Is planning relevant in Indian context today? Page 1

BUSINESS ENVIRONMENT PROJECT REPORT

Submitted to: DR. K. L. CHAWLA Programme Director, FORE School of Management

Submitted by:

ANKITA MAHESHWARI 91007 ANKUR SHARMA 91008 ANMOLSAHNI 91009 NAVJOT SINGH BINDRA 91010 ASHUTOSH KUMAR JHA 91011 BISHNUCHETTRI 91012

FMG XVIII A Group 2 FORE School of Management

Is planning relevant in Indian context today? Page 2

Acknowledgement

We‘d like to express our earnest gratitude towards Dr. K.L. Chawla, Faculty, FORE

School of Management, for the stupendous guidance and support that he provided to

us during the execution of the project on ‗Is planning relevant in Indian context

today?‘. His role in providing a vivid insight into the dynamics of Business

Environment, the various determinants and the present day scenario that goes beyond

the realms of any text-book; have really motivated us to work that bit harder to come

out with this report.

We‘d also like to acknowledge the unending help that we received from our fellow

classmates whilst the execution of this project. Their help and concern goes on to

reiterate the kind of bonhomie that exists at FORE School of Management.

Thanking all,

Group - II

FMG XVIIIA

FORE School of Management, Delhi

Is planning relevant in Indian context today? Page 3

Table of Contents

Executive Summary ...................................................................................................... 5

Review of related Literature ...................................................................................... 6

Section I: What is a Plan? ........................................................................................... 12

History of plans in India ................................................................................ 12

Why to Plan: ...................................................................................................... 13

Objectives .......................................................................................................... 14

Stages in Economic Planning........................................................................ 16

Pre conditions for effective economic planning: .................................... 16

Characteristics of Economic Planning: ...................................................... 17

Planning In India and Impact ....................................................................... 17

Organization ..................................................................................................... 19

Divisions ............................................................................................................ 19

Section II: Progress of Five Year Plans uptil now: .............................................. 21

First Five Year Plan (1951-55) .................................................................... 21

Second Five Year Plan (1956- 61) ............................................................... 22

Third Five Year Plan (1961- 66) ................................................................. 23

Fourth Five Year Plan (1969 - 74) .............................................................. 24

Fifth Five Year Plan (FY 1974-79) .............................................................. 25

Sixth Five Year Plan (FY 1980-85) .............................................................. 26

Seventh Five Year Plan (FY 1985-90) ........................................................ 27

Eighth Five Year Plan (FY 1992-1997) ...................................................... 28

Ninth Five Year Plan (FY 1997-2002) ........................................................ 29

Tenth Five Year Plan (FY 2002-07) ............................................................ 29

Eleventh five year plan (FY 2007-12) ........................................................ 30

Role Of Economic Planning On GDP ............................................... 30

Role of Administration & Pay Commission ................................. 30

Role of Service Sector......................................................................... 31

Role of Economic Planning In Industry And Service ................. 32

Role of Employment ........................................................................... 36

Role of Education ................................................................................ 37

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Advantages and disadvantages of planning ............................................. 39

Disadvantages of economic planning ........................................................ 40

Changing nature of planning ........................................................................ 44

Section III: Analysis ..................................................................................................... 45

Deficiencies of Planning ................................ Error! Bookmark not defined.

Conclusion ..................................................................................................................... 47

Appendix ........................................................................................................................ 48

Bibliography ................................................................................................................. 54

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Executive Summary

Over the course of the last 60 years, India has developed as a stable economy. Indian

planning and policies of the Indian Government have guided and shaped India into a

mixed economy.

Through this report, we attempt to present an analysis of why planning still needs to

be done in India and bring forward the good and the bad aspects of it. This report

brings forth the history of planning, which came into being with the setup of the

Planning Commission. Also, it compares the expected results and actual achievements

of the Five Year Plan from 1951 till date. Then we take a look at the impacts of

economic planning in India on various sectors such as agriculture, banking and

finance and natural resources.

This report envisages the progress of the Five Year Plans of India with special focus

on their objectives and achievements. In case, a plan was a success or a failure, this

report studies in detail the factors that lead to that outcome. It also includes what

were the wrong decisions made on the part of the Planning Commission and what

could have been done to minimize the effect of the failure of a plan.

The report discusses the role of Economic Planning in GDP, employment, education,

industry and services and so on. We also analyze the deficiencies in planning in India

and discuss the ways to overcome them.

Finally, we compare the various macro-economic aggregates for each of the plans and

conclude that Economic Planning is very important for every country. Because of

excellent economic planning now we are one of the parts of developing countries. On

the basis of need in certain sectors government introduced five years plan for better

development. Now India‘s GDP growth is very high as compare with other countries

and that is because of better planning.

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Review of related Literature

Paper I: India’s Development Strategy: Accidents, Design and Replicability

Author: Nirvikar Singh

About the Paper: This paper examines India‘s development strategy, and to what

extent it may be considered a success. It provides a brief history of why and how the

strategy was adopted, as well as of its implementation, including the role of initial

conditions, such as human capital, geographical location, and infrastructure. It

analyses the extent and reasons for success of the strategy, including policy, political

economy, timing, and linkage of the strategy to economy-wide development.

Particular attention is given to the relative roles of domestic and international actors,

including the part played by foreign investment, trade, and other dimensions of

openness. The paper considers the extent to which the strategy remains viable for the

future, the challenges still faced, and what other strategies might be required. It

concludes with possible lessons for other countries and their future development

strategies.

Criticism: Using the colonial period as a benchmark, India certainly has done well. Its

GDP growth and improvements in human development indicators were both well

above the earlier era, and this accelerated progress began almost immediately after

independence. This achievement came while preserving a democratic political system,

with minimal reliance on outside help, and accompanied by the development of a rich

set of governance and private sector institutions for delivering food, health, shelter

and education to a much greater proportion of the population than ever before in the

region‘s history. Infrastructure investment was greater than before, industries were

developed in support of modernization goals, and higher education, in particular,

grew dramatically. India also sustained relatively low inflation rates, preventing the

kind of tax on the poor that has been characteristic of Latin American economies,

several of which have experienced hyper-inflations of varying severity. On the other

hand, as early as the 1960s, several East Asian countries began to outstrip India‘s

economic performance. Their example became the basis for a shift in mainstream

academic views of development, especially towards emphasizing the benefits of

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openness to international trade. However, in India this period was marked by political

impulses that restrained economic policy changes in that direction. Growth in the

1980s was aided by some reforms, as well as a macroeconomic stimulus that turned

out to be unsustainable, and an external payments crisis in 1991 forced some dramatic

changes in economic policy. Essentially, openness to international trade was

increased dramatically through tariff reductions and replacement of import quotas by

tariffs, and the scope of domestic industrial licensing was drastically reduced.

Conclusion: While India has demonstrated that it can grow at almost double digit

rates, comparable to those achieved by the economies of the East Asian ‗miracle‘, it

faces numerous challenges if that growth is to be sustained for long enough to raise

average levels of living comparable to, say, South Korea today, or even China.

Human development indicators such as literacy, educational attainment and infant

mortality also show significant deficits, when comparisons are made to other

countries with similar income levels. Increasing inequality of income is paralleled by

increasing regional inequality.These trends can create political instability, or lead to

growth that peters out, leaving a wealthy class connected with the global market

economy, and significant numbers of poor people.

Paper II: Innovation Capacity and Economic Development: China and India

Author: Peilei Fan

About the Paper: This paper discusses that both China and India, the emerging giants

in Asia, have achieved significant economic development in recent years. China has

enjoyed a high annual GDP growth rate of 10 per cent and India has achieved an

annual GDP growth rate of 6 per cent since 1981. Decomposing China and India‘s

GDP growth from 1981 to 2004 into the three factors‘ contribution reveals that

technology has contributed significantly to both countries‘ GDP growth, especially in

the 1990s. R&D outputs (high-tech exports, service exports, and certified patents

from USPTO) and inputs (R&D expenditure and human resources) further indicate

that both countries have been very committed to R&D and their output is quite

efficient. Both governments have played an essential role in transforming their

national innovation systems so that they can be more adaptable to economic

development. The main focus of their reforms has been to link the science sector with

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the business sector and to provide incentives for innovation activities. Balancing

import of technology and indigenous R&D effort is another major theme. Innovation

capability development has become more and more critical to the success of biofirms

in India and China. Institutional factors have great influence on choice of innovation

at the firm level, i.e., the decision at firm level in terms of indigenous R&D or import

of technology. Nevertheless, limited financial resources and insufficiently qualified

human resources remain two major challenges for domestic companies in both

countries.

