ECONOMIC PLANNING

First Eleven Five Year Plans:

1950-51 to 2007-2012

Objectives of Economic Planning

Long term objectives:Achieve higher level of national and per

capita incomeFull employmentReduce inequalitiesSet up a socialist society-equality & justice

Objectives of Economic Planning…

Two broad headings:Economic planning & removal of poverty:

a. rapid economic growth

b. increase in employmentEconomic planning & social justice:

a. Reduction of inequality of income

b. establishment of a socialist society

First Five year plan (1951-56)

Objectives: to improve the standard of living of the people. total outlay - Rs. 2,069 crores This amount was allocated to various areas. They are: Community and agriculture development Energy and irrigation Communications and transport Industry Land rehabilitation Social services

First five year plan India….

Target of GDP growth - 2.1% per year. Actual growth of GDP had been 3.6% per year. Projects related to irrigation-the Mettur Dam, Bhakra

Dam, and Hirakud Dam. Rehabilitation of landless agricultural workers Emphasis on agriculture and rehabilitation of refugees Improvement of roads, civil aviation, railways, telegraphs,

and posts. Basic industry which includes the manufacture of

fertilizers and electrical equipment Small scale and village industries improved the living condition of the people, of historical

importance

Second five year plan India (1956-1961)

Objectives:

Economy reached a stage where agriculture can be assigned lower priority

Forward thrust given for the development of heavy and basic industries

Big push so that economy takes off Industrial policy 1956 announced Rapid industrialization- emphasis on

development of heavy and basic industries- iron and steel, heavy chemicals, heavy engineering and machine building

Plan was moderately successful

Third Five Year Plan India (1961-1966)

Intended to make a more determined effort to develop the nation

Objectives: Increase the national income by 5% per year Increase production of agriculture create self sufficiency in food

grains Provide employment opportunities for all Establish equality among all Economy is still primarily agrarian so emphasis to be on

agriculture. Increase in agricultural production would lead to the growth Fertilizer and cement plants were built Stress to development of social services and education in India.

Third Five Year Plan India….

Third five year plan in India improved the quality of life of Indian citizens

But a failure because of a severe famine, in 1965-66, two major conflicts with China and Pakistan

1966-69 there were just Annual Plans, also called a period of Plan holiday.

Fourth five year plan(1969-74)

Objectives: Aimed at annual growth rate of 5.5 % Self reliance and provide a national minimum First 2 yrs were good then it failed Failure of monsoons, decline in food grain

production, decline in industrial production, rise in prices and then Indo Pak war in 1972

Able to achieve only 3.4% GNP growth against target of 5.5%

A failed plan

Fifth Five Year Plan(1974 -1979)

Background of the Fifth Five Year Plan India:

Onset of the Fifth Five Year Plan India in the 1970s, the international economy in a turmoil.

Sectors such as food, oil, and fertilizers prices sky-rocketed.

Attaining self-reliance in food and energy top priority. Economy affected by several inflationary pressures. Food grain production above 118 million tons Improvement of infrastructural facilities like the functioning

of the power plants and the rise in the supply of coal, steel, and fertilizers.

Indian exports crossed 18%, and the large earnings from exports

Fifth Five Year Plan(1974 -1979)…..

Objectives : Reduce social, regional, and economic disparities Enhance agricultural productivity Initiate land reforms Check rural and urban unemployment Emphasize household industries like carpet-weaving,

handlooms, sericulture, and handicrafts Encourage self-employment Encourage import substitution in areas like industrial

machinery, chemicals, paper, iron and steel and non-ferrous metals

Initiate appropriate use of fiscal, credit and production support policies in the cottage industry sector

Develop labor intensive technological improvementsTerminated in 1978 when the Janata party came to power

Sixth Five Year Plan India(1980 -1985) Main objectives- speedy industrialization, rise in the

employment level, poverty reduction, and acquisition of technological self-reliance.

Background of Sixth Five Year Plan India: At the onset Rajiv Gandhi, prioritized speedy industrial

development, special emphasis on information technology sector.

