Economic Planning and Planning in India

Economic Planning and Planning in India

2020-06-09 18:58:27

• Economic Planning and Planning in India
  • Planned Economy
  • Types of Planning
  • Pre Independence Economic Planning
  • Post Independence Economic Planning : 5 Year Plans
    • Planning Commission :
  • Central Planning
    • 5 Year Plans
    • Twenty Point Programme and MPLADS
    • Multi Level Planning
  • Decentralised Planning
  • Assessment of Planning
  • Economic Reforms
  • Inclusive Growth
  • Resource Mobilisation
    • Investment Models
    • [[Static - Statutory, Regulatory, Various Quasi Judicial Bodies#NITI Aayog |NITI Aayog]]
      • Full time Framework
      • Aims :
      • Criticism
      • Achievements
        • Reforms in Agriculture
  • Reforms in India
    • Reform Measures
    • Generation of Economic Reforms

---

Planned Economy

• high level of gov regulation in all major sectors, in distribution of income, decision on quantity and type of produce and its price
• IN decision to go for a planned and mixed economy was moulded by many factors including the 1929 great depression, Rise of USSR and China with dominating role of the state.
• Major factors for deciding Industry as major moving force of economy was Infrastructural needs, Industrial needs, Employment generation, profit development of the social sector, help private sector to rise.

What is planning? How did it start?

• making of important economic decisions, what and how much is to be produced and whom it is to allocated by a determining authority on the basis of a comprehensive survey.
• In India it was done to fulfil a socio-economic objective.
• It si process of realising well defined goals by optimum utilisation of resources.
• It started first in the USA in 1916 by the Tennesse Valley Authority. Stalin started national planning in USSR in 1928.

Types of Planning

1. Imperative Planning
   • followed by state economies aka directive or target planning ex China and USSR
   • its features are numerical targets of growth and dev, almost no role for market or price mechanism, no private participation in the economy.
   • Market socialism is a part of imperative planning ex Open door policy of China in 1985.
2. Indicative Planning
   • seeing the growth in socialist countries some non-socialist ones started indicative planning, most of them were mixed economies.
   • Private sector given substantial role, state only a facilitator and market forces played an important role.
   • numerical targets were set side by side, indicative nature meant that private sector was encouraged or discouraged towards certain areas.
   • free trade from controls, assist Private coys.
   • work on building long term startegic vision for future
   • Ex Monnet plant of France in 1947.
3. There are many other types of planning based on the point of view ex . zi regional or national, centralised or decentralised, long term and short term. Financial Planning : physical targets are set against available fin resources, focuses on mobilisaiton and expenditure pattern. Physical Planning : output production prioritized.

India has moved towards normative planning believing that until a prgramme/ scheme run by the govt are not able to connect with customs and traditions of population their acceptability will not be of the desired level. Its counterpart is Systems planning which solely focuses on Economic aspects of and social cultural variables are not given much importance, India earlier used to follow this since it catered well to the ideas of secularism, equality and other democratic values.

Rolling Plan

• b/w normal plan and plan holiday, are flexible and able to overcome the rigidity of fixed FYPs since there is no fixation of dates in respect of commencement and end of plan.
• revision of yearly target makes it difficult to achieve them

Pre Independence Economic Planning

M Visvesvaraya #MainsPYQ

• proposed the 10 year plan for IN in 1934, 1st attempt at planning
• proposed to double the income of country, through bold policies, comprehensive reports of progress
• designer of Kirshnarajasagar dam
• Installed irrigation system at Khadakvasla reservoir, Tigra Dam of Gwalior and Krishnarajsagar Dams
• Govt Eng college in Bangalore; Road construction to Tirupati; New rail lines in Mysore.

FICCI Proposal 1934

• claimed that days of laissez faire was over and a comprehensive dev covering all economic activities was necessary.
• Suggested setting up a National Planning Commission to coordinate whole process.
• Influence by ideas of MG Ranade and Dadabhai Naoroji fortified by ideas of Keynesian.

National Planning Committee NPC or the Congress Plan

• setup in 1938 under J Nehru to ensure adequate standard of living of masses on the initiative of SC Bose.
• emphasis of state owned heavy industries and redistribution of land
• published many reports that became the foundation for coordinated planning in Independent India.

Bombay plan :

• 1944 by leading industrialists viz JRD Tata, GD Birla etc
• expansion of textile and consumer industries in already existing areas
• State to invest in basic industries like steel, protect from foreign competition

Other plans were

• MN Roy - Peoples plan based on Marxist socialism to give people the basic necessities of life
• SN Agarwal - Gandhian Plan
• JP Narayan - Sarvodaya Plan that drew from Gandhian technique of constructive work and Vinoba bhaves sarvodaya concept.