Criticism: After independence in 1947, Indian leaders introduced economic policies

that were characterized by import substitution, industrialization, state intervention in

labor and financial markets, a large public sector, business regulation and central

planning. Nevertheless, India‘s protectionism bordered rather on Fabian socialism and

was less extreme than the Soviet style central-command system in China, as the

regime involved both public and private sectors and was based on direct and indirect

state intervention. The high 3.7 per cent annual growth rate for GDP per capita for the

period 1980-2005 can be attributed to two stages of reforms: the pro-business

measure initiated by Rajiv Gandhi in 1980 and economic liberalization initiated in

1991 by Prime Minister P. V. NarashimhaRao and his finance minister, Manmohan

Singh.Technology progress has contributed significantly to the expansion of GDP,

especially in the 1990s, for both China and India. China has enjoyed an annual GDP

growth rate of 9.6 per cent since 1981, while India has achieved a corresponding

figure of 5.6 per cent. GDP growth rate can be decomposed into three parts: the

contributions of capital, labor, and technology, and the share of technology can be

measured by total factor productivity (TFP) growth rate.

Conclusion: The paper concludes with a review of the development of the biotech

industry in both countries, with special focus on the progress of innovation capability

of domestic firms—a factor that is becoming more and more critical to the success of

the Indian and Chinese biotech firms. Institutional factors have great influence over

the choice of innovation at the firm level, i.e., the decision at firm level in terms of

indigenous R&D or the import of technology. But limited financial resources and the

mediocre human resource qualifications remain two major challenges for domestic

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companies in both China and India.

Paper III: Enforcing the Right to Food in India: Bottlenecks in Delivering the

Expected Outcome

Author: George Cheriyan

About the Paper: Over the past decade, a series of events in India have brought the

question of food security into sharp focus. Vast famine-affected areas versus surplus

production and stocks of grains, the impact of globalization and World Trade

Organization laws on agriculture and farmers, the media‘s spotlight on starvation

deaths and, finally, the Supreme Court of India‘s strong reaction to the plight of the

hungry—all make a case for recognizing the right to food. This paper examines the

situation prevailing in India and reviews the obligations and initiatives by the

government of India to ensure food security. This paper mainly looks at the aspect of

corruption as one of the reasons for the failure of the programmes meant for the poor,

makes suggestions for addressing the issue and examines the possible role of civil

society organizations in making the schemes workable for the poor.

Criticism: The vast number of people below the poverty line, and the failure of

schemes meant for this group, clearly shows that India needs to wake up. The

judiciary cannot monitor the implementation of the schemes forever. The government

needs to review the policy periodically and take corrective measures for effective

implementation of different schemes and programmes, establish mechanisms of

accountability and ensure the right to food for all. Hunger in India has gender and age

dimensions. Half of the country‘s women suffer from anemia and maternal

undernourishment, resulting in maternal mortality and underweight babies. Hunger

and starvation also have regional and geographical dimensions. These social evils

recur not only in particular regions, but also across most of India. The pattern of

agriculture has brought uneven development across regions and is characterized by

low levels of productivity and degradation of natural resources in some areas.

Agriculture has also become a relatively unrewarding profession due to an

unfavorable price regime and low value addition, causing increased migration from

rural areas as farmers abandon farming, and increased numbers of suicides among

farmers due to debt.

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Conclusion: India is an active member of the United Nations and is a state party to

International Covenant on Economic, Social and Cultural Rights (ICESCR). Hence

there is an obligation to respect, protect and fulfill the right to food for every citizen

of India. The Indian Constitution does not expressly recognize the fundamental right

to food. The Supreme Court had appointed a commission to look into the right-to-

food schemes and in its latest report observed that despite the fact that starvation

deaths were continuing to occur across the country, there was little proof to indicate

that the states were taking effective measures to improve the situation. As the problem

of food insecurity relates to both the demand and supply of food, a solution could be

to empower people towards greater purchasing power, as well as addressing the

inadequacy of the distribution system, and checking corruption and leakages.

Awareness among the people with regard to their right to food can escalate the

process of equitable distribution and thus help to realize the right to food for all

citizens. The obligation to protect and respect the people compels the state to

implement the right to food effectively, without recourse to extensive financial means.

Paper IV: Indian Agriculture in the New Economic Regime, 1971-2003: Empirics

based on the Cobb Douglas Production Function

Author: Manoj S. Kamat, Sanjay N. Tupe, and Manasvi M. Kamat

About the Paper: New Economic Policy 1991 and the formation of WTO in 1995

have brought structural transformations in the Indian agricultural sector. This paper

attempts to review trends in this since 1970-71 periods. It also examines the

determinants of agricultural gross domestic product during the pre and post-economic

reforms. This paper explores the trend and the impact of the New Economic Policy on

the state of Indian agriculture with reference to socio-economic factors like poverty,

farmers suicides, food stock, input support, quantum of production, cropping pattern

and India‘s membership of the WTO on agricultural growth .

Criticism: The importance of agriculture sector in the process of economic

development is indispensable. With the recognition of this fact, Indian planners have

emphasized on the development of agricultural and allied sector right from the

beginning of the economic planning process in India. In the last 57 years, Indian

agriculture has significantly contributed in terms of income and employment

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generation. Even today the 24% of the total GDP (Gross Domestic Product) originates

from the agriculture sector and 62 % people find direct and indirect employment in

the agriculture sector in India. However in the process of economic transformation,

agriculture sector looses its importance due to its eroding contribution in national

income. In the earlier years of economic planning, food availability was the serious

problem in India. The total food grain production was hardly 51 million tones in

1950-51, which increased to 216 million tones in 2004-05. Ninth Five Year Plan

(1997-2002) emphasized on building of food stock to take up the challenge of famine

and ever increasing demand for food from the masses. However the average

Compounded Annual Growth Rate (CAGR) of agriculture and the allied sector

remained low and volatile since the beginning of the said Plan. A change in cropping

pattern indicates a shift in area under the cultivation of major crops. Since 1950-51

the area under food grain crop cultivation has been declining, also indicating that the

cultivation of non-food grain crops has been increasing. In 1950-51 the area under

food grain crop cultivation was 74 percent of the cultivable land, which declined by 2

percent to 72 percent in 2002-03. This shift in cropping pattern was taking place due

remunerative prices being offered to commercial crops and better market access given

to growers. it is evident that after the introduction of new economic policy the area

under cultivation of the rice and wheat crops decelerated from 0.66 and 2.02 in 1970s

to -0.08 and 0.51 in the decade 1990s respectively. Area devoted for the coarse

cereals and pulses also decreases during the same duration. Declining trend in all

these crops created shortage of food in the recent days and puts pressure on prices of

daily foodstuff, resulting into increasing cost of living of masses.

Conclusion: Before and after the introduction of the New Economic Policy, Indian

agriculture sector is in the Decreasing Returns to Scale phase. This paper proves that

input availability was under strain during that period, hence there is urgent need to

increase the flow of agro-inputs to meet the global challenge of food security, poverty

reduction and unemployment. We therefore advocate government to increase the flow

of inputs to this sector so that the proposed 10 percent growth rate can be achieved

successfully.

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What is a Plan?

A plan spells out how the resources of a nation should be put to use. It should have

some general goals as well as specific objectives, which are to be achieved within a

specified period of time. A plan spells out how the resources of a nation should be put

to use. It should have some general goals as well as specific objectives, which are to

be achieved within a specified period of time; in India plans are of five years duration

(we borrowed this from the former Soviet Union, the pioneer in national planning).

Our plan documents not only specify the objectives to be attained in the five years of

a plan but also what is to be achieved over a period of twenty years. This long-term

plan is called ‗perspective plan‘. The five-year plans are supposed to provide the basis

for the perspective plan.

THE basic objective of development necessarily is to provide the masses of the Indian

people the opportunity to lead a good life.It will be unrealistic to expect all the goals

of a plan to be given equal importance in all the plans. The planners have to balance

the goals, a very difficult job indeed. Our five-year plans do not spell out how much

of each and every good and service is to be produced. This is neither possible nor

necessary. It is enough if the plan is specific about the sectors where it plays a

commanding role, while leaving the rest to the market.

History of plans in India

On 15th

August 1947, India woke to a new dawn of freedom: finally we were masters

of our own destiny after some two hundred years of British rule; the job of nation

building was now in our own hands. The leaders of independent India had to decide,

among other things, the type of economic system most suitable for our nation, a

system which would promote the welfare of all rather than a few. Among the different

economic systems, socialism appealed to Jawaharlal Nehru the most. However, he

was not in favor of the kind of socialism established in the former Soviet Union where

all the means of production, i.e., all the factories and farms in the country, were

owned by the government. There was no private property. Nehru, and many other

leaders and thinkers of the newly independent India, sought an alternative to the

extreme versions of capitalism and socialism. Basically sympathizing with the

socialist outlook, they found the answer in an economic system which, in their view,

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combined the best features of socialism without its drawbacks. In this view, India

would be a socialist society with a strong public sector but also with private property

and democracy; the government would plan economy with the private sector being

encouraged to be part of the plan effort. The ‗Industrial Policy Resolution‘ of 1948

and the Directive Principles of the Indian Constitution reflected this outlook. In 1950,

the Planning Commission was setup with the Prime Minister as its Chairperson. The

era of Five Year Plans had begun.

