Essay on the Planning of Economic Activity in India

Public and Private sectors are viewed as complementary. Private sector covers not only organised industry but also small-scale industries, agriculture, trade and a great deal of activity in housing, construction and other fields.

Individual effort and private initiative are considered necessary and desirable in national endeavor on development with optimum of voluntary co-operation.

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Although in the past economic planning did envisage a growing public sector with massive investments in basic and heavy industries, the emphasis now on the public sector is less pronounced and the current thinking on planning in the country, in general, is that it should increasingly be of an indicative nature.

The Planning commission was set up in 1950 to prepare the blue-print of development, taking an overall view of the needs and resources of the country.

First Plan:

The first Five Year Plan (1951-56) had a two-fold objective: to correct the disequilibrium in the economy caused by the Second World War and partition of the country and also to initiate simultaneously a process of all-round balanced development.

This was to ensure increase in the national income and steady improvement in living standards. Keeping in view large-scale imports of food grains in 1951 and inflationary pressure on economy, the plan accorded the highest priority to agriculture including irrigation and power projects.

About 44.6 per cent of the total outlay of Rs. 2,069 crore in the public sector (later raised to Rs. 2,378 crore) was allotted for its development. The plan also aimed at increasing the rate of investment from 5 to about 7 per cent of national income.

Second Plan:

In 1954, the Parliament declared that the broad objective of economic policy should be to achieve a socialistic pattern of society under which the basic criteria for determining the lines of advance would be social gain and greater equality in income and wealth and not private profit.

The second Five Year Plan (1956-57 to 1960-61) therefore, sought to promote a pattern of development which would ultimately lead to the establishment of a socialistic pattern of society in India.

In particular, it stressed that the benefits of economic development should accrue more to the relatively less privileged sections of society and there should be a progressive reduction in the concentration of income, wealth and economic power.

The main aims of the second Plan were: (i) an increase of 25 per cent in the national income: (ii) rapid industrialisation with particular emphasis on the development of basic and heavy industries; (iii) large expansion of employment opportunities; and (iv) reduction of inequalities in income and wealth and a more even distribution of economic power. The Plan also aimed at increasing the rate of investment from about 7 per cent of the national income to 11 per cent by 1960-61. The Plan laid special stress on industrialisation—increased production of iron and steel, heavy chemicals and development of heavy engineering and machine-building industry.

Third Plan:

The third Five Year Plan (1961-62 to 1965-66) aimed at securing a marked advance towards self-sustaining growth. Its immediate objectives were to:

(i) Secure an increase in the national income of over 5 per cent per annum and at the same time ensure a pattern of investment which could sustain this rate of growth during subsequent plan periods;

(ii) Achieve self-sufficiency in food-grains and increase agricultural production to meet the requirements of industry and export;

(iii) Expand basic industries like steel, chemicals, fuel and power and to establish machine-building capacity so that the requirements of further industrialisation could be met within a period of 10 years mainly from the country’s own resources;

(iv) Utilise fully the manpower resources of the country and ensure a substantial expansion in employment opportunities; and

(v) Establish progressively greater equality of opportunity and bring about reduction in disparities of income and wealth and a more even distribution of economic power.

The Plan aimed at increasing the national income by about 30 per cent from Rs. 14,500 crore in 1960-61 to about Rs. 19,000 crore by 1965-66 and per capita income by about 17 per cent from Rs. 330 to Rs. 385 during the same period.

Annual Plans:

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 finalisation of the fourth Five Year Plan.

Instead, between 1966 and 1969, three Annual Plans were formulated within the framework of the Draft Outline of the fourth Plan.

They took into account the conditions prevailing at that time. The state of the economy and the non-availability of financial resources for plan purposes kept down the size of development outlay during this period.

Fourth Plan:

The fourth Five Year Plan (1969-74) aimed at accelerating the tempo of development and reducing fluctuations in agricultural production as well as the impact of uncertainties of foreign aid. It sought to raise the standard of living through programmes designated to promote equality and social justice.

