whole. In linking the labour input with output, one should use such a measure that captures better, the gainful employment. Here, again CDS is the better measure to estimate output elasticity of employment. However, for the study of employment / unemployment situation, for a specific category or class of persons (educated, NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 illiterate, women, minority, S.C./S.T., etc), the usual status measure should be used. And for the purpose of a deeper study of factors underlying the social well being of the persons, the usual status measure needs to be used in conjunction with the current daily and current weekly status measures.

(Table 3)

The projections of population under the above assumptions have been made separately for the urban and the rural areas and are presented in Tables A1a and A1b. Certain features of the developments in population scenario that have implications for the location of incremental employment and for the magnitude of new entrants to labour force are summarized in Table. Rural to urban migration during the 11th Plan period is projected at 19.2 million, and at 18.2 million during the next 5 year period (Table 2.1)Urban share of the increase in population during the 11th Plan period will be 46 percent, as compared to the base year (2007) share at 29 per cent.

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ECONOMIC PLANNING 2009 1.6 ROLE OF EDUCATION Recommendations Covering all sectors Education Policy should be sensitive towards cultural and linguistic diversity of Indian society, and therefore uniform standards should not be applied. There should be increased access of minorities in all non-minority institutions. While minority institutions are kept out of the purview of reservation of SCs, STs and OBCs in general, they should be obligated to reserve certain seats for members of their own minority community who belong to SCs, STs and OBCs. Nomadic groups and de-notified tribes should also be grouped along with disadvantaged. Data gaps on this category of students-SC/ST/Minorities/ Girls/Disadvantaged – need to be filled at each stage of education. Majority of the people are not aware of all the Plan schemes, which benefit them. In view of this an Equal Opportunities Cell may be set up. An Officer (Ombudsman) who would manage this Equal Opportunities Cell should be made responsible to widely circulate information brochures and pamphlets and also to educate people in the target group. The officer so appointed should act like a single window operator who can be approached by the applicant. All the universities should establish SC/ST/OBC/Disadvantaged Groups Cells at the earliest, which could also function as anti-discrimination Cell. Mid day meal scheme has increased the enrollment of children in schools. However, teachers should have the ability to motivate students to learn. They should encourage the students to develop skills and learn, so that children look forward to coming to schools not only for eating but also for learning. Refresher courses may also be developed for the teachers. SSA should enlarge support for hostels for boys and girls on the same lines as Kasturba Gandhi Balika Vidyalayas with 75% minimum reservation for SC/ST/OBC and disadvantaged groups. Registrar General (Census) may be directed to ensure availability of disaggregated data for OBCs, Backward Castes amongst minorities and other disadvantaged groups. Data relating to all the disadvantaged groups should be collected and published so that they should become a point of reference to general public and for formulation of perspective planning. Textbooks and workbooks and also raw materials and equipments should be made available at subsidized rates in vocational institutions for children belonging to SC/ST/OBC/girls and other Disadvantaged Groups. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 A total revamping of the existing scheme of Vocational Education, keeping in view the existing weakness and also to consider the special incentives that can be extended to SC/ST/OBCs/girls and other Disadvantaged Groups, may be done at the earliest.

The Planning Commission had constituted a Working Group on “Development of Education of SC/ST/Minorities/Girls and other disadvantaged Groups” - Eleventh Five Year Plan – 2007-2012 vide their order No.M-12015/2/2005-Edn. dated 21.6.2006, under the Co-chairmanship of Secretary, Higher Education and Secretary, School Education and Literacy(Annexure-A). First meeting of the Working Group was held on 17th August 2006 in which it was decided that the Working Group may consider the sectoral issues presented by various sectors like Higher Education, Technical Education, Vocational Education, School Education, Elementary Education and Adult Education. Accordingly, Working Group met on 1st, 6th, 7th & 8th September, 2006 to consider the issues raised by various sectors including a special session exclusively devoted to the issues and problems faced by children with specific needs. Population Profile (a) Scheduled Castes/ Scheduled Tribes As per the 2001 Census, the population of Scheduled Castes (SCs) is 16.66 crores amounting to 16.2% of the country’s total population of 102.86 crores. The male population is 8.61 crores and female population is 8.05 crores which accounts for 16.18% and 16.22% respectively of the country’s total population of respective groups. The population of Scheduled Tribes as per 2001 Census is 8.43 crore accounting for 8.20% of the country’s total population. Out of this, males are 4.26 crores and females 4.17 crores, accounting for 8.01% and 8.40% of the total population of respective groups. (b) Other Backward Classes (OBCs) and Minorities Separate data pertaining to OBCs and Minorities is not published in the Census Operations. (c) Girls/Women As per the Census 2001, the population of women is 49.64 crore, which represents 48.26% of the total population.

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ECONOMIC PLANNING 2009 (d) Disabled Children Separate data pertaining to Disabled Children is not published in the Census Operations. Literacy Status Despite the fact that there has been an increase in the literacy rates of SCs/STs since independence, the present position is still far from satisfactory. The overall increase in literacy rate in the country during the period 1961-2001 was 36.54 against which increase in literacy rate for SCs and STs during the same period was 44.42 and 38.57 respectively. The female literacy rates among STs continue to remain a serious cause of concern, as it is only 34.76% as against the total female literacy rate of 53.67%. However, in overall terms, the female literacy rate has increased significantly since independence, the female literacy rate was only 8.86% in 1951. The literacy rate of females is 53.67% as compared to 75.26% among males in 2001. The female literacy rate has risen by 14.38% compared to a corresponding increase of 11.13%

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ECONOMIC PLANNING 2009 1.7 PROBLEM OF PLANNING IN BACKWARD COUNTRIES

Planning is much more necessary and much more difficult to execute in backward than in advanced countries. First of all, “planning requires a strong, competent and incorrupt administration” (Arthur Lewis). But most of the economically backward nations have weak, incompetent and corrupt administration. Further, they have democratic planning. So they cannot do things in a quick manner as was done in former Soviet Russia. They have to go slow. And agriculture is the main stay of their economies. Since agriculture depends upon natural factors which are uncertain, there is a lot of uncertainty about their agricultural programmer. Over– population and low capital formation are some other important problems of planning in underdeveloped nations.

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ECONOMIC PLANNING 2009 1.8 ADVANTAGES AND DESADVANTAGES OF PLANNING 4 Advantages of economic planning Supporters of planned economies cast them as a practical measure to ensure the production of necessary goods—one which does not rely on the vagaries of free market(s). Stability Long-term infrastructure investment can be made without fear of a market downturn (or loss of confidence) leading to abandonment of the project. This is especially important where returns are risky (e.g. fusion reactor technology) or where the return is diffuse (e.g. immunization programs or public education). Critics will point out that even though the economy will never go down, it never goes up. Conformance to a grand design While a market economy maximizes wealth by evolution, a planned economy favors design. While evolution tends to lead to a local maximum in aggregate wealth, design is in theory capable of achieving a global maximum. For example, a planned city can be designed for efficient transport, while organically grown cities tend to suffer from traffic congestion. Critics would point out that planned cities will suffer from the same problems as unplanned cities, unless reproduction and population growth is subject to strict control, as in a closed city. Meeting collective objectives by individual sacrifice Planned economies may be intended to serve collective rather than individual needs: under such a system, rewards, whether wages or perquisites, are to be distributed according to the value that the state ascribes to the service performed. A planned economy eliminates the individual profit motives as the driving force of production and places it in the hands of the state planners to determine what is the appropriate production of different sets of goods.

4

http://en.wikipedia.org/wiki/Planned_economy

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ECONOMIC PLANNING 2009 The government can harness land, labor, and capital to serve the economic objectives of the state. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. This is what happened in the Soviet Union during the 1930s when the government forced the share of GNP dedicated to private consumption from 80 percent to 50 percent. While there was a significant decline in individual living standards, the state was able to meet some of its "economic objectives." It could be seen as the government deciding: Who produces what, Where it is produced, How much it costs, and Where it goes. Comparison with capitalist corporations Taken as a whole, a centrally planned economy would attempt to substitute a number of firms with a single firm for an entire economy. As such, the stability of a planned economy has implications with the Theory of the firm. After all, most corporations are essentially 'centrally planned economies', aside from some token intra-corporate pricing. That is, corporations are essentially miniature centrally planned economies and seem to do just fine in a free market. As pointed out by Kenneth Arrow and others, the existence of firms in free markets shows that there is a need for firms in free markets; opponents of planned economies would simply argue that there is no need for a sole firm for the entire economy. Disadvantages of economic planning5 Inefficient resource distribution – surplus and shortage Critics of planned economies argue that planners cannot detect consumer preferences, shortages, and surpluses with sufficient accuracy and therefore cannot efficiently co-ordinate production (in a market economy, a free price system is intended to serve this purpose). For example, during certain periods in the history of the Soviet Union, shortages were so common that one could wait hours in a queue to buy basic consumer products such as shoes or bread. [15] These shortages were 5