The Soviet planners under the support of Joseph Stalin set up the first of what later

became known as the Five Year Plans. The initial five-year plans were created to

serve in the rapid industrialization of the Soviet Union, and thus placed a major focus

on heavy industry.The remarkable successes in industrialization achieved by the

Union of Soviet Socialist Republics (USSR) under a regime of state ownership of

means of production and central planning in the face of the hostility of the world‘s

major capitalist powers, which did everything to thwart Soviet development,

including denying the USSR access to technology and trade and supporting fascist

Germany, subtly and otherwise, as a bulwark against the perceived ―Bolshevik

menace‖. This, clearly, impressed the stalwarts of the freedom movement,

andJawaharlal Nehru, so much that they implemented similar principles in India. And

thus, India has an extensive network setup to formulate 5-year plans under the

supervision of the Planning Commission

Why to Plan:

Plan tries to specify some fixed targets and some ways to achieve. India, during days

just after independence, was in dire conditions and needed to start acting soon. Some

of the problems which necessitated need for an immediate plan are :

Vicious circle of poverty

Foreign Trade

Need for Rapid industrialization

Population pressure

Development of Natural resources

Backward Population

Capital Deficiency

Market imperfections

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Objectives

The central objective of planning in India is to raise the standard of living of the

people. Five Year Plans aim at increasing output. At the same time, they aim at

reducing inequalities of income and wealth and providing equal opportunities for all.

Growth with social justice is basic goal. Estimation of poverty line and incidence of

poverty for which the Planning Commission is the nodal agency in the Government of

India.

To increase per capita and NI:

To increase in per capita and NI of a country is regarded as an indicator of eco,

development. The increase in income represents higher standard of living as well as

increase in income of india.

Higher level of employment:

Growing population nullifies the effect of growing economy and hence reduces the

increase in real income and per capita income. If labor base is expanding, output must

also expand correspondingly to ensure full employment. Unemployment problem

requires an immediate solution for the elimination of poverty. It is observed that the

rising of unemployed expands poverty base.

Removal of unemployment has thus been mentioned as one of the objectives of

economic planning in all the five year plans, but according to lots of critiques it has

never been accorded the priority it merited. Time bound targets have never been set.

There also has been difference in opinion between centre and planning commission

over the treatment of unemployment.

Growth with social justice:

Social justice means equal opportunities for all, improving the standard of living of

the poorest groups and reduction in inequalities in income and wealth. The Social

Welfare Sector deals the with welfare, rehabilitation and development of persons with

disabilities, social deviants and other disadvantaged in close co-ordination with the

nodal Ministry of Social Justice and Empowerment and the Women and Child

Development sector handles Empowerment of women and Development of Children

in close co-ordination with the nodal Department of Women and Child Development.

Increasing industrial output:

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The Indian industry saw its output shrink for the first time in 15 years with a 0.4 per

cent year-on-year decline in October, as the impact of the global economic downturn

deepened in the country. Increasing industrial output is also linked with growing

employment generation and growing prosperity overall.

To remove bottlenecks in agriculture, manufacturing industry (especially capital

goods) and the balance of payments.

In the agricultural sector, the main objective was increasing agricultural productivity

and attaining self–sufficiency in foodgrains. In the industrial sector, the emphasis was

on basic and heavy industries. In the foreign trade sector, the emphasis was on having

a viable balance of payments position‘. The strategy adopted in Indian Planning is

often referred to as ‗Mahalanobis strategy‘. In this strategy, emphasis was laid on

rapid industrialization with priority for basic and heavy industries.

Reduction of inequality in income

Although, reduction in income inequality has been mentioned as one of the objectives

of economic planning in India but in terms of priority it always got a very low place.

It is probably on accounts of this reason that neither the plan documents, nor any

other publications of the Planning Commission ever provided estimates of the

inequalities in income and wealth distribution. PramitChaudhari is perhaps right in his

assertion that Indian plans have never made any serious attempt to redistribute income

and wealth.

Modernisation

Although, the role of science and technology in the country‘s development has been

recognized it was never on the agenda till sixth plan. The sixth plan document stated,

―the term modernization connotes a variety of structural and institutional changes in

the framework of economic activity.‖ If one accepts this concept of modernization,

then this is also to be admitted during the whole of the planning period, India did

make advances on the modernization path though the progress might not have been

spectacular.

Self- reliance: About five decades ago on the eve of the first plan, India was

dependent on foreign countries as industry was almost non-existant, primary sector

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agriculture was not producing enough for domestic consumption and very low

foreign funds inflow.

It has been observed in many cases that developed countries while supplying essential

commodities like food grains, machinery and other capital equipment to

underdeveloped countries attempt to take full advantage of their strong bargaining

position and extort exorbitant prices for their products.

It is now generally agreed that in the field of self-reliance, India has two achievements

to its credits. First, the country is now almost self sufficient in food. Second, with the

growth of iron and steel, machine tools and heavy engineering industries, this country

has made considerable advancement towards self-reliance in capital equipment. In

totality, however, the goal of self-reliance has proved to be elusive.

Stages in Economic Planning

i. 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.

ii. Adoption-By Parliament

iii. Approval - After the approval of Parliament only, the draft becomes the

planned document.

iv. Execution-By executive

v. Supervision- By Officials

Pre conditions for effective economic 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 Organisation

Government Setup

Public Cooperation-Citizen must provide every information so that

government can formulate policies for their betterment.

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Characteristics of Economic Planning:

In a planned economy, major economic decisions such as what and how much is to

be produced, when and where it is to be produced and to whom it is to be allocated

will be determined by a central authority such as the State, through the Planning

Commission.The Government will have the powers of implementation.

Before the Plan is drawn up, a detailed survey of all available resources – physical

resources, financial resources and human resources – has to be made. The first step in

drawing up a Plan is to determine a growth target for an economy over the Plan

period. The planners then divide the economy into a number of sectors such as

agriculture, industry and service sector. The planners will fix the targets for the

sectors and also decide how much investment must be made in each sector to

achieve the targets. Then they will decide the right type of investment projects and

production techniques.

Planning In India and Impact

The economy of India is the twelfth largest in the world by market exchange rates

and the fourth largest in the world by GDP, measured on purchasing power parity

(PPP) basis. The country was under socialist-based policies for an entire generation

from the 1950s until the 1980s. The economy was characterized by extensive

regulation, protectionism, and public ownership, leading to pervasive corruption and

slow growth. Since 1991, continuing economic liberalization has moved the economy

towards a market-based system.

Independence to 1991

Indian economic policy after independence was influenced by the colonial experience

(which was seen by Indian leaders as exploitative in nature). Policy tended towards

protectionism, with a strong emphasis on import substitution, industrialization, state

intervention in labor and financial markets, a large public sector, business regulation,

and central planning. Steel, mining, machine tools, water, telecommunications,

insurance, and electrical plants, among other industries, were effectively nationalized

in the mid-1950s. Elaborate licences, regulations and the accompanying red tape,

commonly referred to as Licence Raj, were required to set up business in India

between 1947 and 1990.

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India's low average growth rate from 1947–80 was derisively referred to as the Hindu

rate of growth, because of the unfavorable comparison with growth rates in other

Asian countries, especially the "East Asian Tigers".

The Rockefeller Foundation's research in high-yielding varieties of seeds, their

introduction after 1965 and the increased use of fertilizers and irrigation are known

collectively as the Green Revolution, which provided the increase in production

needed to make India self-sufficient in food grains, thus improving agriculture in

India.

After 1991

In the late 80s, the government led by Rajiv Gandhi eased restrictions on capacity

expansion for incumbents, removed price controls and reduced corporate taxes. While

this increased the rate of growth, it also led to high fiscal deficits and a worsening

current account. The collapse of the Soviet Union, which was India's major trading

partner, and the first Gulf War, which caused a spike in oil prices, caused a major

balance-of-payments crisis for India, which found itself facing the prospect of

defaulting on its loans. India asked for a $1.8 billion bailout loan from IMF, which in

return demanded reforms.

In response, Prime Minister NarasimhaRao along with his finance minister

Manmohan Singh initiated the economic liberalisation of 1991. The reforms did away

with the Licence Raj (investment, industrial and import licensing) and ended many

public monopolies, allowing automatic approval of foreign direct investment in many

sectors. Since 1990 India has emerged as one of the fastest-growing economies in the

developing world; during this period, the economy has grown constantly, but with a

few major setbacks. This has been accompanied by increases in life expectancy,

literacy rates and food security.

While the credit rating of India was hit by its nuclear tests in 1998, it has been raised

to investment level in 2007 by S&P and Moody's. In 2003, Goldman Sachs predicted

that India's GDP in current prices will overtake France and Italy by 2020, Germany,

UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third

largest economy of the world, behind US and China.

