bba503-b1851-slm-unit-07

Unit 7 Planning Experience in India

Structure

7.1 Introduction

Objectives

7.2 First Ten Five Year Plans (1950-51 to 2007)

7.3 Eleventh Five Year PlanSectoral Allocation of ResourcesCritique of the Eleventh Plan

7.4 Introduction to Twelfth Five Year Plan

7.5 Summary

7.6 Glossary

7.7 Terminal Questions

7.8 Answers

7.9 Case Study

Caselet

Regional Disparities in Growth Rates

During the Tenth Five year Plan, All-India GDP growth average was 7.6 per

cent. States which showed better performance were Jharkhand, Gujarat,

Orissa, Chhattisgarh, Maharashtra, Goa, Uttaranchal, Nagaland and Tripura.

Laggards which showed less than 6 per cent GDP growth included Bihar,

Rasjasthan, Madhya Pradesh, Uttar Pradesh, Punjab, Meghalaya, Arunachal

Pradesh and Jammu & Kashmir. Remaining states which indicated growth

rates between 6 per cent and 7.6 per cent were Karnataka, Andhra Pradesh,

Kerala, West Bengal, Tamil Nadu and Assam.

It may be noted that the laggards (below 6 per cent GDP growth) accounted

for nearly 45 percent of the total population of India. Consequently, efforts

have to be made to strengthen GDP growth rates in these states so that

they reach higher levels between 7-8 per cent at last.

Eleventh Plan has fixed targets of GDP growth in consultation with the State

Governments. It may be noted that whereas All-India growth rate is targeted

at 9 per cent for the Eleventh Plan, Bihar, Rajasthan, Madhya Pradesh,

Uttar Pradesh and Punjab are likely to remain below the 7.5 per cent GDP

growth level. The planning process has to concentrate attention to stimulate

growth among the laggards.

Many states of the North Eastern Region namely, Arunachal Pradesh,

Meghalaya, Mizoram, Assam and Sikkim have indicated low growth rates.

Economic Planning and Policies Unit 7

Sikkim Manipal University Page No. 132

Planning process is helping them by a special package which will be

continued in the Eleventh Plan.

Source: Compiled by author

7.1 Introduction

In the previous unit, you learnt about the objectives of economic planning in India

the concept of democratic socialism, development strategy in India, models of

economic development and also the LPG model development.

The scheme of the five-year plans started in 1951 in India. These are the

development plans which formulate the pace and direction of economic

development. The National Development Council in December 2006 approved

the Approach to the 11th Plan document titled ‘Towards faster and more Inclusive

growth’ and directed the Planning Commission to prepare a detailed plan to

assess the resources required to meet the broad objective set forth in the

Approach Paper. The detailed version of the Eleventh Five Year Plan (2007-12)

was approved by the National Development Council in December 2007.

In this unit, you will study the first ten five year plans, approach to eleventh

five year plan, sectoral allocation of resources under the eleventh five year plan,

and the approach to the twelfth five year plan.

Objectives

After studying this unit, you should be able to:

• describe the approach taken towards the first ten Five Year Plans

• interpret the critique of the eleventh plan

• identify the approach to the twelfth plan

7.2 First Ten Five Year Plans (1950-51 to 2007)

Since 1951, India has completed eleven Five-Year Plans. The guiding principles

of India’s Five-Year Plans are provided by the basic objectives of growth,

employment, self-reliance and social justice. Apart from these basic objectives,

each Five-Year Plan takes into account the new constraints and possibilities

faced during the period and attempts to make the necessary directional changes

and emphasis.

At the time of the First Five Year Plan (1951-56), India faced three main

problems—influx of refugees, severe food shortage and mounting inflation. India



also had to correct the disequilibrium in the economy caused by the Second

World War and the partition of the country. Accordingly, the First Plan emphasized,

as its immediate objectives, the rehabilitation of refugees, rapid agricultural

development so as to achieve food self-sufficiency in the shortest possible time

and control inflation. Simultaneously, the First Plan attempted a process of all-

round balanced development which could ensure a rising national income and a

steady improvement in the living standards of the people over a period of time.