http://en.wikipedia.org/wiki/Planned_economy

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ECONOMIC PLANNING 2009 due in part to the central planners deciding, for example, that making tractors was more important than making shoes at that time, or because the commands were not given to supply the shoe factory with the right amount of leather, or because the central planners had not given the shoe factories the incentive to produce the required quantity of shoes of the required quality. This difficulty was first noted by economist Ludwig von Mises, who called it the "economic calculation problem". Economist János Kornai developed this into a shortage economy theory (advocates could claim that shortages were not primarily caused by lack of supply). There is also the problem of surpluses. Surpluses indicate a waste of labor and materials that could have been applied to more pressing needs of society. Critics of central planning say that a market economy prevents long-term surpluses because the operation of supply and demand causes the price to sink when supply begins exceeding demand, indicating to producers to stop production or face losses. This frees resources to be applied to satisfy short-term shortages of other commodities, as determined by their rising prices as demand begins exceeding supply. It is argued that this "invisible hand" prevents long-term shortages and surpluses and allows maximum efficiency in satisfying the wants of consumers. Critics argue that since in a planned economy prices are not allowed to float freely, there is no accurate mechanism to determine what is being produced in unnecessarily large amounts and what is being produced in insufficient amounts. They argue that efficiency is best achieved through a market economy where individual producers each make their own production decisions based on their own profit motive. Cannot determine and prioritize social goods better than the market can Some who oppose comprehensive planned economies argue that some central planning is justified. In particular, it is possible to create unprofitable but socially useful goods within the context of a market economy. For example, one could produce a new drug by having the government collect taxes and then spend the money for the social good. On the other hand, opponents of such central planning say that "absent the data about priorities conveyed through price signals created by freely acting individuals, [it is questionable] whether determinations about what is socially important can even be made at all." Opponents do not dispute that something useful can be produced if money is expropriated from private businesses and individuals, but their complaint is that "it’s far from certain that those monies could not have NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 been spent better" if individuals were allowed to spend and invest as they wished according to their own wants. We can see things of value being produced by the state taxing and using those funds to undertake projects which are believed to be social goods, but we cannot see what social goods have not been produced due to wealth taken out of the hands of those who would have invested and spent their money in other ways according to their own goals. These opponents of central planning argue that the only way to determine what society actually wants is by allowing private enterprise to use their resources in competing to meet the needs of consumers, rather those taking resources away and allowing government to direct investment without responding to market signals. According to Tibor R. Machan, "Without a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals." If the government in question is democratic, democratically-determined social priorities may be considered legitimate social objectives in which the government is justified in intervening in the economy. It must be noted that to date, most if not all countries employing command economies have been dictatorships or oligarchies – few or none were democracies. Many democratic nations, however, have a mixed economy, where the government intervenes to a certain extent and in certain aspects of the economy, although other aspects of the economy are left to the free market. Lack of incentive for innovation Another criticism some make of central planning is that it is less likely to promote innovation than a free market economy. In the latter, inventors can reap huge benefits by patenting new technology, so there is arguably much more incentive to innovate. Conversely a planned economy can deliver vast national resources into research and development if it gets the idea that a particular field is critical to its interests, usually military technology. The Soviet Union's ability to maintain fierce competition versus the United States during the space race and Cold War, despite its smaller economy, is an example of this.

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ECONOMIC PLANNING 2009 Infringement on individual freedoms The top down structure of a centrally planned economy dictates a hegemonic operating culture whereas in a free market economy several models of operating can compete simultaneously in a manner similar to organisms in an ecosystem. Critics also hold that certain types of command economies may require a state which intervenes highly in people's personal lives. For example, if the state directs all employment then one's career options may be more limited. If goods are allocated by the state rather than by a market economy, citizens cannot, for example, move to another location without state permission because they would not be able to acquire food or housing in the new location, as the necessary resources were not preplanned. Likewise, because of the state's controls over an individual's personal choices, critics contend that central planning intrinsically results in a top-down, dictatorial state where politicians and bureaucrats use the state to achieve their own ends, which are in turn described as the "social" objectives of the state. In essence, critics contend that a planned economy has nothing to do with the preferences of the individuals that comprise a society, but rather the abstract goals of some group. This criticism is supported by Rummel's Law which states that the less freedom a people have, the more likely their rulers are to murder them. R. J. Rummel's top three examples of 20th century "Megamurders" were Soviet Russia, People's Republic of China and Nazi Germany, all planned economies with limited individual freedom. The Road to Serfdom is a book written by Friedrich Hayek and critical of collectivism, presenting the argument that a central planned economy must ultimately result in tyranny. An idea similar to this is the idea of the iron cage presented even earlier by Max Weber in The Protestant Ethic and the Spirit of Capitalism. The Black Book of Communism claims that Communist regimes are responsible for a greater number of deaths than any other political ideal or movement.

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ECONOMIC PLANNING 2009 Suppression of economic democracy and self-management Central planning is also criticized by elements of the radical left. Libertarian socialist economist Robin Hahnel notes that even if central planning overcame its inherent inhibitions of incentives and innovation it would nevertheless be unable to maximize economic democracy and selfmanagement, which he believes are concepts that are more intellectually coherent, consistent and just than mainstream notions of economic freedom. As Hahnel explains, “Combined with a more democratic political system, and redone to closer approximate a best case version, centrally planned economies no doubt would have performed better. But they could never have delivered economic self-management, they would always have been slow to innovate as apathy and frustration took their inevitable toll, and they would always have been susceptible to growing inequities and inefficiencies as the effects of differential economic power grew. Under central planning neither planners, managers, nor workers had incentives to promote the social economic interest. Nor did impending markets for final goods to the planning system enfranchise consumers in meaningful ways. But central planning would have been incompatible with economic democracy even if it had overcome its information and incentive liabilities. And the truth is that it survived as long as it did only because it was propped up by unprecedented totalitarian political power.” Corruption A planned economy creates social conditions favoring political corruption. "Particularly, command economies have been notoriously corrupt. First, centralized decision-making predisposes planners to abuses of power. Second, the inherent inefficiency of plans drawn with insufficient information creates a need for bypassing or subverting the official decision-making process. For example, the Soviet Gosplan could not create plans that were feasible, and other means were used to meet the quotas." A gift economy featuring corruption, blat, developed. The Chinese guanxi is somewhat similar.

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ECONOMIC PLANNING 2009 1.9 CHARACTERISTICS OF ECONOMIC PLANNING

In a planned economy, major economic decisions such as what and how much is to be produced, when and where it is to be produced and to whom it is to be allocated will be determined by a central authority such as the State, through the Planning Commission. The Government will have the powers of implementation. Before the Plan is drawn up, a detailed survey of all available resources – physical resources, financial resources and human resources – has to be made. For example, in the former Soviet Russia, after the Revolution in 1917, there was War Communism between 1918–1921. And there was New Economic Policy (NEP) from 1921 to 1924. And from 1924, the Government made a detailed survey of all available resources and only in 1928, it implemented its First Five Year Plan. After the survey of resources, the objectives of planning will be determined. For example, one of the long term objectives of Soviet Planning was that Soviet Russia should catch up with the production levels of the leading capitalist nation of the world, namely U.S.A., in steel, coal and electricity. Keeping in mind, the objectives of the Five Year Plan, the physical targets will be fixed. And ways and means of mobilizing financial resources will be explored. The Plan will also spell out the details in which the fruits of planning will be distributed in a fair and just manner. The nature of planning is determined by the type of economic system – capitalism, socialism, mixed economy - in which it is practiced. There will be partial planning in a capitalist economy, (e.g., U.K.) but a socialist economy is a totally planned economy (e.g., Former Soviet Russia). In a mixed economy like India, both public sector and private sector play important roles in economic planning. Usually, the period of a Plan is five years. The Plan has to be drawn in advance. It is done by the Planning Commission in India. A plan will be of a definite size and it will fix the targets for the Plan period and it will also indicate the ways by which the financial resources are to be mobilized for the Plan.

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ECONOMIC PLANNING 2009 The first step in drawing up a Plan is to determine a growth target for an economy over the Plan period. The planners then divide the economy into a number of sectors such as agriculture, industry and service sector. The planners will fix the physical targets for the sectors and also decide how much investment must be made in each sector to achieve the targets. Then they will decide the right type of investment projects and production techniques. As the UDCs are poor, labour-intensive techniques will expand employment opportunities. But some heavy industries like steel have to be capital – intensive. The success or failure of a Plan depends upon the choices that are made.

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ECONOMIC PLANNING 2009 1.10 ORGANIZATION

The Prime Minister is the Chairman of the Planning Commission, which works under the overall guidance of the National Development Council. The Deputy Chairman and the full time Members of the Commission, as a composite body, provide advice and guidance to the subject Divisions for the formulation of Five Year Plans, Annual Plans, State Plans, Monitoring Plan Programmes, Projects and Schemes. The Planning Commission functions through several Divisions, each headed by a Senior Officer. The Set up is: •

Chairman

•

Sh. Montek Singh Ahluwalia, Dy. Chairman

•

Shri V. Narayanasamy, Minister of State

•

Members o

Dr. Kirit Parikh

o

Prof. Abhijit Sen

o

Dr. V.L. Chopra

o

Dr. Bhalchandra Mungekar

o

Dr.(Ms.) Syeda Hameed

o

Shri B.N. Yugandhar

o

Shri Anwar-ul-Hoda

o

Shri B. K. Chaturvedi

•

Dr. Subas Pani, Secretary

•

Senior Officials

•

Grievance Officers

•

Induction Material - PDF | ZIP(MS Word)

•

Organisational Chart (PDF)

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ECONOMIC PLANNING 2009 Divisions (Table 4) 1. Agriculture Division

