#e *of a . Aanujjindal.in NG we os Notes Planning Period in India bee1.0 Introduction + Economic planning aims to organize economic activities through specific policies and schemes to achieve long-term objectives. + Inspired by the Soviet Union, India initiated five-year plans for economic development, spearheaded by Prime Minister Pt. Jawaharlal Nehru. + The first five-year plan (1951-1956) marked India's entry into planned economic development. + India has completed twelve five-year plans, with the Twelfth concluding in 2017, marking the end of the era of five-year plans. 2.0 Types of Economic Planning + Imperative Planning (Directive Planning): © Authoritative planning where a central authority dictates economic activities. © Practiced in socialist and communist economies, devoid of market mechanisms like private property and competition. © Resources are fully utilized to meet plan targets set by the central authority. + Indicative Planning: © Flexible planning method prevalent in capitalist and mixed economies. © Government acts as a facilitator, encouraging private sector participation. © Emphasizes holistic policy formulation without diminishing the state's role 3.0 Key Characteristics of the Indian Planning System + Centralized formulation: Plans are developed centrally, typically by the Planning Commission (now NITI Aayog).+ Decentralized execution: Implementation of plans occurs at decentralized levels, involving state and local governments. + Directive and indicative: Combines elements of both imperative and indicative planning methods. + Democratic character: Planning processes involve democratic principles, with inputs from various stakeholders. + Developmental focus: Aimed at fostering overall economic and social development of the country. 4.0 Long-Term Objectives of Economic Planning in India Objectives of Indian Economic Planning: + Economic Development: © Goal: Maximize production for increased national and per capita income. © Focus: Rapid economic growth. + Employment Generation: © Objective: Achieve full employment across sectors. © Aim: Provide job opportunities for all. * Social Equity: © Aim: Reduce income and wealth inequalities. © Vision: Establish a fair and just society. * Societal Transformation: © Objective: Build a socialistic society based on equality and justice. © Aspiration: Create a society free from exploitation.5.0 Government Budgeting and Five-Year Plans + Budget Preparation: © The Government of India drafts a comprehensive document outlining income and expenditure for a five-year period. + Budget Classification: © Central and state government budgets comprise: = Non-plan budget: Annual expenditure on routine items. = Plan budget: Expenditure allocated over a five-year period, aligned with plan priorities. + Implementation Model: © Inspired by Joseph Stalin's implementation of Five-Year Plans in the Soviet Union in 1928. © Indian economy modeled on the concept of five-year planning from 1951 to 2017. + Planning Commission: © Responsible for formulating, implementing, and regulating the Five-Year Plans. © Served as the central body overseeing economic planning and development. 6.0 The Planning Commission: Central Planning Authority in India + Establishment: © Formed in March 1950 to promote economic development through planning. + Compo:© Chaired by the Prime Minister of India, with a Deputy Chairman and several full-time members. + Divisions: © Divisions covered various sectors including education, health, infrastructure, science, finance, industry, social welfare, rural development, and water resources. + Transition to NITI Aayog: © In 2015, the Planning Commission was replaced by the NITI Aayog. © NITI Aayog functions as a think tank and policy advisory body. + NITI Aayog's Initiatives: © NITI Aayog introduced three key documents: = 3-year action agenda = 7-year medium-term strategy paper = 15-year vision document 7.0 Planning Phases in India PRE-1991 PHASE + During the period from 1951 to 1990, India pursued a planning strategy characterized by a dominant public sector and regulated private sector. The strategies employed during this phase included: © Heavy Reliance on Public Sector © Regulated Expansion of Private Sector © Development of Heavy Industries © Protection of Small-Scale Industry © Inward Looking Trade Strategy © Thrust on Savings and Investment © Restriction on Foreign Capital7:1 Harrod-Domar Model (Adopted in the 1st Five-Year Plan) + Emphasis: © Highlights the dual role of capital accumulation: = Increasing national income (demand-side role). = Expanding production capacity (supply-side role). * Key Points: o Demand-side Role: = Capital accumulation boosts national income by stimulating demand for goods and services. © Supply-side Role: = Itenhances production capacity, leading to increased output and economic growth. Planner's Decision: = Planners must determine the rate of net investment increase to balance demand and supply for achieving full employment equilibrium in the long run 7.2 Nehru-Mahalanobis Model (Adopted in the 2nd FYP) ‘Two-Sector Model Strategy (Adopted from the 2nd to 5th Five-Year Plans) + Model Basis: © Two-sector model comprising: = Consumer goods sector = Capital goods sector + Emphasis: © Heavy investment in heavy industries to drive industrialization for rapid economic growth.