The plan laid particular emphasis on improving condition of less privileged and weaker sections especially through provision of employment and education.

Efforts were also directed towards reduction of concentration and wider diffusion of wealth, income and economic power.

The Plan aimed at increasing net domestic production at 1968-69 factor cost from Rs. 29,071 crore in 1969-70 to Rs. 38,306 crore in 1973-74. In terms of 1960-61 prices, this implied an increase from Rs. 17,351 crore in 1968-69 to Rs. 22,862 crore in 1973-74. Average annual compound rate of growth envisaged was 5.7 per cent.

Fifth Plan:

The fifth Five Year Plan (1974-79) was formulated against the backdrop of severe inflationary pressures. Major objectives of the plan were to achieve self-reliance and bold measures for raising consumption standards of people living below the poverty line.

This plan also gave high priority to bringing inflation under control and to achieve stability in the economic situation. It targeted an annual growth rate of 5.5 per cent in the national income. Four Annual Plans pertaining to the fifth Plan period were completed.

It was subsequently decided to end the fifth Plan with the close of Annual Plan of 1978-79 and initiate work for a new plan for the next five years with new priorities and programmes.

Sixth Plan:

The Sixth Plan (1980-85) was conceptualised keeping in view achievements and shortcomings of the past three decades of planning. Removal of poverty was the foremost objective of the plan; even though it was recognised that task of this magnitude could not be accomplished in a short period of five years.

The strategy adopted for the plan consisted essentially in moving simultaneously towards strengthening infrastructure for both agriculture and industry so as to create conditions for an accelerated growth in investments, output and exports and provide through special programmes designed for the purpose, increased opportunities for employment especially in rural areas and unorganised sector as well as meeting minimum basic needs of people.

Stress was laid on dealing with inter-related problems through a system approach rather than in separate compartments, greater management efficiency and intensive monitoring in all sectors and active involvement of people in formulating specific schemes of development at local level and securing their speedy and effective implementation.

Actual expenditure during the Sixth Plan stood at Rs. 1,09,291.1 crore as against the envisaged total public sector outlay of Rs. 97,500 crore accounting for a 12 per cent increase in nominal terms. The average annual growth rate for the plan was 5.2 per cent which was the targeted growth rate for this period.

Seventh Plan:

The seventh Five Year Plan (1985-90) laid emphasis on policies and programmes, the aim of which had been rapid growth in food grains production, employment opportunities and productivity within the framework of basic tenets of planning, namely growth, modernisation, self-reliance and social justice.

Due to overall favourable weather conditions, implementation of various thrust programmes and concerted efforts of the government and the farmers, the food grains production during the seventh plan grew by 3.23 per cent as compared to long-term growth rate of 2.68 per cent during 1967-68 to 1988-89 and a growth rate of 2.55 per cent recorded in the 80s.

To reduce unemployment and consequently the incidence of poverty, special programme like Jawahar Rozgar Yojana have been initiated in addition to the already existing programmes. Due recognition has also been accorded to the role that small-scale and food processing industries can play in this regard.

Various policy instruments have also been used to improve the productivity and the international competitiveness of the Indian economy. Instead of creating new facilities, the thrust has been on improvement of existing facilities and fuller capacity utilisation.

The total expenditure during the entire Seventh Plan stood at Rs. 2,18,729.62 crore as against the envisaged total public sector outlay of Rs. 1,80,000 crores resulting in a 21.52 per cent increase in nominal terms. During this plan period, GDP grew at an average rate of 5.6 per cent per year exceeding the targeted growth rate by 0.6 per cent.

Annual Plans:

The eighth Five Year Plan (1990-95) could not take off due to the fast changing political developments at the Centre.

In the meantime, the new Government which assumed power at the Centre decided that the eighth Five Year Plan would commence on April 2, 1992 and that 1990-91 and 1991-92 should be treated as separate Annual Plans.

Formulated within the framework of the earlier approach to the eighth Five Year Plan (1990-95), the basic thrusts of these Annual Plans were on maximization of employment and social transformation. The approved plan outlays for 1990-91 and 1991-92 were of Rs. 64,716.80 crore and Rs. 72,316.75 crore respectively.

