INDIAN ECONOMY - IAS NOTES
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BASICS OF INDIAN PLANNING
Five-Year Plans (FYPs) are centralized and integrated national economic programs.
joseph stalin implemented the first five year plan in soviet russia in the late 1920s.we are adopting with relavance to indian context
India launched its First FYP in 1951, immediately after independence under socialist influence of first Prime Minister Jawaharlal Nehru.
The First Five-Year Plan was one of the most important because it had a great role in the launching of Indian development after the Independence.
Thus, it strongly supported agriculture production and it also launched the industrialization of the country (but less than the Second Plan, which focused on heavy industries).
It built a particular system of mixed economy, with a great role for the public sector welfare state , as well as a growing private sector, that is we are adopting the policy of democratic socialism or mixed economic system.
First Plan (1951–1956)
The first Indian prime minister pandit nehru presented the First Five-Year Plan to the parlament of india and needed urgent attention.
The First Five-year Plan was launched in 1951 which mainly focused in development of the primary sector The First Five-Year Plan was based on the harrod-domar model with few modifications.
At the end of the plan period in 1956, five IITs were started as major technical institutions.
The university grants commission (UGC) was set up to take care of funding and take measures to strengthen the higher education in the country.
Contracts were signed to start five steel plants, which came into existence in the middle of the Second Five-Year Plan. The plan was quasi successful for the government.
The target growth rate was 2.1% annual gross domestic product (GDP) growth; the achieved growth rate was 3.6% the net domestic product went up by 15%.
Many irrigation projects were initiated during this period, including the bhakra dam and hirakud dam.
The world health organisation (WHO), with the indian government, addressed children's health and reduced infant mortality , indirectly contributing to population growth.
Second Plan (1956–1961)
The Second Plan was 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.its prime importance was rapid industrialization
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 theIndian Statistical Institute kolkata.
The plan assumed a closed economy in which the main trading activity would be centred on importing capital goods.
Hydroelectric power projects and five steel plants at Bhilai, Durgapur kolkata , and Rourkela -orissa were established. Coal production was increased. More railway lines were added in the north east.
The Tata Institute of Fundamental Research-bombay 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.
The total amount allocated under the Second Five-Year Plan in India was Rs.48 billion.
This amount was allocated among various sectors: power and irrigation, social services, communications and transport, and miscellaneous.
The target growth rate was 4.5% and the actual growth rate was 4.27%.1956-industrial policy.
Third Plan (1961–1966)
The Third Five-year Plan stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the defence industry and the Indian Army. In 1965–1966, India fought a War with Pakistan.
There was also a severe drought in 1965. The war led to inflation and the priority was shifted to price stabilisation. The construction of dams continued
.
Many cement and fertilizer plants were also built. Punjab began producing an abundance of wheat.
Many primary schools were started in rural areas. In an effort to bring democracy to the grass-root 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.
The target growth rate was 5.6%, but the actual growth rate was 2.4%.
Due to miserable failure of the Third Plan the government was forced to declare "plan holidays" (from 1966–67, 1967–68, and 1968–69). Three annual plans were drawn during this intervening period.
During 1966–67 there was again the problem of drought. Equal priority was given to agriculture, its allied activities, and industrial sector. The main reasons for plan holidays were the war, lack of resources, and increase in inflation.
Fourth Plan (1969–1974)
At this time Indira Gandhi was the Prime Minister. The Indira Gandhi government nationalised 14 major Indian banks and the Green Revolution in India in mid 1960s advanced agriculture and attaining food security.
In addition, the situation in East Pakistan (now Bangladesh) was becoming dire as the Indo-Pakistan War of 1971 and Bangladesh Liberation War took funds earmarked for industrial development.
India also performed theSmiling Buddha underground nuclear test in 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of Bengal.
The target growth rate was 5.6%, but the actual growth rate was 3.3%.
Fifth Plan (1974–1979)
The Fifth Five-Year Plan laid stress on employment, poverty alleviation (Garibi Hatao), and justice. The plan also focused on self-reliance in agricultural production and defence.
In 1978 the newly elected Morarji Desai government rejected the plan. The Electricity Supply Act was amended in 1975, which enabled the central government to enter into power generation and transmission.
The Indian national highway system was introduced and many roads were widened to accommodate the increasing traffic. Tourismalso expanded. It was followed from 1974 to 1979.