18. Monitoring Division

2. Backward Classes Division

19. Perspective Planning Division

3. Communication & Information

20. Programme Outcome & Response

Division

Monitoring Division

4. Development Policy Division

21. Plan Coordination Division

5. Education Division

22. Power & Energy Division

6. Environment & Forest Division

23. Programme Evaluation Organisation

7. Financial Resources Division

24. Project Appraisal & Management Division

8. Health, Nutrition & Family Welfare

25. Rural Development Division

Division

26. Science & Technology Division

9. Housing, Urban Development &

27. Social Development & Women’s

Water Supply Division

Programme Division

10. Industry & Minerals Division

28. Social Welfare Division

11. International Economic Division

29. State Plans Division

12. Infrastructure Division

30. Transport Division

13. Labour, Employment and Manpower

31. Village & Small Enterprises Division

Division

32. Water Resources Division

14. Multi-level Planning Division o

33. Administration & Services Division

Border Area Development

34. Socio-Economic Research Division

Programmes o

Western Ghat Development Programme

Office Memorandum: Changing the name of 'Village & Small Industries Division' to "Village & Small Enterprises Division" dated 8/3/04

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ECONOMIC PLANNING 2009

1.11 MEMBERS OF PLANNING COMMISION

Dr. Manmohan Singh

Chairman

Mr. Montex singh Aahuwaliya

Deputy Chairman

Shri. MV Rajshekharan

Member

Dr. Kirit Parikh

Member

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ECONOMIC PLANNING 2009

Prof. Abhijit Sen

Member

Dr. VL Chopara

Member

Dr. Bhalchandra Mungekar

Member

Syeda Saiyidain Hameed

Member

Shri. B.K. Chaturvedi

Member

Shri. B.N. Yugandhar

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ECONOMIC PLANNING 2009 1.12 TYPES OF PLANNING

1. Centralized Planning : In a socialist economy (eg. Former Soviet Russia), there was centralized planning; it was planning by direction. In a socialist state, most of the means of production are owned by the State. All basic economic decisions such as whether priority is to be given for industrialization or for development of agriculture ; if it is decided to give importance to industrialization, whether to give importance to basic and heavy industries or for consumer goods industries will be made by the central authority. 2. Planning by Inducement : In a democracy, Planning is done by inducement. For example, ours is a mixed economy where there is a public sector and a private sector. The government has to persuade the industries in the private sector to fulfill the goals of the Plan through inducements such as tax concessions and by providing incentives. 3. Indicative planning – In this type of planning, the government invites representatives of industry, and business and discuss with them in advance what it proposes to do in the Plan under question and indicates to them its priorities and goals. Then the Plan is formulated after detailed discussions with varied interests. Planning in France is a good example of indicative planning. After we embraced liberalization and privatization policies in 1991, even Indian planning, in a way, has become indicative planning. Economic plans can also be divided into midterm plans, shorter plans and perspective plans. Our Five Year Plans are in fact, midterm plans. Short term plans are Annual Plans. During the period of implementation, Five Year Plans operated by dividing them into Annual Plans. Perspective Plans are long term plans and the period ranges from 20 to 25 years. The Five Year Plans are formulated by taking into account the long term objectives of the Perspective Plan. Rolling Plan : Unlike the Five Year Plan with fixed targets, in the case of the rolling plan, at the end of each year, targets will be fixed by adding one more year to the Plan. That is, without fixed targets for all the five years, depending upon the performance of the Plan in the current year,

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ECONOMIC PLANNING 2009 targets will be fixed for one more year. Like this, it will go on a continuous basis. That is the idea behind the rolling plan. A great advantage of centralized planning is that plans can be implemented with great speed and targets and goals can be achieved. For example, by means of planning, former Soviet Russia transformed its economy, which was predominantly agricultural into a predominantly industrial nation, within a short span of 12 years. But a demerit of centralized planning is that as the State enjoys a considerable degree of monopoly, in the absence of competition, it is rather difficult to test the productive efficiency of state owned units. Under planning by inducement (democratic planning), though there is a good deal of freedom for people, because of the procedures and delays associated with the democratic process and because of Parliamentary democracy, there will be a lot of delay in the implementation of programmes and economic growth will be slow.

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ECONOMIC PLANNING 2009 1.13 DEFICIENCIES OF PLANNING 1. Expert s now realize that a minimum standard of living have been ensured for all if resources had been thought of, not in money term, but in term of people. Economic development should not have been equated with increasing the supply of good but with providing opportunity for work to the entire population and raising their productivity by better knowledge and better equipment. 2. In spite of enormous advance in industrialization there has been no change in the occupational pattern of the country’s work force. In spite of an impressive development of the large scale manufacturing and infrastructure sectors, the share of agriculture in the work force had not diminished at all. It was 72 p.c. in 1911 in 2001 and still 60 percent of labour force is in primary sector. In almost all countries economic development is associated with a significant decrease in the share of labour in the primary sector. In India, however, a fairly rapid growth in the non agricultural sectors during the last 50 years of planned development has not made any noticeable impact on the industrial distribution of the work force. Investment and output have grown at a high rate but the production mix and the technology mix have been so capital intensive that employment has not grown paripassu. Between 1961 & 1976, in modern factory sector, investment increased 139 p.c. and output 161 p.c. but employment increased only 71 p.c. Therefore employment per unit of gross output decreased by34 p.c. and employment per unit of capital declined by 28 p.c. The higher output ratio also indicates that much employment has not been created in the industrial sector, as capital intensity was higher for different investment. In1999-00 the employment in secondary sector was 15.8% of working population. In the period of economic reform employment generation rate has been reduced. 3. So long emphasis was on financial rather than physical targets. There should be a change in the way in which target are fixed by the planning commission. In spite of the known ambiguities associated with financial targets, emphasis still continues to be laid on financial rather than physical target. It is true that physical targets are mentioned quite

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ECONOMIC PLANNING 2009 prominently but there is no clear indication of the link between physical and financial targets 4. After 50 years of planning, the condition created and sustained by the government policy has resulted in aggravating inequality in the distribution of wealth. Millions of people specially I rural areas continue to languish on the border line of abject poverty if not of actual starvation. The planning has not touched even to the fate of large part of population. Thus there is ample justification for the general feeling that the technique of planning in India dose not deserve the price that has been paid for it. 5. So far as the conceptual or logical content of planning is concerned there is not much wrong; the wrong lie is its in implementation, its lack of cohesion with social factors and the impediments imposed by political, social, administrative and cultural forces rather then strictly economic factors. What is needed is not an exclusive new approach to replace the old but a reorientation and modification of the old with some additions here and there. 6. One of the objectives of the planning is economic self-reliance means economy should be attaining varies type of securities such as food security, energy security, environment security, social political security though in various field we have made much progress, but we have not been able to bridge the resources and a large part of the resources come from foreign sources. The private sector as well as public sector has failed to generate adequate resources. We have also failed to create sophisticated equipment and material. 7. The situation is respect of distributive justice has not been ensured in various sector of the economy. The tenancy reforms have not been complete and insecurity of tenure has been much more pronounced. The nature of infrastructure has helped mostly to reach peasantry in the industrial sector also big became bigger. The planning has increased the inequalities only. The industrial licensing was neither efficient nor egalitarian. 8. The economy has faced an-uninterrupted inflationary process. The inflation is varied from 5 to 10 % per annum. It has been eroded purchasing power of the people-increased project cost, and reduced the competitiveness of the economy. It has also affected rates of saving and real investment. Common people have become hard hit at such inflation. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 9. The resources allocation pattern does not show any consistent trend. Sometimes it was on

industry or sometimes it was on agriculture, after the 1st five year plan agriculture got prime importance again relatively in 10th plan. Allocation on power and transport were satisfactory but various aspects of social sector has been neglected. Social sectors have got relative attention from 8th plan onwards. 10. The growth rate in the plan period in most cases has not been satisfactory. Accepting the

year of 8th and 9th plan growth rate was not consistent. Moreover, growth rates have not helped to remove poverty and unemployment. The product mix that has been generated has not helped poor people. Balance of payment situation has not been satisfactory. We had always a deficit in the BOP. Another major area of set back is the inability to generate adequate revenue, which has given rise to resource gap and deficit financing. There was generation of black money and corruption and failure to tax black money income.

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1.14 EVOLUTION The National Planning Commission was set up in India in 1950. A major function of the Planning Commission was to “formulate a plan for the most effective and balanced utilization of the country’s resources”. The Planning Commission formulated the First Five Year Plan for the period (1951–56). Since then, we completed nine Five Year Plans and we are now in the midst of Eleventh Five Year Plan (2007-12).

