Economic Planning in India PDF (2012-17)

____________________________________________________________________________________________________ Subject ECONOMICS Paper No and Title Paper 8: Economic Planning in India: Overview & Challenges Module No and T...

____________________________________________________________________________________________________ Subject ECONOMICS Paper No and Title Paper 8: Economic Planning in India: Overview & Challenges Module No and Title Module 14: 12th Five year Plan: A Discussion Module Tag ECO_P8_M14 ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________ TABLE OF CONTENTS 1. Learning Outcomes 2. Introduction 3. The Twelfth Five Year Plan 4. Summary ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________ 1. Learning Outcomes After studying this module, you shall be able to  Know the Twelfth five year plan  Learn the objectives of the plan  Identify the challenges faced in designing the plan  Evaluate the issues and challenges of resources mobilization 2. Introduction There was a shift in the development strategy during the 1990’s with the onset of the ‘New economic Policy’ which heralded the era of liberalisation, privatisation and globalisation. The implementation of new economic policy led to a quantitative and qualitative change in the role of the state and the instrument of planning in the process of economic development. The new economic policy can be described as ‘market oriented’ and provided a greater role for the private sector. The five-year plans are now more indicative in nature and the goals of planning are to be achieved through ‘private initiative’ and market forces. The role of public sector undergoes a change and was to play a coordinating role along with the private sector. Thus, ‘from a commanding heights role to a coordinating private initiative role’, the public sector saw a change in its role. The development strategy since 1990’s focuses on ‘growth with equity and social justice’ but there is greater reliance on the market mechanism and private sector. At the same time, there is a greater emphasis on the role of foreign investments and trade in accelerating the process of economic development. 3. THE TWELFTH FIVE YEAR PLAN(2012-17) 3.1 The eleventh plan (2007- 2012) aimed at ‘sustainable development and inclusive growth’. The plan aims to achieve ‘faster, broader based and inclusive growth’. It aimed at achieving a GDP growth rate of 9 percent per annum and planned to raise the investment rate from 30.1 percent of GDP to 35.1 percent during the plan period to achieve higher growth and social justice. The rapid GDP growth rate targeted at 9 percent was regarded necessary for two reasons (a) To generate income and employment opportunities that were needed for improving the living standards for the bulk of the population ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________ (b) To generate the resources needed for the financial and social sector programmes aimed at reducing poverty and enabling inclusion. The economy performed well on the growth front averaging 8.2 percent for the first four years. The rise in growth rates in the 11th plan period compared to the 10th plan is modest but it is undoubtedly a good performance, given the fact that there were severe challenges from the external front - the American sub-prime crisis and the European crisis. The 11th plan also had an ambitious target of reducing poverty by 2 percent per year. India is well poised to achieve the MDG (Millennium Development Goal, 2015) target of fifty percent reduction of poverty between 1990 -2015. There are some challenges that emanate from the economy’s transition to a higher and more inclusive growth path, the structural changes that accompanies and the aspirations that it generates. The issue of inflation and rising deficit in the trade account along with uncertainties in the global economy are severe challenges. The weaknesses need to be addressed and the challenges need to be faced with greater vigour. The eleventh plan allocated 30 percent of the plan outlay for the social services sector which includes education, health and other welfare services. There was about 42 percent of the public sector outlay meant for energy, transport and infrastructure. Thus, the eleventh plan laid a great emphasis on social sector, infrastructure and also rural development. The objective of inclusive growth and sustainable development aimed at accelerating growth and eradicating growth were achieved through focus on the social sector, infrastructure and rural development. The twelfth plan (2012-17) commenced at a time when the global economy was passing through a financial crisis. With deteriorating global situation, the then Deputy Chairman of the Planning Commission had said that achieving an average growth rate of 9 % in the next five years is difficult. The crisis posed an immediate challenge of bringing the economy back to a high growth rate. Short term downturns do occur in all economies and they do not necessarily indicate an erosion of long term potential. But, short term fluctuations call for correction measures. The Twelfth plan first priority is therefore, to bring back the GDP growth rate while ensuring that growth is both inclusive and sustainable. The twelfth plan (2012 - 2017) aims at faster, sustainable and more inclusive growth. The twelfth plan has to face the internal and external challenges. The GDP growth rate was impressive despite the challenges. While the concern for inflation is high on agenda, the objective of faster, sustainable and MORE inclusive growth could help in nullifying the ills of inflation and inequities. India is performing better than many countries. ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________ The eleventh plan achieved a GDP growth rate of 8 percent though the target was 9 percent. The first year of the twelfth plan witnessed a slow down on account of both external and internal factors and therefore the needs to address the slowdown factors. The Twelfth Plan main focus will be on accelerating the rate of Economic growth and Inclusiveness, it shall endeavour to achieve them faster and in a more inclusive and sustainable way. 1. Real GDP rate of 8 percent. The target of accelerating GDP growth is accompanied by a specific target to accelerate growth of the Agricultural sector. The plan targets a growth rate of 4 percent for the agriculture sector and 10 percent for the manufacturing sector. The plan aims at achieving a growth process which has the structural characteristics to promote inclusiveness. 2. The proportion of population depended on agriculture has been falling, though still large, given the shrinking contribution of agriculture as a percentage of GDP. The Twelfth plan plans to shift a substantial portion of population from agriculture to higher productivity non-agricultural occupations. The growth process should be job creating in order to achieve inclusivity. The plan highlights the need to achieve robust growth in the manufacturing sector with emphasis on medium, small and micro-enterprises (MSME) which provide the best scope for absorbing labour currently employed in low productivity jobs. The plan seeks to stimulate new entrepreneurship while enabling existing MSME, including those in agricultural sector to invest more and grow faster. However, rising income by itself does not assume availability to education, health etc. 3. The Twelfth plan places a special emphasis on expanding access to education, health, sanitation, clean drinking water. The plan seeks to ensure provision of piped drinking to at least fifty percent of the rural population. These are not only essential elements of welfare but also for ensuring a healthy and productive work force. The plan sees it as a critical role for the government in the development process. Apart from education, health and essential services for the bulk of the population, which will be the responsibility of the state, the private sector would also play a significant role. There is a need for restructuring in the role of the state, reducing its role in some areas but increasing it in others. 4. The objective of ‘inclusive growth’ requires pro-active intervention to bridge the gaps in the society. The plan focuses on reducing poverty, promoting employment, reservations for SC/ST and other minorities. There is also efforts to close the gender gap which is a great blot on our social structure. 5. The twelfth plan seeks to provide a competitive environment in which the private sector including the corporate sector but also all Indians are able to reach their full ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________ potentialities. The government should meet the needs for infrastructure and cheaper and faster access to capital. The gain of private participation in meeting the policy objective of the government have been significant during the Eleventh plan. These initiatives will be expanded and reinforced during the Twelfth plan, especially in the social sectors such as health, education, skill-development and so on to meeting the investment targets, while also ensuring inclusiveness. Public Private Partnership would have successfully forayed into the social sector to promote universal access while ensuring quality in the delivery of services. The plan shall increase investment in infrastructure as a percentage of GDP to 9 percent by the end of the twelfth plan. The plan proposes to increase the gross irrigated area from 90 million hectares to 103 million hectares by the end of the plan. The plan would provide electricity to all villages, connect all villages with all-weather roads. The up gradation of the national and state highways to minimum two-lane standard, increase rural tele density to 70 percent, 6. The Twelfth plan has planned to take democratic decentralisation and grass roots planning to the next level. A new centrally sponsored scheme for strengthening the capacity of the Panchayats- the Rajiv Gandhi Panchayat Shashaktikaran Abhiyan has been introduced. The plan proposes to strive so that fifty of the Gram Panchayat achieve the status of Nirmal Gram Status by the end of the plan. 7. The Twelfth plan gives utmost priority to environment and sustainable development. It states that no development process can afford to neglect the environmental consequences of economic activities or allow unsustainable depletion and deterioration of natural resources. The Twelfth plan strategy of development effectively reconciles the objective of development with the objective of protecting environment. 