From the Fifth Five Year Plan, the nation had self sufficiency in food.

Industrial sector was diversified, science and technology made a significant advance.

Programs on improvement of public health and epidemic control to reduce infant mortality and increase life expectancy.

Investments in Indian healthcare sector.

Sixth Five Year Plan India(1980 -1985)…. Objectives: Industrialization Increase growth rate of the economy Promotion of efficient use of resources Improve productivity level Modernization for economic and technological self-reliance Control poverty and unemployment Develop indigenous energy sources and efficient energy usage Improved quality of life Minimum Needs Program for the poor Reduce discrepancies in income and wealth Check the growing population Promote education

Last year of the plan severe famine and low agricultural output. Broadly the plan a success - achieved average growth rate of 5.5%

Seventh Five Year Plan India(1985 - 1989)

Background:

The main objectives - establish growth in the areas of increasing economic productivity, production of food grains, generating employment opportunities.

Due to sixth plan- steady growth in agriculture, control on Inflation, favorable balance of payments

Strong base for the seventh five Year plan

Seventh Five Year Plan India(1985-1989)

Objectives: Social Justice Removal of oppression Using modern technology Agricultural development Anti-poverty programs Full supply of food, clothing, and shelter Increasing productivity of small and large scale farmers Making India an Independent Economy Achieving the pre-requisites of self-sustaining growth by the

year 2000. Employment to grow at the rate of 4 percent per year

Seventh Five Year Plan India(1985 -1989)

Anti-poverty program: Special emphasis to women, children, schedule tribes, and

schedule castes. The poverty ratio to decline to 26 percent in 1989-90. Agriculture: Increase productivity of oilseeds, fruits, vegetables, pulses,

cereals, fish, egg, meat, and milk. Welfare: Education to girls, family welfare, healthcare, reduction in infant

mortality Emergence of informatics, telematics, and hooking up of

telecommunications with computers for development in Communications.

Stress on increasing supplementary modes of transport - inland waterways, product pipelines, civil aviation, coastal shipping.

Eighth Five Year Plan (1992-97)

Severe economic crisis due to balance of payment crisis

Rising debt burden Budget deficits Inflation and recession in industry Fiscal reforms were initiated

Ninth Five Year Plan (1997-2002)

Focus was on growth with social justicePriority to agriculture and rural

developmentEradication of povertyGDP growth of 7 % per annumActually it achieved only 5.35% GDP

growth rate

Achievements of Planning in India- till 2002

Average Annual Growth Rate (At 1993-1994 prices)  

Year Net national productPer

Capita

1950-51 to 1980-81 3.4 1.2

1980-81 to 1996-97 5.5 3.3

1996-97 to 2001-02 6.2 3.6

Increase in national and per capita income Between 1950-51 and 2001-2002 growth process can be

divided into. A- 1950-51 to 1980-81 NNP Annual Average Growth Rate 3.4% Per Capita NNP Growth Rate 1.2% B- 1981- 1997 NNP Annual Average Growth Rate 5.5% Per Capita NNP Growth Rate 3.3% 1996-97 and 2001-02 NNP growth rate was 6.2% Per capita NNP increased by 3.6%

Growth performance in the five year plans (at 1993-94 prices)

NNP at factor cost (% per annum)

   

 Plans Target Actual

First Plan (1951-56) 2.1 3.6

Second Plan(1956-61) 4.5 4.1

Third Plan (1961-66) 5.6 2.8

Fourth Plan (1969-74) 5.7 3.3

Fifth Plan (1974-79) 4.4 4.8

Sixth Plan (1980-85) 5.2 5.7

Seventh Plan (1985-90 5 6

Eighth Plan (1992-97) 5.6 6.8

Ninth Plan (2002-07) 6.5 5.4

Progress in Agriculture

Government has spent 23-24 % of the plan outlay on agriculture and allied activities.