© Inspired by the Russian strategy, focusing on heavy industry development. + Objectives: © Achieve self-reliance and overcome capital constraints by boosting domestic industrial capacity. + Implementation: © Introduced in the 2nd Five-Year Plan and continued through the Sth Five- Year Plan. © Considered a long-term strategy for sustained economic development. 7.3 Gandhian Strategy + Origin: © Drafted by Acharya Sriman Narayan Agarwal in 1944. + Objectives: © Raise the material and cultural standards of the masses. © Provide a basic minimum standard of living. + Emphasis: © Scientific development of agriculture. © Rapid growth of cottage and village industries. + Focus: © Employment-oriented planning prioritized over production-oriented planning of the Nehru-Mahalanobis strategy POST-1991 PHASE 7.4 New Economic Policy: Liberalization, Privatization, and Globalization (LPG) Model + Introduction:© Introduced in 1991 by the then Finance Minister Dr. Manmohan Singh. + Key Features: © Encouragement of Foreign Capital: = Foreign Direct Investment (FDI) and Foreign Institutional Investment (Fil) were promoted to boost economic growth. © Promotion of Private Sector = Private sector participation was encouraged, and the market was given more freedom to operate. © Export Promotion and Import Liberalization: = Export promotion measures were implemented, while restrictions on imports were minimized. © Public-Private Partnership (PPP): = Emphasis was placed on promoting the Public-Private Partnership (PPP) model to leverage the strengths of both sectors. 7.5 PURA (Providing Urban Amenities in Rural Areas): A Neo-Gandhian Approach to Development Strategy * Initiation: © Proposed by former President Dr. Abdul Kalam in January 2003 to empower and accelerate rural development. + Connectivity Focus: © Aimed at providing four types of connectivity to rural areas: 1. Physical connectivity (roads, railways, bridges, etc.). 2. Electric connectivity 3. Knowledge connectivity 4. Economic connectivity + Implementation Approach:Advocated urban infrastructure and services provision in rural hubs to generate economic opportunities outside cities. + Challenges: © Despite its objectives, PURA faced challenges and couldn't achieve desired outcomes effectively. * PURA 2.0: © In 2012, Ministry of Rural Development introduced PURA 2.0, focusing on physical infrastructure development of Census Towns under a Public- Private Partnership (PPP) model + Shyama Prasad Mukherji Rurban Mission (SPMRM): © Launched in 2016 by Ministry of Rural Development, SPMRM aimed at similar objectives but with different features and perspective compared to PURA or PURA 2.0. 8.0 Five Years Plan in India: Duration, Targets and Achievements Plans Duration Target growth Actual growth Ist 1951 - 1956 21% 2nd 1956 - 1961 45% 3rd 1961 - 1968 5.6% Annual plans 1966 - 1969 NA ath 1969 - 1974 5.7% sth 1974 - 1979 44% 6th 1980 - 1985 5.2% 7th 1985 - 1990 5% Annual plans 1990-1992 ath 1992 - 1997 sth 1997- 2002 roth 2002 - 2007 8%Plans Duration Target growth Actual growth mith 2007 - 2012 9% 8% 12th 2012- 2017 8.2% 9.0 Key Features of Each Five Year Plan 9.1 First 5-Year Plan (1951-56) Challenges Faced: + Influx of refugees + Severe food shortage + Mounting inflation Approach of the Plan: + Based on Harrod-Domar Model. + Launched Community Development Program in 1952. + Heavy focus on transport and communication; limited focus on industrialization. + Rehabilitation of refugees due to partition. + Rapid agricultural development to achieve food security. + Implementation of irrigation projects like Bhakra Nangal, Damodar Valley, Hirakund, ete. + Emphasis on rural development and ensuring price stability. Evaluation of the Program: + The 1st Five-Year Plan was largely successful. * Agricultural production targets were surpassed.