8. The Twelfth plan also seeks the development of human capabilities which include education, health and so on. The Sarva Shiksha Abhijan (SSA), the Right to education (RTE) , the Midday Meal Scheme (MDM) , which are showing some positive results will be pursued intensely with greater allocation. The plan aims to increase the mean years of schooling to seven years by the end of the plan. The plan seeks to enhance access to higher education by creating additional seats and align them to the skill needs of the economy. The plan also seeks to eliminate gender and social gap in school enrolment. 10. The Twelfth plan focuses on improvising the service delivery mechanism. To provide access to banking services to 90 percent of the households. Also, Major subsidies and welfare related budgetary payments to be shifted to direct cash transfer. TABLE 1: THE FIVE YEAR PLANS POST 1990S ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________ Plans Year Public sector outlay Growth (Rs in crores) rate (%) Target realised Eighth five year plan 1992-97 4, 85,457.2 5.6 6.7 Ninth five year plan 1997-2002 8,59,200.0 6.5 5.4 Tenth five year plan 2002-2007 15,25,639.0 8.0 7.8 Eleventh five year plan 2007-2012 36,44,717.0 9.0 7.0 Twelfth five year plan 2012-2017 80,50,124 8 Source: Planning Commission Documents and Economic Survey (various issues) TABLE 2: SOURCES OF RESOURCES MOBILISATION Sources Tenth plan Eleventh plan Twelfth plan (Rs in crore) (Rs in crore) (Rs in crore) Balance from Current revenue 20,193 10,39,039 23,47,350 including Additional taxation Surpluses from Public 5,98,240 14,17,145 20,03,218 enterprises Borrowings 9,46,667 11,88,535 36,99,556 Net Capital inflow 27,200 - - Deficit financing Nil Nil Nil Total 15,92,300 36,44,719 80,50,124 Source: Planning Commission Documents and Economic Surveys (various issues) Thus, there has been a shift in the development strategy with the onset of the new economic policy and the macro-economic reforms. The main features of the post reforms planning strategy has been a curtailed role of the public sector and an enlarged role for the private sector. The role of the government in the development process has been redefined as the provider of social sector, infrastructural services and an enabler and facilitator for the private sector. 4. Summary  The twelfth plan (2012-17) commenced at a time when the global economy was passing through a financial crisis. ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________  With deteriorating global situation, the then deputy chairman of the Planning Commission had said that achieving an average growth rate of 9 % in the next five years is difficult.  The crisis posed an immediate challenge of bringing the economy back to a high growth rate.  Short term downturns do occur in all economies and they do not necessarily indicate an erosion of long term potential. But, short term fluctuations call for correction measures.  The Twelfth plan first priority is therefore, to bring back the GDP growth rate while ensuring that growth is both inclusive and sustainable.  The twelfth plan (2012 - 2017) aims at faster, sustainable and more inclusive growth.  The twelfth plan has to face the internal and external challenges.  While the concern for inflation is high on agenda, the objective of faster, sustainable and MORE inclusive growth could help in nullifying the ills of inflation and inequities. India is performing better than many countries.  The eleventh plan achieved a GDP growth rate of 8 percent though the target was 9 percent.  The first year of the twelfth plan witnessed a slow down on account of both external and internal factors. The needs to address the slowdown factors.  The target of accelerating GDP growth is accompanied by a specific target to accelerate growth of the Agricultural sector.  The plan targets a growth rate of 4 percent for the agriculture sector and 10 percent for the manufacturing sector.  The plan aims at achieving a growth process which has the structural characteristics to promote inclusiveness.  The proportion of population depended on agriculture has been falling, though still large, given the shrinking contribution of agriculture as a percentage of GDP. The  Twelfth plan plans to shift a substantial portion of population from agriculture to higher productivity non-agricultural occupations. The growth process should be job creating in order to achieve inclusivity.  