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Organization

The Prime Minister is the Chairman of the Planning Commission, which works under

the overall guidance of the National Development Council. The Deputy Chairman and

the full time Members of the Commission, as a composite body, provide advice and

guidance to the subject Divisions for the formulation of Five Year Plans, Annual

Plans, State Plans, Monitoring Plan Programmes, Projects and Schemes.

The Planning Commission functions through several Divisions, each headed by a

Senior Officer. The Set up is:

Chairman

Sh. Montek Singh Ahluwalia, Dy. Chairman

Shri V. Narayanasamy, Minister of State

Members

o Dr. Kirit Parikh

o Prof. AbhijitSen

o Dr. V.L. Chopra

o Dr. BhalchandraMungekar

o Dr.(Ms.) SyedaHameed

o Shri B.N. Yugandhar

o Shri Anwar-ul-Hoda

o Shri B. K. Chaturvedi

Dr. SubasPani, Secretary

Senior Officials

Grievance Officers

Divisions

Divided in following Sectors :

A. Agriculture

Flow of Institutional Credit to Agriculture

Land use Classification

Distribution of Land Holdings—All India

All India Area, Production and Yield of Food Grains (Kharif and Rabi)

Area Irrigated by Sources

Per-capita Net Availability of Foodgrains in India

Progress in Use of Agricultural Inputs

Irrigation and Flood Control

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Magnitude and Composition of Investment

B. Infrastructure

Power and Energy

Transport – Shipping

Transport – Railways

Transport – Roadways

Transport – Civil Aviation

Telecommunication and Broadcasting

C. Social Sector

Education

Employment

Health and Family Welfare( Including Population)

Empowerment of Women and Development of Children

Empowerment of the Socially Disadvantaged Groups

Social Welfare

Public Distribution System

Rural Development

Housing, Water Supply and Sanitation

D. Other sectors/ Areas

Science and Technology

Environment and Forests

Tourism

Special Area Programmes

Office Memorandum: Changing the name of 'Village & Small Industries

Division' to "Village & Small Enterprises Division" dated 8/3/04

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Progress of Five Year Plans uptil now:

First Five Year Plan (1951-55)

The First Five-Year Plan (FY 1951-55) attempted to stimulate balanced economic

development while correcting imbalances caused by World War II and partition.

Agriculture, including projects that combined irrigation and power generation,

transportation and price stability, received priority. It was based on Harrod-Domar

Model. Community Development Program was launched in 1952. This plan was more

than a success, because of good harvests in the last two years of the plan.

Total budget: 206.8 billion (INR) or USD$23.6 billion.

Objectives:

o The standard of living

o Community and agriculture development

o Energy and irrigation

o Communications and transport

o Industry

o Land rehabilitation

o Social services

o Target of GDP growth 2.1 per year

Achievements:

o GDP 3.6% per year

o Evolution of good irrigation system

o Improvements in Roads

o Improvements inCivil aviation

o Improvements inRailways

o Improvements inTelegraphs

o Improvements inPosts

o Improvements inManufacture of fertilizers

o Improvements inElectrical equipment

Disadvantages

o Development of only a few industries

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o Private industry had not developed

Second Five Year Plan (1956-61)

By contrast, the Second Five-Year Plan (FY 1956-60) emphasized rapid

industrialization, particularly basic, heavy industries in the public sector, and

improvement of the economic infrastructure. The plan also stressed social goals, such

as more equal distribution of income and extension of the benefits of economic

development to the large number of disadvantaged people. This plan is also called

Mahalanobis Plan after its chief architect. It advocated huge imports, which led to

emptying of funds leading to foreign loans. It shifted basic emphasis from agriculture

to industry far too soon. During this plan, price level increased by 30%, against a

decline of 13% during the First Plan.

Objectives

o To increase by 25% the national income

o To make the country more industrialized

o To increase employment opportunities so that every citizen gets a job

Development of

o Mining and industry

o Community and agriculture development

o Power and irrigation

o Social services

o Communications and transport

o Miscellaneous

Achievements

o 5 steel plants

o A hydro-electric power project

o Production of coal increased

o More railway lines

o Land reform measures

o Improved the living standards of the people

o The large enterprises in seventeen industries were nationalized

Disadvantages

o Eliminate the importation of consumer goods

o High tariffs

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o Low quotas or banning some items altogether

o License were required for starting new companies

o This is when India got its License Raj , the bureaucratic control over the

economy

o When a business was losing money the Government would prevent them

from shutting down

Third Five Year Plan (1961-66) The Third Five-Year Plan (FY 1961-65) aimed at a substantial rise in national and per

capita incomewhile expanding the industrial base and rectifying the neglect of

agriculture in the previous plan. The third plan called for national income to grow at a

rate of more than 5 percent a year; self-sufficiency in food grains was anticipated in

the mid-1960s.At its conception time, it was felt that Indian economy has entered a

take-off stage. Therefore, its aim was to make India a 'self-reliant' and 'self-

generating' economy. Also, it was realized from the experience of first two plans that

agriculture should be given the top priority to suffice the requirement of export and

industry.

Economic difficulties disrupted the planning process in the mid-1960s. In 1962, when

a brief war was fought with China on the Himalayan frontier, agricultural output was

stagnating, industrial production was considerably below expectations, and the

economy was growing at about half of the planned rate. Defense expenditures

increased sharply, and the increased foreign aid needed to maintain development

expenditures eventually provided 28 percent of public development spending.

Midway through the third plan, it was clear that its goals could not be achieved. Food

prices rose in 1963, causing rioting and looting of grain warehouses in 1964. War

with Pakistan in 1965 sharply reduced the foreign aid available. Successive severe

droughts in 1965 and 1966 further disrupted the economy and planning.

Objectives

o More stress to agriculture

o Subsidies

o Sufficient help

o Effective use of country resources

o To increase the national income by 5% per year

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o To increase the production of agriculture so that the nation is self

sufficient in food grains

o To provide employment opportunities for every citizen of the country

o To establish equality among all the people of the country

Achievements

o Decentralization

o Organizations formed

o Panchayat

o ZilaParishads

o Laid emphasis on Oil conservation

o Laid emphasis on Irrigation

o Laid emphasis on A forestation

o Laid emphasis on Dry farming

o Laid emphasis on Many fertilizer and cement plants were built

o Laid emphasis on Green Revolution

Fourth Five Year Plan (1969 -74) The Fourth Five-Year Plan (FY 1969-73) called for emphasis on agriculture's growth

rate so that a chain reaction can start. It fared well in the first two years with record

production, last three years it faced failure because of poor monsoon. This plan had to

tackle the influx of Bangladeshi refugees before and after 1971 Indo-Pak war.A 24

percent increase over the third plan in real terms of public development expenditures

was emphasized. Main The public sector accounted for 60 percent of plan

expenditures, and foreign aid contributed 13 percent of plan financing. Agriculture,

including irrigation, received 23 percent of public outlays; the rest was mostly spent

on electric power, industry, and transportation. Although the plan projected national

income growth at 5.7 percent a year, the realized rate was only 3.3 percent.

Objectives

o To reform and restructure govts expenditure agenda( defense became

one major expense)

o To facilitated growth in exports

o To alter the socio economic structure of the society

Achievements

o Great advancement has been made with regard to India national income

o Considered as one of the emerging powers

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o Served as a stepping stone for the economic growth

o Food grains production increased

Problems

o A gap was created between the people of the rural areas and those of the urban

areas.

o Due to recession, famine and drought, India did not pay much heed to long

term goals

Fifth Five Year Plan (FY 1974-79) The Fifth Five-Year Plan (FY 1974-78) was drafted in late 1973 when crude oil prices

were rising rapidly; the rising prices quickly forced a series of revisions.The fifth plan

prepared and launched by D.D. Dhar proposed to achieve two main objectives viz,

'removal of poverty' (GaribiHatao) and 'attainment of self reliance', through promotion

of high rate of growth, better distribution of income and a very significant growth in

the domestic rate of savings. The plan was subsequently approved in late 1976. The

plan was terminated in 1978 (instead of 1979) when Janta Government came to power.

The fifth plan was in effect only one year, although it provided some guidance to

investments throughout the five-year period.

The economy operated under annualrolling plans in FY 1978 and FY 1979.There were

2 Sixth Plans. One by the Janta Government (for 78-83) which was in operation for 2

years only and the other by the Congress Government when it returned to power in

1980.

