A BRIEF OVERVIEW OF THE PREVIOUS CLASS (05:01 PM)

BACKGROUND OF PLANNING IN INDIA (05:04 PM)

• Imperative Planning/ Centralized planning
• It is also called authoritative planning by direction or command- A top-down approach
• There is one central authority that decides all aspects of planning, Socialistic economies adopt this method.  
• [* Gandhi ji always believed in decentralized planning, Gandhiji believed in the Trusteeship model ]
• Long-term objective-
• Economic growth- To achieve this, the Harrod Domar model (Public or government Investment)
• Poverty- Here India saw partial success [* China did better than India]
• Reduce inequality- This became more important since the 8th Five-year plan. 
• Self-reliance- [* Self-reliance with respect to capital goods, FOREX, Food security ] [* Even today we are not self-sufficient related to manufacturing technology, oil, vegetable oil]. Self-reliance was a partial success. 
• Handling the problem of unemployment. 
• Indicative planning, Decentralization, Flexible planning-
• After 1991, along with economic reforms government also followed governance reforms [73rd and 74th Constitutional Amendment Act]
• After the 8th FYP, the planning shifted from a top-down to a Bottom-up approach. 
• More focus was given to the Private sector, and Government regulation decreased. 
• [** Marxist and Gandhian ideologies were more idealistic in nature and were difficult to implement]
• After the 8th FYP, the government faced challenges. Why?
• Government has to simultaneously focus on Infrastructure, and welfare i.e. to take structural reforms and an inclusive economy. 
• Also, governance-related reforms needed more fiscal space which increased the Fiscal deficit. 

POVERTY (05:24 PM)

• India was focusing on Absolute poverty. 
• Why has India failed in terms of poverty?
• India overfocussed on Trickle down theory. Till the 5th FYP, there was no specific strategy to handle poverty. 
• There was the blind belief that growth will trickle down. 
• Issues of implementation of government schemes [* For 5 rupees spending by the government only 1 rupee is reaching and 4rs is eaten away- Planning commission].
• Job creation issues- Labor intensive v/s capital intensive sector
• We failed to focus on agriculture. [* For every 1% growth in agriculture, It will be 3 times more effective in handling poverty in comparison with industry]
• In the five-year plan, agriculture was overshadowed by manufacturing and industry. 
• Marketisation of basic services- Like education, and health. And the government was not in a condition to provide quality basic services. 
• [* Poverty also has to deal with gender inequality, voting rights, social exclusion, etc thus making it Multi-dimensional]
• Poverty trap- The poverty trap makes human capital ineffective. 
• 
• Environment degradation v/s per capita income 
• 
• When the country is growing, the environmental degradation increases, and after increasing up to a level, then only the environmental conditions improve.   

ECONOMIC PLANNING (05:38 PM)

• It refers to the allocation of resources in a comprehensive manner to achieve the predetermined objectives with optimum utilization of resources. 
• In India, economic planning was adopted in 1951, in an economic system characterized by the co-existence of public and private sectors. 
• For 4 decades, the public sector was considered as the engine of growth, however, with the beginning of the liberalization process government started withdrawing from direct involvement in productive activities, and hence the private sector has now become the dominant sector and the public sector is nearly an adjunct to the former. 
• The rationale of economic planning/ Why planning?
• The common perception at the time of independence was that if economic planning was adopted in India's democratic framework, it could not only increase economic growth but also ensure inclusiveness. 
• Failure of the market mechanism 
• a) Just after the independence India was economically backward, struggling with problems like food security, poverty, life expectancy (Health, etc)
• b) It was realized that market economic models might not help in bringing inclusive growth (Failure of trickle-down) and therefore India decided to rely on a planned economic model along with a focus on the market economy. 
• Ensuring social justice- In a free enterprise economy the benefits of economic growth rarely trickle down hence in an underdeveloped country like India, state intervention is required to reduce poverty, increase employment, ensure food security, etc
• Mobilization and allocation of resources- As India lags resources it has to be careful about the optimum utilization of resources. Resources should be pushed into priority areas to make economic growth egalitarian. 