The plan highlights the need to achieve robust growth in the manufacturing sector with emphasis on medium, small and micro-enterprises (MSME) which provide the best scope for absorbing labour currently employed in low productivity jobs.  The plan seeks to stimulate new entrepreneurship while enabling existing MSME, including those in agricultural sector to invest more and grow faster.  The Twelfth plan places a special emphasis on expanding access to education, health, sanitation, clean drinking water.  The plan seeks to ensure provision of piped drinking to at least fifty percent of the rural population.  These are not only essential elements of welfare but also for ensuring a healthy and productive work force. ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________  The plan sees it as a critical role for the government in the development process. Apart from education, health and essential services for the bulk of the population, which will be the responsibility of the state, the private sector would also play a significant role.  There is a need for restructuring in the role of the state, reducing its role in some areas but increasing it in others.  The objective of ‘inclusive growth’ requires pro-active intervention to bridge the gaps in the society.  The plan focuses on reducing poverty, promoting employment, reservations for SC/ST and other minorities. There is also efforts to close the gender gap which is a great blot on our social structure.  The twelfth plan seeks to provide a competitive environment in which the private sector including the corporate sector but also all Indians are able to reach their full potentialities.  The government should meet the needs for infrastructure and cheaper and faster access to capital.  The gains of private participation in meeting the policy objective of the government have been significant during the Eleventh plan.  These initiatives will be expanded and reinforced during the Twelfth plan, especially in the social sectors such as health, education, skill-development and so on to meeting the investment targets, while also ensuring inclusiveness.  Public Private Partnership would have successfully forayed into the social sector to promote universal access while ensuring quality in the delivery of services.  The plan shall increase investment in infrastructure as a percentage of GDP to 9 percent by the end of the twelfth plan.  The plan proposes to increase the gross irrigated area from 90 million hectares to 103 million hectares by the end of the plan.  The plan would provide electricity to all villages, connect all villages with all- weather roads. The up gradation of the national and state highways to minimum two-lane standard, increase rural tele-density to 70 percent,  The Twelfth plan has planned to take democratic decentralisation and grass roots planning to the next level.  A new centrally sponsored scheme for strengthening the capacity of the Panchayats- the Rajiv Gandhi Panchayat ShashaktikaranAbhiyan has been introduced. The plan proposes to strive so that fifty of the Gram Panchayat achieve the status of Nirmal Gram Status by the end of the plan.  The Twelfth plan gives utmost priority to environment and sustainable development. It states that no development process can afford to neglect the environmental consequences of economic activities or allow unsustainable depletion and deterioration of natural resources.  The Twelfth plan strategy of development effectively reconciles the objective of development with the objective of protecting environment. ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion ____________________________________________________________________________________________________  The Twelfth plan also seeks the development of human capabilities which include education, health and so on. The Sarva Shiksha Abhijan (SSA), the Right to education (RTE), the Midday Meal Scheme (MDM), which are showing some positive results will be pursued intensely with greater allocation.  The plan aims to increase the mean years of schooling to seven years by the end of the plan. The plan seeks to enhance access to higher education by creating additional seats and align them to the skill needs of the economy. The plan also seeks to eliminate gender and social gap in school enrolment.  The Twelfth plan focuses on improvising the service delivery mechanism.  To provide access to banking services to 90 percent of the household, Major subsidies and welfare related budgetary payments to be shifted to direct cash transfer.  The role of the government in the development process has been redefined as the provider of social sector, infrastructural services and an enabler and facilitator for the private sector. ECONOMICS Paper 8: Economic Planning in India: Overview & Challenges Module 14: 12th Five year Plan: A Discussion