Agriculture production increased considerably but not to the extent planned

Initial yrs of planning additions to output more from extension of area under cultivation than from increases in production per hectare

Since 1960-61 only higher yields from land cultivated- Green Revolution

Agriculture Production under Five Year Plans (1951-2002)

  1950-51 1970-71 2001-02increase %

1951-2002

Foodgrains(in tonnes) 51 108 213 317

Rice(m tonnes) 21 42 93 343

Wheat (m tonnes) 7 24 73 942

Oilseeds (m tonnes) 5 10 21 320

Sugarcane (m tonnes) 57 126 297 421

Cotton ( m bales) 3 5 10 233

Jute (m bales) 3 6 12 300

Potatoes (m tonnes) 2 5 24 1100

Progress in Industry

From 1951-2002 Government has invested heavily on development of industries, transport and communication, electricity,etc.

53-55 % of all planned outlay of Government in each Five year Plan was on these sectors

Progress of Industrial Production

  1950-51 1970-71 2001-02

Coal (m tonnes) 32 76 353

Iron ore (m tonnes) 3 32 76

Fertilizers (m tonnes) 0.02 1 15

Cement (m tonnes) 3 14 107

Finished steel (m tonnes) 1 5 31

Aluminium ('000 tonnes) 4 169 552

Petroleum, crude (m tonnes) 0.3 7 32

Electricity (billion kwh) 5 56 579

Net per capita availability of some essential consumer goods in India

Items 1950-51 1970-71 2001-02

Cereals and Pulses (Kgs) 144 167 180

Sugar (Kgs) 5 7.4 16

Edible oils and vanaspati (Kgs) 3.2 4.5 10.2

Tea (gms) 362 401 650

Milk (kgs) 47 40 80

Eggs (number) 5 11 37

Cloth (meters) 14 16 32

Electricity, domestic (kwh) 2.4 7 76.8

Development of economic infrastructure

Creation of economic infrastructure provided the base for industrialization

Expansion of road and rail transportIrrigation and hydro electric projectsNational and state highwaysTelecommunication networkModernization of semi-urban and rural

areas

Diversification of exports and import substitution

Dependence for import of capital goods declined

Several consumer goods imported earlier being produced at home

Import substitutionExports of manufactures, mineral ores and

engineering goods

Development of a huge educational system

Total enrolment of 239 lakhs in 1950-51In 1996-97 it was 1827 lakhs

Failures of Planning - till 2002

Inefficiency of production in many public sector companies

Inefficiency in the generation of power, transport, steel, fertilizers

Not been able to employ proportionately larger population in industry

Inability to carry out effective land reforms, still traditional methods of agriculture in so many areas

Failures of Planning….

Failure to eliminate poverty- 26 % of the population still below poverty line

Failure to provide employment to allEmphasis on growth rather than

employmentAdoption of capital intensive methods At the end of 1996-97 total unemployment

and under employment -10.5 % of the labor force

Failures of Planning….

Failure to reduce inequalities of income and wealth

Failure to check growth of black moneyFailure to reduce concentration of

economic powerFailure to implement land reforms

Tenth Five Year Plan

2002-2007

Background

High expectationsGDP growth in post reform pd- average of

6.1% in 8th & 9th plans from average of 5.7% in 1980s

Literacy increased from 52% in 1991 to 65% in 2001

Sectors like software services & IT enabled services as sources of strength

Weaknesses in the economy

UnemploymentStagnant infant mortality ratePower problem- 60 % of rural & 20 % of

urban households do not have power connection

Water , health, pollution, environmental degradation

Poverty not eradicated

The Development Strategy Redefinition of strategy - role of government Create a vibrant private sector & public sector

make less dominant Government’s role important but to be redefined Govt. Role in Social Sector, Infrastructure

development especially rural infrastructure & road development

Telecommunication, power & ports private sector can play a larger role

Role of government- facilitate crucial investments while still remain a public sector service provider

Objectives of the Tenth Plan Target of GDP growth, 2002-7: 8 % Reduction of poverty ratio by 5 % by 2007 and by 15% by 2012 Gainful employment to the addition to labor force over the Tenth Plan Universal access to primary education by 2007 Reduction in decadal rate of population growth between 2001 and

