A Textbook of Tn d in 1947, she hen India got independence ‘the damage was largely letely damaged. The done W exports 6 ye ee by the British rulers in India and exploitative police? 's econoitiy that we inherited was full of mise oo the partition of the country. widespread poverty. 7 | 4 hoose the path of planning which ‘To reconstruct and rebuild the economy, pding the levels and methods of produ Jay a vital role in de ah paatnpeiete Our constitution also gave scope for the market function, yet it asked state to intervene in its functioning. It pee ae, eae to fi ice ° ial resources are used for public we! Jicies to ensure that country’s materi e D aes economic system does not result in the concentration of economic power, 1, Meaning of Economic Planning (or Development Planning) Planning means doing some activity in accordance with some well thought out program! sia i We Gohetved tanline? pereatlag ‘some pre-determined goals and achiev the set out objectives. It is a path of action in terms of policy measures to be foll in future for pre determined goals. Planning, thus, can be defined as a technique in which a central planning authority seeks to achieve definite objectives and targets within a specified period of time while keeping the country’s available resources in view, According to Planning Commission, “Economic planning means utilisation of country’s resources into development activities in accordance with national priorities.” Planning thus, implies deliberate control and direction of the economy by a central planning authority (e.g. Planning Commission in India.) for the purpose of achieving definite targets and objectives within a specified period of time. 2. Types of Economic Systems or Economies Economic System is defined as an arrangement by which the central problems of an economy are solved. * Every country has to find answer of three central problems namely * ‘What to produce’ in the country? * How to produce the selected goods and services? * And fr whom to produce (i.e, how goods and services be distributed among people). ‘The answers to these questions lie in the adopti i ie apie bo tice loption of any one of the following types ‘The three main types of economic systems are : ; t Economy ; A capitalist economy is the one in which the means of central problems (what, the market forces of d ‘ Similarly, that n will be used which is relatively che ed goods are distributed aT seers essCommon Goats of Five Year Plans purchasing power instead on the basis of their need. + The chief merit of this system is that it promotes self interest and profit. * On the other hand, only those goods and services are produced which yield high profit. And hence, it ignores the welfare of the common man. 2. Socialist Economy : A socialist economy is one where means of production are owned by the society (the government). They are used by the government with a view of maximising social welfare. * The government owns the factors of production and takes decisions about what to produce, for whom to produce and how to produce. * Social welfare (instead of private profit) is the guiding factor for the decision making. * Individual consumers are not given much importance. It is here assumed that the government knows about the needs of the people of the country. * This system is guided by the objective of welfare of the society and not by profit maximisation thus, promoting growth with social justice * However since production is not guided by profit motive, GDP growth remains slow. 3. Mixed Economy : A mixed economy is a combination of a free market economy and a socialist economy. * It has the co-existence of private sector and public sector side by side. © In mixed economies, the government (i.e. the public sector) and the market (i.e. private sector) together answer the three basic problems. The government will provide/produce goods and services that the market fails to do. For example, the market fails to provide essential goods and services like health, education etc. and the market will provide what it can provide well. * The areas/sectors which are strategic and are of national importance are reserved for the public sector. India adopted the Mixed Economy Soon after independence India chose the path of economic development within the framework of mixed economy. * Some leaders were in favour of socialist economy. However, in a democratic country like India, complete abolition of private ownership was not possible. re in favour of capitalist economy. Capitalist economy did not this system, there would be less chances for improvement f majority of people. Further, Indian industrialists did not pital to undertake industrial investment. ent for mixed economy (with best features of both socialist nomy) was adopted by India when the first Industri: s announced, in India (or Importance of Econ ) -d in India on account of the following reasons t Mechanism. In a free market economy, there isEER 2 extort of Indian Economic Development For Class XIT mic activities. Hence, all ecg, tion of the government in econo age pape ihiough the bee play of market forces of demand and supe This AHA based economy, though maximizes Private profits, but disre, otal bens, Itneither protects the a pbs 4 forge x ten i Is, land, wat a » Plann use of scarce resources like rare minerals, ing is needed to avoid the adverse effects of a market sconemy, . Establishment of Economic and Social Justice. ot sae oa adopted social and economic justice as a Directive Principle which has gigs been accepted as a basic national long run goal in Indian plannin, ra Therefore direct government intervention in form of development Planning Wag needed. x itution h, 3. Use of Resources in Natio u country can be utilized i mic plannin, Planning facilitates inc ut according to national Priorities, 4 centralised planning system could ensure that the money gets spent where it was most needed. 