NIS Clock

Nis World News

Nis World News

Nis Time

Nis Time

Thursday 1 March 2012

Priorities of the Twelfth Five Year Plan.


Need for Planning

Planning in India has been adopted to realise the social objective enshrined in the Constitution. It was recognised that the objective of promoting a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production, and offering enhanced opportunities for employment could be best achieved by judicious planning that would optimize resource use and redress market failure.  It was also acknowledged early that Planning in a democratic State is a social process in which, citizen should have the opportunity to participate.  To address these objectives, Government of India by Cabinet Resolution of 1950 set up Planning Commission.  The Planning Commission was entrusted with the task of formulating Five Year and the Annual Plans for most effective and balanced utilisation of the country’s material, capital and human resources, appraise from time to time, the progress in their implementation and suggest adjustment of policy and such other measures that were considered necessary in light of these appraisals.

Processes of plan formulation
Planning Commission formulates plans involving following processes. 

(i)                 Approach to the plan

As a first step towards preparation of the plan, an Approach to the Plan is prepared which lays out the major targets, the key challenges in meeting them, and the broad approach that must be followed to achieve the stated objectives. The Approach to the Plan provides the broad architecture around which the details of the plans are developed.

(ii)                Preparation of comprehensive plan delineating programmes and projects of priority in various sectors.   

Planning Commission undertakes the exercise of preparing the five year plans which inter alia involves investment planning of the economy including distribution of plan funds between the Centre Sector Plan and the Central Assistance to State Plans as also across Ministries / Departments in the Central Sector. Based on the Approach, various Working Groups and Steering Committees are constituted to deliberate extensively on important sectoral issues for inclusion in the Plan.  These Working Groups further constitute Sub-Groups on specific issues with representation from various stakeholders so that issues / concerns in these segments could be discussed threadbare.  In Indian context, as mandated, Plans are prepared / finalized after wide ranging consultations with various stake holders.  The draft plan is prepared based on the consolidated reports of these Steering Committees / Working Groups. This draft Plan is placed for widest possible public discussion including consultations with the organisations representing industry, commerce, labour, farmers, other interest groups, educational institutions, district boards and municipal committees, Central Ministries and State Governments. The Five Year Plan is operationalized through successive Annual Plans. 

(iii)              Mid-Term review in terms of impact, monitoring and the requisite follow-up. 

To assess the progress in different sectors of the economy, finding out the performance of the programmes and any mid-course correction that may be needed for improved performance, Planning Commission undertakes Mid-Term Appraisal (MTA) of the Plan. The MTA involves inter-Ministerial consultations wherein detailed feedback from Line Ministries regarding schematic appraisal including scheme wise physical and financial targets/outlays and achievements are obtained. Consultations are also held with officials of State Governments who are the main implementers of the schemes.  Interactions with academia, researchers and NGOs are also undertaken to obtain their perspectives on the schemes.  The results and outcomes of the MTA are also important input for the next Five Year Plan.  



5.     Plans so far
First Plan

         Keeping in view the large-scale import of food grains in 1951 and inflationary pressures on the economy, the First Plan (1951-56) accorded the highest priority to agriculture including irrigation and power projects. About 44.6 per cent of the total outlay of Rs 2,069 crore in the public sector (later raised to Rs 2,378 crore) was allocated for this purpose, The Plan aimed at increasing the rate of investment from five to about seven per cent of the national income.

Second Plan

         The Second Five-Year Plan (1956-57 to 1960-61) sought to promote a pattern of development, which would ultimately lead to the establishment of a socialistic pattern of society in India. Its main aims were (i) an increase of 25 per cent in the national income; (ii) rapid industrialization with particular emphasis on the development of basic and heavy industries; (iii) large expansion of employment opportunities; and (iv) reduction of inequalities in income and wealth and a more even distribution of economic power. The Plan aimed at increasing the rate of investment from about seven per cent of the national income to 11 per cent by 1960-61.  It laid emphasis on industrialization, increased production of iron and steel, heavy chemicals including nitrogenous fertilizers and development of heavy engineering and machine building industry.

