Economic Planning

INTRODUCTION #

The government has scraped the Planning Com- mission and in its place a new commission known as Niti-Ayog has been established, nonetheless, as a future civil servent you must know the history of planning in India. Therefore in this chapter a brief history of the economic planning has been given.

Planning implies deliberate control and direction of the economy by the state or central authority for achieving considered targets within a period of time. The task of economic planning in India has been entrusted to Planning Commission. The Planning Commission was set up by a Resolution of the Government of India in March 1950 to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for the service of the community. The Planning Commission was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

The Prime Minister was the Chairman of the Planning Commission, which works under the over- all guidance of the National Development Council (consisting of Chief Ministers of all the States). The Deputy Chairman and the full time Members of the Commission, as a composite body, provide advice and guidance for the formulation of Five Year Plans, Annual Plans, State Plans, Monitoring Plan Programmes, Projects and Schemes.

FIVE YEAR PLANS #

India adopted five year plan model on the lines

of Russia. Planning commission lays down certain goals to be covered over a long period of time like 15 to 20 years, based on the needs of the economy and the technical possibilities. This forms the long-term perspective. These long-term goals are achieved in stages through five year plans.

Major changes in Development Policies #

During the first five year plan (1951-56) emphasis was on agriculture. The second five year plan (1956-61) was executed with heavy industry strategy or the Mahalanobis growth model. Due to high requirements of imports, especially of industrial goods, balance of payments problem and inflationary difficulties appeared in the economy.

The Third five year plan (1961-66) tried to achieve a balance between agricultural and industrial sector. The country had three annual plans (1966- 69) mainly due to Indo-Pakistan conflict in 1965 and severe droughts during 1965-67. The Fourth Plan (1969-74) aimed at accelerating the tempo of development and reducing fluctuations in agricul- tural production and the impact of uncertainties of foreign aid.

During fifth five year plan (1974-79), importance was attached to poverty eradication programmes. Due to increasing poverty levels, it was realized that economic growth by itself could not take care of the poverty problem. Hence, poverty had to be tackled directly through poverty eradication programmes. The annual plan of 1979-80 was a rural-oriented plan.

The Sixth plan (1980-85) had removal of pov- erty as the foremost objective.

Seventh plan (1985-90) emphasized policies and programmes, which aimed at rapid growth in food

grains production, increased employment opportuni- ties and productivity. Two annual plans (1990-92) were due to political instability.

The eighth five year plan (1992-97) was launched immediately after initiation of New Economic Policy in 1991. So the development strategy was based on the ideologies of New Economic Policy.

The Ninth plan (1997-2002), continued with development strategies of Eighth plan.

The Tenth plan (2002-2007) has aimed 8% annual growth rate of the economy along with pri- ority to Millennium Development Goals.

The Eleventh Plan (2007-2012) paper has emphasized on achieving faster and inclusive growth. A key element of the strategy for inclusive growth must be an all out effort to provide the mass of our people the access to basic facilities such as health, education, clean drinking water etc.

12th Five Year Plan (2012-17): The govern- ment on 4th october approved the 12th five year plan (2012-17). The 12th Five Year Plan that seeks an average annual economic growth of 8.2 percent and identifies infrastructure, health and education as thrust areas. The growth rate has been lowered to

8.2 percent from the 9.0 percent projected earlier in view of the slowdown in the economy and adverse international situation. The duration of the plan was 2012 to 2017. During the 11th Plan period, the average annual growth was 7.9 percent.

New Economic Policy-1991 #

Due to severe crisis of balance of payments position, India had to accept structural adjustment loans of the World Bank and International Mone- tary Fund. As per the conditionalities of Structural Adjustment Programme, India had to embark on the path of the structural reforms with major ideologies of Fiscal Discipline, Privatization, Liberalization and Globalization, to make India a market driven economy or market oriented economy.

Fiscal Discipline #

The primary aspect of the fiscal discipline is to bring down the fiscal deficit of the government to 4%. This is to reduce the unproductive government expenditure.

Liberalization #

Dismantling of controls and licensing system is what liberalization calls for Import licensing is done away with; capital markets would be freed and opened to private enterprise seeking capital, convertibility of rupee under current account etc., indicates liberalization both for domestic and foreign investors.

Privatization #

There is increased scope for privatization under structural adjustment reforms. Since the private sec- tor functions more efficiently and competitively, the sick pubic sector units can be privatized or handed over to private sector to avoid wastage of resources and bring in efficiency. Private sector should be allowed to operate freely so that competition is brought into the economy. As competition is the key element of a free economy based on market principles.

