The Five Year Plans (Part - 2), Economy Traditional UPSC Notes | EduRev

Economy Traditional for UPSC (Civil Services) Prelims

UPSC : The Five Year Plans (Part - 2), Economy Traditional UPSC Notes | EduRev

The document The Five Year Plans (Part - 2), Economy Traditional UPSC Notes | EduRev is a part of the UPSC Course Economy Traditional for UPSC (Civil Services) Prelims.
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The Eighth Plan : (1992-97)

  • The Government has redefined the role of the Planning Commission from a highly centralised planning system to indicative planning.
  • The priority will be to achieve goals, and efforts directed towards reducing the bottle necks and making higher rate of growth possible.
  • The Planning Commission will play an integrative role and help in the development of a holistic approach to policy formulation in critical areas of development.
  • It will be a mediatory and facilitating role for managing the change smoothly and creating a culture of high productivity and efficiency in the government.
  • In addition to the role of resource allocation, the Planning Commission will concern itself with resource mobilisation for development as well as efficient utilisation of funds.

Distinguishing features

  • It is indicative in nature. It concentrates on building a long-term strategic vision of the future and sets forth the priorities of the nation.
  • It recognises human development as the core of all developmental effort for only healthy and educated people can contribute to economic growth which, in turn, will contribute to human well-being.
  • No society in the long run can sustain the welfare of its people without economic growth. For rapid economic development, the priority sectors identified for the growth of infrastructure are power, transport and communications.
  • The plan attempts to correct the fiscal imbalances from which the Sixth and Seventh Plans suffered. The funding of the plan is to be done in a non-inflationary manner by avoiding the debt trap, both internally and externally.
  • This is an integrative plan. If the results of developmental activities so far have not been commensurate with the investment made, one of the main reasons is the fragmented approach. Thus the Eighth Plan stresses on integrated development efforts so that the output will be impressive with given resources.
  • The Eighth Plan recognises the essential need to involve people in the process of development. The attitude of passive observance and total dependence on the government for developmental activities has become all-pervasive.
  • It has to be altered to a pro-active attitude of people taking the initiative themselves. In the process of development, “people must be operative and the government must cooperate.”
  • The plan is performance-oriented. It concentrates not so much on its allocative role but on how to optimally utilise the allocations.
  • The stress is on improvement of performance, quality consciousness, competitiveness, efficiency of operations and completion of projects on time.
  • The Eighth Plan pays special attention to employment in rural areas. If people can get adequate earning opportunities where they reside normally, they would not migrate to urban areas.

Allocation

  • The Eighth Plan proposes a growth rate of 5.6 per cent per annum on an average during the plan period.
  • The level of national investment is proposed at Rs. 7,98,000 crores and the public sector outlay at Rs. 4,34,100 crores.
  • Consistent with the expected resources, the size of the plans of the States and Union Territories is projected at Rs. 1,86,235 crores and of the Central plan at Rs. 2,47,865 crores. (The Seventh Plan outlay was Rs. 1,80,000 crores, comprising Rs. 89,466 crores for the States and UTs and Rs. 95,534 crores for the Centre).
  • The outlays in the public sector are financed by budgetary support and domestic and foreign borrowings.
  • The total budgetary support in the Eighth Plan is Rs. 188,475 crores at 1991-92 prices, which is 43.4% of the outlay. Budgetary support becomes a crucial factor in determining the outlays of sectors which do not have any access to internal resources or borrowings.
  • Besides, in the physical infrastructure areas such as power and transport including railways, a certain minimum budgetary support has to be made available even though they may have access to internal resource and borrowings.

The Eighth Plan focus on —

  1. Clear prioritisation of sectors/projects for investment in order to facilitate operationalisation and implementation of the policy initiatives taken in the areas of fiscal, trade and industrial sectors and human development;
  2. Making resources for these priority sectors available and ensuring their effective utilisation and completion of projects on schedule avoiding cost and time overruns.
  3. Creation of a social security net through employment generation, improved health care and provision of extensive education facilities throughout the country.
  4. Creation of appropriate organisations and delivery systems to ensure that the benefits of investment in the social sectors reach the intended beneficiaries.

Objectives

  1. Generation of adequate employment to achieve near full employment level by the turn of the century.
  2. Containment of population growth through people’s active cooperation and an effective scheme of incentives and disincentives.
  3. Universalisation of elementary education and complete eradication of illiteracy among the people in the age group of 15 to 35 years.
  4. Provision of safe drinking water and primary health care facilities, including immunisation, accessible to all the villages and the entire population, and complete elimination of scavenging.
  5. Growth and diversification of agriculture to achieve self-sufficiency in food and generate surpluses for exports.
  6. Strengthening the infrastructure (energy, transport, communication, irrigation) in order to support the growth process on a sustainable basis.
  7. The Eighth Plan will concentrate on these objectives keeping in view the need for continued reliance on domestic resources for financing investments, increasing the technical capabilities for the development of science and technology, modernisation and competitive efficiency so that the Indian economy can keep pace with and take advantage of global developments.