4. Creation of Ec, nal Interests. The scarce resources avail in the national interest through econo; rease in outp: lable in the ‘onomic and Social Infrastructure, Infrastructure re all the facilities and services which support the production and distri activities in the conomy. These include Power, transport, communication, irrigation, educational institutions, health and family welfare. We have to Plan to build invest in them d @ strong infrastructure, Private investors are generally reluctant to ue to low rate of return on one hand and heavy j, investi on the other, By a fers to bution, dia in India, the frst systematic attempt of economic ; Planning wa; svaraya published his book ‘Planned Eco, nia Fo 28 when is called the ‘Fa iCommon Goals of Five Year Plans different phases of economic development. The government aims at transforming the development agenda of India with the help of NITI Aayog. The government has decided to set-up the NITI Aayog as means to serve the people of India better. Indian states now are no longer completely dependent on the centre. They are the actual drivers of national development. States need to be heard. It is, thus, unreasonable to centralise powers with the centre. This is the another reason given by the government while establishing NITI Aayog. ‘The ex-officio chairman of the NITI Aayog will be the Prime Minister. Besides, a vice chairman and all the members would be full timer, the maximum number of part time member will be 2, honorary members will be 4 who will be selected from among the cabinet by the Prime Minister. Members of executive /administrative council (Chief ministers of States and Lieutenant-Governors of Union Territories) and members of regional councils are included, Dr. Arvind Panagariya had been appointed the first vice-chairman of the NITI Aayog. Dr. Rajiv Kumar took over as the new vice-chairman of the NITI Aayog on 1st September 2017 . Main features of NITI Aayog * The think tank’ (An Intellectual Institution) - NITI Aayog has a comprehensive orientation towards decentralised planning : + NITI Aayog is a think (An intellectual institution) and which has no power to impose policies. * It has a comprehensive orientation towards decentralised planning. * The Aayog has to design the development policies keeping in view the needs of nation, states and Panchayat Raj Institutions (PRIs). This will be a fully ‘integrated’ planning process. * Ithas to adopt the bottom-up approach unlike top-down approach in the past. * With regards the finalisation of plans and required funds, all stakeholders will be having their says. * Promoting the idea of Team India’ which will be working on a common ‘National Agenda’. * The Aayog has to promote the idea of ‘cooperative federalision’ enabling states to have active participation in the formulation of national policy. vs Plan Objectives can be divided into 2 parts: 2. Short term objectives Jong term gedoctiven to be achieved over a period of twenty include:xi BEER A eto of Indian Economic Development For Class Difference ; The difference between plannil as under : Difference between E "Planning Objectives _ “I Plan Objectives ing objectives and plan objectives can be s Planning Objectives and Plan Objectives. g term objectives to be} 1. They are objectives to be achieveq They are lon! short term of 5 years. achieved over 20 years period. 5 < regeneralgoals. =| 2 ie mua all plans. 3._They vary from plan to plan. ‘They are also called Perspective plan’. | 4. They are also called Five Year Plang, “Their objectives relate to growth,|5. They are different in different five “_ modernisation, self-reliance and equity. | __ year plans. 7. Common Goals (or Objectives) of Development Plans in India India adopted economic planning to fight poverty. Therefore, the basic or central objective of economic planning in India is to abolish poverty and to achieve highest Possible standard of living for its masses. The central objective, in turn, is related to _ certain other objectives which are called common goals (or long term objectives) of planning, It can be successfully achieved only if other related objectives are realized. A plan with long term objectives is called perspective planning. While the short term objectives of our plans have varied from time to time, these have depended upon the immediate problems faced by each plan. However, Indian plans have laid down certain long-term goals which are mentioned below : | Objectives They are specific goals. { Short Term ] eee, Long Term | Obj Objectives = pai ae + Short term objectives are] { Long term objectives refer to | plan-wise objectives.