    Third Plan

          The Third Plan (1961-62 to 1965-66) aimed at securing a marked advance towards self-sustaining growth. Its immediate objectives were to: (i) secure an increase' in the national income of over five per cent per annum and at the same time ensure a pattern of investment which could sustain this rate of growth in the subsequent Plan periods; (ii) achieve self-sufficiency in foodgrains and  increase  agriculture production to meet the requirements of industry and exports; (iii) expand basic industries like steel, chemicals, fuel and power and establish machine building capacity so that the requirements of further industrialisation could be met within a period of about 10 years mainly from the country's own resources; (iv) fully utilise the manpower resources of the country and ensure a substantial expansion in employment opportunities; and (v) establish progressively greater equality of opportunity and bring about reduction in disparities of income and wealth and a more even distribution of economic power. The Plan aimed at increasing the national income by about 30 per cent from Rs 14,500 crore in 1960-6l to about Rs 19,000 crore by 1965-66 (at 1960-61 prices) and per capita income by about 17 per cent from Rs 330 to Rs 386 over the same period.

Annual Plans
                                                                          
         The situation created by the Indo-Pakistan conflict in 1965, two successive years of severe drought, devaluation of the currency, general rise in prices and erosion of resources available for Plan purposes delayed the finalization of the Fourth Five Year Plan. Instead, between 1966 and 1969, three Annual Plans were formulated within the framework of the draft outline of the Fourth Plan.

Fourth Plan

          The Fourth Plan (1969-74) aimed at accelerating the tempo of development and reducing fluctuations in agricultural production as well as the impact of uncertainties of foreign aid. It sought to raise the standard of living through programmes designed to promote equality and social justice. The Plan laid particular emphasis on improving the conditions of the less privileged and weaker sections especially through provision of employment and education. Efforts were directed towards reduction of concentration of wealth, income and economic power to promote equity. The Plan aimed at increasing the net domestic product (at 1968-69 factor cost) from Rs 29,071 crore in 1969-70 to Rs 38,306 crore in 1973-74. The average annual compound rate of growth envisaged was 5.7 per cent.  


Fifth Plan
        
The Fifth Plan (1974-79) was formulated against the backdrop of severe inflationary pressures. The major objectives of the Plan were to achieve self-reliance and adopt measures for raising the consumption standard of people living below the poverty line. This Plan also gave high priority to bringing inflation under control and to achieving stability in the economic situation. It targeted an annual growth rate of 5.5 per cent in the national income. Four Annual Plans pertaining to the Fifth Plan period were completed. It was subsequently decided to end the Fifth plan period with the close of the Annual Plan 1978-79.  

Sixth Plan

          Removal of poverty was the foremost objective of the Sixth Plan (1980-85). The strategy adopted was to move simultaneously towards strengthening the infrastructure for both agriculture and industry. Stress was laid on tackling inter­related problems through a systematic approach with better management, improved efficiency and intensive monitoring in all sectors and active involvement of people in formulating specific schemes of development at the local level and securing their speedy and effective implementation.  The actual expenditure in the Sixth Plan stood at Rs 1,09,291.7 crore (current price) as against the envisaged total public sector outlay of Rs 97,500 crore (1979-80 prices) accounting for a 12 per cent increase in nominal terms. The average annual growth rate targeted for the Plan was 5.2 per cent.