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1.15 PLANNING IN DEVELOPING COUNTRIES

Since the end of World War II, it has become an accepted practice among the governments of the developing countries to publish their “development plans.” These are medium-term plans, usually for a five-year period. The aim is to select a period long enough to include projects spanning a number of budget years but not so long as to delay periodic assessment of the development effort stretching over a series of plans. The development plan attempts to promote economic development in four main ways: (1) by assessing the current state of the economy and providing information about it; (2) by increasing the overall rate of investment; (3) by carrying out special types of investment designed to break bottlenecks in production in important sectors of the economy; and (4) by trying to improve the coordination between different parts of the economy. Of these, the first and fourth are perhaps the most important and the least understood function of economic planning. The other two functions of planning cannot be efficiently carried out without ample and reliable information, nor without effective economic coordination between the different government departments and agencies within the public sector and the private sector. In most developing countries, information about the economy is scarce, and planning has provided the impetus to acquire and analyze the necessary data in order to provide a better understanding of the functioning of the economy. In order to improve coordination it is necessary to spread reliable economic information to indicate the future course of the government’s economic intentions and activities so that the people concerned, both in the public and the private sectors, may make appropriate plans of their own to bring them in line with the government’s plan. In fact, this may be regarded as the main reason for publishing development plans, although this point is not always clearly appreciated by the governments that issue them. he newly independent countries, just starting to plan their economies, usually begin with a simple type of development plan. In most cases this is merely an ad hoc list of individually conceived social and economic projects NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 that the various government departments have submitted for the plan. So long as the projects are well selected (say, to break some obvious bottlenecks in production) and are well designed in a technical sense, such a simple plan may be quite serviceable. But it tends to suffer from a number of weaknesses arising from insufficient coordination. (1) Since the projects are drawn up on a piecemeal basis in separate government departments, there is usually no systematic attempt to compare the relative costs and benefits of the plans proposed by the different departments on a uniform basis. As a consequence, the collection of projects included in the plan may or may not represent the most productive pattern of investing. the available resources of the government. (2) A lack of coordination frequently leads to wasteful duplication and a failure to take advantage of complementary relationships between individual projects. (3) A simple listing of the projects does not provide a clear-cut system of priorities in their implementation. Typically, the projects that are relatively easy to implement are pushed far ahead of others that, although requiring a longer time to prepare and implement, may have the potential to contribute more directly to the expansion of national output and government revenue. This can have serious budgetary consequences when the projects that are easier to implement generally happen to be in the field of social welfare, education, and health and—although they may indirectly contribute to economic development in the longer run—entail a significant and ever-increasing stream of recurring government expenditure after their completion. An obvious way of remedying these defects is to formulate a more systematic plan of the public investment program as an integrated whole. In order to do this, it is necessary to begin by making a careful estimate of the total amount and time pattern of the financial resources that the government expects to receive during the plan period from domestic sources and from external loans and aid. Next, it is necessary to make realistic estimates of the costs and benefits of the alternative investment projects within the public sector as a whole so as to select the most productive combination of projects, taking into account significant complementary relationships between the different projects. In selecting the best combination of projects to be included in the plan, it is necessary to pay special attention to the time pattern of costs and benefits. A poor country, with limited sources of government revenue, would have to discount future benefits NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 heavily relative to the more immediate benefits and would have to give priority to the type of project with quicker returns in the form of expansion in output and tax yields over the type of project that may promise higher rates of return, but only in the more distant future. The problems of carrying out an integrated public investment program serve to emphasize the crucial role of the annual budget in development planning. At the aggregate level, with a given amount of external aid, the stream of the total investable funds available to the government during the plan period depends on its ability to raise revenue (and borrow from domestic sources) and, equally important, to control it’s no development, or “consumption,” expenditure year by year during the plan period. At the individual project level, the fact that a project requires a number of budget years to complete does not dispense with the need for annual budgetary controls to ensure that it is being implemented in stages, according to the timetable as originally planned. Indeed, it is only through the discipline of annual budgetary controls that a mediumterm development plan is likely to be kept nearer the course as originally planned. Few developing countries have submitted themselves to the budgetary discipline necessary for implementing an integrated public investment program. This has not deterred them, however, from jumping from a simple type of development plan to “comprehensive” economic planning, embracing both the public and the private sectors and regulating both the aggregate level of economic activity and its detailed composition. The drive toward comprehensive planning arises from various causes: from a distrust of the automatic working of the market mechanism and its ability to promote economic development; from a desire to assert national economic independence by government control of foreign trade and investment; and from the theories of economic development, fashionable during the 1950s, that emphasize the need for a “big push” to overcome technical indivisibilities and the need for a simultaneous setting up of a number of mutually supporting projects to enjoy the benefits of technical complementary. The economic development plans published by the developing countries in the 1960s were fairly elaborate. The trend to “quantitative” planning encouraged the use of elaborate statistical estimates and projections even when the primary statistical sources on which these computations were based were often unreliable or conjectural. Advanced mathematical techniques were also increasingly employed. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 Basically, there are three parts to such a development plan: (1) the target figures for increase in per capita income and consumption to be attained at the end of the plan (with estimated figures for the intermediate years during the plan); (2) estimates of the quantities of various resources, such as capital, manpower, and foreign exchange needed to implement the target figures (including the time profile of the rate at which these resources will be required during the plan); and (3) parallel but independent estimates and projections of the quantities and the time pattern of these resources expected to be available both to the government and to the economy as a whole during the plan period. The elaborate planning documents issued by some developing countries may be described as attempts to quantify as far as possible the information required under the three heads and to test the formal consistency of the plan. This essentially consists in asking (a) whether the total amount of available resources is sufficient to meet the total requirements of resources as set by the target figures, and (b) whether the allocation of resources planned for different sectors is consistent with the detailed target figures for the increased output of different goods and services required for consumption and investment. When the resources required by some industries are intermediate goods (the output of other industries), input–output tables are frequently used to check whether the outputs of different industries are sufficient to supply not only the target figures for final use in the form of consumption and investment but also the “indirect use” required by other industries. The more advanced planning models using programming techniques in an attempt to solve the further question (c) whether the planned pattern of allocating resources is the most efficient; i.e., whether it minimizes the resources needed to meet the target figures as compared with other patterns.

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1.16 OBJECTIVES

The central objective of planning in India is to raise the standard of living of the people. Five Year Plans aim at increasing output. At the same time, they aim at reducing inequalities of income and wealth and providing equal opportunities for all. Growth with social justice is basic goal. Estimation of poverty line and incidence of poverty for which the Planning Commission is the nodal agency in the Government of India. To increase per capita and NI: To increase in per capita and NI of a country is regarded as an indicator of eco, development. The increase in income represents higher standard of living as well as increase in income of india. Higher level of employment: if population is growing it will necessities an increase in real income for marinating per capita income. If labor is expanding, output must also expand to ensure full employment. If net investment takes place, income should also grow to avoid idle capacity of the economy. Unemployment problem requires an immediate solution for the elimination of poverty. It is observed that the rising number of unemployed, poverty expands. Removal of unemployment has thus been mentioned as one of the objectives of economic planning in all the five year plans, but it never got a high priority. Ashok Rudra asserts the government never had an employment policy. It also did not set a target date “ by when any able bodies person who wants to work and make an honest living can be assured of a job that would offer him at least a minimum subsistence.” This explains why unemployment has not decreased over the years. However, the planning commission stated in the eighth plan document that employment is to be treated as a direct focal NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 point of policy. The government at the center, it seems, does not share this perception of the planning commission. The approach of the planning commission till recently has been of not seeing the question of employment generation separately from investment programs. It was believed that as investment increased employment would also grow. In the third plan document, while discussing the objectives of economic planning the Planning Commission had argued that as national grows in response to increased investment and development outlay. The demand for labour rises and employment expands. Growth with social justice: By social justice, we mean equal opportunities for all. That means, improving the standard of living of the poorest groups and reduction in inequalities in income and wealth. The Social Welfare Division handles two sectors; (i) Social Welfare; and (ii) Women and Child Development. The Social Welfare Sector deals the welfare, rehabilitation and development of persons with disabilities, social deviants and other disadvantaged in close co-ordination with the nodal Ministry of Social Justice and Empowerment and the Women and Child Development sector handles Empowerment of women and Development of Children in close co-ordination with the nodal Department of Women and Child Development. Increasing industrial output: The Indian industry saw its output shrink for the first time in 15 years with a 0.4 per cent yearon-year decline in October, as the impact of the global economic downturn deepened in the country. To remove bottlenecks in agriculture, manufacturing industry (especially capital goods) and the balance of payments. In the agricultural sector, the main objective was increasing agricultural productivity and attaining self–sufficiency in foodgrains. In the industrial sector, the emphasis was on basic and heavy industries. In the foreign trade sector, the emphasis was on having a viable balance of payments position’. The strategy adopted in Indian Planning is often referred to

