Introduction & Planning of Indian Economy PDF

INTRODUCTION & PLANNING

ECONOMIC PLANNING IN INDIA

History of Planning in India

• First attempt to initiate economic planning in India was made by Sir M. Visvesvaraya, a noted engineer and politician, in 1934 through his book, 'Plannet Economy for India'.
• In 1938, 'National Planning Commission' was set up under the chairmanship of JL Nehru by the Indian National Congress. Its recommendation could not be implemented because of the beginning of the Second World War and changes in the Indian Political situation.
• In 1944, "Bombay Plan' was presented by 8 leading industrialists of Bombay.
• In 1944, 'Gandhian Plan' was given by S.N, Agarwal.
• In 1945, 'People Plan' was given by MN Roy.
• In1950, 'Sarvodaya Plan' was given by JP Narayan. A few points of this plan were accepted by the Government.

The Planning Commission

• The planning commission was set up on Mar 15, 1950, under the chairmanship of JL Nehru, by a resolution of Union Cabinet.
• It is an extra constitutional, non statutory body.
• It consists of Prime Minister as the ex-officio chairman, one Deputy Chairman appointed by the PM and some full-time members.
• The tenure of its members and deputy chairmanship is not fixed. There is no definite definition of its members also. They are appointed by the government on its own discretion. The number of members can also change according to the wishes of the government.

Functions

• Assessment of material, capital and human resources of the country.
• Formulation of plans for the most effective and balanced utilization of country's resources.
• To determine the various stages of planning and to propose the allocation of resources on the priority basis.
• To act as an advisory body to the Union Government.
• To evaluate from time to time the progress achieved in every stage of the plan and also to suggest remedial measures.
• To advise the Centre and the state governments from time to time on special matters referred to the commission.

National Development Council

• All the plans made by the Planning Commission have to be approved by National Development Council first. It was constituted to build co-operation between the states and the planning commission for economic planning.
• It is an extra constitutional and extra legal body.
• It was set up on august 6. 1952, by a proposal of the government. The PM is the ex-officio chairman of NDC. Other members are Union Cabinet Ministers and Finance Ministers of all states Ltd. Governors of Union Territories and Governors of Centrally ruled states.

State Planning Board

• Apex planning body at state is generally a state planning body comprising the chief minister as chairman, finance and planning ministers of that state and some technical expects.
• District planning committee is also there comprising both official and non-official members.

Types of Plans

A. The Visvesvaraya Plan 1934

First attempt to initiate the blueprint economic planning in India was made by Sir M. Visvesvaraya, a noted engineer and politician. He formulated a "ten year" plan for economic development of the country in 1934 through his book, Planned Economy for India'.

His ideas of state planning were an exercise in democratic capitalism (similar to USA) with emphasis on industrialization - a shift of Laboure from the agrarian sectors to the industrial sector targeting to double national income in a decade.

B. The Congress Plan 1938

Though, the Gandhians and some of the business representatives opposed the idea of centralized state planning, it was initiated by Nethaji Subhash Chandira Bose the National Planning Committee (NPC) was set up at the end of 1938 under the Chairmanship of Pandit Jawaharlal Nehru

The Committee considered all aspects of planning and a series of studies on different subjects concerned with economic development; it laid down following recommendations.

• The state should own or control all key industries, all those large- scale industries which were likely to become monopolistic in character, services, mineral resources, railways, waterways shipping and other public utilities.
• Agriculture is crucial to draw up a scheme of national planning
• It aimed to double the standard of living in 10 years. Its recommendations could not be implemented because of the Second World War and changes in the Indian political situation.

C. Bombay plan - 1944

The eight industrialists conceived "A Plan of Economic Development" which was popularly known as the Bombay Plan. its major focus was on the maintenance of a capitalist order and giving a step- motherly treatment to agriculture sector.

D. The Gandhian Plan 1944

Espousing the spirit of the Ghandhian Economic thinking with regard to the development of Indian agriculture, small-scale industries etc. was prepared by S.N. Agarwal in 1944. It articulated a decentralized economic structure for Indian with self- contained villages. Though it is referred to as industrialization it aimed to promote cottage and village level industries. Whereas the NPC and the Bombay plan supported for the heavy and large industries.