The target growth rate was 4.4% and the actual growth rate was 3.8%
Rolling Plan (1978–1980)
The Janata Party government rejected the Fifth Five-Year Plan and introduced a new Sixth Five-Year Plan (1978–1980).
This plan was again rejected by the Indian National Congress government in 1980 and a new Sixth Plan was made.The Rolling Plan consists of three kind of plans that were proposed.
The First Plan is for the present year which comprises the annual budget and Second is a plan for a fixed number of years, which may be 3, 4 or 5 years.
Plan number two is kept changing as per the requirements of the Indian economy.
The Third Plan is a perspective plan which is for long terms i.e. for 10, 15 or 20 years.
Hence there is no fixation of dates in for the commencement and termination of the plan in the rolling plans.
The main advantage of the rolling plans is that they are flexible and are able to overcome the rigidity of fixed five year plans by mending targets,the object of the exercise, projections and allocations as per the changing conditions in the country’s economy.
The main disadvantage of this plan is that if the targets are revised each year, it becomes very difficult to achieve them which are laid down in the five-year period and it turned out to be a complex plan.
Frequent revisions make them resulted in instability of the economy which are essential for its balanced development and progress.
Sixth Plan (1980–1985)
The Sixth Five-Year Plan marked the beginning of economic liberalisation.
Price controls were eliminated and ration shops were closed. This led to an increase in food prices and an increase in the cost of living.
This was the end of Nehruvian socialism. TheNational Bank for Agriculture and Rural Development was established for development of rural areas on 12 July 1982 by recommendation of the Shivaraman Committee.
Family planning was also expanded in order to prevent overpopulation.
In contrast to China's strict and binding 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.
The Sixth Five-Year Plan was a great success to the Indian economy.
The target growth rate was 5.2% and the actual growth rate was 5.4%. The only Five-Year Plan
which was done twice.
Seventh Plan (1985–1990)
The Seventh Five-Year Plan marked the comeback of the Congress Party to power.
The plan laid stress on improving the productivity level of industries by upgrading of technology.
The main objectives of the Seventh Five-Year Plan were to establish growth in areas of increasing economic productivity, production of food grains, and generating employment.
As an outcome of the Sixth Five-Year Plan, there had been steady growth in agriculture, controls on the rate of inflation, and favourable balance of payments which had provided a strong base for the Seventh Five-Year Plan to build on the need for further economic growth.
The Seventh Plan had strived towards socialism and energy production at large.
The thrust areas of the Seventh Five-Year Plan were: social justice, removal of oppression of the weak, using modern technology, agricultural development, anti-poverty programmes, full supply of food, clothing, and shelter, increasing productivity of small- and large-scale farmers, and making India an independent economy.
Based on a 15-year period of striving towards steady growth, the Seventh Plan was focused on achieving the prerequisites of self-sustaining growth by the year 2000.
The plan expected the labour force to grow by 39 million people and employment was expected to grow at the rate of 4% per year.
Annual Plans (1990–1992)
The Eighth Plan could not take off in 1990 due to the fast changing political situation at the centre and the years 1990–91 and 1991–92 were treated as Annual Plans.
Eighth Plan (1992–1997)
1989–91 was a period of economic 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 US$1 billion.
Thus, under pressure, the country took the risk of reforming the socialist economy. P.V. Narasimha Rao was the tenth 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 (later Prime Minister of India) launched India's free market reforms that brought the nearly bankrupt nation back from the edge.
It was the beginning of privatisation and liberalization in India.it is popularly known as rao-manmohan strategy/new economic policy /LPG era of india.
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, the Rao and Manmohan model of economic development.
The major objectives included, controlling population growth, poverty reduction, employment generation, strengthening the infrastructure, institutional building, tourism management, human resource development, involvement of Panchayati rajs, Nagar Palikas, NGOs, decentralisation and people's participation.
Ninth Plan (1997–2002)
The Ninth Five-Year Plan came after 50 years of Indian Independence. Atal Bihari Vajpayee was the Prime Minister of India during the Ninth Five-Year Plan.
it emphasized quality of life , generation of productive eployment , reginal balance
The Ninth Five-Year Plan tried primarily to use the latent and unexplored economic potential of the country to promote economic and social growth.
It offered strong support to the social spheres of the country in an effort to achieve the complete elimination of poverty.
The satisfactory implementation of the Eighth Five-Year Plan also ensured the states' ability to proceed on the path of faster development.
The Ninth Five-Year Plan also saw joint efforts from the public and the private sectors in ensuring economic development of the country.