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ECONOMIC PLANNING 2009 as ‘Mahalanobis strategy’. In this strategy, emphasis was laid on rapid industrialization with priority for basic and heavy industries. Reduction of inequality in income Reduction in income inequality has been mentioned as one of the objectives of economic planning in India. However, in terms of priority it always got a very low place. It is probably on accounts of this reason that neither the plan documents, nor any other publications of the Planning Commission ever provided estimates of the inequalities in income and wealth distribution. Pramit chaudhari is perhaps right in his assertion that Indian plans have never made any serious attempt to redistribute income and wealth. The Planning Commission had spelt out its approach in respect if income inequalities in the Fourth Plan. In its opinion, fiscal measures at best can reduce disposable income at the top and thus their importance for eliminating income inequalities is limited. It stressed the need for raising the living standards of the poor by accelerating the pace of growth on the assumption that the gains of development will percolate downward. The plan document simply hoped that fiscal policy, industrial licensing, monopoly control measured and additional employment opportunities to be created during the plan period should be able to reduce disparities in income distribution. The seventh plan did not make even a passing reference to these objectives. Modernisation Indian planners have always recognized the role of science and technology in the country’s development. However, until the sixth five year plan modernization was never on the agenda of any plan. In the sixth plan for the first time the objective of modernization was explicitly mentioned. The plan document stated, “the term modernization connotes a variety of structural and institutional changes in the framework of economic activity.” It thus implied a “shift in the sectoral composition of production diversification of activities, an advancement of technology and institutional innovations” so as to transform “a feudal and colonial economy into a modern and independent economy”. If one accepts this concept of modernization, then this is also to be admitted during the whole of the planning period, India did make advances on the modernization path though the progress might not have been spectacular. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 Over the five decades of planning, the composition of national income has change steadily. The share of manufacturing, mining, construction and productive infrastructure has increase from above 20% in early fifties to about 30% in the late 1980’s. In the industrial sector considerable success has been achieved from the point of view of diversification. Today India’s capabilities in technical know-how are far greater than those in the early 1950s. Even in the institutional framework this country’s achievements are not small. For example, setting up of development banks for industry and agriculture, innovation of Regional Rural Banks and extension of cooperative credit to the remotest interiors of the country have radically changed the institutional framework of credit. Self- reliance About five decades ago on the eve of the first plan, India was dependent on foreign countries at least in three respects. First, despite the fact that Indian economy was essentially agrarian, the output of food grains was not adequate and the country imported big quantities of food grains from the USA. And some other countries. Second on account of virtual non existence of basic industries, transport equipment machine tools, heavy engineering goods, electrical plant and machines and many other capital goods had to be acquired from developed countries. Third, saving rate being very low, foreign aid had to be obtained in order to step up the investment rate in the country. It has been observed in many cases that developed countries while supplying essential commodities like food grains, machinery and other capital equipment to underdeveloped countries attempt to take full advantage of their strong bargaining position and extort exorbitant prices for their products. Often exports of these and other essential goods are used as political weapons to blackmail the Third World countries. Therefore, if some underdeveloped country seriously desire to keep it’s growth activity free from political pressure of other countries, it has no choice but become a completely self-reliant in food and capital equipment. Further, it has also to minimize it’s dependence in respect of aid from other countries and the institutions like the IMF and The World Bank.

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ECONOMIC PLANNING 2009 It is now generally agreed that in the field of self-reliance, India has two achievements to it’s credit. First, the country is now almost self sufficient in food. Second, with the growth of iron and steel, machine tools and heavy engineering industries, this country has made considerable advancement towards self-reliance in capital equipment. In totality, however, the goal of selfreliance has proved to be elusive.

1.17 GROWTH

In the first 30 years of planning, the trend rate of growth of national income was 3.5 percent. Eminent economist Raj Krishna called it the Hindu rate of growth. Agricultural production increased at an average rate of 2.7 percent and industrial production at 6.1 percent. And per capita income increased at the trend rate of 1.3 percent. Though these rates appear rather small, we must remember that throughout the British period, for almost a century, there was stagnation in the Indian economy. For example, in the undivided India from 1901 – 46, the trend growth rate of the national income was only 1.2 percent. So one of the achievements of planning in Indian economy is that it has overcome stagnation and we have had a slow but steady economic growth. GROWTH RATE OF NATIONAL INCOME(IN PERCENTAGE). (Table 5)

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The growth performance of the economy during different plan periods is given in Table 5.1. From the Table, it can be seen that there are shortfalls in the growth targets during early plan periods except the First Five Year Plan. During the Ninth Plan period, the GDP growth rate was 5.4 percent as against the target of 6.5 percent.

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1.18 FUNCTIONS The 1950 resolution setting up the Planning Commission outlined its functions as to: a. Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nation’s requirement; b. Formulate a Plan for the most effective and balanced utilisation of country's resources; c. On a determination of priorities, define the stages in which the Plan should be carried out and propose the allocation of resources for the due completion of each stage; d. Indicate the factors which are tending to retard economic development, and determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the Plan; e. Determine the nature of the machinery which will be necessary for securing the successful implementation of each stage of the Plan in all its aspects; f. Appraise from time to time the progress achieved in the execution of each stage of the Plan and recommend the adjustments of policy and measures that such appraisal may show to be necessary; and g. Make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it, or on a consideration of prevailing economic conditions, current policies, measures and development programmes or on an examination of such specific problems as may be referred to it for advice by Central or State Governments. Evolving Functions

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ECONOMIC PLANNING 2009 From a highly centralised planning system, the Indian economy is gradually moving towards indicative planning where Planning Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities of nation. It works out sectoral targets and provides promotional stimulus to the economy to grow in the desired direction. Planning Commission plays an integrative role in the development of a holistic approach to the policy formulation in critical areas of human and economic development. In the social sector, schemes which require coordination and synthesis like rural health, drinking water, rural energy needs, literacy and environment protection have yet to be subjected to coordinated policy formulation. It has led to multiplicity of agencies. An integrated approach can lead to better results at much lower costs. The emphasis of the Commission is on maximising the output by using our limited resources optimally. Instead of looking for mere increase in the plan outlays, the effort is to look for increases in the efficiency of utilisation of the allocations being made. With the emergence of severe constraints on available budgetary resources, the resource allocation system between the States and Ministries of the Central Government is under strain. This requires the Planning Commission to play a mediatory and facilitating role, keeping in view the best interest of all concerned. It has to ensure smooth management of the change and help in creating a culture of high productivity and efficiency in the Government. The key to efficient utilisation of resources lies in the creation of appropriate self-managed organisations at all levels. In this area, Planning Commission attempts to play a systems change role and provide consultancy within the Government for developing better systems. In order to spread the gains of experience more widely, Planning Commission also plays an information dissemination role.

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2.DIVISIONS 2.1 FINANCIAL RESOURCE DIVISION 1. The principal task of the Financial Resources (FR) division is to estimate the financial resources available with the Public Sector for building the economy productive capacity in a given span of time. Such resources are referred to as Aggregate Plan resources, which the FR division estimates for the Governments at the Center, States and Union territories with legislatures. The information on Aggregate Plan resources indicates the ability of the Public sector in directly developing the productive capacities. Without this, the necessary support required from the private sector in building the potential size of productive capacity cannot be delineated. 2. While the size of Aggregate Plan resources reflects the ability of the Public sector in building productive capacities, its sources of funding have a significant bearing on sustaining this ability. Accordingly, the FR division provides the information on both the size and composition of Aggregate Plan resources in a format referred to as the’ Scheme of Financing’ the annual or five year Plan as the case may be. The inputs necessary for making the ‘Scheme of Financing’ emerge out of periodic discussions the FR division has with the representatives of concerned Governments. 3. Some of these inputs include policy prescriptions on raising potential levels of tax and non-tax revenues, limiting borrowings and therefore interest burden to debt sustainability levels, restricting establishment and administrative expenses in favour of maintenance of capital assets and social security schemes and reducing budgetary support to commercial Public sector undertakings. The objective is to obtain that level and composition of Aggregate Plan resources, which reflects the stability of Public finances for Governments at all levels. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 4. For the State Governments the Scheme of Financing includes Central Assistance of which the Normal Central Assistance is derived on the basis of Gadgil-Mukherjee formula operated exclusively by the FR division. The formula gives due cognizance to economically disadvantaged States as also their performance in meeting specified targets of fiscal and social objectives. The FR division regularly proposes well-researched modifications of the formula for consideration of the National Development Council. 5. In obtaining fiscally sound level of Aggregate Plan resources of state Governments, the efforts of FR division is complemented by Plan-Finance-I, Department of Expenditure,. Ministry of Finance. The efforts of FR division are also supplemented by expert views which the division obtains from outside the Planning Commission. While the regular reports of Finance Commission serve as crucial inputs, the contributions of Steering Committees and Working Groups on financial resources constituted by Planning Commission in the context of five-year plans are no less significant. The officers of FR division actively participate in the deliberations of such Committees and Working-Groups drawing upon their experience of State and sectoral specific issues. In addition FR division also commissions specialized studies.

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2.2 PERSPECTIVE PLANNING DIVISION The primary role of the Perspective Planning Division is to analyse, assess, estimate and make projections relating to quantitative dimension of medium term and long term development plans. The projection exercises ensure that the quantitative dimensions of the plans are consistent between sectors and between various macro economic aggregates. The Division is responsible for making the projection of economic growth and its sector-wise distribution, projection of levels of living, estimation of poverty ratios, projection of Governments' fiscal balance, assessment and estimation of external sector balance. The Division has a formal economic modeling unit for providing sectoral growth profiles of the economy under alternative assumptions. The activities of the Division cover: (a) Macro-Economic Modeling Macro-balance in National Accounting Frame under alternative assumptions of growth profiles and (a) formulating appropriate macro-economic model (b) analyzing sectoral growth and investment profiles/requirements and the emerging structures of the economy, (c) inter-sectoral flow of funds including alternative savings instruments. Analysis of input-output structure; sectoral projections based on consistency-cum-investment planning model for estimating mutually consistent growth targets of various sectors. Analysis of State level income aggregates and its sectoral distribution; measurement of inter-state economic disparity and their intertemporal variations. (b) Fiscal Issues Preparation of the fiscal sub-model of the macro-economic model for medium term plans. Assessment of the fiscal position of the Government in the medium term. Analysis of various components of government finances and measures of the deficits and policy implication for macro economic stability and growth. (c) External Sector NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 Short and medium-term projections for imports, exports at sectoral level; policy issues associated with the WTO agreements. Projection of imports, exports, invisibles, current account balance and balance of payments, using a model for the external sector. Status papers on trade and customs tariff policy. Technical appraisal of WTO agreements and issues of concern for India based on developments in the global economy. (d) Consumption and Levels of Living Assessment of class distribution of consumption and indicators of levels of living. Estimation of poverty line and incidence of poverty for which the Planning Commission is the nodal agency in the Government of India. The incidence of poverty and inequality estimated at national and state level at regular intervals. Analysis of issues relating to human development and their measurement; preparation of the National Human Development Report.