E. The People's Plan 1945

The famous revolutionary M.N. Roy formulated the people's Plan. Its chief emphasis was on agricultural and consumer goods industries through collectivization and setting up of state-owned industrialization.

F. Sarvodaya Plan -1950

After the reports of the NPC were published and the Government was set to go for the five-year Plans, a lone blueprint for the planned development of India was given by JP Narayan. It aimed at economic political, social and normal development of the common masses in 1950.

A REVIEW OF FIVE-YEAR PLAN

First Plan (1951-56) (Agri, irrigation) Harrod-Domar Madel

On the eve of Independence, India had to confront three immediate problems, viz.,

• Influx of refugees.
• Food shortages, and
• High inflation

It accorded the highest priority to agriculture including irrigation and power projects. Community Development Program launched in 1952 It was based on Harrod-Domar Model.

Second Plan (1956 - 61) (Industrialization)

Also called Mahalanobis Plan named after the well-known economist. It is based on The Feldman
Mahalanobis model, which is a Neo-Marxist model of economic development. It laid emphasis on
industrialization, increased production of iron and steel, heavy chemicals including nitrogenous fertilizers development of heavy engineering and machine building industry. Reduction of inequalities in income and wealth and a more even distribution of economic power. Large industries including steel plants at Durgapur, Bhilai and Rourkela, Locomotive factory at Chittaranjan and Coach Factory at Perambur were setup.

Third Plan (1961-66) (Self-sufficiency) 

It aimed at securing a marked advance towards self-sustaining growth. Aimed to achieve self-sufficiency in food grains production and to increase total agricultural production. To expand basis industries like steel, chemicals, fuel and power and establish machine building capacity so that the requirements of further industrialization could be met within a period of about 10 years mainly from the country's own resources, to fully utilize the manpower resources and ensure employment opportunities.

Annual Plan (1966 - 69)

The situation created by the Indo- Pakistan conflict in 1965, two successive years of severe drought, devaluation of the currency, general rise in prices and erosion of resources available for Plan purposes delayed the finalization of the Fourth Five Year Plan. Instead of FYPs, three Annual Plans were formulated within the framework of the draft outline of the Fourth Plan.

Fourth Plan (1969-74)

It is based on the Gadgil Strategy with main focus on growth with stability and progress towards self- reliance. It sought to raise the standard of living through programmes designed to promote equality and social justice. It laid particular emphasis on improving the conditions of the less privileged and weaker sections of the society especially through the provision of employment and education.

Fifth Plan (1974 -79)

It was formulated by D.D. Dhar against the backdrop of severe inflationary pressures. Aimed to achieve self-reliance, removal of poverty (Garibi Hato) and measures for raising the consumption standard of people living below the poverty line. This Plan also gave high priority to bring inflation under control and to achieve stability in the economic situation.

Sixth Plan (1980 - 85)

Aimed to strengthen the infrastructure for both agriculture and industry. Stress was laid on tackling inter- related problems through a systematic approach with greater management, efficiency and intensive monitoring in all sectors and active involvement of people in formulating specific schemes of development at the local level. It also aimed to sec re their speedy and effective implementation.

Seventh Plan (1985 - 90)

It emphasized on rapid growth in food grains production, increased employment opportunities and productivity within the framework of basic tenets of planning, namely, growth, modernization, self- reliance and social justice. The four basic elements that signified change in the strategy in this 

Plan are

• It gave importance to higher agricultural production by relying more on new technology
• It undermined the role of public sector and induced promotion of private sector through industrial deregulation.
• With liberalization of imports, it aimed at raising efficiency in the manufacturing sector.
• Necessary changes were made in industrial and export- import policies. It changed the role of the state changes from a regulatory to facilitatory authority.

Annual Plan (1990- 92)

The Eight plan was not adopted due to the 'fast changing' political situation at the center. The important reasons for the delay in the launch of the Eight Plan are the path- breaking and restructuring- oriented suggestions of the Eighth Plan, the sweeping economic reforms ensuing around the world and the fiscal imbalances of the late 1980s.