The Second Plan (1956-61) was conceived in an atmosphere of economic

stability. Agricultural targets fixed in the First Plan had been achieved. It aimed at

rapid industrialization with particular emphasis on the development of basic and

heavy industries, such as iron and steel, heavy chemicals, including nitrogenous

fertilizers, heavy engineering and machine building industry.

By the beginning of the Third Plan (1961-66) the Indian planners felt that

the Indian economy had entered the ‘Take off stage’ and that the first two plans

had generated an institutional structure needed for rapid economic development.

Consequently, the Third Plan set as its goal the establishment of a self-reliant

and self-generating economy. The Third Plan accordingly gave top priority to

agriculture but it also laid adequate emphasis on the development of basic

industries, which were vitally necessary for rapid economic development of the

country.

The Fourth Plan (1969-74) set before itself the two principal objectives of

‘growth with stability’ and ‘progressive achievement of self-reliance’. The Fourth

Plan aimed at 5.5 per cent average rates of growth in the national income and

the provision of minimum income for the weaker sections of the community.

The latter came to be known as the objectives of ‘growth with justice’ and “Garibi

Hatao” (removal of poverty).

The Fifth Plan (1974-79) was introduced at the time when the country

was reeling under a veritable economic crisis arising out of run-away inflation,

fuelled by the hike in oil prices since September 1973 and failure of the

Government take-over of the wholesale trade in wheat. But the Indian planners

were concerned with the slogans of ‘Garibi Hatao’ (removal of poverty) and the

‘growth with social justice’. The final draft of the Fifth Plan prepared and launched

by D.P. Dhar proposed to achieve the two main objectives, namely, removal of

poverty and attainment of self-reliance, through promotion of higher rate of growth,

better distribution of income and a very significant step-up in the domestic rate

of saving.

There were two Sixth Plans. The focus of the Sixth Plan was expansion of

the employment potential in agriculture and allied activities, providing support to



household and small industries producing consumer goods for mass

consumption and to increase the earnings of the lowest income classes through

a minimum needs programme. After the defeat of the Janata Party, the Congress

came to power in 1980 and decided to have a new Sixth Plan. When the new

Sixth Plan (1980-85) was introduced by the Congress, the planners rejected the

Janata approach and brought back the Nehru model of growth by aiming a direct

attack on the problem of poverty by creating conditions of an expanding economy.

The Seventh Five Year Plan (1985-90) was introduced in April 1985, after

the country had enjoyed a reasonable rate of economic growth of 5.4 per cent

during the Sixth Plan. The Seventh Plan sought to emphasize policies and

programmes which would accelerate the growth in foodgrains production,

increase employment opportunities and raise productivity. All these three

immediate objectives were regarded central to the achievement of long-term

goals determined as far back as the First Plan itself.

The approach to the Eighth Five Year Plan (1990-95) was approved in

September 1989 and the Eighth Plan was to be introduced in April 1990. Finally,

the fourth version of the Eighth Plan (1992-97) was approved at a time when the

country was going through severe economic turmoil caused by a balance of

payments crisis, a rising debt burden, ever-widening budget deficits, mounting

inflation and recession in industry. The Narasimha Rao Government initiated

the process of fiscal reforms as also of economic reforms with a view to provide

a new dynamism to the economy. The Eighth Plan (1992-97) reflected these

changes in its attempt to accelerate economic growth and improve the quality

of life of the common man.

The Ninth Plan prepared under the United Front Government was released

in March 1998. It assigned priority to agriculture and rural development with a

view to generating adequate productive employment and eradication of poverty.

It aimed at achieving GDP growth of 7 per cent per annum, since during the

Eighth Plan, already a GDP growth rate of 6.5 per cent had been achieved.

Besides, it ensured food and nutritional security for all, particularly for the weaker

sections of the society. However, the Plan failed to achieve the GDP growth

target of 7 per cent and realized only 5.35 per cent average GDP growth.

The Tenth Plan (2002-2007) was prepared against a backdrop of high

expectations arising from some aspects of the recent performance. With

population expected to grow at about 1.6 per cent per annum, this target required

the rate of growth of GDP to be 8 per cent over the Tenth Plan and 9.3 per cent

during the Eleventh Plan.