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2.3 PROJECT APPRAISAL MANAGEMENT DIVISION Project Appraisal & Management Division (PAMD) was set up in 1972 to institutionalize the system of project appraisal in Government of India. The Division is mainly responsible to undertake techno-economic appraisal of all plan project /schemes of Ministries/Departments of Government of India to facilitate investment decision by the Expenditure Finance Committee/Public Investment Board. The Investment proposals of Ministry of Defence, Department of Atomic Energy and Space are out of purview of appraisal by EFC/PIB. 2. Besides, PAMD also develop formats and guidelines for the submission of proposals for projects / programmes and for their techno- economic evaluation, undertake support research studies with a view to improving methodology and procedure for appraisal of projects and programmes, associate with Subject Divisions in Planning Commission in examining the proposals received from Departments/Ministries for grant of "in principle" approval for new schemes etc. 3. As a part of techno-economic appraisal, PAMD presently appraises Central Sector/Centrally Sponsored schemes/projects costing Rs.50 crore & above, and prepares Appraisal Notes in consultation with the Subject Division of the Planning Commission, before these are considered by the Public Investment Board (PIB), Expenditure Finance Committee (EFC), Committee of Public Investment Board (CPIB) and Expanded Board of Railways (EBR), depending upon the nature and size of the proposal. The outer limit for issue of appraisal note by the PAMD has been fixed at six weeks from the date of receipt of PIB/EFC proposal. 4. In pursuance of the recommendations of Cabinet Committee on Economic Affairs, Standing Committees were constituted in Ministries / Departments to examine the Revised Cost Estimates proposals, wherein time overrun and cost overrun have occurred, to assign responsibility for the time and cost overruns. PAMD's officer is nominated as a member on the Standing Committee, to represent Planning Commission.

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ECONOMIC PLANNING 2009 5. The Division is headed by an Adviser & supported by Joint Advisers, Deputy Advisers, Senior Research Officers, Research Officers, Section Officer and other supporting staff. The work amongst various officers is allocated as far as possible on sectoral basis taking into account the workload at a given point of time. 6. The Division has a well-documented collection of appraisal notes (Chronologically arranged), sectoral volumes of appraisal notes, records of the minutes of the meetings of the Public Investment Board. The Division also published in 1992, "Guidelines for the Preparation of Feasibility Reports", for Industry (including Mines), Coal and Power sectors. Division maintains all the Appraisal Notes issued since inception of PAMD in bound form for reference and record. 7. EFC/PIB proposals pending for appraisal in PAMD and list of Appraisal Notes issued are placed at the Website EFC/PIB Proposals" of Planning Commission. This is updated weekly.

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2.4 WOMEN AND CHILD DEVELOPMENT DIVISION

Material Pertaining to Women & Child Development Sector The Women & Child Development Division of the Planning Commission look after all works relating (i) Empowerment of Women; and (ii) Development of Children in close collaboration with the nodal Ministry of Women and Child Development. The Division bears the responsibilities for fulfillment of the commitments made in the Approach Paper and Five Year Plan Document through formulation of suitable programmes and policies and their implementation towards inclusive growth, women’s agency and child rights. The major function of the Division includes the following: 1. Over all guidance and Advise to both Central and States Governments in the area of Women’s Agency & Child Rights. 2. Work relating to Five Year Plans and Annual Plans A . Central Sector (I) Preparation of material for inclusion in the Approach Paper. (II) Setting up of Steering Committee in the Planning Commission and its related Works viz. organizing meetings, preparation of background material /agenda, minutes of the meeting, preparation of the of steering committee reports (III) Setting up of Working Groups on Women and Children at the Ministry level and coordination with the Ministry for their meetings/Reports. (IV) Preparation of chapter for inclusion in the Five Year and Annual Plan Documents. (V) Examination of Plan Proposals for Five Year Plans and Annual Plans of Ministry of Women and Child Development and discussion with the Ministry and recommendation of the outlays. B. State Sector

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ECONOMIC PLANNING 2009 (I) Examination of Plan Proposal (Five Year Plan and Annual Plan) of various states relating to Women and Child Development sector and organizing Working Group Discussion to review the implementation of policies and programme with physical and financial targets and achievements and recommendation of sectoral outlay. (II) Examination of proposal for Additional Central Assistance (ACA) for Women and Child Development sector by States. (III) Preparation of Notes and participation in ther performance review meetings for different states taken by Memebers/Pr.Advisers/Advisers 3. Mid-Term Appraisal (i).Review of the progress of implementation of policies and programmes (ii) Assessment of achievements in terms of Physical & Financial targets. (iii) Suggestions for Mid Term Corrections 4. Other Works (I) Setting up of Committees/Groups and Task Forces on issues relating to Women & Children, organizing their meetings and preparation of Reports; (II) Preparation of background notes and organizing Performance Review Meetings of the Ministry of Women and Child Development (III) Work relating to Women Component Plan(WCP) and Gender Budgeting (GB); (IV) Examination and preparation of briefs and comments on Cabinet Notes, EFC Memos, SFC Memos with regard to schemes of Ministry of Women & Child Development besides participating in EFC and SFC meetings; (V) Advisory role with regard to Subodinate Organizations of Ministry of Woomen & Child development i.e. National Commission for Women (NCW), National Commission for Protection of Child rights (NCPCR), national Institute of Public co-operation and Child Development (NIPCCD), Rashtriya Mahila Kosh (RMK) and Central Social Welfare Board (CSWB) besides participation in General Body and Governing Body meetings of NIPCCD, RMK and CSWB (VI) Representing Planning Commission in the meeting of Parliamentary Committees, InterMinisterial Committees, Expert Groups/Committees, Task Forces on the subject relating to Women & Child Development; (VII) All parliamentary matters viz. answering Questions, supply of material withn and ouside the Planning Commission; NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 (VIII) Coordination with other Ministries/Departments, UN and other International Agencies and subject Divisions within Planning Commission on women and child issues; (IX) Examination of the proposals on Research Studies, Seminars, Workshops and Conferences on Women and Child issues received through Socio-Economic Research Division of the Planning Commission; (X) Representing Planning Commission in the meetings of various Sanctioning Committees constituted under respective schemes and other committees on women and child issues constituted by the Minstry of Women & Child Development; (XI) Preparation of material relating to women and child sector for inclusion in Economic Survey, President Address to the Joint Session of the Parliamnet, Prime Minister Independence Day Speech, Finance Minister Budget Speech etc.; (XII) Any other works assigned by the higher authorities of Planning Commission. Setting up of Committees/Groups and Task Forces on issues relating Examination and preparation of briefs and comments on Cabinet Notes, EFC Memos, SFC Memos with regard to schemes of Ministry of Women & Child Development besides participating in EFC and SFC Meetings. 5. Advisory role for Subordinate Organizations of Ministry of Women & Children i.e. National Commission for Women. National Child Protection Commission, National Institute for public Cooperation and Child development, Rashtriya Mahila Kosh and Central Social Welfare Board besides participation in General Body and Governing Bodies meetings of National Institute for public Cooperation and Child development, Rashtriya Mahila Kosh and Central Social Welfare Board. 6.Repersenting Planning Commission in the meeting of Parliamentary Committees, InterMinisterial Committees, Expert Group/Committees, Task Forces on the subject relating to Women & Child Development. 7. All parliamentary matters viz. answering Questions, supply of material within and outside the Planning commission. 8. Coordination with women and child related Ministries/Departments ,UN and other International Agencies and subject Divisions within Planning Commission.

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ECONOMIC PLANNING 2009 9. The Division examine the proposals of Research Studies, Seminars, Workshops and Conferences on Women and Child issues received through Socio-Economic Research Division of the Planning Commission. 10. The Division also represents Planning Commission in the various Sanctioning Committees for various schemes Constituted by Ministry of Women & Child Development besides various committees constituted on the various issues relating to women and children 11.The Division also prepares and furnish relevant material relating to women and child sector for inclusion in Economic Survey, President’s Address to the Joint Session of the Parliament, Prim Minister’s Independence Day Speech ,Finance Minister’s Budget Speech. 12.Any other works assigned by the higher authorizes of Planning Commission.

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3. FIVE YEAR PLANS First plan (1951-1956) The first Indian Prime Minister, Jawaharlal Nehru presented the first five-year plan to the Parliament of India on December 8, 1951. The total plan budget of 206.8 billion INR (23.6 billion USD in the 1950 exchange rate) was allocated to seven broad areas: irrigation and energy (27.2 percent), agriculture and community development (17.4 percent), transport and communications (24 percent), industry (8.4 percent), social services (16.64 percent), land rehabilitation (4.1 percent), and other (2.5 percent). The plan promoting the idea of a self reliant closed economy was developed by Prof. P. C. Mahalanobis of Indian Statistical Institute and borrowed the ideas from USSR's five year plans developed by Domer. The plan is often referred to as the Domer-Mahalanobis Model. The target growth rate was 2.1 percent annual gross domestic product (GDP) growth; the achieved growth rate was 3.6 percent. During the first five-year plan the net domestic product went up by 15 percent. The monsoons were good and there were relatively high crop yields, boosting exchange reserves and per capita income, which went up 8 percent. Lower increase of per capita income as compared to national income was due to rapid population growth. Many irrigation projects were initiated during this period, including the Bhakra Dam and Hirakud Dam. The World Health Organization, with the Indian government, addressed children's health and reduced infant mortality, contributing to population growth. At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as major technical institutions. University Grant Commission was set up to take care of funding and take measures to strengthen the higher education in the country. Contracts were signed to start

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ECONOMIC PLANNING 2009 five steel plants; however these plants did not come into existence until the middle of the next five-year plan.