Seventh Plan

          The Seventh Plan (1985-90) emphasized policies and programmes, which aimed at rapid growth in food grains production, increased employment opportunities and productivity within the framework of basic tenets of planning, namely, growth, modernisation, self-reliance and social justice. Foodgrains production during the Seventh Plan grew by 3.23 per cent as compared to a long-term growth rate of 2.68 per cent between 1967-68 and 1988-89 and the growth rate of 2.55 per cent in the eighties due to overall favourable weather conditions, implementation of various thrust programmes and concerted efforts of the Government and the farmers. To reduce unemployment and consequently, the incidence of poverty, special programmes like Jawahar Rozgar Yojana were launched in addition to the existing programmes. Due recognition was accorded to the role that small-scale and food processing industries could play in this regard. The total expenditure during the entire Seventh Plan stood at Rs 2,18,729.62 crore (current prices) as against the envisaged total public sector outlay of Rs 1,80,000 crore, resulting in a 21.52 per cent increase in nominal terms. During this Plan period, the Gross Domestic Product (GDP) grew at an average rate of 5.8 per cent exceeding the targeted growth rate by 0.8 per cent.

Annual Plans

          The Eighth Five-Year Plan (1990-95) could not take off due to the fast-changing political situation at the Centre. The new Government, which assumed power at the Centre in June 1991, decided that the Eighth Five-Year Plan would commence on 1 April 1992 and that 1990-91, and 1991-92 should be treated as separate Annual Plans. Formulated within the framework of the Approach to the Eighth Five-Year Plan (1990-95), the basic thrust of these Annual Plans was on maximization of employment and social transformation.         

Eighth Plan

         The Eighth Five-Year Plan (1992-97) was launched immediately after the initiation of structural adjustment policies and macro stabilization policies, which were necessitated by the worsening Balance of Payments position and the position of inflation during 1990-91. The various structural adjustment policies were introduced gradually so that the economy could be pushed to a higher growth path and improve its strength and thus prevent a crisis in Balance of Payments and inflation in the future. The Plan aimed at an average annual growth rate of 5.6 per cent and an average industrial growth rate of about 7.5 per cent. These growth targets were planned to be achieved with relative price stability and substantial improvement in the country's Balance of Payments.        

Some of the salient features of economic performance during the Eighth Five­ Year Plan indicate, among other things, (a) a faster economic growth, (b) a faster growth of the manufacturing sector and agriculture and allied sectors, (c) significant growth rates in exports and imports, improvement in trade and current account deficit, and a significant reduction in the Central Government's fiscal deficit.  However, a shortfall in expenditure, in the Central sector due to inadequate mobilisation of internal and extra budgetary resources by the PSUs and various departments was witnessed. In the States sector, the reason for the shortfall was lack of mobilisation of adequate resources due to deterioration in the balance of current revenues, erosion in the contribution of state electricity boards and state road transport corporations, negative opening balance, mounting non-Plan expenditure and shortfalls in the collection of small savings, etc.  The total expenditure during the entire Eighth Plan stood at Rs. 4,85,457.20 crore at current prices as against envisaged total public sector outlay of Rs. 4,34,100 crore (1991-92 prices) resulting in a, 11.8 per cent increase in nominal terms. The Eighth Plan envisaged an annual average growth rate of 5.6 per cent. Against this an average annual growth rate of 6.5 per cent was achieved during this plan period.

Ninth Plan

          The Ninth Plan (1997-2002) was launched in the fiftieth year of India's Independence. The Plan aimed at achieving a targeted GDP growth rate of seven per cent per annum and there was emphasis on the seven identified Basic Minimum Services (BMS). Additional Central Assistance was earmarked for these services with a view to obtaining a complete coverage of the population in a time-bound manner. These BMS included provision of safe drinking water, availability of primary health service facilities, universalization of primary education, public housing, assistance to shelter­less poor families, nutritional support to children, connectivity of all villages and habitations and streamlining of the public distribution system with a focus on the poor. The Plan also aimed at pursuing a policy of fiscal consolidation. The focus of the fiscal consolidation was on sharp reduction in the revenue deficit of the Government, including the Centre, States and PSUs through a combination of improve revenue collections and control of expenditures.