Eighth Five Year Plan (1992-97):

The Eighth Plan is being launched at a time of momentous changes in the world and in India. Human development, in all its many facets, is the ultimate goal of the eighth plan.

It is towards fulfilling this goal that the eighth Plan accords priority to the generation of adequate employment opportunities to achieve near-full employment by the turn of the century.

The eighth Plan is a plan with a difference. It is a plan for managing the change, for managing the transition from centrally planned economy to market-led economy without tearing our socio-cultural fabric.

In the changing circumstances, from a highly centralised planning system, we are gradually moving towards indicative planning.

This eighth Plan is indicative in nature. The Plan recognises “human development” as the core of all developmental effort. It is only healthy and educated people who can contribute to economic growth and this growth, in turn, will contribute to human well-being.

The eighth Plan pays special attention to employment in the rural areas. If people can get adequate earning opportunities where they reside normally, they would not migrate to the urban areas.

Such an expansion of employment opportunities calls for a shift in emphasis in the rural development programmes from the creation of relief type of employment to the building up of durable productive assets in the rural areas.

Micro Dimensions:

The Plan proposes a growth rate of 5.6 per cent per annum on an average during the Plan period. The level of national investment is proposed at Rs. 7, 98,000 crore and the public sector outlay at Rs. 4, 34,100 crore. The size of the State Plans is Rs. 1, 86,235 crore and of the Central Plan is Rs. 2, 47,865 crore.

The outlay in the public sector are financed by budgetary support and domestic and foreign borrowings. The total budgetary support in the eighth Plan is Rs. 1, 88,475 crore at 1991-92 prices, which is 43.4 per cent of the outlay.

Employment Generation:

If we are to reach ultimately the goal of full employment by the turn of the century, we will have to concentrate on creating job opportunities, particularly in the rural areas.

The Central Plan has made a substantial step-up in the outlay for Department of Rural Development from Rs. 4,900 crore approved in the seventh Plan to Rs. 30,000 crore in the eighth Plan.

The emphasis has to shift from the creation of relief type of employment to the building up of durable productive assets in the rural areas.

Financing the Plan:

One of the major concerns was to avoid the trap that we had got into during the seventh Plan. At the time of formulating the seventh Plan, it was envisaged that nearly 40 per cent of the total public sector outlay would be financed by the balance from the current revenues (BCR) and by the contribution from public enterprises.

Ultimately, the contribution from BCR and public sector enterprises turned out to be only 20 per cent of the total outlay and the balance was met through borrowings.

That created an internal debt- trap and acute BOP crisis. We want to avoid that situation. To achieve this we have to reduce Government’s dis-savings drastically from 2.3 per cent of GDP to 1.1 per cent of GDP for the eighth Plan period.

Assumptions:

The success of the eighth Plan rests on achieving some targets. These are: a reasonable degree of price stability; export growth rate of 13.6 per cent in volume terms; limiting imports to a growth rate of 8.4 per cent of the GDP; savings rate of 21.6 per cent and limiting of Government dis-saving to 1.1 per cent.

The present inflationary trend in the economy has to be contained. Determined efforts to augment our resources have to be made.

A surplus in current revenue must be generated to fund developmental expenditure by drastically reducing non- developmental expenditure.

Objectives:

The following objectives have accorded priority in the eighth Plan.

1. Generation of adequate employment to achieve near full employment level by the turn of the century; three per cent average annual growth of employment is envisaged.

2. Containment of population growth through people’s active co-operation and an effective scheme of incentives and disincentives.

3. Universalisation of elementary education and complete eradication of illiteracy among the people in the age group of 15-35 years.

4. Provision of safe drinking water and primary health care facilities accessible to all the villages and the entire population and complete elimination of scavenging.

5. Growth and diversification of agriculture to achieve self-sufficiency in food and generate surpluses for exports.

6. Strengthening the infrastructure (energy, transport, communication, irrigation) in order to support the growth process on a sustainable basis.

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