It is, thus, clear that the short-term objectives of each plan also called as

the Approach to each Plan reflect the current state of the economy and the

economic thinking of the Party in power and of the planners in the Planning

Commission.

Self Assessment Questions

1. Since 1951, India has completed nine five-year plans. (True/False)

2. The Second Plan (1956-61) was conceived in an atmosphere of

__________.

7.3 Eleventh Five Year Plan

Eleventh Five Year Plan emphasized the fact that during the last four years of

the Tenth Plan, average GDP growth was 8.6 per cent, making India one of the

fastest growing economies in the world. The saving and investment rates had

also increased. The industrial sector had responded well to competition in the

global economy. Foreign investors were keen to invest in the Indian economy.

However, there are a few weaknesses in the economy by the time the

eleventh five-year plan was drawing to a close. These are outlined below:

1. The percentage of people living below the poverty line in the country

declined from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-10. However,

not only this is high, the rate of decline in poverty has not accelerated with

GDP growth and the incidence of poverty among certain marginalized

groups, e.g. the Scheduled Tribes, has hardly declined at all. Since the

population has grown, the absolute number of poor people has declined

only marginally from 320 million in 1993-94 to 302 million in 2004-05.

2. Indicators of deprivation suggest that the proportion of population deprived

of a minimum level of living is much higher. This is indicated by the

following:

(a) According to National Family Health Survey, 46 per cent of the children

in the 0-3 age group suffered from malnutrition in 2005-06, but the

more disturbing fact is that there is no reduction from the level of 47

per cent reported in 1998.

(b) Human Development indicators like literacy, maternal and infant

mortality rates also show that the progress is slow and India lags



behind several other countries in Asia. While literacy rate has gone

up to 64.8 per cent in 2001, the number of illiterates still exceeds 304

million, making India the country with the largest number of illiterates.

Life expectancy during 2001-06 was 63.9 years for males and 66.9

years for females, was still below 72 years in China. Adverse sex

ratio with only 933 women for 1,000 men is another cause for concern.

More disturbingly, the child sex ratio (ages 0-6) has declined sharply

from 962 in 1981 to 927 in 2001. Infant mortality rate (IMR) which

was 58 per thousand in the year 2005 had fallen to 44 per thousand

in the year 2011.

3. Agriculture growth continues to be sluggish and was of the order of 2.1

per cent during the 10th Plan, despite a target of 4 per cent growth.

7.3.1 Sectoral Allocation of Resources

It may be observed that as compared to Tenth Plan realizations of `16,18,460

crores in the aggregate, Eleventh Plan proposes an overlay of ̀ 36,44,718 crores

– an increase by 125 per cent.

Employment Perspective in the Eleventh Plan

Eleventh Plan rightly states: ‘Generation of productive and gainful employment,

with decent working conditions, on a sufficient scale to absorb our growing labour

force form a critical element in the strategy for achieving inclusive growth.”

Major points noticed in the eleventh five year plan in the employment sector are:

• One of the most remarkable things brought out by the 66th round National

Sample Survey Organization (NSSO) survey on employment in 2009-10

is that the number of young people in education, and therefore, out of the

workforce, has increased dramatically, causing a drop in the labour

participation rate. The total number of young working-age people (15-24)

who continued in educational institutions doubled from about 30 million in

2004-05 to over 60 millions in 2009-10.

• The survey also shows that between 2004-05 and 2009-10, the overall

labour force expanded by only 11.7 million. This was considerably lower

than comparable periods earlier, and can be attributed to the much larger

retention of youth in education, and also because of lower labour force

participation among working-age women.

• Over the same period, 18 million job opportunities were created on current

daily status basis. Thus, in absolute terms, unemployment came down



by 6.3 million and the unemployment rate which had increased from

6.06 per cent in 1993-94 to 7.31 per cent in 1999-2000 and further to 8.28

per cent in 2004-05, came down to 6.60 per cent in 2009-10.

• The lower growth in the labour force is not expected to continue in future

and we can assume that much larger numbers of educated youth will be

joining the labour force in increasing numbers during the Twelfth Plan and

in the years beyond.