Area-wise reports

• Gadgil report on Rural credit
• Kheragat report on Agricultural dev
• Krishnamachari Report on Agricultural prices
• Saraiya report on Cooperatives
• Reports on Irrigation

Post Independence Economic Planning : 5 Year Plans

Major Objectives of Planning :

• Long term sustained economic Growth,
• Poverty Alleviation
• Modernisation
• Self-Reliance
• Social Justice liek controlling Economic Inequality and Employement generation

Planning Commission :

What was the planning commission?

• Need for a permanent expert body was realised at the national level for the economy soon after Independence.
• Set up in 1950 it was an extra-constitutional, non-statutory, autonomous advisory body.
• It acted as a think tank on economic development.
• PM was its ex-officio chairman, did not have reps from States/UT’s.
• was operational arm of the National Dev Council NDC a political institution,
• had more mem all were full time.

Functions

• made an assessment of material, capital and HR of the country and tried to augment these resources
• formulated a plan for the most effective and balanced utilisation of res
• defined stages on which plans were to be carried out.
• appraise the progress achieved in execution of the stages of program.
• had allocative functions

National Development Council

• #todo

Central Planning

5 Year Plans

1st Plan(1951-56)

• In the backdrop of refugee influx, severe food shortage and inflation.
• Plan was drafter by KN Raj and was based on Harrod Domar model that suggested higher level of saving to enable more investment and low capital ouput ratio to ensure investment and higher growth rate.
• Focused on Agriculture, price stability, power and transport.
• stress on agriculture due to larges scale import of food grains
• 3.61% growth target was 2.1%, agricultural targest also achieved

2nd Plan (1956-61)

• based on Nehru-Mahalanobis model
• estd of heavy industries/capital goods, trickle down effect to boost other sectors, expanding productive ability of system
• Other elements were Import substitution, sizeable public sector, vibrant small scale sector
• achieved more than targeted growth rate but created imbalance b/w heavy industries and agriculture
• ==adopted a self reliance and basic industry model== #PrelimsPYQ

3rd Plan(1961 - 66)

• balance industry and agri, aim was self-sustaining economy
• 1st time borrowing from IMF
• 62,65 wars and drought led to failure
• Rolling Plan adopted in 1962

Annual Plans (66-67, 67-68, 68-69)

• inflation, floods, forex crisis, political instability due to death of Nehru, Shastri aka plan holiday

4th Plan (1969-74)

• aim ==growth with stability==, social emphasis education and employment
• bank nationalisation, abolition of privy purses, green rev, oil shock, 71 war
• Not able to achieve its target

5th plan (1974-79)

• aim growth for social justice
• cut short by Janata Party Gov its 6th FYP
• was removed from official records, 79-80 was Plan Holiday
• Garibi Hatao
• Integrated Rural Development Program 1978.

6th Plan (1980-85)

• emphasis on infrastructure
• 5.7% growth was more than target

7th Plan (1985-90)

• rapid growth in food grain production and employment,
• beginning of liberalisation,
• long term fiscal policy started, 3 year exim policy 1st time announced
• 2 Plan holidays 1990-91 and 1991-92 due to economic crisis

8th Plan (1992-97) :

• based on ==RaoManmohan Singh Model==
  • Reorient role of state focus on social and infra dev
  • selective control, remove permit system
  • open up the economy, create competition for PSEs
  • integrate Indian eco w/ global economy
• Disinvestment started, India joined WTO in 1995.
• Constitutional basis to Panchayati Raj, SEBI made statutory body

9th FYP (1997-02)

• target of 6.5% through high investment rate, domestic savings rate
• political instability, East Asian Fin crisis 1997, Kargil Ware, 9-11 attacks
• Privatisation of PSU started
• did not achieve target

10th FYP (2002-07)

• aim was 8% GDP growth
• reduce poverty by 5%, gainful high quality employment, reduce gender gap in literacy

11th FYP (2007-2012)

• faster more inclusive growth, Target of 9%
• poverty reduction by 10%, reduce unemployment
• Recession, Sovereign debt crisis in Greece, thrust was agri, education and infra

12th FYP (2012-17)

• 8% growth rate, planning discontinued by new govt
• NITI Aayog established

Twenty Point Programme and MPLADS

• TPP was introduced in 1975 for monitoring of schemes of centrala and state govt.
  • Was meant to improve the quality of life esp of the BPL.
  • Garibi Hatao 6th plan was based on the the experience of TPP.
• [[1.3 Separation of Power between various organs, dispute redressal mechanisms. Judiciary#MPLADS scheme |MPLADS]]