          The Specific objectives of the Ninth Plan included: (i) priority to agriculture and rural development with a view to generating adequate productive employment and eradication of poverty; (ii) accelerating the growth rate of the economy with stable prices; (iii) ensuring food and nutritional security for all, particularly the vulnerable sections of society; (iv) providing the basic minimum services of safe drinking water, primary health care facilities, universal primary education, shelter, and connectivity to all in a time-bound manner; (v) containing the growth rate of population; (vi) ensuring mobilization and participation of people at all levels; (vii) empowerment of women and socially disadvantaged groups such as Scheduled Caste, Scheduled Tribes and Other Backward Classes and minorities as agents of socio-economic change and development; (viii) promoting and developing people's participatory institutions like Panchayati Raj institutions, cooperatives, and self-help groups; and (ix) strengthening efforts to build self-reliance.

The Ninth Plan envisaged an average target growth rate of 6.5 per cent per annum in GDP as against the growth rate of 7 per cent approved earlier in the Approach Paper. The scaling down of the target was necessitated by the changes in the national as well as global economic situation in the first two years of the Ninth Plan. Against this, the achievement in the growth-rate on an average was 5.5   per cent per annum.        

Tenth Plan

          The Tenth Five-Year Plan (2002-07) was approved by the National Development Council on 21 December 2002. The Plan envisaged doubling the per capita income in the next ten years and achieving a growth rate of eight per cent of GDP per annum. Since economic growth is not the only objective, the Plan aimed at harnessing the benefits of growth to improve the quality of life of the people by setting the following key targets: Reduction in the poverty ratio from 26 per cent to 21 per cent, by 2007; Decadal Population Growth to reduce from 21.3 per cent in 1991-2001 to 16.2 per cent in 2001-11; Growth in gainful employment, at least, to keep pace with addition to the labour force; All children to be in school by 2003 and all children to complete five years of schooling by 2007; Reducing gender gaps in literacy and wage rates by 50 per cent; Literacy rate to increase from 65 per cent in 1999-2000, to 75 per cent in 2007; Providing potable drinking water to all villages; Infant Mortality Rate to be reduced from 72 in 1999­-2000, to 45 in 2007; Maternal mortality ratio be reduced from four in 1999-2000, to two in 2007; Increase in Forest/Tree cover from 19 per cent in 1999-2000, to 25 per cent in 2007; and Cleaning of major polluted river stretches.

          The Tenth Plan had a number of new features. The Plan recognized rapid growth in the labour force and aimed at creating 50 million jobs by placing special emphasis on employment intensive sectors. Specified monitorable targets were set to address the issue of poverty and unacceptably low levels of social indicators. State wise growth and other monitorable targets were worked out in consultation with States for better balanced regional development. ‘Governance’ was recognized as an important factor for the realization of the Plan. The Plan also laid emphasis on institutional reform.

         Achievements of Tenth Five Year Plan

          The Tenth Plan set an ambitious target for growth of gross domestic product (GDP) of 8 per cent per annum. The Tenth Plan period began modestly, but then saw the economy accelerating steadily to achieve an average growth rate of 7.7 per cent for the Plan period as a whole. This was the highest growth rate achieved so far in Plan period. The last four years of the Tenth Plan recorded an average growth of about 8.9 per cent, making India one of the fastest growing economies of the world.

          The following table gives the growth performance of the Indian economy in terms of GDP, relative to the targets set in the various Plans.

Growth Performance in Five Year Plans (1951-56 to 2002-2007)
(per cent per annum)
S.No.
Plan

Target
Realization
1.
First Plan (1951-56)

2.1
3.5
2.
Second Plan(1956-61)

4.5
4.2
3.
Third Plan (1961-66)

5.6
2.8
4.
Fourth Plan (1969-74)

5.7
3.2
5.
Fifth Plan (1974-79)

4.4
4.7
6.
Sixth Plan (1980-85)

5.2
5.5
7.
Seventh Plan (1985-90)

5.0
5.6
8.
Eighth Plan (1992-97)

5.6
6.5
9.
  Ninth Plan (1997-2002)

6.5
5.5
10
  Tenth Plan (2002-2007)

7.9
7.7

Note: The growth targets for the first three Plans were set with respect to National  Income. In the Fourth Plan it was the Net Domestic Product. In all Plan & thereafter it has been the Gross Domestic Product at factor cost.