• Based on the performance of the eleventh plan, where the total public expenditure on health was less than 1% of the GDP, the 12th plan proposes to raise it to 2-3%. By the end of the twelfth plan, it is estimated that the Government will have spent 2.5% of the GDP on crucial rural health factors like water, sanitation and better health outcomes.

• Inadequate infrastructural development was recognized as a major constraint on growth in the eleventh plan. The total investment in infrastructure, including roads, railways, ports, airports, electricity, telecommunications, oil gas pipelines and irrigation has increased from 5.7% of GDP (start of 11th plan) to around 8.4% by 2010-11. The twelfth plan expected to continue this thrust and focus more on PPP-based development, especially in Health and Education sectors.

• For the GDP to grow at the targetted 9%, commercial energy supplies will have to grow at a rate between 6.5-7% per year in the 12th plan. Since India's domestic energy supplies are limited, dependence upon imports will increase.

• Import dependence in the case of petroleum has always been high and is projected to be 80% in the twelfth plan. Similarly for coal, import dependence is projected to increase since the domestic coal supply will not be sufficient to meet growing demand. Twelfth plan will need to address the challenge of aligning domestic fuel prices with the global prices. This can only be done gradually. Sustained growth in this period will happen only if this adjustment is successfully made the poor cannot be denied subside, while the energy price levels cannot be de-linked with global prices either.

Health andEducation

InfrastructureDevelopment

PowerDevelopment

Petroleumand Natural

GasProduction

• Although GDP from Manufacturing increased at 9.5 per cent per annum

between 2004-05 and 2009-10 along with some increase in employment

in the organized manufacturing sector, the survey suggests that overall

employment in manufacturing actually declined during that period.



• The survey also shows that the vast majority of new jobs created between

2004-05 and 2009-10 was in casual employment, mainly in construction.

While such jobs are often more attractive for rural labour than casual wok

in agriculture, there is potential for an accelerated pace of creation of more

durable rural non-farm jobs/livelihood opportunities.

7.3.2 Critique of the Eleventh Plan

The Eleventh Plan had set the correct goal in the form of moving ‘Towards Faster

and More Inclusive Growth’, the course which was charted out to achieve the

goal was paradoxically anti-labour and pro-corporate sector. This was precisely

in conflict with the goal of providing secure income and employment for ‘aam

admi’ (common man). The best way to achieve this was to promote small and

medium enterprises (SMEs) and peasant agriculture. However, there was no

clear policy of promoting SMEs. It sidetracked the issue of small peasant

agriculture and pleads for contract farming which is capital-intensive and not

labour intensive. The recommendations of the National Commission on Farmers

(NCF), headed by eminent agricultural scientist Dr. M S Swaminathan, regarding

the setting up of a fund for farmers affected by crop losses on the lines of national

calamity fund, reducing interest on farm loans to 4 per cent and not charging

compound rate of interest and imposing quantitative restrictions on import of

agricultural products, were not included in the Eleventh Plan.

The Eleventh Five Year Plan had aimed at achieving faster and more

inclusive growth. rapid GDP growth, targeted at 9.0 per cent per annum, was

regarded necessary for two reasons: first, to generate the income and

employment opportunities that were needed for improving living standards for

the bulk of the population; and second, to generate the resources needed for

financing social sector programmes, aimed at reducing poverty and enabling

inclusiveness.

The economy has performed well on the growth front, averaging 8.2 per

cent in the first four years. Growth in 2011-12, the final year of the Eleventh Plan

was originally projected at around 9.0 per cent continuing the strong rebound

from the crisis, which saw 8.4 per cent growth in 2010-11. Instead, the economy

actually slowed down in 2011-12 compared to the previous year—a phenomenon

common to all major economies reflecting the fact that 2010 was a rebound

from depressed levels in 2009. Growth in 2011-12 is likely to be around 6.5 per

cent. The economy is therefore, likely to achieve an average GDP growth of

around 7.9 per cent over the eleventh plan period, which is lower than the 9.0

per cent targeted originally, but somewhat around the 7.8 per cent achieved in



the tenth plan. This implies a nearly 6.2 per cent increase in per-capita GDP

during this period. It has also led to a substantial increase in government

revenues, both at the centre and the states, resulting in a significant step-up of

resources for the programmes aimed at inclusiveness. A healthy increase in

aggregate savings and investment rates, particularly in the private sector, testifies

to the strength of our economy as it enters the Twelfth Plan Period.