+ Short-term objectives of refugee rehabilitation, food self-sufficiency, and price control were mostly achieved 9.2 Second 5-Year Plan (1956-61) Periodic Situation of the Country: * Conceived in an atmosphere of economic stability. + Agricultural targets from the first plan were achieved, highlighting the need for development of heavy and basic industries. * Fallin price level. Approach of the Plan: + Mahalanobis Strategy: Highest priority to heavy industries and rapid development of public sector. © Developing self-sufficiency and availability of resources. © Heavy industrialization. © Development of capital goods. © Growth of consumer goods industries left to market forces. © Emphasis on import substitution. + Establishment of the socialist pattern of society. Problems Faced During the Plan: + Balance of payment crises due to acute shortage of foreign exchange. Evaluation of the Program: + Moderately successful, but implementation was hindered by acute shortage of foreign exchange. + Planning Commission had to reduce development targets as a result. 9.3 Third 5-Year Plan (1961-66) Periodic Situation of the Country:+ Indian planners perceived that the Indian economy had entered the "Takeoff stage." + The take-off stage is a period of intense growth in which a society begins to industrialize and achieve economic growth Approach of the Plan: + Aimed to make India a: © “self-reliant” and © “self-generating" economy. * Focus on: © Heavy industrialization © Food grain production + Shifted focus from development to defense due to conflicts with China in 1962 and with Pakistan in 1965. Evaluation of the Plan: + Complete failure in reaching plan targets due to: © Unforeseen events such as Chinese aggression (1962), Indo-Pak war (1965), and severe drought (1965-66). © Severe foreign exchange crisis leading to borrowing from the IMF. © Acute food shortage, with the United States exporting food grains to India in exchange for Indian rupees, known as PL-480 food aid under section 480 of US Public law. 9.4 Annual Plans (1966-69) Periodic Situation of the Country: + Despite having a draft for the 4th five-year plan, financial conditions worsened, leading to the planning and formulation of Annual Plans for the next three years. + Worsening financial conditions were caused by:‘© Two years of drought © Devaluation of the rupee © Inflationary pressures Approach of the Plan: + This period was termed the "planned holiday." + Implementation of a new agricultural strategy, which included: © Widespread distribution of High-Vielding Variety (HYV) seeds as part of the Green Revolution © Extensive use of fertilizers © Utilization of irrigation potential 9.5 Fourth 5-Year Plan (1969-74) Periodic Situation of the Country: + Influx of Bangladesh refugees before and after the 1971 Indo-Pak war posed a major challenge. + India faced disappointment during the Indo-Pakistan war when supposed allies refused to supply essential equipment and raw materials for economic development. Approach of the Plan: + Main Objectives: © Growth with stability © Progressive achievement of self-reliance + Based on GADGIL strategy, with a focus on agricultural growth to enable progress in other sectors and achieve self-reliance. * Decision to halt concessional imports of food grains from the USA. + Emphasis on social justice and family planning Evaluation of the Plan:+ The plan is considered a significant failure due to: © Promising first two years with record food grain and industrial production followed by disappointment in the next three years. © Successive failures of monsoons, declining food grain production, industrial setbacks due to power breakdowns and unrest. © Rapid rise in prices upsetting plan cost calculations. © Massive influx of refugees from Bangladesh and the Indo-Pakistan war of 1972 9.6 Fifth 5-Year Plan (1974-79) Periodic Situation of the Country: + The country faced a severe economic crisis due to runaway inflation, exacerbated by the surge in oil prices since September 1973 and the failure of the government's takeover of wholesale wheat trade. Approach of the Plan: + Main Objectives: © Poverty eradication (Garibi Hatao) © Attainment of self-reliance + Programs Launched: © Minimum Needs Program: Aimed to provide basic minimum needs to improve living standards. © Directed anti-poverty program: Introduced the '20-point Economic Program’ in 1975 to enhance the quality of life, especially for Below Poverty Line (BPL) families. + As emergency was declared in 1975, the plan was terminated, and a Rolling Plan (1978-83) was introduced by the New Janata Government in 1978. However, the Rolling Plan was abandoned due to a change in government in 1980.