Multi Level Planning

• First Strata was Central Level planning covering FYP, TPP and MPLADS.
• Second Strata was State Level Planning they were 5 years in term and headed by resp state CMs.
• Third Strata was District level planning done by resp District Planning Boards with DM being the head.
• Fourth Strata was the Block Level planning District Planning boards were nodal body.
• Fifth strata was the Local Level planning DPBs was the nodal agency and had 3 variants Village Level, Hill Area and Tribal Area Planning.
• MLP failed to include peoples participation

Decentralised Planning

• Giving PRI’s constitutional status planning became a constitutional exercise at the Panchayat level.
• Challenges faced by PRIs
  • financial status of them are not stabilised
  • taxes PRIs can impose are not clear.
  • States do not delegate power
  • Use of money and muscle power

Assessment of Planning

Achievements

• 3rd largest in PPP terms
• Social indicators viz IMR, MMR, Literacy, disease eradication etc
• created strong industrial ecosys, service sector improved
• Forex reserves has risen to $592 bil in 2021
• Strengthened private sector
• Tax base and collection increased

Failures

• Unemployment still high/jobless growth, Poverty still prevalent
• Inequality in income, Regional imbalance
• Malnutrition, stunting, wasting esp among children prevalent
• inadequate attention to infra

Economic Reforms

• Need to have favourable BoP, more FDI, FII and higher growth rate
• targeted to dismantle licensing raj, drive PSEs towards sustainable profitability
• Fiscal reforms to stabilise growths, deregulate banking sector

First Generation reforms

• non legislative gov initiatives, reduce SLR, CRR, disinvestment
• deregulation of Rupee,

Second Gen reforms

• Legislative action to reach larger social base viz labour law, pension reforms, GST, liberalised FDI in retail etc
• Challenges :
  • User changes need to be regulated, man power optimisation in PSEs this faced resistance
  • Labour flexibility laws challenged by Trade Unions, similarly response by farmers and middle class

Indian @75 : holistic 3D dev, bringing together stakeholders from industry, govt, institutions, Community

Inclusive Growth

• growth process that yiels broad based benefits and ensures equality of opportunity for all.
• The fruits of reform was not accessed by all ie the disadvantaged and the marginalised.
• It became glaring due to high rate of growth after the reforms. The 11th and 12th plan focused on it.

Short term Policy

• aimed at supplyinh goods and services to the disadvantaged and marginalised sections
• Schemes such as Annapuran, Antyodaya, NHM, Indira Awas Yojana etc.
• These schemes are subsidy based and incur heavy drain on national exchequer and they fail to make target population self dependent.

Long Term policy

• Aim at making target population as self dependent
• all schemes that focus on poverty alleviation and employment generation, promotion of educatoin, vocationalistation of education, skill development.
• Skill India mission is an ex
• adoption of multi dimensional economic and social objectives to ensure efficiency and timely implementation.

Resource Mobilisation

• It includes raising and directing resources of economy to realise desired socio-economic objectives from sources such as GOI, State Govt, Private sector and general public.
• Planning Commission used to do this.
• GOI needs funds to meen infrastructural targets ex power, transportation and social sector targets ex health, education etc.
• States also need finances for the same purpose which they mobilise from incomes and market borrowings; loans from GOI and through GOI central sector schemes.
• Private sectors needs funds to meet short term working capital and long term capital market.

Investment Models

• are the means and tools that GOI has used to mobilise required funds to promote different goals.

From 1951-69

• phase was led by the state using all internal and external means to mobilise resources.
• Whole system ex financial, tax, fiscal policy etc was regulated.
• duing this time the need was high but availability was less.

From 1970-73

• Industrial policy 1970 GOI decided to go for including private capital .
• Idea of Join sector having both private and public was put forward this initiative failed.

From 1974-90

• FERA was inacted as GOI tried to get foreign capital through technology transfer route.
• It tightened the flow of foreign currency into private sector as ToT was to offset this.
• This was the time when East Asian countries like Thailand, South Korea, Malaysia became economic powerhouse.

1990 Onwards

• Here came a diferent investment model
  • monopoly sectors of industry were opened for investment except few.
  • PPP model was articulated, govt set up Infrastructure dev fund with provisions such as Viability Gap funding.
  • PPP models such as BOT, BOO(Build Own Operate), BOOT(Build Own Operate Transfer) etc.

