Prepare Prelims 2017-Day-21-Indian Economy

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Details on Five Year Plans:

Five-Year Plans

When India became an independent country, many questions had arisen in front of the country’s leaders at that time. The British had left the Indian economy handicapped; leaders had the challenges to make country’s economy  strong. A formal model of planning was adopted. The Planning commission was established on 15th March 1950, with Former Prime Minister Jawaharlal Nehru as the Chairman. The Planning Commission used to directly report to the Prime Minister of India. The planning commission was replaced by  NITI Aayog (National Institute for Transforming India Aayog) which was established by Prime Minister Narendra Modi on 1st January 2015.

Planning Commission was assigned the task of formulating plans for the most effective and balanced utilisation of resources and determining priorities. Since then the Planning Commission frames the centralized and integrated national economic programs at the interval of every five years, thereby known as the Five-Year Plans.

The First Five-Year Plan of India was presented by Pandit Jawaharlal Nehru in 1951.

First Plan (1951-56):

  • It was based on Harrod-Domar Model.
  • Focus on Agriculture, Price Stability, Power and Transport
  • It was a successful plan primarily because of good harvests in the last two years of the plan.

Second Plan (1956-61):

  • It also called Mahalanobis plan named after the well known statistician.
  • Focus on rapid industrialization
  • Advocated huge imports through foreign loans.
  • Shifted basic emphasis from agriculture to industry
  • During this plan prices increased by 30%, against a decline of 13% during the First plan

Third Plan (1961-66):

  • It stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian war of 1962 exposed weaknesses in the economy and shifted the focus towards the defence industry and the Indian Army.
  • Complete failure in reaching the targets due to unforeseen events-Chinese aggression (1962), Indo-Pak war (1964), severe drought 1965-66.

Three Annual Plans (1966-69):

  • Prevailing crisis in agriculture and serious food shortage necessitated the emphasis on agriculture during the Annual Plans
  • During these plans a whole new agricultural strategy was implemented. It involving wide-spread distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation.
  • During the Annual Plans, the economy absorbed the shocks generated during the Third Plan.

Fourth Plan (1969-74):

  • Main emphasis was on growth rate of agriculture to enable other sectors to move forward
  • First two years of the plan saw record production. The last three years did not measure up due to poor monsoon
  • Influx of Bangladeshi refugees before and after 1971 Indo-Pak war was an important issue

Fifth Plan (1974-79):

  • It proposed to achieve two main objectives: ‘removal of poverty‘ (Garibi Hatao) and ‘attainment of self reliance’
  • Promotion of high rate of growth, better distribution of income and significant growth in the domestic rate of savings were seen as key instruments
  • The plan was terminated in 1978 (instead of 1979) when Janta Party government rose to power

Rolling Plan (1978-80):

  • Janta government put forward a plan for 1978- 1983. However, the government lasted for only 2 years. Congress government returned to power in 1980 and launched a different plan.

Sixth Plan (1980-85):

  • Focus – Increase in national income, modernization of technology, ensuring continuous decrease in poverty and unemployment, population control through family planning etc

Seventh Plan (1985-90):

  • Focus – rapid growth in food-grains production, increased employment opportunities and productivity within the framework of basic tenants of planning
  • The plan was very successful, the economy recorded 6% growth rate against the targeted 5%

Eight Plan (1992-97):

  • The eighth plan was postponed by two years because of political uncertainty at the centre
  • Worsening Balance of Payment position and inflation during 1990-91 were the key issues during the launch of the plan
  • The plan undertook drastic policy measures to combat the bad economic situation and to undertake an annual average growth of 5.6%
  • Some of the main economic outcomes 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

Ninth Plan (1997-2002):

  • It was developed in the context of four important dimensions: Quality of life, generation of productive employment, regional balance and self-reliance.