Globalization #

The integration of the domestic economy into the world economy is called as globalization. The foreign investors and multinational companies will be allowed to operate in the domestic economy without major restrictions.

All these ideologies help in setting up a market driven economy where market driven forces like demand and supply guide the economic activities without much interference from the state or gov- ernment.

Decentralization is the devolution of powers from the highest unit of administration to the low- est unit. The slogan “Lok Sabha to Grama Sabha” rightly indicates devolution of power from the central government to local government. The 73rd and 74th Amendment to the constitution of India has been a milestone in the process of establishing democratic decentralized administration through local bodies and taking administration to the doorsteps of the people to ensure economic and social justice.

73rd     Constitution     Amendment     Act (Panchayats) provides for:

• Formation of Grama Sabha in every village with powers of general supervision over the

elected village panchayat and the power to accord approval to the annual plans of the panchayats.

• Formation of three tier panchayats i.e., District Panchayats, Panchayat Unions and Village Panchayats made obligatory.
• More or less uniform composition of panchayats at each level throughout the country.
• Reservation of seats for weaker sections of the public i.e. SCs, STs and for women, not only in the offices of members of panchayats but also in the offices of their Chairpersons.
• Duration of office of the elected bodies fixed rigidly as 5 years uniformly and election to panchayats brought under the supervision, direction and control of an independent con- stitutional authority viz., the State Election Commission.
• Devolution of adequate powers and respon- sibilities and
• Powers to impose taxes and provision for grants, assignments etc. from Government funds.

74th Constitution Amendment Act (Urban Local Bodies) stipulates:

1. Devolution of more functions and taxation powers.
   1. Revenue sharing with State Government funds.
   1. Regular conduct of elections.
   1. Reservation of seats for SCs, STs and for women.
   1. Uniform composition of the urban bodies throughout the country.
   1. Prescription of criteria for categorizing urban local bodies like Town Panchayat, Munici- palities, City Municipal Corporations.
   1. Restriction on the formation of Townships only to industrial areas where the entire mu- nicipal services are provided or proposed to be provided by the industry and
   1. Formation of District Planning and Metropol- itan Planning Committee.

NITI AAYOG #

NITI Aayog also known by the acronym the National Institution for Transforming India, is a Government of India policy think-tank established by the government to replace the Planning Com- mission which followed the top-down model. The stated aim for NITI Aayog’s creation is to foster involvement and participation in the economic pol- icy-making process by the State Governments of India. The emphasis is on bottom-up approach and make the country to move towards cooperative fed- eralism. The Union Government of India announced the formation of NITI Aayog on 1 January 2015, and the first meeting was held on 8 February 2015. The Prime Minister serves as the Ex-officio chairman. The governing council consists of all state Chief Ministers, chief ministers of Delhi and Puducherry, Lieutenant Governor of Andaman and Nicobar, and vice chairman nominated by the Prime Minister. In addition to full members, there are two part-time members and four ex-officio members and a chief executive officer. The temporary members are selected from the leading universities and research institutions.

History #

On 29 May 2014, the Independent Evaluation Office submitted an assessment report to Prime Min- ister Modi with the recommendation to replace the Planning Commission with a “control commission.” On 13 August 2014, the Union Cabinet scrapped the Planning Commission, to be replaced with a diluted version of the National Advisory Council (NAC) of India. On 1 January 2015 a Cabinet resolution was passed to replace the Planning Commission with the newly formed NITI Aayog (National Institution for Transforming India). The first meeting of NITI Aayog was chaired by Indian Prime Minister Nar- endra Modi on 8 February 2015.

Functions of national development priorities sectors and strategies with the active involvement of States in the light of national objectives.

• To foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis, recog- nizing that strong States make a strong nation.
  • To develop mechanisms to formulate credible

plans at the village level and aggregate these progressively at higher levels of government.

