Chapter 1 Economic Planning

Introduction and MeaningEconomic Planning is a panacea for all economic ailments of modern times. Prof RobinsonEconomic planning implies existence of a economic system in which each production unit uses only the productive resources allocated to it and disposes of its product according to the directives from the central authority.

Need/Objectives of Economic PlanningLow per capita:

2. Low level of living:

-In India person gets 36 grams of fat, 54 grams of proteins and 2126 calories per day.-In advanced countries it is 3 times more.

3. UnemploymentMore then 580 lacs of people are unemployed.Population increase may give rise to population.

4. Population structurePer year 1.75 crores of people increases.Population of children is increasing.With population policy and planning we can change structure of population.

5. Technology of lower levelIndia requires modern technology.Sound planning for cottage, small scale and large scale industries.

6. Capital formationOver-population and poverty reduces capital formation low.India requires 14% of the gross capital formation to cover depreciation.

7.Agriculture sector66% employed in agriculture.Agriculture is dominant sector.Should apply modernization.

8. To increase productivityModernised machinery.Modernization in agriculture .

9. Market development

- Through exporting.

10. Social changes

Five year PlansIndian economy is based on planning.Five year plans are monitored & executed by Planning commission.Prime minister is ex-officio Chairman.There is Deputy chairman too.Montek Singh Ahluwalia is currently Deputy chairman of the commission.

Twelfth Five year Plan

Growth rate for the 12th Plan approved by National Development Council (NDC) is 8%.The Duration of the plan is 2012 to 2017.Govt intends to reduce poverty by 10%.12th five year plan size is 47.7 lakh crore.The 12th Plan seeks to achieve 4 percent agriculture sector growth.

Highlights of 12th Five Year Plan (2012-17):Average growth target at 8.2 percent.Main thrust areas are Infrastructure, health and education.Growth rate has been lowered to 8.2 percent from the 9.0 percent projected earlier due to domestic and global situation.During the 11th Plan period, the average annual growth was 7.9 percent

The 12th Plan seeks to achieve 4 percent agriculture sector growth during the five-year periodPoverty ratio by 10 percent. At present, the poverty is around 30 per cent of the population.

Health and education sectors are major thrust areas and the outlays for these in the plan have been raised.The outlay on health would include increased spending in related areas of drinking water and sanitation.

Direct cash transfer of subsidies in food, fertilizers and petroleum be made by the end of the 12th Plan period. After the cabinet clearance, the plan for its final approval would be placed before the National Development Council (NDC), which has all chief ministers and cabinet ministers as members and is headed by the Prime Minister.

Different sectors to be promoted

AgricultureAgriculture in the current plan period has grown at 3.3 percent, compared to 2.4 percent during the 10th plan period. The growth target for manufacturing sector has been pegged at 10 percent.

InfrastructureThe document stresses the importance of infrastructure development, especially in the power sector, and removal of bottlenecks for high growth and inclusiveness. It also sets targets for various economic and social sectors relating to poverty alleviation, infant mortality, enrolment ratio and job creation.

Poverty

On poverty alleviation, the commission plans to bring down the poverty ratio by 10 percent. At present, the poverty is around 30 per cent of the population.

Health and EducationHealth and education sectors are major thrust areas Increased spending in related areas of drinking water and sanitation.Direct cash transfer of subsidies in food, fertilizers and petroleum be made by the end of the 12th Plan period.Direct cash transfers would bring down the government's subsidy burden .National Development Council (NDC), which has all chief ministers and cabinet ministers as members and is headed by the Prime Minister.

Evaluation of Indian Planning

Achievements/ImportanceEconomy has become dynamic:Indian economy is dynamic because of planning.Due to planning approach Indian economy has been strenghtened.Indias vision 2020 has made indian economy dynamic.

2: Increase in national income

National income is used to measure economic development.National income in 1990-91 was 9,63,615 crores and now it has reached to 27,60,325 crores.National income has increased 12.5 times.

3: Increase in per capita income

Per capita income in 2000-01 was 16,172 Rs & it went upto 25,494 Rs in 2008-09.Per capita increased 4 times during planning period.4: Increase in Production in food grains:2000-01 production was 1,968 lakh tons and in 2008-09 it had gone upto 2,368 lakh tons.Production increased upto 4.5 times.

5: Increase in Commercial cropsProduction of oilseeds, sugarcane, cotton, jute etc in 1980-81 was 94 lakh tons, 1.542 lakh ton bags, 70 lakh tons and 65 lakh tons.Production of oilseeds, sugarcane, cotton, jute etc in 2006-07 was 238 lakh tons, 3453 lakh ton bags, 227 lakh tons and 103 lakh tons.

6: Increase in Industrial productionIndustrial products like electrical goods, railway carriages & engines, tanks, aeroploanes, ships, lathe machines, watches and petroleum products etc. a- Steel Productionb - Cloth Productionc - Cement Productiond - Coal Productione Petroleum Productionf - Sugar productiong Chemical fertilizerh Aluminium productionI - Software and service industries

7- Increase in power productionIn 1950-51, capacity of power was 23 lakh kilowatts but as the consumption increases it increased upto 1,570 lakh kilowatts in 2006-07.It increased 67 times.8- Expansion in irrigation:- Area under irrigation in 1950-51 was 1,194 lakh hectares and increased to 1,419 lakh hectares

8: Increase in Foreign tradeIn 1990-91 exports was 32,553 crores and it developed to 6,40, 172 crores in 2007-08.Imports in 1990-91 was 43,198 crores and went upto 9,64,850 crores.9- Development of infrastrure:- 1950-51 total road network was 4 lakh kilometer and in 2003-04 it had extended to 27.13 lakh kilometers.

8. Increase in foreign trade9. Development of infrastructure10. Increase in average life span

B. Failures of Indian PlanningToo high targetsDefective Planning MethodNeglect of employment generationIncrease in price levelIncrease in disparity of income and wealthToo much use of deficit financingToo much dependence on foreign assistanceFailure in controlling the population