[[Static - Statutory, Regulatory, Various Quasi Judicial Bodies#NITI Aayog |NITI Aayog]]

• Replaced PC due to changing nature of Eco
• Policy think tank of GOI aims to involve states in policy making
• Comprises
  • PM as Chair
  • Governing council consists of CM of all states/Uts and Lt Govs, Regional councils can also be formed
  • Experts and special invitees with relevant domain knowledge
  • Team India wing engages states and the Centre

Full time Framework

• Vice Chair and 4 FT mem
• Knowledge and Innovation Hub - think tank capabilities and Team India hub
• 4 ex officio mem from Union council of ministers nominated by PM
• Part time mem - max 2 from leading univs
• CEO appt by PM for a fixed term

Aims :

• provide critical ==directional and strategic input into dev process==
• evolved shared vision, foster cooperative federalism
• dev mechanism to formulate plan inculcate bottom up approach
• enabler rather than provider
• focus from food security to agri production, leverage human capital, demographic dividend
• Eliminate poverty, redress inequality etc

Criticism

• Only nomenclatural change, does not influence public or private investment

Achievements

Reforms in Agriculture

• Model Land Leasing laws to recognise and safeguard interest of landowners
• Reforms in APMC ex Dev of Agriculture Marketing and Farmer Friendly reform Index
• Digital India, Make in India movt
• Atal Innovation Mission

Reforms in India

• Typically means declining role of govt and inc role of private sector.
• 1991 reforms were in response to BoP crisis.

What caused the BoP crisis ?

• reforms of 1980s under the influence of Washington consensus had a crippling impact on the economy.
• It led to heavy external borrowings to inc exports and was exacerbated by the Gulf War that shot oil prices up.
• This was coupled by hyperinflation and fiscal deficit.

IMF conditions put on India

• Devaluation of the rupee by 22%
• Reduction in peak import tariff to 30%.
• Hike excise by 20% to off set revenue short falls.
• All gov expenditure to be cut down by 10%.

Reform Measures

• Macroeconomic Stabilisation measures included all policies that intended to boost aggregate demand in economy.
• Structural Reform measures includes all policy reforms that have been initiated by govt ot boost aggregate supply of goods.
• LPG process specify the characterstics of reform process that India initiated where Liberalisation is the direction, Privatisation is the path and Globalisation is the end goal.

Liberalisation

• Based on principles of Laissez faire that became popular form the economic writing of Adam Smith.
• It has pro market or pro capitalistic inclination in economic policies.
• Process of increasing trait of market economy and decreasing trait of state economy is called as liberalisation.

Privatisation

• The process through which the roll back of the state took place from the economy is called as privatisation essentially transferring state ownership of assets of private sector ex UK during Thatcher regime.
• Disinvestment of assets is also privatisation ie selling of shares of PSUs anything below 100% is disinvesting and below 50% would be privatisation.
• Economic policies that directly or indirectly seem to promote expansion of the private sector can be called privatisation.

Globalisation

• it is closed integration of world economies.
• OECD defined it as internationalisation of production and free flow of financial capital b/w countries.
• For WTO it is unrestricted movt of goods and services.

Generation of Economic Reforms

First Generation reforms : 1991-2000

• Promoting private sector through de-reservatino and de-licensing of the industries, abolition of MRTP, simplifying environmental laws etc.
• Public sector reforms taken to make them profitable and efficient through disinvestment, corporatisation.
• External Sector reforms through policies like abolishing quantitative restriction on import, switching to floating exchange rate, full current account convertibility etc.
• Financial sector reforms in areas of Banking, capital market, insurance, MFs etc.
• Tax reforms towards simplifying, broadbasing, modernising, mutual funds etc.

2000-01 Onwards

• Factor Market reforms consisted of dismantling of Administered Price Mechanism APM ie fixed by the govt ex petroleum, sugar, fertilizers etc. This had led to underselling by the manufacturers -> demand supply gap.
• Public Sector Reforms emphasis on greater functional autonomy, free leverage to capital market, international tie ups etc.
• Reforms in Govt and Public institution to make the govt the facilitator instead of controller.
• Legal Sector reforms Abolishing outdated and contradictory law, reforms in IPC, CrPC etc.
• Reforms in Critical areas such as agricultural extension, education etc.; fiscal consolidation, Greater tax devolution to states.

Third Generation Reforms

• Focused on including the masses into the development process that started with constitutional validity to PRI.

Fourth Generation Reforms

• Hypothesised a 2 way connection b/w economic reforms and IT reinforcing each other.

India’s Reform Approach

• has been called as gradualist in nature with traits of occasional reversal.
• Certain other countries went for the stop and go kind of a reform ie reforms on sectors that needed them

---

[[legy209.pdf]] - Planning and Sustainable Development in Indian Context

---

![[Pasted image 20220107144221.png]] ![[Pasted image 20220107144253.png]] ![[Pasted image 20220107144305.png]] ![[Pasted image 20220107144316.png]]

![[Pasted image 20220107144335.png]] ![[Pasted image 20220107144349.png]] ![[Pasted image 20220107144359.png]] ![[Pasted image 20220107144413.png]] ![[Pasted image 20220107144425.png]]