Indian Economy

Prelims 2020
Crash Course
Rise 2.0
By Kapil Sikka
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 About Me
● I have been mentoring, guiding
and teaching UPSC students since
6 years.
● I teach Polity, Indian Economy,
Essay, Internal Security & Post
Independence India.
● In past 6 years I have mentored
more than 5000 aspiring
candidates, many of them have got
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GDP Deflator
• The GDP price deflator is also known as the GDP deflator or the
implicit price deflator
• It measures the changes in prices for all of the goods and services
produced in an economy.
• It helps economists compare the levels of real economic activity from
one year to another.
• The GDP deflator is a more comprehensive inflation measure than
the CPI index because it isn't based on a fixed basket of goods.

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• Since the deflator covers the entire range of goods and services
produced in the economy — as against the limited commodity
baskets for the wholesale or consumer price indices — it is seen as a
more comprehensive measure of inflation.

• As a result, nominal GDP will most often be higher than real GDP in
an expanding economy.
• The formula to find the GDP price deflator:
• GDP price deflator = (nominal GDP ÷ real GDP) x 100

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 Economic Planning
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@kapillive
Contents of Chapter
• Introduction
• Definition
• Origin and Expansion of Planning
• Types of Planning

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What is Planning

• “the making of major economic decisions—what and how much is to be

produced and to whom it is to be allocated by the conscious decision of a
determinate authority, on the basis of a comprehensive survey of the economic
system as a whole.” HD Dickinson

• “Planning, under a democratic system, may be defined as the technical

coordination, by disinterested experts of consumption, production, investment,
trade, and income distribution, in accordance with social objectives set by bodies
representative of the nation. Such planning is not only to be considered from the
point of view of economics, and raising of the standard of living, but must include
cultural and spiritual values, and the human side of life.”
Introduction
• A comprehensive plan sets targets to cover all major aspects of the
economy, while a partial plan may go for setting such targets for a part of
the economy (i.e., agriculture, industry, public sector, etc.).

• It is a process, which incorporates well defined goals, for the optimum

utilisation of resources

• Used widely in India, along with China, USSR, France whereas USA,
Canada, Mexico never went for planning
Origin of Planning
• Regional Planning - 1916 started in Tennessee Valley (USA)

• National Planning- Soviet (under gosplan)

Types of Planning
• Imperative Planning – Targeted Planning
• State Control
• No role for Markets
• It suitable for Planned Economies

• Indicative Planning
• Mixed Economies
• Monnet Plan

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Santiago/New Consensus (1998)
• Indicative planning

• Marginal role of state in economy

• State will provide nutrition, healthcare, drinking water, education,

social security, etc

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Normative Approach of Planning
• Generally Planning is largely value-neutral
• Focus is on the economic aspects of development.
• Socio-cultural variables are taken care of.
• Only quantitative data matters
• Normative approach of planning is value-based.
• Planning remains according to the value system of the target
population

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Normative Approach of Planning
• The Economic Survey 2010–11 highlighted this need

• Programme/scheme run by the governments if not able to connect

with the customs, traditions and ethos of the population, their will
not be accepted by population

• Niti Aayog was established for this approach only to plan according to
culture, ethos and sustenance

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Examples
• Giving up subsidy culture
• Removing Social prejudices,
• Swach Bharat Mission
• Public Cleanliness

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Planning in India
What is Planning
• For the first eight Plans the emphasis was on a growing public sector with
massive investments in basic and heavy industries, but since the launch of the
Ninth Plan in 1997, the emphasis on the public sector has become less
pronounced and the current thinking on planning in the country, in general, is
that it should increasingly be of an indicative nature”
• PC, 2013
The Visvesvaraya Plan
• Popular civil engineer and the ex-Dewan of the Mysore state, M.
Visvesvaraya gave first blueprint of plan
• The planned Economy of India, published in 1934, outlined the broad
contours of his plan proposal.
• Promoted democratic capitalism (similar to the USA) with emphasis
on industrialisation
• Doubling National Income in a decade

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The FICCI Proposal
• Federation of Indian Chambers of Commerce and Industry (FICCI),
for a comprehensive plan for economic development covering the
holistic economic activities
• Proposed a National Planning Commission’ to coordinate the whole
process of planning
• Capitalist, Ranade, Naroji all got influenced by Keynesian Model
• Role of state in development

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The Congress Plan
• An initiative of the INC president Subhash C. Bose
• that the National Planning Committee (NPC) was set up in October
1938 (chairmanship of Nehru)
• to work out for Holistic Development of Economy
• final report of the NPC could only be published in 1949

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Area of Focus
• NPC planned
• (i) Post War Reconstruction Committee: Early in June 1941
• (ii) Consultative Committee of Economists:
• (iii) Planning and Development Department:
• (iv) Advisory Planning Board: In October 1946,
• The Board strongly recommended the creation of “a single, compact
authoritative organisation ... responsible directly to the Cabinet
• States opposed due to highly centralized viewpoints

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The Bombay Plan
• Prepared by India’s leading capitalists. Like plan Thakurdas, J.R.D.
Tata, G.D. Birla, Lala Sri Ram, Kasturbhai Lalbhai, A.D. Shroff, Avdeshir
Dalal and John Mathai.
• The Plan was published in 1944–45.
• Agri restructuring
• Basic Industries
• Role of State along in development and removing inequalities

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The Gandhian Plan

• Idea of Cottage Industries

• ‘decentralised economic structure’ for India with ‘self-contained

villages’..

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The people’s Plan.
• based on Marxist socialism
• need of providing the people with the ‘basic necessities of life’.
• Agricultural and industrial sectors were equally highlighted by the
plan.
• Later in mid 90’s 2000’s many govt adopted this plan

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The Sarvodaya Plan
• Jayaprakash Narayan’s—the Sarvodaya Plan

• Inspired from Gandhi and Bhave.

• Narayan criticized state heavy centralised planning model

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Objectives of Planning
• Economic Growth

• Poverty alleviation

• Employment Generation

• Controlling Economic Inequality

• Self Reliance

• Modernisation
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Planning Commission
• Extra-constitutional & non-statutory
• Advisory body
• Autonomous body
• Technocratic organization

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Functions were
• Asses Resources

• Plan formulation

• Plan Review

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Independent Evaluation Office Report for PC
• Top Down

• Centralized

• Replace with Reform and Solutions Commission

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Reform and Solutions Commission Functions
• Exchange of Ideas b/w various stakeholders

• Integrate Institutions

• Identify New Challenges

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National Development Council
• The National Development Council (NDC) (1952)
• by a Resolution of the Cabinet Secretariat to promote

• A Model of Federalism

• Co-operative Federalism

• Model of Decentralized Planning

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Central Planning
• Five Year Plan

• Twenty Point Prog

• MPLADS

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12TH FYP
• The broad vision and aspirations which the Twelfth Plan seeks to fulfil
are reflected in the subtitle: ‘Faster, Sustainable, and More Inclusive
Growth’.
• Inclusiveness is to be achieved through poverty reduction, promoting
group equality and regional balance, reducing inequality,
empowering people etc
• whereas sustainability includes ensuring environmental sustainability
,development of human capital through improved health, education,
skill development, nutrition, information technology etc and
development of institutional capabilities , infrastructure like power
telecommunication, roads, transport etc ,

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20 Point Programe
• Launched in 1975
• Improving quality of life especially poor
• Education
• Housing
• Family welfare
• Health
• TPP 86, TPP2006,

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MPLADS

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2014Revised Guidelines
• New permissible list

• Focus on Village-Rural Development

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