Though growth in the eleventh plan period is almost at par with the tenth

plan, but it is nevertheless a good performance, given the fact that a severe

global economic crisis depressed growth in two of these five years, and also

that in the year 2009 India had the weakest monsoon in three decades. The

slowdown in 2011-12 is a matter of concern, but can be reversed if the investment

climate is turned around and fiscal discipline is strengthened.

The Planning Commission’s target of creating 58 million jobs during the

Eleventh Plan was inadequate and it would have been much better if the

Commission had adhered to the target of 65 million jobs as suggested by the

Approach Paper.

The removal of poverty required targeted attention on the poor. The Planning

Commission had given a long catalogue of schemes such as National Rural

Employment Guarantee Scheme, Swaran Jayanti Rozgar Yojana (SJRY), slum

improvement programme, housing for the poor and skill development

programmes, etc. However, the Planning Commission was silent on some issues

like food security, strengthening price support systems, creation of price

stabilization fund for agricultural commodities, universalizing crop insurance,

protection to peasantry from subsidized imports of agricultural commodities

and land reform.

Eleventh Plan was a very ambitious plan which sought 125 per cent

increase in resources over the Tenth Plan. Its initiative in providing over 30 per

cent resources to improve the quality of social services was appreciable. It was

also ambitious from the point of view of the target of 9 per cent GDP growth.

However, its success was dependent on the extent to which it was able to convert

the growth process into pro-poor growth and reduce the urban-rural divide and

the rich-poor divide.

Some of the notable achievements of the Eleventh Five-Year plan are outlined

below:

• The economy exceeded expectations in the first year of the Eleventh Plan

(2007–08) with a growth rate of over 9 per cent but the momentum was

interrupted in 2008–09 because of the global financial crisis.



• The growth rate in 2008–09 declined to 6.7 per cent but rebounded to 7.4

per cent in 2009–10, despite the fact that agriculture showed negligible

growth at 0.2 per cent.

• The relatively modest slowdown in the face of an exceptionally sharp

contraction in output in the industrialized world has established the

resilience of the Indian economy in terms of its ability to manage a downturn

despite greater openness. While the advanced economies saw their

growth decline from a trend rate of 2.0 to 2.5 per cent to (–) 2.0 to (–) 3.0

per cent, growth in India declined by only about 2 percentage points.

• The average of annual growth rates of GDP in agriculture and allied sectors

during the Eleventh Five Year Plan is now placed at 3.3 per cent. This is

short of the target of 4 per cent but is significantly better than the

achievement of 2.4 per cent in the Tenth Plan.

• The Eleventh Plan had made four conscious choices. First, with

technology fatigue evident, it funded research better but emphasized on

getting more from existing technology. Second, since one size does not

fit all, it decentralized plan funds to encourage initiatives at State and lower

levels. Third, aware of low public investment and food security needs, it

increased Centre’s spending on these, particularly in disadvantaged

regions. Fourth, noting farmer distress, it tried to focus not just on

production but also on farm incomes, stressing service delivery and

suggesting encouragement of group activity with land and tenancy reforms

put back on the agenda.


4. Rapid GDP growth in 11th Plan was considered necessary because

generating income and _________ opportunities was necessary and for

reducing poverty and enabling ___________.

5. Eleventh Plan targets to reach a subscriber base of 600 million and a

rural teledensity of 25 per cent. (True/False)

6. Several weaknesses were noticed in the eleventh five year plan in the

________sector.

Activity 1

According to you what are the characteristics of the employment sector

witnessed in the eleventh five year plan.

Hint: Refer section 7.3.