Objectives

o To reduce social, regional, and economic disparities

o To enhance agricultural productivity

o To check rural and urban unemployment

o To encourage self-employment

o Production support policies in the cottage industry sector

o To develop labor intensive technological improvements

Achievements

o Food grain production was above 118 million tons due to the improvement of

infrastructural facilities

o Bombay High had shot up the commercial production of oil in India

Problems faced

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o The world economy was in a troublesome state

o This had a negative impact on the Indian economy

o Prices in the energy and food sector skyrocketed and as a consequence inflation

became inevitable

o The international economy was in a trouble

o Food, oil, and fertilizers where prices sky-rocketed

o Several inflationary pressures

Sixth Five Year Plan (FY 1980-85) The Sixth Five-Year Plan (FY 1980-84) was intended to be flexible and was based on

the principle of annual "rolling" plans. It called for development expenditures of

nearly Rs1.9 trillion, of which 90 percent would be financed from domestic sources,

57 percent of which would come from the public sector. Public sector development

spending would be concentrated in energy (29 percent); agriculture and irrigation (24

percent); industry including mining (16 percent); transportation (16 percent); and

social services (14 percent). In practice, slightly more was spent on social services at

the expense of transportation and energy. The plan called for GDP growth to increase

by 5.1 percent a year, a target that was surpassed by 0.3 percent.

Objectives

o To improve productivity level

o To initiate modernization for achieving economic and technological self-

reliance

o To control poverty and unemployment

o To develop indigenous energy sources and efficient energy usage

o To promote improved quality of life of the citizens

o To introduce Minimum Needs Program for the poor

o To initiate Family Planning

Achievements

o Speedy industrial development

o Emphasis on the information technology sector

o Self sufficiency in food

o Science and technology also made a significant advance

o Several successful programs on improvement of public health

o Government in the Indian healthcare sector

o Government investments in the Indian healthcare sector

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Problems faced

o During this time the Prime Minister was Rajiv Gandhi and hence industrial

development was the emphasis of this plan some opposed it specially the

communist groups, this slowed down the pace of progress.

Seventh Five Year Plan (FY 1985-90) The Seventh Five-Year Plan (FY 1985-89) envisioned a greater emphasis on the

allocation of resources to energy and social spending at the expense of industry and

agriculture. Also, it emphasized on policies and programs which aimed at rapid

growth in food-grains production, increased employment opportunities and

productivity within the framework of basic tenants of planning. It was a great success,

the economy recorded 6% growth rate against the targeted 5%. The main increase was

in transportation and communications, which took up 17 percent of public-sector

expenditure during this period. Total spending was targeted at nearly Rs3.9 trillion, of

which 94 percent would be financed from domestic resources, including 48 percent

from the public sector. The planners assumed that public savings would increase and

help finance government spending.

Objectives

o Anti-poverty program

o Improved facilities for education to girls

o The government undertook to increase productivity of

o Oilseeds,Fruits,Vegetables

o Pulses, Cereals,Fish

o Egg, Meat, milk

o Communications - Emergence of informatics, and hooking up of

telecommunications with computers

o Transport - inland waterways, product pipelines, civil aviation, coastal

shipping

Achievements

o Social Justice

o Removal of oppression of the week

o Using modern technology

o Agricultural development

o Anti-poverty programs

o Full supply of food, clothing, and shelter

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o Increasing productivity of small and large scale farmers

o Making India an Independent Economy

Problems

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

plan was implemented

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

Eighth Five Year Plan (FY 1992-1997) The schedule for the Eighth Five-Year Plan (FY 1992-96) was affected by changes of

government and by growing uncertainty over what role planning could usefully

perform in a more liberal economy. Two annual plans were in effect in FY 1990 and

FY 1991.The eighth plan was launched after a worsening Balance of Payment

position and inflation during 1990-91. The plan undertook various drastic policy

measures to combat the bad economic situation and to undertake an annual average

growth of 5.6%. Some of the main economic performances during eighth plan period

were rapid economic growth, high growth of agriculture and allied sector, and

manufacturing sector, growth in exports and imports, improvement in trade and

current account deficit. The eighth plan was finally launched in April 1992 and

emphasized market-based policy reform rather than quantitative targets.

Objectives

o Prioritize the specific sectors which requires immediate investment

o To generate full scale employment

o Promote social welfare measures like improved healthcare, sanitation,

communication and provision for extensive education facilities at all levels

o To check the increasing population growth by creating mass awareness

programs

o To encourage growth and diversification of agriculture

o To strengthen the infrastructural facilities

o To place greater emphasis on role of private initiative in the development of

the industrial sector

Achievements

o Rise in the employment level

o Poverty reduction

o Self-reliance on domestic resources

o Self-sufficiency in agricultural production

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o GDP Growth Per Annum 5.6

Ninth Five Year Plan (FY 1997-2002)

The Ninth Five Year Plan(FY 1997-02) was developed in the context of four

important dimensions: Quality of life, generation of productive employment, regional

balance and self-reliance.

Objectives

o To prioritize rural development

o To generate adequate employment opportunities

o To stabilize the prices

o To ensure food and nutritional security

o To provide for the basic infrastructural facilities like education for all, safe

drinking water, primary health care, transport, energy

o To check the growing population increase

o To encourage social issues like women empowerment

o To create a liberal market for increase in private investments

Achievements

o A combined effort of public, private, and all levels of government

o Ensured the growth of india economy.

o Service sector showed fast growth rate

Tenth Five Year Plan (FY 2002-07)

To achieve the growth rate of GDP @ 8%.

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.

Increase in forest and tree cover to 25% by 2007 and 33% by 2012.

All villages to have sustained access to potable drinking water by 2012.

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Cleaning of all major polluted rivers by 2007 and other notified stretches by

2012.

Eleventh five year plan (FY 2007-12)

Objectives

o Income & Poverty

o Education

o Health

o Women and Children

o Infrastructure

o Environment

Role Of Economic Planning On GDP

India moved from the ―Hindu Rate of Growth (HRG)‖ during the sixties and seventies

to a ―Bharatriya Rate of Growth (BRG)‖ of 5.8 per cent during the eighties and

nineties. A number of eminent economists have asserted that the growth of the

economy during the second half of the nineties was propped up by pay commission

related increases in the pay of government/public servants and this artificial increase

is unsustainable. Thus the real growth rate of the economy is currently not 5.8 per

cent but closer to 5 per cent. Other commentators have gone even further to assert

that services growth during the entire nineties, which has kept average growth during

the nineties at 5.8 per cent is unsustainable and that the underlying growth rate is

currently as low as 4.5 per cent. In this article I address these and other related

questions by looking a little deeper into the underlying sector growth rates,

particularly the role of services. Such assertions based on short-term movements, are

shown to have little relevance to long-term growth trends and prospects.

Role of Administration& Pay Commission Because of the way in which GDP from administration is measured, it is quite

legitimate to question its role in long-term growth. The productive sectors of the

economy meet the market test in that the consumer is willing to pay for the goods or

services purchased. Thus their value is determined by market prices. As there is no

market price for the administrative services supplied by the government, their

contribution to GDP is measured by wages etc. incurred in the sector. Thus a rise in

the real wages paid raises the value added as measured by the GDP statistics. As long

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as these services are not produced at rates determined through competitive bidding,

there is no other way in which they can be valued. We can, however, get a better fix

on the sustainable rate of growth by excluding GDP from administration from our

growth estimates.

During the eighties and nineties, average rate of growth of GDP (adj.) i.e. excluding

the GDP from administration, was only 0.04 per cent point lower than the growth of

conventionally measured GDP. This leaves the Bharatiya rate of growth unchanged

at 5.8 per cent. This is not, however, true of the Hindu rate of growth. During the

sixties and seventies the average rate of growth of GDP (adj) was 0.13 per cent point

lower than for GDP as a whole, so that the HRG is reduced from 3.4 per cent to 3.3

per cent.

Role of Service Sector As per broad globally accepted definition of goods and services, Agriculture & allied

sectors, mining & quarrying and manufacturing sectors produce goods while the

output of all other sectors constitutes services. The former are traditionally classified

as tradable and the latter as non-tradable, though this is rapidly changing. We can

define GDP from Services (adj) by excluding the GDP from administration. A

comparison of the growth rate in this with the unadjusted GDP completely contradicts

the common assertion that much of services growth was due to the government pay

rise. On the contrary the rate of growth of services (adj) during the last two decades

was marginally (0.05 per cent point) higher than that for Services as a whole

(unadjusted).

It is, however, wrong to conclude, as some have done, that the nineties is the first

instance in which services have grown faster than other sectors of the economy. On

the contrary in each of the five decades since independence, GDP from Services has

grown faster than GDP from the tradable goods sectors of the economy. The gap

averaged about 2.2 per cent points in the first four decades but has expanded to 3.1

per cent points in the nineties. If we exclude GDP from administration from our GDP

calculations, the gap shows much greater fluctuations; It was 0.8 per cent point in the

fifties, rose to 1.3 per cent point in sixties and seventies, fell back to 0.7 per cent point

in the eighties and then rose to a peak of 1.7 per cent point in the nineties. Though in

absolute terms the last is unprecedented it is worth noting that it is only 30 per cent

Is planning relevant in Indian context today? Page 32

higher than the GDP (adj) growth rate for the nineties. The 1.3 per cent point gap in

the seventies & sixties was respectively 46 per cent & 34 per cent higher than GDP

(adj) growth rate.