 Eleventh Plan

          The Eleventh Five Year Plan (2007-2012) aims at Faster and More Inclusive Growth. The central vision of the Eleventh Plan is to build on our strengths to trigger a development process which ensures broad based improvement in the quality of life of the people, especially the poor, SCs/STs, OBCs, minorities and women. The National Development Council, in approving the Approach to the Eleventh Plan, endorsed a target of 9 percent GDP growth for the country as a whole.  It is designed to reduce poverty and focus on bridging the various divides that continue to fragment our society. The aim is to put the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of the Plan period. The thrust areas identified for Eleventh Plan include Education, Health, Nutrition, Drinking Water & Sanitation, Agriculture & Irrigation, Rural Development, Land Resources & Panchayati Raj, Social Justice & Empowerment, Physical Infrastructure,   Energy, and Science and Technology.

          In addition to the 9 per cent growth target, Eleventh Plan period lists 26 other monitorable targets highlighting inclusiveness concerns. These include targets for agricultural growth, poverty reduction, employment generation, school enrolment, and reduction in the gender gap, reduction in IMR and MMR, and access to clean drinking water.

          This broad vision of the Eleventh Plan includes several inter related components: rapid growth that reduces poverty and creates employment opportunities, access to essential services in health and education especially for the poor, equality of opportunity, empowerment through education and skill development, employment opportunities underpinned by the National Rural Employment Guarantee, environmental sustainability, recognition of women’s agency and good governance

6.     Mid-Term Appraisal of the Eleventh Five Year Plan
The Mid Term Appraisal projects that the Eleventh Plan will achieve an annual average growth rate of 8.1 per cent per. This is lower than the Eleventh Plan target of 9 per cent, but is still the highest ever achieved in any Plan period. The MTA observes that despite the financial crisis the economy is doing well in many areas and these gains need to be consolidated.  

The Mid Term Appraisal assesses the performance of the many schemes and programmes that are designed to achieve the objective of inclusiveness. These programmes have produced progress towards the objectives intended. Rates of enrolment in primary schools have increased; gender gaps in schooling are narrowing and life expectancy rates and immunization of children have increased. The percentage of population with access to safe drinking water has also gone up and so has village connectivity and electrification. The Mid Term Appraisal also brings out many deficiencies in the implementation of these schemes that need to be removed.    The MTA points out that progress in governance agenda is critical to achieve the goal of inclusiveness and should be given high priority by State Governments.
         
The Eleventh Plan programmes for creating social and economic infrastructure to meet the requirements of rapid and inclusive growth implied a significant increase in Plan expenditure. Total plan expenditure of the Centre and the States combined was expected to increase from an average of 9.5 per cent of GDP in the Tenth Plan to 13.5 per cent of GDP in the Eleventh Plan. Estimates indicate that in the case of Centre, the realisation of Plan expenditure is likely to be between 95 and 100 per cent of the Eleventh Plan target. In the case of the States it will be lower, but much better than in the Tenth Plan.

Deficiencies in infrastructure are a critical constraint on our ability to achieve faster growth and the Eleventh Plan emphasizes the role of expanding investment in infrastructure through a combination of expanded public investment combined with private investment wherever feasible. The Plan has a target of increasing the investment in infrastructure from little under 6 per cent of the GDP in 2006-07 to 9 per cent in 2011-12. The Mid Term Appraisal reports that total investment in infrastructure is likely do well because of a massive expansion beyond the original target in telecommunications, led by an investment boom in the private sector. But, in all the other infrastructure areas investment will be short of the target.