7.4 Introduction to Twelfth Five Year Plan

The Approach Paper to the Twelfth Five Year Plan states, ‘The Indian economy

on the eve of the Twelfth Plan is characterized by strong macro fundamentals

and good performance over the Eleventh Plan period, though clouded by some

slowdown in growth in the terminal year of the Eleventh Five Year Plan, with

continuing concern about inflation and a sudden increase in uncertainty about

the global economy’. The paper further states ‘Objective of the Eleventh Plan

was faster and inclusive growth and the initiatives taken in the Eleventh Plan

period have resulted in substantial progress towards both objectives. Inevitably,

there are some weaknesses that need to be addressed and new challenges

that need to be faced. Some of the challenges themselves emanate from the

economy’s transition to a higher and more inclusive growth path, the structural

changes that come with it and the expectations it generates. There are external

challenges also arising from the fact that the global economic environment is

much less favourable than it was at the start of the Eleventh Plan. These

challenges call for renewed efforts on multiple fronts, learning from the experience

gained, and keeping in mind global developments.’ (Source: Planning

Commission of India).

Prospects for the Twelfth Plan

Approach Paper claims that having achieved 8.2 per cent growth during the

Eleventh Plan, it is reasonable to aim at 9.0 per cent growth for the Twelfth Plan.

It may be important to mention here that this growth estimate has been reduced

to 7.9 per cent later. Though Planning Commission thinks this to be a feasible

target from a macro-economic perspective but it cannot be viewed as an assured

outcome. Global economic conditions are very uncertain and energy prices are

likely to remain high. To achieve rapid growth, the economy will have to overcome

constraints posed by limited energy supplies, increase in water scarcity,

shortages in infrastructure, problems of land acquisition for industrial

development and infrastructure, and the complex problem of managing the urban

transition associated with rapid growth. Greater efforts also need to be made in

agriculture, health and education to ensure inclusion of the most excluded and

sometimes invisible parts of our population.

Growth Targets for the Twelfth Plan

The Planning Commission has explored two alternative targets for economic

growth in the Twelfth Plan. The first is a restatement of the Eleventh Plan target

of 9.0 per cent growth, which could not be achieved. The second is an even



higher target of 9.5 per cent average growth for the Twelfth Five Year Plan.

Several macro-economic models have been used to examine the feasibility of

these targets in terms of internal consistencies and inter-sectoral balances.

The draft of Twelfth Five Year Plan’s subtitle ‘Faster, More Inclusive and

Sustainable Growth’, puts the growth debate in the right perspective. Following

the slowdown induced by the global financial crisis in 2008-09, the Indian economy

responded strongly to fiscal and monetary stimulus and achieved a growth rate

of 8.6 per cent and 9.3 per cent respectively in 2009-10 and 2010-11. However,

with the economy exhibiting inflationary tendencies, the Reserve Bank of India

(RBI) started raising policy rates in March 2010. High rates as well as policy

constraints adversely impacted investment, and in the subsequent two years

viz. 2011-12 and 2012-13, the growth rate slowed to 6.2 per cent and 5.0 per

cent respectively. Nevertheless, despite this slowdown, the compound annual

growth rate (CAGR) for gross domestic product (GDP) at factor cost, over the

decade ending 2012-13 is 7.9 per cent.

(a) Growth targets seemingly unachievable

In view of the slowdown of the economy in the last two years of the Eleventh

Five Year Plan, the growth target of even 9 per cent seems to be impractical.

This slowdown has been broad based affecting almost all sectors of the economy.

Gross fixed capital formation has been badly hit in the last two years of the

Eleventh plan due to rising interest rates, slowing consumption growth and the

uncertain business environment.

Further, the target Gross Capital formation rate at 38.7 per cent of GDP

(with 9 per cent growth scenario), seems to be unachievable and with 9.5 growth

scenario, gross capital formation of 41.1 per cent is even more impractical.

Therefore, growth target, which primarily depends upon Gross Capital Formation

is seemingly unachievable.

(b) Unrealistic financial pattern once again

Eleventh Five year Plan had an unrealistic financial pattern, whereby balance

from current revenues was expected to provide 28.5 of the resources (2.31 per

cent of GDP), actual realization from balance from current revenue actually

was 0.17 per cent of GDP. The Twelfth Five Year Plan repeats the same mistake.

Due to shortfall in surplus from current revenues for resources of the centre,

11th plan had to rely heavily or borrowings for financing plan expenditure, though

public sector enterprises provided more or less on the expected lines.

It would have been better if Planning Commission had adopted a more

practical financial plan for the 12th plan period.