There are two broad reasons for the higher contribution of non-tradable services to

GDP growth during the nineties. The decline in protection for non-tradable sectors

arising from the elimination of QRs and reduction in tariffs for mining and

manufacturing sectors. The measurement of community services, however, suffers

from valuation problems whenever it is provided free, whether by the government or

by non-governmental organisations. As ―Other community services‖ include

education and health services, it is contaminated by the pay commission related wage

increases for government teachers and doctors. The effect on overall trends is,

however, likely to be even less than for administration.

In conclusion, we find that though the pay commission related pay increases may

have distorted estimates of GDP for a few years they do not affect the trend rate of

growth of GDP. The ―Bharatiya rate of growth‖ remains at 5.8% per annum even if

government administration is excluded altogether. A similar adjustment of services

also contradicts the assertion that this factor is responsible for higher service growth.

Further, services (adjusted) have always grown faster than overall GDP growth,

though their contribution has fluctuated. The contribution of services during the

nineties is high only in comparison to the eighties, when their contribution was

unusually low.

Role of Economic Planning In Industry And Service

India has one of the world's fastest growing automobile industries and is global leader

of auto industry

Industry accounts for 27.6% of the GDP and employ 17% of the total workforce.

However, about one-third of the industrial labour force is engaged in simple

household manufacturing only. In absolute terms, India is 16th in the world in terms

of nominal factory output. India's small industry makes up 5% of carbon dioxide

emissions in the world.

Economic reforms brought foreign competition, led to privatization of certain public

sector industries, opened up sectors hitherto reserved for the public sector and led to

Is planning relevant in Indian context today? Page 33

an expansion in the production of fast-moving consumer goods. Post-liberalization,

the Indian private sector, which was usually run by oligopolies of old family firms

and required political connections to prosper was faced with foreign competition,

including the threat of cheaper Chinese imports. It has since handled the change by

squeezing costs, revamping management, focusing on designing new products and

relying on low labour costs and technology.

Textile manufacturing is the second largest source for employment after agriculture

and accounts for 26% of manufacturing output. Tirupur has gained universal

recognition as the leading source of hosiery, knitted garments, casual wear and

sportswear. Dharavi slum in Mumbai has gained fame for leather products. Tata

Motors' Nano attempts to be the world's cheapest car.

India is fifteenth in services output. It provides employment to 23% of work force,

and it is growing fast, growth rate 7.5% in 1991–2000 up from 4.5% in 1951–80. It

has the largest share in the GDP, accounting for 55% in 2007 up from 15% in 1950.

Business services (information technology, information technology enabled services,

business process outsourcing) are among the fastest growing sectors contributing to

one third of the total output of services in 2000. The growth in the IT sector is

attributed to increased specialization, and an availability of a large pool of low cost,

but highly skilled, educated and fluent English-speaking workers, on the supply side,

matched on the demand side by an increased demand from foreign consumers

interested in India's service exports, or those looking to outsource their operations.

India's IT industry, despite contributing significantly to its balance of payments,

accounted for only about 1% of the total GDP or 1/50th of the total services in 2001

However the contribution of IT to GDP increased to 4.8 % in 2005-06 and is

projected to increase to 7% of GDP in 2008.

Tourism in India is relatively undeveloped, but growing at double digits. Some

hospitals woo medical tourism.The Industry Division deals with the industrialization

issues including policies and programmes relating to large and medium industries. It

handles matters concerning formulation, implementation, monitoring and evaluation

of Plans and programmes for the larger and medium industries for the Annual and

Five Year Plans in respect of both the Central Sector and States /UT's . The industry

groups /industries being dealt with by the Division include engineering industries like

Is planning relevant in Indian context today? Page 34

capital goods industry, steel, non-ferrous metals, ship building, fertilizers, chemicals

and petrochemicals, drugs and pharmaceuticals, textiles including jute, electronics,

paper and paper board, cement, sugar, leather, alcohol; other consumer industries, etc.

The division also deals with issues such as economic reforms, liberalisation,

disinvestment, technology policies, public sector, foreign direct investment, exports,

productivity, consumer protection, weights & measures, Patent/IPR/Trademark and

similar other matters which have a bearing on industrial development of the country.

The matters relating to public sector enterprises and industrial finance are also

handled by the Division, Reference to the Planning Commission in these areas in the

form of Cabinet Notes, Parliament question and other miscellaneous forms of

communication are dealt with in the Division.

The broad functions of the Division are:

To handle all matters relating to industrial policy and other associated policy

To deal with policies relating to the public sector enterprises

To handle matters relating to industrial finance, financial institutions and

capital markets

To study and analyse industrial statistics and undertake special studies relating

to industrial development and sickness

To undertake appraisal and evaluation of industrial projects in the public

sector

To undertake appraisal and evaluation of industrial projects related to

development of export infrastructure and allied activities

To undertake appraisal of export promotion efforts and market access

initiatives in the wake of WTO regime

To implement policy issues relating to Disinvestment of PSUs

To study and analyse industrial production trends and to make forecast of the

demand estimates

To undertake coordination and review of industrial development programmes

To formulate plans and programmes for development of various industrial

sub-sectors and industries, their financing and re-viewing the targets of

capacity and production

To study scientific and technical advances and technology transfer issues

To study factors inhibiting or accelerating growth in particular sectors for

industries

Monitoring the programs and progress of Centrally Sponsored Schemes

relating to industrial sector export promotion and allied activities.

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To inter-act with various Ministries, Industry Associations and other

Governmental and non-Governmental bodies on industrial matters

To inter-act with the State Governments and Union Territories on industrial

development issues

Service: The major items of work handled by the Division and activities undertaken include:

The work relating to formulation of policies, Five Year Plans, Annual Plans,

Mid-term Appraisal of Plans pertaining to Telecommunications, Posts,

Information Technology and Information & Broadcasting sectors of the

Economy.

Examination of the Plan schemes / projects of the above mentioned sectors

including the PSUs / Organizations under them.

Examination of various policy documents / papers and preparation of

comments as required by the Commission and Government from time to time.

Participation in various Inter-Ministerial Committees and Commissions set up

by the Government for these sectors.

Maintenance and updation of Planning Commission Website :

http: //planningcommission.nic.in

Printing and distribution of 'Plan Documents' and other reports of the Planning

Commission.

Preparation and circulation of 'Daily News Digest'

The details of organisations and the major programme areas with which the Division

is associated for various aspects of policy formulation, monitoring and evaluation

include:

(A) TELECOMMUNICATIONS

I. Department of Telecom – DOT, WMO, WPC

II. Regulatory Bodies – TRAI, TDSAT

III PSUs Providing Telecom Services- BSNL, MTNL

IV Development and Manufacturing of Telecom Equipment- ITI, TEC, C-DOT

(B) POSTAL SECTOR: DEPARTMENT OF POSTS

(C) INFORMATION TECHNOLOGY

I. Department of Information Technology-C-DAC, DDEACC, SAMEER

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II. Strengthening of IT infrastructure in States / UTs

(D) INFORMATION AND BROADCASTING

I. Ministry of Information & Broadcasting

II. PrasarBharati Corporation

III. Information Sector

IV. Film Sector

(V) Public Sector Units (PSUs)

(E) PLANNING COMMISSION WEBSITE

ADDRESS:http://planningcommission.gov.in//.

Role of Employment

1. A quantitative scenario of the population, labour force and work force is the

starting point of the plan exercise on employment and unemployment. It also

serves as a baseline, with reference to which, the impact of the various plan

initiatives, policies and programmes can be articulated in a quantitative manner.

2. The Eleventh Five Year Plan is being evolved as an Education Plan, and a novel

feature of the exercise on projections of labour force is the explicit treatment of

the influence of the levels of education on participation in labour force. The

concerns of employment strategy for the Eleventh Five Year Plan differ from

the earlier Plans, in that now there is an explicit focus at the quality of

employment, and not merely at the aggregate unemployment.

3. Besides the focus on growth in output, the strategy for creation of employment

opportunities should carefully look at the institutional environment that governs

the exchange of labour for wages received in the labour market.

4. The Eleventh Plan aims to address many economic and social problems, such as

inadequate physical infrastructure, in the rural areas, in particular – roads,

housing, drinking water, sanitation, housing, and access to electricity; urban

renewal; care of the child and adolescent girls; children out of school;

improving productivity and income from agriculture; and unemployment among

the rural labour households.

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5. In its recommendations the Working Group has emphasized on measurement of

Quality of employment‗. There is a need to supplement the existing

methodology for measurement of labour force and employment. Many technical

issues have to be contended with in determining the right approach to

measurement of employment and unemployment, if the quality of employment

is also to be accounted for.

