Five yr planning in India

Is Planning relevant in Indian context today?

What is Plan?

Define Plan

• Spells out how the resources of a nation should be put to use.

• Has some general goals as well as specific objectives, which are to be achieved within a specified period of time.

• Unrealistic to expect all the goals of a plan to be given equal importance in all the plans.

History of Plans• Borrowed the concept of five-year plans from the

former soviet union, the pioneer in national planning

• Jawaharlal Nehru was impressed with the remarkable successes in industrialization achieved by the USSR in their initial five year plans

• India has an extensive network setup to formulate 5-year plans under the supervision of the planning commission

Why to Plan

• After independence, was in dire conditions and needed to start acting soon

• Some of the problems necessitated need for an immediate plan:– Vicious circle of poverty – Foreign Trade – Need for Rapid industrialization – Population pressure – Development of Natural resources – Backward Population – Capital Deficiency – Market imperfections

Objectives of Planning

• Central objective - raise the standard of living of the people– To increase per capita and NI– Higher level of employment– Growth with social justice– Increasing industrial output– To remove bottlenecks in agriculture, manufacturing

industry– Reduction of inequality in income– Modernization – Self- reliance

Stages in Planning• Formulation- by planning commission. In this stage,

planning commission prepares draft that goes to National development council. The council then endorse the draft, and it is forwarded to Parliament.

• Adoption- By Parliament

• Approval- After the approval of Parliament only, the draft becomes the planned document.

• Execution-By executive

• Supervision- By Officials

Pre-conditions of Planning

• Collection of Statistical Data- If at collection stage data is incorrect or irrelevant or collected half heartedly then economic planning won‘t be effective at all.

• Economic Organization • Government Setup • Public Cooperation- Citizen must provide every

information so that government can formulate policies for their betterment.

Characteristics of Planning

• Major economic decisions are determined by a central authority, through the planning commission.

• The government will have the powers of implementation.

• The planners fix the targets for the sectors and also decide how much investment must be made in each sector to achieve the targets.

Planning and its Impact

Planning Organization & its Divisions• Prime minister is the chairman of the planning

commission• The planning commission functions through several

divisions, each headed by a senior officer. • Works under the overall guidance of the national

development council.• Deputy chairman and the full time members of the

commission provide advice and guidance to the subject divisions

Planning Commission Divisions

• Planning Areas is divided under the following sectors:AgricultureInfrastructureSocial SectorOther sectors/ Areas

Five year Plan overview

First plan (1951-1956)• Plan primarily addressed the agrarian sector

• Including investments in dams and irrigation

• Total plan budget of 206.8 billion INR was allocated to seven broad areas: o Irrigation and energy (27.2 percent)o Agriculture and community development (17.4 percent)o Transport and communications (24 percent)o Industry (8.4 percent)o Social services (16.64 percent)o Land rehabilitation (4.1 percent), and o Other (2.5 percent)

• Target 2.1% annual GDP growth, achieved 3.6 % ; per capita income up by 8%

• The Bhakra dam and Hirakud dam projects initiated

• Contracts signed to start 5 major steel plants

• UGC set up; plans to set up IITs initiated

Second plan (1956-1961)

• Focused on industry, especially heavy industry

• Development of the public sector

• Advocated huge imports, which led to emptying of funds leading to foreign loans

• 5 steel mills established, coal production increased

• Initiated license raj

• Price level increased by 30%

Third plan (1961-1966)

• Stressed on agriculture and improving production of rice

• Panchayat elections were started and the states were given more development responsibilities

• Higher stress on grass-root level education

• Increased focus on cement and fertilizer plants

• Sino-Indian War in 1962 exposed weaknesses in the economy and shifted the focus towards defence

• War-time policies led to inflation and the priority was shifted to price stabilisation

• Increased foreign aid needed to maintain development expenditures eventually provided 28 percent of public development spending

Fourth plan (1969-1974)

• Nationalised 14 major Indian banks and the Green Revolution in India advanced agriculture

• Spending on war efforts reduced industrial spending

• Poor monsoon and influx of refugees form Bangladesh

• Projected national income growth at 5.7 percent/ yr; realized rate - 3.3 percent

• Focus on sorting short-term problems; No long term focus in plan

Fifth plan (1974-1979)

• Stress on employment, poverty alleviation, and justice

• Also focused on self-reliance in agricultural production and defence

• Rapidly changing oil prices in 1973 forced series of revision during formulation of plan

• Turmoil in world economic situation caused high inflation in prices of energy, fertilizers and food sector

• Terminated in 1978 by the newly elected Morarji Desai govt

• Janta govt’s 5-yr plan was terminated in 1980 by next Congress govt.