(c) Impractical infrastructure targets

The twelfth plan sets an ambitious target of one lakh MW in power generation,

whereas actual realization in 11th plan was 50,000 MW, on account of slippage

in public sector power projects. Thus, the 12th plan target is unrealistic in actual

practice. From another point of view, the target actually is only 72000 MW

because 28000 MW capacity supposed to be completed in the 11th plan is

expected to be completed in the first two years of the 12th plan. The 12th plan

target of 72000 MW is thus effectively lower than 78700 MW set for the 11th

plan.

(d) Overemphasis on public private partnership

Government seems to be withdrawing from the infrastructure sector in 12th

Five Year Plan and lays overemphasis on public private partnership (PPP).

Approach paper of 12th Five Year Plan states that India has 1017 PPP projects

accounting for ̀ 4,86,603 crores. India today is second only to China in terms of

number of PPP projects and in terms of investments it is second to Brazil. So

far transport sector has been the major recipient of investment in these PPP

projects. Approach Paper of 12th Five Year Plan talks about the need to explore

the scope for PPP projects in the development of social sectors like health and

education.


7. A healthy increase in the ________ savings and ________ rates, specially

in the private sector, testified to the strength of our economy at the start of

the twelfth plan.

8. In view of the slowdown of the economy in the last two years of the Eleventh

Five Year Plan, the growth target of even 9 per cent seems to be impractical.

(True/False)

9. Government seems to be withdrawing from _________ sector in 12th

Five Year Plan and lays overemphasis on public private partnership (PPP).

Activity 2

What are some of the shortcomings of the twelfth five year plan that need to

be overcome in the next five year plan?

Hint: For instance, unachievable growth target set in the twelfth five year

plan.



7.5 Summary

Let us recapitulate the important concepts discussed in this unit:

• The guiding principles of India’s Five-Year Plans are provided by the basic

objectives of growth, employment, self-reliance and social justice.

• Eleventh Five Year Plan emphasized the fact that during the last four years

of the Tenth Plan, average GDP growth was 8.6 per cent making India one

of the fastest growing economies in the world.

• Eleventh Plan proposes an overlay of ̀ 36,44,718 crores – an increase by

125 per cent as compared to the Tenth Plan.

• The Eleventh Five Year Plan had aimed at achieving faster and more

inclusive growth.

• The short-term objectives of each plan, also called the Approach to each

Plan, reflect the current state of the economy and the economic thinking

of the Party in power and of the planners in the Planning Commission.

• The draft of Twelfth Five Year Plan’s subtitle ‘Faster, More Inclusive and

Sustainable Growth’, puts the growth debate in the right perspective.

Following the slowdown induced by the global financial crisis in 2008-09,

the Indian economy responded strongly to fiscal and monetary stimulus

and achieved a growth rate of 8.6 per cent and 9.3 per cent respectively in

2009-10 and 2010-11.

7.6 Glossary

• Mass consumption: The use of goods or services, either by the

consumers or by the companies that produce the goods or services.

• Fiscal discipline: It refers to a balanced budget where current expenditures

are equal to receipts.

• Casual labour: It refers to an individual hired on a temporary basis to fill

up a specific work requirement.

7.7 Terminal Questions

1. Briefly describe the approach taken while devising the first ten five year

plans.



2. Identify the weaknesses highlighted by the eleventh five year plan which it

planned to overcome.

3. State the objectives and vision of the eleventh five year plan.

4. Describe the sectoral allocation of resources done under the eleventh

five year plan.

5. List the prospects and growth targets set for the twelfth five year plan.

6. Analyse the Twelfth Plan Approach Paper.

7.8 Answers


1. True

2. Economic stability

3. True

4. Employment, inclusiveness

5. True

6. Employment

7. Aggregate, investment

8. True

9. Infrastructure

Terminal Questions

1. Since 1951, India has completed eleven five-year plans. The guiding

principles of India’s Five-Year Plans are provided by the basic objectives

of growth, employment, self-reliance and social justice. For more details,

refer section 7.2.

2. Some of the weaknesses highlighted by the eleventh five year plan are:

The percentage of population below the official poverty line has come

down from 36 per cent in 1993-94 to 28 per cent in 2004-05.