In addition, the Ninth Five-Year Plan saw contributions towards development from the general public as well as governmental agencies in both the rural and urban areas of the country.
New implementation measures in the form of Special Action Plans (SAPs) were evolved during the Ninth Five-Year Plan to fulfil targets within the stipulated time with adequate resources.
The SAPs covered the areas of social infrastructure, agriculture, information technology and Water policy.
Objectives
The main objective of the Ninth Five-Year Plan was to correct historical inequalities and increase the economic growth in the country. Other aspects which constituted the Ninth Five-Year Plan were:
Population control.
Generating employment by giving priority to agriculture and rural development.
Reduction of poverty.
Ensuring proper availability of food and water for the poor.
Availability of primary health care facilities and other basic necessities.
Primary education to all children in the country.
Empowering the socially disadvantaged classes like Scheduled castes, Scheduled tribes and other backward classes.
Developing self-reliance in terms of agriculture.
Acceleration in the growth rate of the economy with the help of stable prices.
Strategies
Structural transformations and developments in the Indian economy.
New initiatives and initiation of corrective steps to meet the challenges in the economy of the country.
Efficient use of scarce resources to ensure rapid growth.
Combination of public and private support to increase employment.
Enhancing high rates of export to achieve self-reliance.
Providing services like electricity, telecommunication, railways etc.
Special plans to empower the socially disadvantaged classes of the country.
Involvement and participation of Panchayati Raj institutions/bodies and Nagar Palikas in the development process.
Performance
The Ninth Five-Year Plan achieved a GDP growth rate of 5.4% against a target of 6.5%
The agriculture industry grew at a rate of 2.1% against the target of 4.2%
The industrial growth in the country was 4.5% which was higher than that of the target of 3%
The service industry had a growth rate of 7.8%.
An average annual growth rate of 6.7% was reached.
The Ninth Five-Year Plan looks through the past weaknesses in order to frame the new measures for the overall socio-economic development of the country.
However, for a well-planned economy of any country, there should be a combined participation of the governmental agencies along with the general population of that nation.
A combined effort of public, private, and all levels of government is essential for ensuring the growth of India's economy.
The target growth was 7.1% and the actual growth was 6.8%.
Tenth Plan (2002–2007)
The main objectives of the Tenth Five-Year Plan were:
Attain 8% GDP growth per year.
Reduction of poverty rate by 5% by 2007.
Providing gainful and high-quality employment at least to the addition to the labour force.
Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.
20-point program was introduced.
Target growth: 8.1% – growth achieved: 7.7%
Expenditure of ₨ 43,825 crores for tenth five years
Eleventh Plan (2007–2012)
Rapid and inclusive growth.(Poverty reduction)
Emphasis on social sector and delivery of service therein.
Empowerment through education and skill development.
Reduction of gender inequality.
Environmental sustainability.
To increase the growth rate in agriculture,industry and services to 4%,10% and 9% respectively.
Reduce Total Fertility Rate to 2.1
Provide clean drinking water for all by 2009.
increase agriculture growth to 4%.
Twelfth Plan (2012–2017)
The theme of the Approach Paper is “faster, sustainable and more inclusive growth”.
The Approach Paper in broader sense laid down the major targets of the Twelfth Plan, the key challenges in meeting them and the broad approach to be followed to achieve the stated objectives.
It proposes a growth target of 8 percent.
However in view of the uncertainties in the global economy, and challenges in the domestic economy, achieving the growth rate of 9 percent may not be feasible unless difficult decisions are taken. And this uncertainty was also discussed in the process.
The document has projected the aggregate Plan resources at Rs37.16 lakh crore during the five year period starting 2012-13.
Increasing green cover by one million hectare every year and adding 30,000 MW of renewable energy generation capacity in the Plan period.
To reduce emission intensity of the GDP in line with the target of 20-25 reduction by 2020 over 2005 levels.
Raising agriculture output to 4 per cent for the full Plan.
Manufacturing sector growth to 10 per cent for the full Plan.
Target of adding over 88,000 MW of power generation capacity in the 12th five year plan.
It also wants all the states to set higher targets of growth than what was achieved in the 11th Five Year Plan.
All the targets are welcome step and now total care should be taken in implementation process, because that is the field where our government lacks efficiency.
In a small blow to the projections, the document envisages 6.7 per cent growth rate in the current fiscal, but now it has been projected at 5.7-5.9 per cent in 2012-13 by the Finance Ministry.
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