The financing of plan expenditure departs significantly from the pattern originally envisaged. The increase of 4 percentage points of GDP in the Eleventh Plan compared with the Tenth Plan was to be achieved primarily through higher balance of current revenues and greater internal resource mobilization. This objective could not be met, partly because the economic slowdown meant a lower           growth in revenues, some of which was itself due to tax reduction measures introduced as part of the stimulus. As a result there has been a much larger volume of borrowing than was envisaged in the Eleventh Plan to support desired levels of Plan expenditure.

          The National Development Council in its 55th Meeting held on 24th July, 2010 approved the MTA document. The same has been uploaded on the Planning Commission website for the public.

7. Present Context

Of late, it may seem that this exercise has lost some of its importance on account of dwindling share of public investment to the total investment in the economy and also due to changing economic policy regime and administration, which is placing an ever-greater reliance on the market to deliver on the nation’s development goals. It has also been observed that in the face a fast paced integration of the economy with the emerging global order, the instrument of investment planning is no more the only, or the more predominant, or even the most effective means of pursuing development goals. However, the relevance of planning for overseeing and coordinating the process of capacity building in crucial social and physical infrastructure sectors, continues to be as important, demanding and urgent as ever before. In the context of changing overall operative environment, the role of State and, hence, of Planning has to gradually move away from direct intervention in economic activity in general and production process in particular, towards facilitating an environment that encourages individual initiatives. 

8      Approach to Twelfth Five Year Plan
The Twelfth Five Year Plan will commence in 2012-13. The Planning Commission has initiated the exercise to prepare the Approach to the Twelfth plan and has introduced a new innovative model to prepare the Approach Paper by involving stakeholders, building alternative scenarios, recognizing the Trade-offs, and converging priorities of Centre and State. The approach to the Twelfth Plan will be developed through an inclusive and participative approach.  A new web based consultative process has been initiated in which all interested persons can give their comments and suggestions by logging onto planning Commission website.

          Based on the in-house deliberations and consultations with experts, Planning Commission has identified 12 key challenges for the Twelfth Five Year (details are Annexed).  These 12 challenges include
(i)                  Enhancing the capacity for growth,
(ii)                 Better preventive and curative health care,
(iii)                Enhancing skills and faster generation of employment,
(iv)               Improved access to quality education,
(v)                 Managing the environment
(vi)               Managing urbanization
(vii)              Markets for efficiency and inclusion,
(viii)             Rural transformation and sustained growth of agriculture,
(ix)               Decentralization, empowerment, and information,
(x)                 Accelerated development of transport infrastructure,
(xi)               Technology and innovation,
(xii)              Securing the energy future for India.
The challenges are complex and overlapping with each other and could be represented in different ways.  The various stakeholders are expected to emphasise different aspects of these challenges.  It is expected that this participative approach would help in developing a better understanding of critical issues to be addressed in the approach and later in the Tenth Plan to accelerate faster, more inclusive and environmentally sustainable growth. 
These challenges will be placed on the website of Planning Commission so that stakeholders may provide their insight/views on them.  Planning Commission would take due cognizance of the pertinent observations/views of the stakeholder.  In addition, Planning Commission proposes to organizing regional level consultations with State Governments, civil society, business, academia and youth to ascertain their views on these 12 key issues identified. Based on all these inputs the Planning Commission will prepare the Approach paper to the Twelfth Five Year Plan. The Approach Paper, once prepared, will be placed before the Cabinet and subsequently to the National Development Council (NDC) for approval.
8.     Allocation to the Infrastructure Sector during the Twelfth Five Year Plan
          To address the concerns of financing the infrastructure, a ‘High Level Committee on Financing Infrastructure’ has been constituted.  The term of reference of the Committee inter alia includes (i) assessing the investment required to be made by the Central and State Government(s), Public Sector Undertakings (PSUs) and private sectors in the ten major physical infrastructure sectors during the Twelfth Plan, (ii) identifying areas and activities to be financed by the government, PSUs and private sector (iii) suggest ways to enable the requisite flows of private investment in infrastructure including the creation of supportive investor-friendly environment.