Second plan (1956-1961) The second five-year plan focused on industry, especially heavy industry. Domestic production of industrial products was encouraged, particularly in the development of the public sector. The plan followed the Mahalanobis model, an economic development model developed by the Indian statistician Prasanta Chandra Mahalanobis in 1953. The plan attempted to determine the optimal allocation of investment between productive sectors in order to maximise long-run economic growth . It used the prevalent state of art techniques of operations research and optimization as well as the novel applications of statistical models developed at the Indian Statiatical Institute. Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were established. Coal production was increased. More railway lines were added in the north east. The Atomic Energy Commission was formed in 1957 with Homi J. Bhabha as the first chairman. The Tata Institute of Fundamental Research was established as a research institute. In 1957 a talent search and scholarship program was begun to find talented young students to train for work in nuclear power. Third plan (1961-1966) The third plan stressed on agriculture and improving production of rice, but the brief Sino-Indian War in 1962 exposed weaknesses in the economy and shifted the focus towards defense. In 1965-1966, the Green Revolution in India advanced agriculture. The war led to inflation and the priority was shifted to price stabilization. The construction of dams continued. Many cement and fertilizer plants were also built. Punjab begun producing an abundance of wheat.

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ECONOMIC PLANNING 2009 Many primary schools were started in rural areas. In an effort to bring democracy to the grassroot level, Panchayat elections were started and the states were given more development responsibilities. State electricity boards and state secondary education boards were formed. States were made responsible for secondary and higher education. State road transportation corporations were formed and local road building became a state responsibility.Gross Domestic Product rate during this duration was lower at 2.7% due to 1962 Sino-Indian War and Indo-Pakistani War of 1965. Gap between (1966-69) After 1965, when there was a break because of the Indo-Pakistan Conflict. Two successive years of drought, devaluation of the currency, a general rise in prices and erosion of resources disrupted the planning process and after three Annual Plans between 1966 and 1969, the fourth Five-year plan was started in 1969. Fourth plan (1969-1974) At this time Indira Gandhi was the Prime Minister. The Indira Gandhi government nationalized 14 major Indian banks. In addition, the situation in East Pakistan (now independent Bangladesh) was becoming dire as the Indo-Pakistani War of 1971 and Bangladesh Liberation War took place. Funds earmarked for the industrial development had to be used for the war effort. India also performed the Smiling Buddha underground nuclear test in 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of Bengal to warn India against attacking West Pakistan and widening the war. Fifth plan (1974-1979) Stress was laid on employment, poverty alleviation, and justice. The plan also focused on selfreliance in agricultural production and defense. In 1978 the newly elected Morarji Desai government rejected the plan. Electricity Supply Act was enacted in 1975, which enabled the Central Government to enter into power generation and transmission. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 Sixth plan (1980-1985) Called the Janta government plan, the sixth plan marked a reversal of the Nehruvian model. When Rajiv Gandhi was elected as the prime minister, the young prime minister aimed for rapid industrial development, especially in the area of information technology. Progress was slow, however, partly because of caution on the part of labor and communist leaders. The Indian national highway system was introduced for the first time and many roads were widened to accommodate the increasing traffic. Tourism also expanded. The sixth plan also marked the beginning of economic liberalization. Price controls were eliminated and ration shops were closed. This led to an increase in food prices and an increased cost of living. Family planning also was expanded in order to prevent overpopulation. In contrast to China's harshly-enforced one-child policy, Indian policy did not rely on the threat of force. More prosperous areas of India adopted family planning more rapidly than less prosperous areas, which continued to have a high birth rate. Seventh plan (1985-1989) The Seventh Plan marked the comeback of the Congress Party to power. The plan lay stress on improving the productivity level of industries by up gradation of technology. Gap between (1989-91) 1989-91 was a period of political instability in India and hence no five year plan was implemented. Between 1990 and 1992, there were only Annual Plans. In 1991, India faced a crisis in Foreign Exchange (Forex) reserves, left with reserves of only about $1 billion (US). Thus, under pressure, the country took the risk of reforming the socialist economy. P.V. Narasimha Rao)(28 June 1921 – 23 December 2004) also called Father of Indian Economic Reforms was the twelfth Prime Minister of the Republic of India and head of Congress Party, and led one of the most important administrations in India's modern history overseeing a major economic transformation and several incidents affecting national security. At that time Dr. Manmohan Singh (currently, Prime Minister of India) launched India's free market reforms that

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ECONOMIC PLANNING 2009 brought the nearly bankrupt nation back from the edge. It was the beginning of privatization and liberalization in India. Eighth plan (1992-1997) Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy was undertaken to correct the burgeoning deficit and foreign debt. Meanwhile India became a member of the World Trade Organization on 1 January 1995.This plan can be termed as Rao and Manmohan model of Economic development. The major objectives included, containing population growth, poverty reduction, employment generation,

strengthening

the

infrastructure,

Institutional

building,

Human

Resource

development, Involvement of Panchayat raj, Nagarapalikas, N.G.O Sand Decentralization and peoples participation. Energy was given priority with 26.6% of the outlay. An average annual growth rate of 6.7%against the target 5.6% was achieved. Ninth Plan (1997-2002) The Ninth Five Year Plan, launched in the 50th year of India’s Independence, will take the country into the new millennium. Much has happened in the fifty years since independence. The people of India have conclusively demonstrated their ability to forge a nation united despite its diversity, and their commitment to pursue development within the framework of a functioning, vibrant and highly pluralistic democracy. In this process democratic institutions have put down firm roots and flourished and development has also taken place on a wide front. As the millennium draws to a close, the time has come to redouble our efforts at development, especially in the social and economic spheres, so that the country will realise its full economic potential and the poorest and the weakest will be able to shape their destiny in an unfettered manner. This will require not only higher rates of growth of output and employment, but also a special emphasis on all-round human development, with stress on social sectors and a thrust on eradication of poverty. The Approach Paper to the Ninth Five Year Plan, adopted by the National Development Council, had accorded priority to agriculture and rural development with a view to generating adequate productive employment and eradication of poverty; accelerating the growth rate of the economy NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 with stable prices; ensuring food and nutritional security for all, particularly the vulnerable sections of society; providing the basic minimum services of safe drinking water, primary health care facilities, universal primary education, shelter, and connectivity to all in a time bound manner; containing the growth rate of population; ensuring environmental sustainability of the development process through social mobilization and participation of people at all levels; empowerment of women and socially disadvantaged groups such as Scheduled Caste, Scheduled Tribes and Other Backward Classes and Minorities as agents of socio-economic change and development; promoting and developing people’s participatory bodies like Panchayati Raj institutions, co-operatives and self-help groups; and strengthening efforts to build self-reliance. These very priorities constitute the objectives of the Ninth Plan. Some specific areas from within the broad objectives of the Plan as laid down by the NDC have been selected for special focus. For these areas, Special Action Plans (SAPs) have been evolved in order to provide actionable, time-bound targets with adequate resources. Broadly, the SAPs cover specific aspects of social and physical infrastructure, agriculture, information technology and water policy. The Ninth Plan is based on a careful stock taking of the strength of our past development strategy as well as its weakness, and seeks to provide appropriate direction and balance to the socio-economic development of the country. The principal task of the Ninth Plan will be to usher in a new era of growth with social justice and participation in which not only the Governments at the Centre and the States, but the people at large, particularly the poor, can become effective instruments of a participatory planning process. In such a process, the participation of public and private sectors and all tiers of government will be vital for ensuring growth with justice and equity. Objectives of 9th five year plan: The Ninth Plan recognises the integral link between rapid economic growth and the quality of life of the mass of the people. It also recognises the need to combine high growth policies with the pursuit of our ultimate objective of improving policies which are pro-poor and are aimed at

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ECONOMIC PLANNING 2009 the correction of historical inequalities. Thus the focus of the Ninth Plan can be described as : "Growth with Social Justice and Equity". The specific objectives of the Ninth Plan as approved by the National Development Council are as follows: i.

Priority to agriculture and rural development with a view to generating adequate productive employment and eradication of poverty;

ii.

Accelerating the growth rate of the economy with stable prices;

iii.

Ensuring food and nutritional security for all, particularly the vulnerable sections of society;

iv.

Providing the basic minimum services of safe drinking water, primary health care facilities, universal primary education, shelter, and connectivity to all in a time bound manner;

v.

Containing the growth rate of population;

vi.

Ensuring environmental sustainability of the development process through social mobilisation and participation of people at all levels;

vii.

Empowerment of women and socially disadvantaged groups such as Scheduled Castes, Scheduled Tribes and Other Backward Classes and Minorities as agents of socioeconomic change and development;

viii.

Promoting and developing people’s participatory institutions like Panchayati Raj institutions, cooperatives and self-help groups;

ix.

Strengthening efforts to build self-reliance.