• To ensure, on areas that are specifically referred to it, that the interests of national security are incorporated in economic strategy and policy.
  • To pay special attention to the sections of our society that may be at risk of not benefiting adequately from economic progress.
  • To design strategic and long term policy and programme frameworks and initiatives, and monitor their progress and their efficacy. The lessons learnt through monitoring and feedback will be used for making innovative improvements, including necessary mid- course corrections.
  • To provide advice and encourage partnerships between key stakeholders and national and international like-minded Think tanks, as well as educational and policy research institutions.
  • To create a knowledge, innovation and entre- preneurial support system through a collabo- rative community of national and international experts, practitioners and other partners.
  • To offer a platform for resolution of inter-sec- toral and inter departmental issues in order to accelerate the implementation of the develop- ment agenda.
  • To maintain a state-of-the-art Resource Centre, be a repository of research on good governance and best practices in sustainable and equitable development as well as help their dissemination to stake-holders.
  • To actively monitor and evaluate the imple- mentation of programmes and initiatives, including the identification of the needed resources so as to strengthen the probability of success and scope of delivery.
  • To focus on technology upgradation and capacity building for implementation of pro- grammes and initiatives.
  • To undertake other activities as may be necessary in order to further the execution of the national development agenda, and the objectives mentioned above.

The NITI Aayog comprises the following:

The Prime Minister is the Chairperson. A Gov- erning Council composed of Chief Ministers of all the States and Union territories with Legislatures and lieutenant governor of Andaman and Nicobar.

Regional Councils composed of Chief Ministers of States and Lt. Governors of Union Territories in the region to address specific issues and contingen- cies impacting more than one state or a region.

Full-time organizational framework composed of a Vice-Chairperson, three full-time members, two part-time members (from leading universities, research organizations and other relevant institutions in an ex-officio capacity), four ex-officio members of the Union Council of Ministers, a Chief Executive Officer (with the rank of Secretary to the Government of India) who looks after administration, and a secretariat.

NITI AAYOG   PROPOSED  THREE YEAR ACTION AGENDA #

Introduction #

• NITI Aayog has circulated the draft “Three Year Action Agenda” to its governing council (which comprises all chief ministers) for review.
  • The Three-Year Action Agenda covers the last years of the Fourteenth Finance Commission

I.E. The period from 2017-18 to 2019-20,

• This three-year action plan will be part of a seven-year strategy paper and a fifteen-year vision document (spanning 2017-18 to 2031- 32), which are in progress.
  • The agenda includes some 300 specific action points which is outlined in seven parts cov- ering multiple facets of the Indian economy.

Benefits of three year agenda over five year plans

The tree year action agenda has replaced the five year plans – an economic approach adopted by PM Nehru – which became history when the 12th Plan, the last of the Five-Year Plans, came to an end on March 31.

The benefits are: #

• In a country as big and diverse as India, centralized planning could not work beyond

a point due to its one-size-fits-all approach. Thus it was time to come out of the legacy of five-year plans which are reminiscent of centrally planned economies like the Soviet Union and Romania.

• The cycle of five year plan and the term of government are not synchronous. With the three year cycle, government is held more accountable for its action on the plan.
  • By making this three-year action plan a part of a seven-year strategy paper and a 15-year vision document, government can focus on short-term goals which can be changed from time to time in a dynamic environment with eyes firmly stuck on the long-term policy objectives.
  • They will also be aligned with the finance com- mission recommendations as the finances would be provided through the finance commissions.

Selected Key Action Agenda Items

Three Year Revenue and Expenditure Framework:

• Proposes reduction of the fiscal deficit to 3% of the GDP by 2018-19, and the revenue deficit to 0.9% of the GDP by 2019-20.
  • Shifting additional revenues towards high priority sectors: health, education, agriculture, rural development, defence, railways, roads and other categories of capital expenditure.
  • Agriculture: Doubling Farmers’ Incomes by 2022.

• Industry and Services: Job Creation.
• Urban Development: Need to bring down land prices to make housing affordable through increased supply of urban land.
• Energy: Adopt consumer friendly measures such as provision of electricity to all house- holds by 2022, LPG connection to all BPL households, elimination of black carbon by 2022, and extension of the city gas distribu- tion programme to 100 smart cities.
• Governance: Re-calibrate the role of the government by shrinking its involvement in activities that do not serve a public purpose and expanding its role in areas that necessar- ily require public provision.
• The Rule of Law: Undertake significant judi- cial system reforms including increased ICT use, structured performance evaluation and reduced judicial workload.
• Health: Focus on public health through sig- nificantly increasing government expenditure on it, establishing a focal point and creating a dedicated cadre.
• Building an Inclusive Society: Enhance the welfare of women, children, youth, minori- ties, SC, ST, OBCs, differently abled persons and senior citizens
• Environment and Water Resources: Adopt measures to tackle city air pollution and promote sustainable use of water resources.