The Ninth Plan : (1997-2002)
 Background of Economy

  • The Eighth Five Year Plan (1992-97) was launched against the backdrop of severe balance of payment crisis triggered off by financial profligacy and excessive borrowings of the Government which started in the early 1980s.
  • The trade balance deteriorated sharply after the Gulf War in 1990, and remittances from Indian workers in the Gulf also went down. The net result was an almost US$3 billion decline in the current account balance and a sharp reduction in the foreign exchange reserves, which declined to only about US$ 1.1 billion by June 1991.
  • In response to the emerging crisis, in July 1991, the Government initiated a series of stabilisation measures to bring the situation under control. The first step was a substantial devaluation of the rupee while retaining the import controls that had earlier been imposed by the Reserve Bank of India (RBI). In addition, the fiscal deficit of the Central Government was curtailed from 8.3 per cent in 1990-91 to 5.9 per cent in 1991-92. 
  • The Government also initiated a process of structural reforms in trade and industrial policies in 1991 which was aimed at correcting the macro-economic imbalances and other distortions that had developed during the previous years.
  • These measures included dismantling the licensing of domestic investment, removing much of the controls on foreign trade, particularly reforming the financial sector and tax system and reducing the high rates of tariffs and taxes.
  • At the time the Eighth plan was formulated, the set-backs suffered by the economy in 1990-91 and 1991-92, the programme of structural reforms and the need for fiscal discipline had to be taken into account.
  • Thus the growth target (5.6 per cent per annum), and the macroeconomic parameters supporting it, were set at relatively conservative levels compared to what may have been possible on the basis of the peroformance of the economy during the Seventh Plan period, particularly in view of the low base year values attained in 1991-92.
  • The actual growth performance of the economy surpassed the expectations. In the first four years of the Eighth Plan, it has averaged over 5.7 per cent annum, and there is every likelihood that the Plan may end with an average growth rate of nearly 6 per cent as compared to the target of 5.6 per cent. 
  • Much of this growth performance reflected the successive good performance of the agricultural sector, which has averaged a growth rate of 3.8 per cent per annum during the four years despite a set-back in 1995-96, and may average 3.5 per cent over the full Plan period, as compared to the target of 3.1 per cent growth per annum.
  • The industrial sector has also recovered strongly in 1994-95 and 1995-96 after slow growth in the first two years of the Plan, and may marginally fall short of the target of 7.6 per cent by the end of the Plan.
  • Insofar as prices are concerned, the performance of the economy has been a mixed one. Initially, following the stabilisation measures, the over-all inflation rate as measured by the Wholesale Price Index (WPI) fell from a peak of 16 per cent in 1992-93 and further to 8.3 per cent in 1993-94. However, it again accelerated to 10.9 per cent in 1994-95. During 1995-96, the rate of inflation averaged 7.8 per cent after recording a low of 5 per cent in January 1996.
  • Thus the average inflation rate during the Eighth Plan peirod is likely to be about 8.8 per cent per annum as measured by the WPI. As far as cost of living as measured by the CPI are concerned, the inflation rate is considerably higher being in the range of 9.3 to 9.6 per cent annum.
  • On the external front too the economy appears to have performed reasonably well. Foreign exchange reserves have been steadily built up from the low level of US$ 1.1 billion in July 1991 to above US$ 18 billion at present.
  • The total outlay of the Ninth plan was reduced to Rs. 8,59,200 crore from Rs. 8,75,200 crore in its revised format.
  •  In the approach paper of the Plan, the following main directions were prescribed : 
    • To extend the achievements of the Eighth Plan. 
    • To encourage the capital investment in agriculture.
    • To improve the living standard of the poor. 
    • To develop the basic facilities. 
    • To eliminate the disparities in social sector to make it more effective. 
    • To reduce the regional inequalities. 
    • To control the financial deficits. 
  • Along with it, the Indian Economy was in a weak state and thus it was not found possible to convert it into a free market economy, depending fully on the private sector.
  • It was realised that economic growth could possible be achieved only by a rational procedure and intervention of the State. 
  • The interference of the State is particularly necessary in the following areas : 
    • To improve the living standard of the people who are leading their lives in absolute poverty in the rural and the urban areas. 
    • To improve the conditions of the work and life-style of the unorganised labour.
    • To provide educational and employment opportunities to the people of weaker sections-scheduled castes, scheduled tribes and other backward castes, several minority communities and also women and children who are physically weak and handicapped.
    • In the Ninth Plan, following otner areas were identified which need to be given special attention :
    • To lay stress on the need for regulating the debt programmes for improving the Government's financial position at all levels.
    • To prepare long term policies for reducing the losses in the revenue accounts of the Union Government and the State Governments.
    • To ensure the healthy and optimum utilisation of the existing public assets.
    • To plan and implement the firm and stable foreign trade policies for export promotion.
    • To make quantitative and qualitative improvements in Infrastructural sector.
    • To recognise the problems originating from urbanisation and to take measures for their eradication.
    • To remove the environmental imbalances.

Objectives of the Ninth Plan

The following objectives were accepted for the Ninth Five Year Plan:

  1. To create sufficient productive, employment and give priority to the development of agriculture and villages for eradicating poverty.
  2. To accelerate the pace of economic development by keeping the prices stable and under control.
  3. To ensure provision of food and nourishment to'all and especially to the weaker sections of the society.
  4. To provide the basic minimum services like clean drinking water, primary health care facility, universal primary education and housing and also to ensure their availability.
  5. To control the population growth rate.
  6. To ensure environmental balance by adopting the social understanding measures to seek people's participation at all the levels.
  7. To provide strength to the women and socially weaker sections-scheduled castes, scheduled tribes and other backward castes and minorities so as to activate them as agents of economic development and social changes.
  8. To encourage and develop the mass participation institutions like the Panchayatraj institutions, co-operatives and voluntary sections.
  9. To strengthen the efforts of attaining self-sufficiency. 

Self-dependence

In order to attain Self-dependence in the Ninth Plan, the following areas were placed on the priority list:

  1. To ascertain the Balance of Payment.
  2. Not only to check the increasing foreign debt burden but also to ensure a curtailment in it.
  3. To increase dependence on non-debt foreign income for financing the requirements of rational development and balance of payments.
  4. To attain self-sufficiency in foodgrains.
  5. Suitable utilisation and protection of national resources including herbs and medicinal plants.To attain technological self-sufficiency. 
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