2011 to 16.2% Increase in literacy to 75% by 2007 Reduction of infant mortality rate to 45 per 1000 live births by 2007

and to 28 by 2012 Reduction of maternal mortality ratio to 2 per 1000 live births by 2007

and to 1 by 2012 Increase in forest & tree cover to 25% by 2007 and 33% by 2012 All villages - access to potable drinking water by 2012 Cleaning all major polluted rivers by 2007 & other notified stretches

by 2012

Achievements of the Tenth Plan (2002-07)9th plan(1997-2002) 10th plan(2002-2007)

GDP growth of which

a. Agriculture

b. Industry

c. Services

5.5

2.0

4.6

8.1

7.2

1.7

8.3

9.0

Gross Domestic Savings (as a % of GDP at market prices

23.1 28.2

Gross Domestic Investment (as a % of GDP at market prices

23.8 27.5

Current Account Balance (as a % of GDP at market prices)

- 0.7 0.7

Combined Fiscal Deficit of Centre & States (as a % of GDP at market prices

8.8 8.4

Foreign Exchange Reserves (US $ billion)

54.2 165.3

Rate of Inflation (based on WPI)

4.9 4.8

Achievements of the Tenth Plan (2002-07)….

Not able to achieve target of 8% GDP growth but took economy to higher trajectory of growth at 7.2% as against 5.5% in 9th plan

Gross domestic savings averaged 28.2% in 10th plan against 23.1% in 9th plan

Economy able to reduce its incremental capital output ratio from a level of 4.3 during 9th plan to 3.8 during 10th plan

Foreign exchange reserves reached US$ 185 billion on Feb 2007

Foreign investment flows-US$ 20.2 billion in 2005-06

Failures of Tenth Plan (2002-07)

Reduction in size of plan: total planned outlay of Rs 15,25,269 crs, actual allocation was of Rs 14,91,620 crs

Failure to reduce poverty to the targeted level: 10th plan targeted to reduce poverty ratio in 2006-07 to 19.2% as against 26.1% in 1999-2000. Actual was 27.5% in 2004-05

Inconsistency in Indian economy: improvement in GDP growth not reflected in an increase in poverty reduction, no percolation effect of higher GDP growth

Failures of Tenth Plan (2002-07)

Increasing unemployment: Targeted to reduce unemployment from 9.11% in 2001-

02 to 5.11% in 2006-07. Actual- 8.3% in 2004-05 Dismal performance of Agriculture Sector: Target growth rate: 4%, actual- 1.7% No reduction in Regional Inequalities: Richer states benefited from the growth process Failure to achieve targets of reducing Infant Mortality

Rate & malnutrition among children: 10th plan targeted to reduce IMR to 45 and Maternal

Mortality Rate to 2 per 1000 live births Actually IMR was 58 and MMR was 4 in 2005

Eleventh Five Year Plan(2007-2012)

Background:

Tenth Plan accelerated annual average GDP growth rate to 7.2% but not addressed the problems of common man

Not an inclusive economic growth Agriculture lost its growth momentum No increase in jobs in organized sector despite faster

growth Slow decline in percentage of population below the poverty

line Malnutrition levels high Lack of basic services- health, education, drinking water,

sanitation etc Rapid growth is the only solution

Objectives:Macro economic Indicators for the 11th FYP

10th Plan

(Actual)

11th Plan

(Average)Growth Rate of GDP(%)

a. Agriculture

b. Industry

c. Services

7.2

1.7

8.3

9.0

9.0

4.0

10.5

9.9

Investment rate-% of GDP

a. Public

b. Private

27.8

6.7

21.1

35.0

10.2

24.9

Domestic Savings Rate

(% of GDP)

28.2 32.3

Current Account Balance (% of GDP)

0.2 -2.8

Govt Fiscal Balance

(% of GDP)

-8.0 -6.0