6. The Working Group has looked at the employment and unemployment situation

for the Country as a whole. However, in dealing with the planning issues

pertaining to labour and employment, a differential approach across regions is

required. While the elements of such an approach are perceptible in the region-

specific programmes and policies, including the district-specific programmes

such as the NREGA, the Working Group underlines the need for more intensive

work. Best use of the data that already exists, and a new approach to collect

location-specific employment data through more frequent surveys / census of

households and establishments, than once in 5 to 10 years as is done now, are

required.

Role of Education

Education Policy should be sensitive towards cultural and linguistic diversity of

Indian society, and therefore uniform standards should not be applied.There should be

increased access of minorities in all non-minority institutions.

While minority institutions are kept out of the purview of reservation of SCs, STs and

OBCs in general, they should be obligated to reserve certain seats for members of

their own minority community who belong to SCs, STs and OBCs.Nomadic groups

and de-notified tribes should also be grouped along with disadvantaged.

Data gaps on this category of students-SC/ST/Minorities/ Girls/Disadvantaged – need

to be filled at each stage of education. Majority of the people are not aware of all the

Plan schemes, which benefit them. In view of this an Equal Opportunities Cell may be

set up. An Officer (Ombudsman) who would manage this Equal Opportunities Cell

should be made responsible to widely circulate information brochures and pamphlets

and also to educate people in the target group. The officer so appointed should act like

a single window operator who can be approached by the applicant.All the universities

Is planning relevant in Indian context today? Page 38

should establish SC/ST/OBC/Disadvantaged Groups Cells at the earliest, which could

also function as anti-discrimination Cell.

Mid day meal scheme has increased the enrollment of children in schools. However,

teachers should have the ability to motivate students to learn. They should encourage

the students to develop skills and learn, so that children look forward to coming to

schools not only for eating but also for learning. Refresher courses may also be

developed for the teachers. SSA should enlarge support for hostels for boys and girls

on the same lines as Kasturba Gandhi BalikaVidyalayas with 75% minimum

reservation for SC/ST/OBC and disadvantaged groups.

The Planning Commission had constituted a Working Group on ―Development of

Education of SC/ST/Minorities/Girls and other disadvantaged Groups‖ - Eleventh

Five Year Plan – 2007-2012 vide their order No.M-12015/2/2005-Edn. dated

21.6.2006, under the Co-chairmanship of Secretary, Higher Education and Secretary,

School Education and Literacy(Annexure-A). First meeting of the Working Group

was held on 17th August 2006 in which it was decided that the Working Group may

consider the sectoral issues presented by various sectors like Higher Education,

Technical Education, Vocational Education, School Education, Elementary Education

and Adult Education. Accordingly, Working Group met on 1st, 6th, 7th & 8th

September, 2006 to consider the issues raised by various sectors including a special

session exclusively devoted to the issues and problems faced by children with specific

needs.

Literacy Status

Despite the fact that there has been an increase in the literacy rates of SCs/STs since

independence, the present position is still far from satisfactory. The overall increase in

literacy rate in the country during the period 1961-2001 was 36.54 against which

increase in literacy rate for SCs and STs during the same period was 44.42 and 38.57

respectively. The female literacy rates among STs continue to remain a serious cause

of concern, as it is only 34.76% as against the total female literacy rate of 53.67%.

However, in overall terms, the female literacy rate has increased significantly since

independence, the female literacy rate was only 8.86% in1951. The literacy rate of

females is 53.67% as compared to 75.26% among males in 2001. The female literacy

rate has risen by 14.38% compared to a corresponding increase of 11.13%

Is planning relevant in Indian context today? Page 39

Advantages and disadvantages of planning

Supporters of planned economies cast them as a practical measure to ensure the

production of necessary goods—one which does not rely on the vagaries of free

market(s).

Stability

Long-term infrastructure investment can be made without fear of a market downturn

(or loss of confidence) leading to abandonment of the project. This is especially

important where returns are risky (e.g.fusion reactor technology) or where the return

is diffuse (e.g.immunization programs or public education). Critics will point out that

even though the economy will never go down, it never goes up.

Conformance to a grand design

While a market economy maximizes wealth by evolution, a planned economy favors

design. While evolution tends to lead to a local maximum in aggregate wealth, design

is in theory capable of achieving a global maximum. For example, a planned city can

be designed for efficient transport, while organically grown cities tend to suffer from

traffic congestion. Critics would point out that planned cities will suffer from the

same problems as unplanned cities, unless reproduction and population growth is

subject to strict control, as in a closed city.

Meeting collective objectives by individual sacrifice

Planned economies may be intended to serve collective rather than individual needs:

under such a system, rewards, whether wages or perquisites, are to be distributed

according to the value that the state ascribes to the service performed. A planned

economy eliminates the individual profit motives as the driving force of production

and places it in the hands of the state planners to determine what is the appropriate

production of different sets of goods.

The government can harness land, labor, and capital to serve the economic objectives

of the state. Consumer demand can be restrained in favor of greater capital investment

for economic development in a desired pattern. The state can begin building a heavy

industry at once in an underdeveloped economy without waiting years for capital to

accumulate through the expansion of light industry, and without reliance on external

Is planning relevant in Indian context today? Page 40

financing. This is what happened in the Soviet Union during the 1930s when the

government forced the share of GNP dedicated to private consumption from 80

percent to 50 percent. While there was a significant decline in individual living

standards, the state was able to meet some of its "economic objectives."

It could be seen as the government deciding: Who produces what, Where it is

produced, How much it costs, and Where it goes.

Comparison with capitalist corporations

Taken as a whole, a centrally planned economy would attempt to substitute a number

of firms with a single firm for an entire economy. As such, the stability of a planned

economy has implications with the Theory of the firm. After all, most corporations

are essentially 'centrally planned economies', aside from some token intra-corporate

pricing. That is, corporations are essentially miniature centrally planned economies

and seem to do just fine in a free market. As pointed out by Kenneth Arrow and

others, the existence of firms in free markets shows that there is a need for firms in

free markets; opponents of planned economies would simply argue that there is no

need for a sole firm for the entire economy.

Disadvantages of economic planning

Inefficient resource distribution – surplus and shortage

Critics of planned economies argue that planners cannot detect consumer preferences,

shortages, and surpluses with sufficient accuracy and therefore cannot efficiently co-

ordinate production (in a market economy, a free price system is intended to serve this

purpose). For example, during certain periods in the history of the Soviet Union,

shortages were so common that one could wait hours in a queue to buy basic

consumer products such as shoes or bread.[15]

These shortages were due in part to the

central planners deciding, for example, that making tractors was more important than

making shoes at that time, or because the commands were not given to supply the

shoe factory with the right amount of leather, or because the central planners had not

given the shoe factories the incentive to produce the required quantity of shoes of the

required quality. This difficulty was first noted by economist Ludwig von Mises, who

called it the "economic calculation problem". Economist JánosKornai developed this

Is planning relevant in Indian context today? Page 41

into a shortage economy theory (advocates could claim that shortages were not

primarily caused by lack of supply).

There is also the problem of surpluses. Critics of central planning say that a market

economy prevents long-term surpluses because the operation of supply and demand

causes the price to sink when supply begins exceeding demand, indicating to

producers to stop production or face losses. It is argued that this "invisible hand"

prevents long-term shortages and surpluses and allows maximum efficiency in

satisfying the wants of consumers. Critics argue that since in a planned economy

prices are not allowed to float freely, there is no accurate mechanism to determine

what is being produced in unnecessarily large amounts and what is being produced in

insufficient amounts. They argue that efficiency is best achieved through a market

economy where individual producers each make their own production decisions based

on their own profit motive.

Cannot determine and prioritize social goods better than the market can

Some who oppose comprehensive planned economies argue that some central

planning is justified. In particular, it is possible to create unprofitable but socially

useful goods within the context of a market economy. For example, one could

produce a new drug by having the government collect taxes and then spend the money

for the social good. On the other hand, opponents of such central planning say that

"absent the data about priorities conveyed through price signals created by freely

acting individuals, [it is questionable] whether determinations about what is socially

important can even be made at all." Opponents do not dispute that something useful

can be produced if money is expropriated from private businesses and individuals, but

their complaint is that "it‘s far from certain that those monies could not have been

spent better" if individuals were allowed to spend and invest as they wished according

to their own wants.

We can see things of value being produced by the state taxing and using those funds

to undertake projects which are believed to be social goods, but we cannot see what

social goods have not been produced due to wealth taken out of the hands of those

who would have invested and spent their money in other ways according to their own

goals. These opponents of central planning argue that the only way to determine what

society actually wants is by allowing private enterprise to use their resources in

Is planning relevant in Indian context today? Page 42

competing to meet the needs of consumers, rather those taking resources away and

allowing government to direct investment without responding to market signals.

According to Tibor R. Machan, "Without a market in which allocations can be made

in obedience to the law of supply and demand, it is difficult or impossible to funnel

resources with respect to actual human preferences and goals."