Tenth Plan (2002-2007):

  • To achieve 8% GDP growth rate
  • Reduction of poverty ratio by 5 percentage points by 2007
  • 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
  • Increase in forest and tree cover to 25% by 2007 and 33% by 2012.
  • Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012.

Eleventh Plan (2007-2012):

  • Accelerate GDP growth from 8% to 10%. Increase agricultural GDP growth rate to 4% per year
  • Create 70 million new work opportunities and reduce educated unemployment to below 5%
  • Raise real wage rate of unskilled workers by 20 %
  • Lower gender gap in literacy to 10 percentage point. Increase the percentage of each cohort going to higher education from the present 10% to 15 %
  • Reduce Total Fertility Rate to 2.1
  • Raise the sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-2017
  • Provide clean drinking water for all by 2009
  • Attain WHO standards of air quality in all major cities by 2011-12
  • Increase energy efficiency by 20 percentage points by 2016-17

Twelfth Five Year Plan:

The government on 4th october approved the 12th five year plan (2012-17) document that seeks to achieve annual average economic growth rate of 8.2 per cent, down from from 9 per cent envisaged earlier, in view of fragile global recovery. The theme of the Approach Paper is “faster, sustainable and more inclusive growth” .According to officials the projected average rate gross capital formation in the 12th Plan is 37 per cent of GDP. The projected gross domestic savings rate is 34.2 per cent of GDP and the net external financing needed for macro economic balance has been placed at 2.9 per cent of GDP. During the 11th Plan (2007-12), India has recorded an average economic growth rate of 7.9 per cent. This, however, is lower than the 9 per cent targetted in 11th Plan.Besides other things, the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 per cent.The total plan size has been estimated at Rs.47.7 lakh crore, 135 per cent more that for the 11th Plan (2007-12).

The “strategy challenges” refer to some core areas that require new approaches to produce the desired results. Thes are:

1.Enhancing the Capacity for Growth

2.Enhancing Skills and Faster Generation of Employment

3.Managing the Environment

4.Markets for Efficiency and Inclusion

5.Decentralisation, Empowerment and Information

6.Technology and Innovation

7.Securing the Energy Future for India

8.Accelerated Development of Transport Infrastructure

9.Rural Transformation and Sustained Growth of Agriculture

10.Managing Urbanization

11.Improved Access to Quality Education

12.Better Preventive and Curative Health Care

Highlights of 12th Five Year Plan (2012-17):

  • Average growth target has been set at 8.2 percent
  • Growth rate has been lowered to 8.2 percent from the 9.0 percent projected earlier in view adverse domestic and global situation.
  • Areas of main thrust are-infrastructure, health and education
  • Growth rate has been lowered to 8.2 percent from the 9.0 percent projected earlier in view adverse domestic and global situation.
  • The commission had accepted Finance Minister P. Chidambaram’s suggestion that direct cash transfer of subsidies in food, fertilizers and petroleum be made by the end of the 12th Plan period
  • After the cabinet clearance, the plan for its final approval would be placed before the National Development Council (NDC), which has all chief ministers and cabinet ministers as members and is headed by the Prime Minister
  • Agriculture in the current plan period grew at 3.3 percent, compared to 2.4 percent during the 10th plan period. The growth target for manufacturing sector has been pegged at 10 percent
  • During the 11th Plan period, the average annual growth was 7.9 percent
  •  A full Planning Commission chaired by Prime Minister Manmohan Singh on September 15 endorsed the document which has fixed the total plan size at Rs.47.7 lakh crore
  • The 12th Plan seeks to achieve 4 percent agriculture sector growth during the five-year period
  • On poverty alleviation, the commission plans to bring down the poverty ratio by 10 percent. At present, the poverty is around 30 per cent of the population.
  •  According to commission Deputy Chairperson Montek Singh Ahluwalia, health and education sectors are major thrust areas and the outlays for these in the plan have been raised.
  • The outlay on health would include increased spending in related areas of drinking water and sanitation.

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