Tenth Plan (2002-2007) The Tenth Five Year Plan, covering the period 2002-03 to 2006-07, represents but another step in the evolution of development planning in India. In the 55 years that have passed since our Independence, the challenges, the imperatives and the capabilities of the nation have undergone profound changes. The planning methodologies have attempted to keep pace with the emerging requirements and to guide the economy through the vicissitudes of national and global events, with greater or lesser success. The Tenth Plan carries on this tradition in the context of the objective realities of Indian economic life as they are manifested today. The single-most NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 important feature of our post-colonial experience is that the people of India have conclusively demonstrated their ability to forge a nation united despite its diversity, and to pursue development within the framework of a functioning, vibrant and pluralistic democracy. In this process, democratic institutions have put down firm roots, which continue to gain strength and spread. The degree of democratisation that has been achieved in the political sphere is, however, not matched by its progress on the economic front. There are still too many controls and restrictions on individual initiatives, and many of our developmental institutions continue to exhibit paternalistic behaviour, which today has become anachronistic. For the country to attain its full economic potential, and for the poorest and weakest to shape their destiny according to their own desires, it requires a comprehensive reappraisal not only of our development strategy, but also of the institutional structures that guide the development process. This is the task that the Tenth Plan has set for itself. Proposed Additional Allocation for the Tenth Plan (Table 6)

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ECONOMIC PLANNING 2009 PERSPECTIVES: The last decade of the 20th century has seen a visible shift in the focus of development planning from the mere expansion of production of goods and services, and the consequent growth of per capita income, to planning for enhancement of human well being. The notion of human well being itself is more broadly conceived to include not only consumption of goods and services in general but more specifically to ensure that the basic material requirements of all sections of the population, especially those below the poverty line, are met and that they have access to basic social services such as health and education. Specific focus on these dimensions of social development is necessary because experience shows that economic prosperity, measured in terms of per capita income, alone does not always ensure enrichment in quality of life, as reflected, for instance, in the social indicators on health, longevity, literacy and environmental sustainability. The latter must be valued as outcomes that are socially desirable in themselves, and hence made direct objectives of any development process. They are also valuable inputs in sustaining the development process in the longer run. In addition to social development measures, in terms of access to social services, an equitable development process must provide expanding opportunities for advancement to all sections of the population. Equality of outcomes may not be a feasible goal of social justice but equality of opportunity is a goal for which we must all strive. OBJECTIVES:

Traditionally, the level of per capita income has been regarded as a summary indicator of the economic well being of the country, and growth targets have therefore focused on growth in per capita income or per capita GDP. The Prime Minister’s vision has been the basis for setting the target in this regard, not only for the Tenth Plan period, but for all of the next ten years. The Approach Paper had proposed that the Tenth Plan should aim at an indicative target of 8 per cent average GDP growth for the period 2002-07. It is certainly an ambitious target, specially in view of the fact that GDP growth has decelerated to below 6 per cent at present. Even if the deceleration is viewed as a short-term phenomenon, the medium-term performance of the economy over the past several years suggests that the demonstrated growth potential is only about 6.5 percent. The proposed 8 per cent growth target therefore involves an increase of at least 1.5 percentage points over the recent medium term performance, which is substantial. NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 Nevertheless, the National Development Council (NDC) affirmed its faith in the latent potentialities of the Indian economy by approving the 8 per cent growth target for the Tenth Plan period. The Approach Paper also recognized that economic growth cannot be the only objective of national planning and indeed, over the years, development objectives are being defined not just in terms of increases in GDP or per capita income but more broadly in terms of enhancement of human well being. To reflect the importance of these dimensions in development planning, the Tenth Plan identifies specific and monitor able targets for a few key indicators of human development. The NDC has approved that, in addition to the 8 per cent growth target. The targets mandated by the NDC at the time of approval of the Approach Paper to the Tenth Five Year Plan are, by and large, consistent with the 8 percent growth target either through direct linkages that exist or through the resources that are generated by the growth process for more intensive public interventions. At the time of formulation of the Approach Paper, these linkages had been assessed on the basis of economy-wide aggregative trends observed in the past, and it was felt that achievement of even these targets would require concerted efforts. Subsequently, more detailed study and analysis by the Planning Commission have revealed that it may be possible to record even better achievement as far as employment generation and poverty reduction are concerned. The Report of the Special Group on Targeting 10 Million Employment Opportunities Per Year, which was constituted to deliberate upon the Prime Minister’s vision, indicated that with appropriate sectoral focus and directed interventions, it would be possible to generate substantially more employment opportunities than arising merely out of the growth process, not only to take care of the additions to the labour force, but also to reduce the backlog of unemployment. Similarly, internal exercises carried out in the Planning Commission revealed that the state-wise break down of the aggregate growth target, which seeks to redress regional imbalances, could lead to even faster reduction in the poverty rate than the assessment made on the basis of the aggregative trends. The Tenth Plan, therefore, seeks to achieve targets in these two areas which go beyond those set by the NDC in the Approach Paper. MONITORABLE TARGETS FOR THE TENTH PLAN AND BEYOND NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 • Reduction of poverty ratio by 5 percentage points by 2007 and by 15 percentage points by 2012; • Providing gainful and high-quality employment at least to addition to the labour force over the Tenth Plan period; • All children in school by 2003; all children to complete 5 years of schooling by 2007; • Reduction in gender gaps in literacy and wage rates by at least 50 per cent by 2007; • Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2 per cent; • Increase in Literacy rates to 75 per cent within the Plan period; • Reduction of Infant mortality rate (IMR) to 45 per 1000 live births by 2007 and to 28 by 2012; • Reduction of Maternal mortality ratio (MMR) to 2 per 1000 live births by 2007 and to 1 by 2012; • Increase in forest and tree cover to 25 per cent by 2007 and 33 per cent by 2012; • All villages to have sustained access to potable drinking water within the Plan period; • Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012. Eleventh Plan (2007-2012) On the eve of the 11th Plan, our economy is in a much stronger position than it was a few years ago. After slowing down to an average growth rate of about 5.5% in the 9th Plan period (199798 to 2001-02), it has accelerated significantly in recent years. The average growth rate in the last four years of 10th Plan period (2003-04 to 2006-07) is likely to be a little over 8%, making the growth rate 7.2% for the entire 10th Plan period. Though, this is below the 10th Plan target of 8%, it is the highest growth rate achieved in any plan period. The 11th Plan provides an opportunity to restructure policies to achieve a new vision based on faster, more broad-based and inclusive growth. It is designed to reduce poverty and focus on bridging the various divides that continue to fragment our society. The 11th Plan must aim at putting the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of the Plan period. It will create productive employment at a faster pace than before, and target robust agriculture growth at 4% per year. It must seek to reduce disparities across regions and communities by ensuring access to basic physical infrastructure as well as NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 health and education services to all. It must recognize gender as a cross-cutting theme across all sectors and commit to respect and promote the rights of the common person. The first steps in this direction were initiated in the middle of the 10th Plan based on the National Common Minimum Programme adopted by the government. These steps must be further strengthened and consolidated into a strategy for the 11th Plan. Rapid growth is an essential part of strategy for two reasons. Firstly, it is only in a rapidly growing economy that we can expect to sufficiently raise the incomes of the mass of our population to bring about a general improvement in living conditions. Secondly, rapid growth is necessary to generate the resources needed to provide basic services to all. Work done within the Planning Commission and elsewhere suggests that the economy can accelerate from 8 per cent per year to an average of around 9% over the 11th Plan period, provided appropriate policies are put in place. With population growing at 1.5% per year, 9% growth in GDP would double the real per capita income in 10 years. This must be combined with policies that will ensure that this per capita income growth is broad based, benefiting all sections of the population, especially those who have thus far remained deprived. While encouraging private sector growth the 11th Plan must also ensure a substantial increase in the allocation of public resources for Plan programmes in critical areas. This will support the growth strategy and ensure inclusiveness. These resources will be easier to mobilize if the economy grows rapidly. A new stimulus to public sector investment is particularly important in agriculture and infrastructure and both the Centre and the States have to take steps to mobilize resources to make this possible. The growth component of this strategy is, therefore, important for two reasons: a) it will contribute directly by raising income levels and employment and b) it will help finance programmes that will ensure more broad based and inclusive growth.

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Alternative Scenarios for 11th Plan: (Table 7)

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3.1 MACROECONOMIC INDICATOR (Table 8)

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ECONOMIC PLANNING 2009 3.2 SOCIO-ECONOMIC INDICATORS (table 9)

CONCLUSION On the bases of facts and figures Economic Planning is very important for every country. Because of excellent economic planning now we are one of the parts of developing countries. On the bases of need in certain sectors government introduced five years plan for better development. Now India’s GDP growth is very high as compare with other countries and that is NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 because of better planning. After introduced 1991 policy the growth of India became very faster because of liberalization and licensing in different sectors. Because of liberalization the rate Foreign Direct Investment increased after 1991.

BIBLIOGRAPHY BOOKS: Upadhyay, Saroj. Economic Planning, deficiencies of planning. Delhi: Asian Books Private Limited, Pg no: 212-214 WEBSITE: NSVKMS/MBA/SEM-II/BE

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ECONOMIC PLANNING 2009 Planning Commision: Planningcommission.nic.in Economic planning in developing countries: http://www.britannica.com/EBchecked/topic/178458/economic-planning/30579/Planning-indeveloping-countries-approaches Economic Planning: http://www.textbooksonline.tn.nic.in/Books/11/Econ-EM/Chapter_05.pdf Economic Planning: http://www.ccsindia.org/ccsindia/pdf/friedmanindia/03%20Indian%20Economic%20Planning %20-%20Milton%20Friedman.pdf Role of employment: http://en.wikipedia.org/wiki/Planned_economy Advantages and Disadvantages: http://en.wikipedia.org/wiki/Planned_economy

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