If the government in question is democratic, democratically-determined social

priorities may be considered legitimate social objectives in which the government is

justified in intervening in the economy. Many democratic nations have a mixed

economy, where the government intervenes to a certain extent and in certain aspects

of the economy, although other aspects of the economy are left to the free market.

Lack of incentive for innovation

Another criticism some make of central planning is that it is less likely to promote

innovation than a free market economy. In the latter, inventors can reap huge benefits

by patenting new technology, so there is arguably much more incentive to innovate.

Conversely a planned economy can deliver vast national resources into research and

development if it gets the idea that a particular field is critical to its interests, usually

military technology. The Soviet Union's ability to maintain fierce competition versus

the United States during the space race and Cold War, despite its smaller economy, is

an example of this.

Infringement on individual freedoms

The top down structure of a centrally planned economy dictates a hegemonic

operating culture - whereas in a free market economy several models of operating can

compete simultaneously in a manner similar to organisms in an ecosystem.

Critics also hold that certain types of command economies may require a state which

intervenes highly in people's personal lives. For example, if the state directs all

employment then one's career options may be more limited. If goods are allocated by

the state rather than by a market economy, citizens cannot, for example, move to

another location without state permission because they would not be able to acquire

food or housing in the new location, as the necessary resources were not preplanned.

Likewise, because of the state's controls over an individual's personal choices, critics

contend that central planning intrinsically results in a top-down, dictatorial state

Is planning relevant in Indian context today? Page 43

where politicians and bureaucrats use the state to achieve their own ends, which are in

turn described as the "social" objectives of the state. In essence, critics contend that a

planned economy has nothing to do with the preferences of the individuals that

comprise a society, but rather the abstract goals of some group.

The Road to Serfdom is a book written by Friedrich Hayek and critical of

collectivism, presenting the argument that a central planned economy must ultimately

result in tyranny. An idea similar to this is the idea of the iron cage presented even

earlier by Max Weber in The Protestant Ethic and the Spirit of Capitalism.

Suppression of economic democracy and self-management

Central planning is also criticized by elements of the radical left. Libertarian socialist

economist Robin Hahnel notes that even if central planning overcame its inherent

inhibitions of incentives and innovation it would nevertheless be unable to maximize

economic democracy and self-management, which he believes are concepts that are

more intellectually coherent, consistent and just than mainstream notions of economic

freedom. But they could never have delivered economic self-management, they would

always have been slow to innovate as apathy and frustration took their inevitable toll,

and they would always have been susceptible to growing inequities and inefficiencies

as the effects of differential economic power grew. Under central planning neither

planners, managers, nor workers had incentives to promote the social economic

interest. Nor did impending markets for final goods to the planning system

enfranchise consumers in meaningful ways. But central planning would have been

incompatible with economic democracy even if it had overcome its information and

incentive liabilities. And the truth is that it survived as long as it did only because it

was propped up by unprecedented totalitarian political power.‖

Corruption

A planned economy creates social conditions favoring political corruption.

"Particularly, command economies have been notoriously corrupt. First, centralized

decision-making predisposes planners to abuses of power. Second, the inherent

inefficiency of plans drawn with insufficient information creates a need for bypassing

or subverting the official decision-making process. For example, the Soviet Gosplan

could not create plans that were feasible, and other means were used to meet the

Is planning relevant in Indian context today? Page 44

quotas." A gift economy featuring corruption, blat, developed. The Chinese guanxi is

somewhat similar.

Changing nature of planning

• In a federal democracy like ours, the principal task of planning is to evolve shared

vision among not only the federal units but also among other economic agents, so that

the efforts of all the actors become convergent towards the national priorities.

• While the growth process can be made the responsibility of the corporate sector to a

greater degree, its direction and distribution are to be steered by planned public

intervention, so that regional imbalances are reduced and socio economic inequities

are set right. For example, directing the growth of the large industry into the

backward areas and technology-intensiveareas to realise national goals.

• The nature of instruments available to planners in the implementation has changed.

The planning process has to focus on the need for planning for policy, so that the

signals that are sent to the economic system induce the various agents to grow in a

manner that is consistent with national goals. In particular, investment patterns would

be determined by sectoral policies. For example, phasing in rupee convertibility over

almost a decade, so that the necessary changes and adjustments can be made.

• Given the federal nature of the Indian context, the role of planning is to develop a

common policy stance for the Centre and the States. Also, the task of federal policy

coordination is central to Indian planning. For example, the need to invite foreign

investment in infrastructure areas like power need centre-state coordination as the

necessary legislation and administrative changes involve both.

• Lastly, planning at the grass root level, that is participatory, is very crucial for

improving the delivery systems and proper use of resources. The role of the

Government is thus to facilitate participatory planning.

Is planning relevant in Indian context today? Page 45

Analysis

Deficiencies of Planning

1. Experts now realize that a minimum standard of living have been ensured for

all if resources had been thought of, not in money term, but in term of people.

Economic development should not have been equated with increasing the

supply of good but with providing opportunity for work to the entire

population and raising their productivity by better knowledge and better

equipment.

2. In spite of enormous advance in industrialization there has been no change in

the occupational pattern of the country‘s work force. Agriculture sector was

72 p.c. in 1911 in 2001 and still 60 percent of labour force is in primary sector.

In India,a fairly rapid growth in the non agricultural sectors during the last 50

years of planned development has not made any noticeable impact on the

industrial distribution of the work force. Investment and output have grown at

a high rate but the production mix and the technology mix have been so

capital intensive that employment has not grown. Between 1961 & 1976, in

modern factory sector, investment increased 139 p.c. and output 161 p.c. but

employment increased only 71%. In the period of economic reform

employment generation rate has been reduced.

3. So long emphasis was on financial rather than physical targets. There should

be a change in the way in which target are fixed by the planning commission.

In spite of the known ambiguities associated with financial targets, emphasis

still continues to be laid on financial rather than physical target. It is true that

physical targets are mentioned quite prominently but there is no clear

indication of the link between physical and financial targets

4. After 50 years of planning, the condition created and sustained by the

government policy has resulted in aggravating inequality in the distribution of

wealth. Millions of people specially I rural areas continue to languish on the

border line of abject poverty if not of actual starvation. The planning has not

touched even to the fate of large part of population. Thus there is ample

Is planning relevant in Indian context today? Page 46

justification for the general feeling that the technique of planning in India dose

not deserve the price that has been paid for it.

5. So far as 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. What

is needed is not an exclusive new approach to replace the old but a

reorientation and modification of the old with some additions here and there.

6. One of the objectives of the planning is economic self-reliance means

economy should be attaining varies type of securities such as food security,

energy security, environment security, social political security. The private

sector as well as public sector has failed to generate adequate resources. We

have also failed to create sophisticated equipment and material.

7. The tenancy reforms have not been complete and insecurity of tenure has been

much more pronounced. The nature of infrastructure has helped mostly to

reach peasantry in the industrial sector also big became bigger. The planning

has increased the inequalities only.

8. The economy has faced an-uninterrupted inflationary process. The inflation is

varied from 5 to 10 % per annum. It has been eroded purchasing power of the

people-increased project cost, and reduced the competitiveness of the

economy. It has also affected rates of saving and real investment. Common

people have become hard hit at such inflation.

9. The resources allocation pattern does not show any consistent trend.

Sometimes it was on industry or sometimes it was on agriculture, after the

1stfive year plan agriculture got prime importance again relatively in 10

th plan.

Allocation on power and transport were satisfactory but various aspects of

social sector has been neglected. Social sectors have got relative attention

from 8th

plan onwards.

10. The growth rate in the plan period in most cases has not been satisfactory.

Moreover, growth rates have not helped to remove poverty and

unemployment. The product mix that has been generated has not helped poor

people. Balance of payment situation has not been satisfactory. We had always

a deficit in the BOP.

Is planning relevant in Indian context today? Page 47

Conclusion

On the basis of facts and figures, Economic Planning is very important for every

country. Because of excellent economic planning now we are one of the parts of

developing countries. On the basis of need in certain sectors government introduced

five years plan for better development. 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. Besides India has been blessed with good planners with a

very impartial outlook development. After introduced 1991 policy the growth of India

became very faster because of liberalization and licensing in different sectors.

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

But this success does not hide the fact that the growth rate, although Impressive, In

recent years has not been our true potential. We were brought out of out slumber by

the crisis of 1991 and subsequent pressure from World bank. But that crisis also made

us realisethat we need to back our lofty plans with equally high Implementation plans.

Corruption, Red-Tapism and politicization of every trivial issue has somewhat

restricted our pace and we need to plan simultaneously to weed it out as well as

transverse past it. Also we have seen in past that planning commission has been

affected by the political upheavals with some of the 5 year plans delayed or

influenced by the leaders in power.

Is planning relevant in Indian context today? Page 48

Appendix (All attachments sourced from documents available on Planning Commission’s website)

Plan-wise Targeted and Actual GDP growth rate

Is planning relevant in Indian context today? Page 49

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Is planning relevant in Indian context today? Page 54

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