Eighth Plan (1992- 97)

It was launched immediately after the initiation of structural adjustment policies and macro stabilization policies which were necessitated by certain critical imbalances like: increasing fiscal and budgetary deficits, mounting public debt and severe constraints on the resources of the Government and the public sector to undertake the essential developmental activities, a critical situation in the balance of payments, and a high rate of inflation during 1990-91. The various structural adjustment policies were introduced gradually to push the economy to a higher growth path, improve its strength, thus it prevents a crisis in Balance of Payments and inflation in the future.

The major aim was to promote

a) A faster economic growth

b) A faster growth in the manufacturing sector and agriculture and allied sectors,

c) Significant growth rates in exports and imports, improvement in trade, decrease in current account deficit and a significant reduction in the Central Government's fiscal deficit.

The Plan also aimed at pursuing a policy of fiscal consolidation, with the focus on sharp reduction in the revenue deficit.

The major concerns and path breaking initiations taken as follows

i. An immediate re- definition of the state's role the economy was Suggested;

ii. 'market- based' developed. i.e. a greater role for the private sector in the economy

iii. More investment in the infrastructure sector.

iv. Rising non- plan expenditure and reduction in fiscal deficits.

v. Subsidies need restructuring and refocusing

vi. Planning immediately need to be 'decentralized

vii. Special emphasis on 'co- operative federalism suggested;

viii. Greater focus on 'agriculture' and other 'rural activities' was suggested. The Plan cited empirical evidences as they encourage the economy to achieve enhanced standard of living and to promote the cause of balanced growth (a shift in the minds et of planning)

Ninth Plan (1997-2002)

It was launched when there was an all- round 'slow down' in the economy led by the South East Asian Financial Crisis (1996-97). With a general nature of the 'indicative planning' the Plan recognizes 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 the correction of historical inequalities.

The focus of this plan is described as "Growth with Social Justice and Equity".

The plan emphasized on seven Basic Minimum Services (BMS) with additional Central Assistance for these services with a view of obtaining complete coverage of the population in a time - bound manner.

From the ninth FYP the issue of fiscal consolidation became a top priority and for the first time the Government focused on the following related issues:

i.  An immediate re- definition of the state's role in the economy was suggested;

ii. Sharp reduction in the revenue deficit of the Government, including centre, states and the PSUs.

iii. Cutting down subsidies, collection of user charges on economic services (.e. electricity) Transportation etc.

iv. Decentralization of planning and implementation through greater reliance on states and the Panchayat Raj Institutions (PRls)

Tenth Plan (2002-07)

The Tenth Plan has a number of new features which undoubtedly points out a change in the planning policy mind- set of the economy, major ones being:

Firstly, the Plan recognizes the rapid growth in the labour force. Therefore aims at creating 50 million job opportunities during the period, by placing special emphasis on employment intensive sectors of agriculture, Irrigation, agro-forestry, small and medium enterprises, information and communication technology and other services.

Secondly, it addresses the issue of poverty and the unacceptably low levels of social indicators by specific monitorable targets, which will need to be attained along with the growth target.

Thirdly, it adopted a differential development strategy. For the first time a state wise growth and monitorable targets have been worked out in consultation with the Stages to focus better on their own development plans.

Another feature of this Plan is the recognition that Governance is perhaps one of the most important factors for ensuring that the Plan is realised, as envisaged.

Finally, considering the present market- oriented economy, the Tenth Plan has dwelt at length on the polices that would be necessary and the design of key institutions

The Tenth Plan includes a carefully drafted medium - term macroeconomic policy stance, both for the Center and the States and lays out the policy and institutional reforms that are required for each sector.

Eleventh Plan (2007- 12)

The 11th Plan aimed to achieve a new vision based on "Faster and More Inclusive Growth" It is designed to reduce poverty and focus on bridging the various divides that continue to fragment the Indian Society. It aims 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 aimed to create productive employment at a faster pace than before, and target robust agriculture growth at 4% year.

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