+ The Congress government treated 1978-79 as part of the original 4th Five- Year Plan and 1979-80 as a separate annual plan. 9.7 Sixth 5-Year Plan (1980-85) Approach of the Plan: Focus Areas: « Increasing national income * Modernization of technology * Ensuring continuous decrease in poverty and unemployment + Adopted the slogan 'Garibi Hatao' to alleviate poverty with a more targeted approach * Shifted focus from industrialization towards infrastructure development Employment Generation Programs: + National Rural Employment Program + Integrated Rural Development Program * Village and Small Industries Development Program Highest Financial Allocation: * Energy sector Evaluation of the Plan: + Considered a success + The Indian economy experienced all-round progress during this period, with most targets realized. + Agricultural output in the last year of the plan (1984-85) was lower than the previous year due to severe famine conditions. 9.8 Seventh 5-Year Plan (1985-90) Approach of the Plan: Focus Areas:+ Rapid growth in food grain production. + Increased employment opportunities. + Productivity improvement within the planning framework. + Initiation of long-term fiscal policy. + Introduction of the first-ever 3-year import-export policy. + Emphasis on infrastructure development. + Import substitution strategy and gradual liberalization of the economy. Evaluation of the Plan: + Considered a great success. + The sixth and seventh plans (the decade of the Eighties) witnessed a credible average annual growth rate of 5.8%, significantly higher than the previous plans' average of 3.5%. + The Indian economy surpassed the barrier of what Professor Raj Krishna sarcastically termed as "The Hindu rate of growth." 9.9 Annual Plans (1990-92) The 8th plan faced delays in 1990 due to the: * Fast-changing political situation at the center + Balance of Payments (BOP) crisis in 1991 and the conditions imposed by the IMF. + Asa result, the years 1990-91 and 1991-92 were treated as annual plans instead of the full-fledged 8th Five-Year Plan. 9.10 Eighth 5-Year Plan (1992-97) Periodic Situation of the Country: * The final version of the 8th plan was approved amidst: © Severe economic crisis triggered by a Balance of Payments (BOP) crisis© Rising debt burden © Ever-widening budget deficits © Mounting inflation and recession in the industry Approach of the Plan: + Implementation of Economic reforms as part of the new economic policy since July 1991 was a key focus. + Liberalization, privatization, and globalization were the main components of the new economic policy, also incorporated into the eighth plan. * Plan based on the (PV Narasimha) Rao-Manmohan Singh model of liberalization. + Recasting of the planning model from imperative and directive to indicative. Evaluation of the Plan: + Considered a great success, achieving a 6.8% GDP growth rate, the highest annual rate of growth against the targeted 5.6%. + Major outcomes included: © Rapid overall economic growth © High growth rates in agriculture, manufacturing, and allied sectors © Growth in imports and exports © Improvement in trade and current account deficit + However, social spending was neglected in this plan. + Adoption of economic reforms and liberalization, along with the importance given to the private sector and movement towards a market-based economic system, contributed to the higher rate of economic growth during the Eighth plan. 9.11 Ninth 5-Year Plan (1997- 2002) Approach of the Plan: Common Minimum Program of the United Front Government:+ Focused on achieving growth with equity, emphasizing: Improving the quality of life for the poor. Generating productive employment. Bringing about regional balance. Achieving self-reliance. + Priority areas included agriculture and rural development. Initiatives Launched: + Swarnajayanti Gram Swarojgar Yojana (SGSY) launched in 1990. * Pradhan Mantri Gram Sadak Yojana (PMSGY) started in 2000. Privatization and Disinvestment: * Privatization of public sector units began in this plan, while disinvestment had already started in the previous plan. 9.12 Tenth 5-Year Plan (2002-07) Approach of the Plan: Main Objectives: * Reduction of: Poverty ratio by 5 percentage points by the end of the plan period. Gender gap in literacy and wages by at least 50%. Decadal rate of population growth between 2001 and 2011 to 16.12%. Infant mortality rate to 45 per 1000 births by 2007 and 28 per 1000 births by 2012. Overall capital outflow. + Increase in: 8% GDP growth per year. Literacy rates to 75% by 2007. Forest and tree cover to 25% by 2007 and 33% by 2012.