FIVE-YEAR PLANS (05:50 PM)

• First five-year plan 
• Agriculture, in view of the large-scale import of food grains and to achieve food security,  Irrigation, Rural Development, and Price Stability. 
• Second five-year plan 
• Focus was on rapid industrialization, self-reliance, and investment in heavy capital goods industries.
• Advocated huge imports through foreign loans- It may lead to the development of the Ancillary industry, Township etc which may lead to a trickle-down effect. 
• Industrial Policy Resolution of 1956 (IPR 1956) was adopted- This policy led to "License Raj"
• It also focused on cottage industries. [* Inclusiveness and Jobs creation]
• Third Five-year plan (1961-66)
• Indian economy had entered a take-off stage.
• Stages of economy
• Subsistence (Agriculture, primary sector, No much industry)
• Take-off stage (Small industry, stage of self-sustaining)
• Manufacturing stage
• Consumption-driven stage (Indisutry and services, and agriculture come down)
• Institutionalisation of PDS- Creation of FCI in 1965
• It was focused on Heavy Industrialisation and Food grains production
• The agricultural prices commission was set up in 1965 and was renamed as CACP in 1985 (The Commission for Agricultural Costs and Prices)
• IDBI came up in 1964. 
• Plan holiday [1966-69]
• The green revolution occurred. 
• Ruppe was devalued for the first time
• Fourth five-year plan 
• Based on the Gadgil strategy with a main focus on growth in agriculture to achieve self-reliance
• Focus was given to social justice
• Bank's Nationalization occurred. 
• Mnopoolies restrictive trade practices Act (MRTP Act), 1969 was enacted 
• [* After 1991, company mergers, dumping, Acquisitions, Predatory pricing, etc increased thus we needed a new Act so the Competition Commission of India was constituted]

LONG-TERM OBJECTIVE OF PLANNING (06:12 PM)

• 1) Self-reliance-
• India was dependent on other countries with respect to food security (PL 480), foreign aid, Importing capital goods and technologies, etc. Therefore self-reliance was one of the most important objectives of India's five-year plan.
• Currently, Self-reliance is a partial success as India still depends on other countries with respect to Oil, manufacturing technology, etc 
• India was successful in achieving self-reliance, especially with respect to Food security, Dependence on Foreign aid, and forex reserves. 
• 2) Elimination of poverty (Partial success)
• Failure of trickle-down theory
• Economic growth was not inclusive
• Poverty is a multidimensional concept covering aspects like social exclusion, gender equality, access to political rights, access to education and healthcare and also ensuring social security. 
• There was no specific strategy to handle poverty till the 5th five-year plan. 
• 3) Unemployment (partial success)
• Stagnation of the manufacturing sector
• India's growth model was capital-intensive rather than labour intensive
• Stringent labour laws led to an increase in contract jobs. 
• Inefficient tax policies affecting the manufacturing sector. 
• Challenges of jobless growth
• MSMEs turning out to become dwarfs [10 years of existence but less than 100 permanent jobs]
• Over-tertiarization of the economy after 1991
• Challenges of disguised unemployment. 
• Increase in the labour force
• Skill development + Lack of vocational training
• Education is not job oriented. 
• The link between in-formalization and Globalization 
• After 1991, foreign competition was coming, and domestic MSMEs could not withstand the competition 
• MNCs started moving into India after 1991, and they indulged in cost cutting thus they started the contractulaisation of the labor force i.e. hiring contract laborers. 
• LPG reforms were responsible for Gig workers. 
• In the construction sector, the workers were informal. 
• 4) Reduction in income inequalities 
• Failure to implementation of government schemes
• Agriculture was overshadowed by Industry during the planning process
• Failure of trickle-down theory
• Excessive marketization of basic services like primary healthcare and primary education. 
• India was not ready enough to implement LPG in its true format.  