Sixth plan (1980-1985)

• Aimed for rapid industrial development, especially in the area of information technology

• Marked the beginning of economic liberalization

• Price controls were eliminated and ration shops were closed - led to an increase in food prices and an increased cost of living

• Family planning concept introduced – but not forcibly

• Planned GDP growth - 5.1 percent a year, achieved 5.4 percent

• Political constraints limited effectiveness of industrial growth policies

Seventh plan (1985-1989)

• Establish growth in the areas of increasing economic productivity, production of food grains, and generating employment opportunities

• Stress on improving the productivity level of industries by upgradation of technology

• Long-term steady growth plan: focused on achieving the pre-requisites of self-sustaining growth by the year 2000

• Economy recorded 6% growth rate against the targeted 5%

– 1989-91 was a period of political instability in India and hence no five year plan was implemented

– In 1991, India faced a crisis in foreign exchange(Forex) reserves

Eighth plan (1992-1997)

• Gradual opening of the Indian economy to reduce the high deficit and foreign debt

• Energy was given priority with 26.6% of the outlay

• Avg annual growth rate of 6.7% against the target 5.6%

• major objectives included containing population growth, poverty reduction, employment generation, strengthening the infrastructure, Institutional building, Human Resource development, Involvement of Panchayat raj

Ninth Plan (1997 - 2002)

• Developed in the context of four important dimensions: Quality of life, generation of productive employment, regional balance and self-reliance

• 1998 Nuclear test and subsequent sanctions imposed affected Ex-Im but developed domestic capabilities

• Services sector showed higher growth

• Growth rate was 5.35 per cent, against the target GDP growth of 6.5 per cent

Tenth plan (2002-2007)• Reduction of poverty ratio to 20% by 2007 and to 10% by 2012• Providing gainful high quality employment to the addition to the labour

force over the tenth plan period• Universal access to primary education by 2007• Reduction in gender gaps in literacy and wage rates by atleast 50% by

2007• Reduction in decadal rate of population growth between 2001 and 2011

to 16.2%• Increase in literacy rate to 72% within the plan period and to 80% by

2012.• Reduction of Infant Mortality Rate (IMR) to 45 per 1000 live births by

2007 and to 28 by 2012• All villages to have sustained access to potable drinking water by 2012• Achieved 7.7% growth rate against visualized 10%

Eleventh plan (2007-2012)• Accelerate GDP growth from 8% to 10% and then

maintain at 10% in the 12th Plan in order to double per capita income by 2016-17

• To reduce the poverty by 10% and generate 7cr new employment opportunities

Analysis

• Planning outlines have been greatly influenced by leaning of government at centre

• Accountability and target ownership is not present

• Some hold belief that the Industrial development here has not been because of, rather inspite of government efforts.

Deficiencies of Planning - 1

• A minimum standard of living could have been ensured for all if resources had been thought of, not in money term, but in terms of people

• In spite of enormous advancement in industrialization there has been no change in the occupational pattern of the country‘s work force

• So long the emphasis was on financial rather than physical targets

• Government policy has aggravated inequality in the distribution of wealth

Deficiencies of Planning - 2

• 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.

• We have also failed to create self-reliance.• The tenancy reforms have not been complete and

insecurity of tenure has been much more pronounced.

Deficiencies of Planning - 3

• The economy has faced an-uninterrupted inflationary process. Eroded purchasing power of the people-increased project cost, and reduced the competitiveness of the economy.

• The resources allocation pattern does not show any consistent trend. Various aspects of social sector has been neglected.

• The growth rate in the plan period in most cases has not been satisfactory. They have not helped to remove poverty and unemployment.

Deficiencies of Planning - 3

• The economy has faced an-uninterrupted inflationary process. Eroded purchasing power of the people-increased project cost, and reduced the competitiveness of the economy.

• The resources allocation pattern does not show any consistent trend. Various aspects of social sector has been neglected.

• The growth rate in the plan period in most cases has not been satisfactory. They have not helped to remove poverty and unemployment.

Conclusion

YES, because... - 1• Because of excellent economic planning now

we are one of the parts of developing countries.

• Five year duration chosen gives planning commission ample time to review the effects or ineffectiveness of the plans

• Planning has also evolved over the years with plans becoming more and more inclusive and broadening their scope.

• Because of liberalization the rate Foreign Direct Investment increased after 1991

YES, because... - 2

• India has been blessed with good planners with a very impartial outlook development.

• After introduced 1991 policy the growth of India became very faster

• We were brought out of out slumber by the crisis of 1991 and subsequent pressure from World bank.

• “We need to back our lofty plans with equally high Implementation plans.”

Thank You!!