© Domestic savings, foreign investment, and foreign exchange. + Universal access to primary education. + Providing gainful high-quality employment to the additional labor force. + Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012. + Initiated programs like NREGA and National Rural Health Mission. Evaluation of the Plan: Achievements: + The plan propelled the economy to a higher growth trajectory of 7.6% compared to 5.5% in the Sth plan. + Increased levels of saving and investment to 32% and 34%, respectively. + Enhanced foreign exchange reserves and foreign investment flows. Failures: + Growth benefits largely benefited the better-off sections of society, failing to trickle down to the poor and weaker sections. + Missed targets for reducing infant mortality rate (IMR) and child malnutrition, with IMR still high at 58 per 1000 births. * Gross failure in agriculture, achieving only 2.1% growth against the 4% target. + Unsuccessful in poverty reduction, unemployment reduction, and reducing regional inequalities. 9.13 Eleventh 5-Year Plan (2007-12) Periodic Situation of the Country: The plan was launched amidst the emerging Global Financial Crisis in 2008. Approach of the Plan: Major Highlights: To Increasi * Overall GDP growth to 9%.+ Agriculture sector growth to 4%. + Real wage rate of unskilled workers by 20%, + Literacy rate for persons aged 7 years or above to 85%. * Sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-17. + Forest coverage by 5% points. + Energy efficiency by 20% points within 2016-17. To Reduce: + Dropout rates of children from elementary school from 52.2% in 2003-04 to 20% by 2011-12. * Total fertility rate to 21%. * Infant mortality rate to 28. + Malnutrition among children aged 0 to 3 years to half of its present level. + Anaemia among girls and women by 50%. Other Objectives: + Create 70 million new work opportunities and reduce educated employment to below 5%. + Allocate 30.2% of the total outlay for the social service sector for the first time. + Ensure that at least 33% of the direct and indirect beneficiaries of all government schemes were women and girl children. + Ensure all-weather road connectivity to habitations with a population of 1,000 and above by the end of 2009. + Attain WHO standards of air quality in all major cities by 2012. Theme of the Plan: Towards faster and more Inclusive growth. Evaluation of the Plan: Despite challenges such as the global economic crisis and weak monsoons, thegrowth in the Tith plan period is almost at par with the 10th plan. This performance is commendable given these circumstances. 9.14 Twelfth 5-Year Plan Periodic Situation of the Country: The Twelfth Plan began amid the second global financial crisis, triggered by sovereign debt issues in the Eurozone during the Eleventh Plan. Approach of the Plan: The plan emphasized the need to restore rapid growth while ensuring inclusivity and sustainability. Its subtitle, ‘Faster, Sustainable, and More Inclusive Growth,’ reflected these aspirations. Inclusive Growth: + Poverty reduction + Promotion of group equality and regional balance + Reduction of inequality + Empowerment of people Sustainable Growth: + Environmental sustainability + Development of human capital (health, education, skill development, nutrition, IT) + Development of institutional capabilities and infrastructure (power, telecommunication, roads, transport) Monitorable Targets of the Plan: Economic Growth: + Real GDP growth rate of 8.0%* Agriculture growth rate of 4.0% + Manufacturing growth rate of 10.0% + Every state to achieve an average growth rate higher than the Eleventh Plan Poverty and Employment: + Reduction of head-count ratio of consumption poverty by 10 percentage points * Generation of 50 million new work opportunities in the non-farm sector Education: + Increase mean years of schooling to seven years * Create two million additional seats for higher education + Eliminate gender and social gaps in school enrollment Health: * Reduce IMR to 25 and MMR to 1 per 1,000 live births, and improve Child Sex Ratio (0-6 years) to 950 by the end of the Twelfth FYP + Reduce Total Fertility Rate to 2.1 by the end of Twelfth FYP * Reduce under-nutrition among children aged 0-3 years to half of the NFHS-3 levels by the end of Twelfth FYP Infrastructure: + Increase investment in infrastructure to 9% of GDP + Increase gross irrigated area * Provide electricity to all villages + Connect all villages with all-weather roads + Upgrade national and state highways + Complete Eastern and Western Dedicated Freight Corridors + Increase rural tele-density Environment and Sustainability:* Increase green cover (as measured by satellite imagery) by 1 million hectare every year during the Twelfth FYP + Add 30,000 MW of renewable energy capacity + Reduce emission intensity of GDP in line with the target of 20% to 25% reduction over 2005 levels by 2020 Service Delivery: + Provide access to banking services to 90% of Indian households + Shift major subsidies and welfare payments to direct cash transfers using the Aadhar platform These targets aimed to propel India towards faster, more inclusive, and sustainable growth during the Twelfth Five-Year Plan period.