TYPES OF ECONOMIC PLANNING (06:35 PM)

• Imperative planning 
• It is also called authoritative planning by direction or command. There is one central authority that decides all aspects of planning. It is generally used in socialist economies. 
• Indicative planning 
• It is also called inducement planning (Flexible in nature)
• Government acts as a facilitator and encourages the role of the private sector in the economy. However, it also regulates the private sector to achieve specific targets. It is generally practised in a mixed economy which is more inclined toward the private sector. 
• Rolling plan 
• Under the rolling plan every year 3 new plans are prepared and acted upon. Plan for the current year which includes the annual budget. 
• A plan for a fixed number of years (3- 5 years) is revised every year as per the requirements and changes in the economic conditions of the economy. 
• A perspective plan for 10 to 15 years
• NOTE- There is no fixation of dates with respect to the commencement and end of the rolling plan. 
• It was introduced by the Janta government in 1978, however, it was abandoned due to changes in government. 
• Perspective planning (07:00 PM)
• It is planned for a long-term period usually 15-20 years (But not one plan for the whole period)
• It is operationalized through five-year plans and annual plans, currently, NITI Aayog has adopted this type of planning structure. 

SIXTH FIVE-YEAR PLAN (07:02 PM)

• Shift from industrialization toward infrastructure. 
• The plan was adopted with the slogan Garibo Hatao to alleviate poverty with a more targeted approach. 
• The food calorie method was standardized in this plan. 
• [* Connect with National infrastructure pipeline, National monetization pipeline, PM Gati Shakti]
• Focus on employment creation- Village and Small Industries Development Programme
• NABARD was established in 1982. 
• EXIM bank was created in 1981. 

SEVENTH FIVE-YEAR PLAN (07:06 PM)

• Focus on education and pension programs
• Rapid food grain production
• The concept of ration shops was extended to rural areas. 
• Long-term Fiscal policy was started. This plan was termed an Infrastructure plan. 
• Import Substitution strategy was given due importance and the economy began its journey towards gradual liberalization. 
• Annual plans (1990-92) due to changing political and economic climate

EIGHTH FIVE-YEAR PLAN (07:09 PM)

• Implementation of LPG reforms
• Structural reforms were adopted and the country’s economic growth model was reoriented.
• Midday Meal Scheme was launched in 1995. 
• 9th Five-year plan
• Priority was also given to agriculture and rural development
• Privatisation of public sector units was started in this plan while dis-investment began in the previous plan
• Sarva Shiksha Abhiyan (SSA) was launched in 2001
• 10th Five-year plan 
• NREGA and National Rural Health Mission started
• Providing gainful high-quality employment to the addition in the labour force
• The National Food for Work Programme (NFWP) was launched in 2004.
• 11th Five-year plan 
• Plan launched amidst emerging Global Financial Crisis (2008)
• The theme was inclusive growth. 
• Specific targets with respect to Infant mortality rate, energy efficiency, dropout rates, etc. 
• [* Inclusiveness from an economic perspective as well as social perspective- including the vulnerable groups (Disabled groups, SC/ST, etc) ]
• 12th Five-year plan 
• The theme was “Faster, More Inclusive and Sustainable Growth”

ACHIEVEMENTS AND CRITICISMS OF FIVE-YEAR PLANS (07:35 PM)

• Achievements 
• Increase in economic growth, savings, and investment.
• Development in the field of science and technology.
• Self-sufficiency with respect to food security, capital goods, FOREX reserves
• Diversification of industrial structure.
• Improvement in social indicators like IMR- Infant mortality rate, Literacy rate, etc
• Development of Economic infrastructure particularly in the field of transport, irrigation, and telecommunication.
• Criticisms
• Failure to eliminate poverty.
• Regional imbalances
• Failure to check the growth of black money.
• The politicization of the planning process.
• Excessive emphasis on PSUs leads to inefficiency.
• Agriculture is overshadowed by industry. 
• Planning did not focus on handling unemployment specifically till the 7th Five-year plan. 
• NOTE- The planning commission was replaced by NITI Aayog on 1st January 2015. It was deemed to be an advisory institution that can advise both central and state governments on implementing policy matters. 

The topic for the next class:- NITI Aayog.