Indicators of deprivation suggest that the proportion of population deprived

of a minimum level of living is much higher. For more details, refer section

7.3.



3. The Plan envisages a high growth of GDP of the order of 9 per cent for the

country as whole. This implies that per capita GDP would grow at about

7.5 per cent per year to double in ten years. For more details, refer section

7.3.2.

4. It may be observed that as compared to Tenth Plan realizations of

`16,18,460 crores in the aggregate, Eleventh Plan proposes an overlay of

`36,44,718 crores – an increase by 125 per cent. For more details, refer

section 7.3.1.

5. Approach paper claims that having achieved 7.2 per cent growth during

the Eleventh Plan, it is reasonable to aim at 9.0 per cent growth for the

Twelfth Plan. For more details, refer section 7.4.

6. A critical analysis of the Twelfth Plan Approach Paper was done on the

following basis. For more details, refer section 7.4.

7.9 Case Study

Strategy to Reduce Poverty under the Eleventh Five Year Plan

In 2004-05, the proportion of the poor was 27.5 per cent – 28.3 per cent for

rural areas and 25.7 per cent for urban areas. The total number of poor in

2004-05 was 301.7 million, lower than 321.3 million in 1973-74 by about

19.6 million, during the long span of 31 years which cannot be described as

a very creditable achievement. Nearly 60 years after independence, more

than a quarter of population continues to be poor.

The Planning Commission further states: ‘There is growing consensus that

the poverty line (`356 monthly per capita consumption for rural areas and

`458 for urban areas in 2004-05) in India is much too low, and continues to

be based on the consumption basket. If the poverty line was higher, the

share of the population below the poverty line would be accordingly higher.’

To reconsider and revise the poverty lines, the Planning Commission has

constituted an expert group whose recommendations, hopefully, would

provide acceptable measures of both poverty reduction and the population

below the poverty line.

Since poverty is a multidimensional problem, it requires a multi-pronged

strategy to tackle it.

Firstly, regions which have large number of poor people include tribal forested

regions and rainfed agricultural regions. In these regions, watershed

development has to be the crucial instrument for poverty reduction.



Secondly, the poor are concentrated in certain states or regions where land-

man ratio is the lowest. In these regions, effective land reforms and provision

of agricultural services need special emphasis.

Thirdly, there is a large dependence on casual labour. These workers get

low wages and are unable to find employment throughout the year. Most of

them belong to SC and STs. A programme like the National Rural

Employment Guarantee Programme can provide better wages and enhance

the number of working days for this category.

Fourthly, the poor have to be enabled to increase their incomes by diversifying

away from agriculture to non-farm work as a source of subsidiary income.

Fifthly, education and skill development among the poor should be enhanced

so that they can seek employment in emerging sectors like information

technology, and other occupations requiring better skills.

Last but not the least, the structure of production has to be employment

generating, especially in non-agricultural occupations. In other words, the

Eleventh Plan recommends a three-legged strategy – economic growth,

income- poverty reduction through programmes like NREGA and Swaran

Jayanti Rozgar Yojana (SJRY) and human capital formation with the help of

education and skill development.

The Eleventh Plan has only made a general observation that it intends to

reduce poverty by 10 percentage points which implies a reduction from 28

per cent to 18 per cent. But since it has started the process of revision of

poverty line, it has to revise its whole programme of poverty reduction when

new norms and findings become available.

Discussion Questions

1. Analyse the strategy devised by the Planning Commission to tackle the

issue of poverty reduction under the eleventh five year plan.

2. Do you think that the strategies devised by the Planning Commission

will be successful in reducing poverty?

Source: Compiled by author

References

• Pierre-Richard Agenor. (2004).The Economics of Adjustment and Growth:

Harvard University Press.



• William J. Baumol, Robert E. Litan, Carl J. Schramm.( 2007).Good

Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity,

New Haven: Yale University Press.

• Planning Commission: Faster, Sustainable And Inclusion Growth, An

Approach To The Twelfth Five Year Plan (2012-17), October 2011.

E-References

• http://planningcommission.gov.in/plans/planrel/12thplan/pdf/vol_2.pdf

(Retrieved on 9 May 2013)

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