|| common goals (i.e. general Hay from plan to|| goals) of planning. They are an. They are called plan| to be achieved over 20 years jectives. Period. They are also called | Planning | objectives, ps namie Common Goals Increase in GDP, change insocal owen n= technology and Foe atee = Avoidngimporisof goods to reduce | th of growth toreach everyone ich | oF Poor. Inequality in the shouldbereduced, distributionCommon Goals of Five Year Plans GERM 1. Economic Growth * Economic growth means an increase in gross domestic product of an economy (Gross domestic product is the total value of final goods and services produced in an economy during the period of one year). * Economic growth implies an increase in productive capacity of the economy to produce more output of goods and services in the country. For this thing to happen either a larger stock of productive capital or a large size of supporting services like transport, banking, communication or an increase in the efficiency productive capital and services is required. * For growth to take place, per capita availability of goods and services (or per capita income) must increase, 2, Modernisation : Modernisation refers to adoption of new technology, new methods of production and changes in social outlook. To increase the output of goods and services, the producers in the country must adopt new technology {ie. better/modern ways of production). For Example, a farmer can increase the output by using high yielding verities of seeds instead of using old/traditional ones. Similarly, a factory owner can produce more by using advanced and modern machines. Besides raising productivity levels, modernisation also helps in improving the quality of products and also in lowering the cost of production. Therefore, Indian planners laid more emphasis on modernisation. Modernisation does not confine to the use of new technology in production but it also refers to change in social outlook. For example, there should be no gender inequality. Men and women should have the same rights. Every modern society also makes use of women talents. We find women working in the banks, schools, factories, MNCs etc. Modernisation and Employment : Nevertheless, the objective of modernisation may create contradiction in the light of employment generation. Modernisation i.e. adoption of new technology may throw some people out of job in the initial stage. But ultimately it will generate more employment in the country. It is because, with increase in productivity level, the level of income tends to rise. Rising income means more demand for goods and services which in turn we lead to higher level of output and employment. Thus, modernisation and employment generation are not contradictory. on foreign countries : Self reliance as an is necessary for India to reduce its dependence onBERD. 4 Rextb00k of indian Economic Development For Class XII i omic growth became these reasons, a self-reliant econ: t ame eee at cone planning in India. For the first time, the objective faa reliance was incorporated in the Fourth Year Plan... 4. Equity: Economic growth would ae eee & aan a each the have high growt! ving in Satyr in addition to growth, the planners ore focused equity. The objective of equity has two aspects(1) elimination o Poverty, (2) reduction of income inequalities. Both these objectives were acknowledged ‘as objectives of Indian plans along with economic growth, é The planning commission stated its policy towards income in Fourth Plan document. It emph: equalities in asized economic growth with the hoy the poor will benefit from it and thus, income inequalities would be reduced eraaually. The objectives of higher rate of growth and social justice have been called by our planners as ‘growth with social justice.’ Les qual Distribution and TEL os * [becomes essential here to understand the difference between equal distribution and equitable distribution of income. * By equal distribution of income we mean equality in the distribution of income, Every body in the society should get the same share in the country’s national income. * On the other hand, equitable refers to situation when differences in income are allowed within certain limits. In other words, differences should be such that the and gare Socially desired and are in proportio mn to the difference; tions and skills of different people in the ees : eis luity in terms of equitable distri ibution of income implies Social justice, a in Employment ‘Another major objective ofour plans has been better ion of sources and increasing employment opportunities. J ¢ elimination of povey . Measures” year plans. Barto Provide employment to millions of people une various five y force in tomPloyment generation hae not kept i See Pace with the growth through higher employment.Fifth Five Year Plan (1974-1979) ‘seto.1905) Seventh Five Year Plan (1985-1990) Righth Five Year Plan (1992-1997) Ninth Five Year Plan (1997-2002) Tenth Five Year Plan (2002-2007) Eleventh Five Year Plan (2007-2012) ‘Twelfth Five Year Plan (2012-2017) Human resource development Modernisation of industries through Liberalisation, Privatisation and Globalisation Growth with social justice and equity Growth with social justice and equity Faster, broad-based and inclusive growth Faster, sustainable and more inclusive growth 8. Achievements and Failures of Indian Plans Let us now see how far Indian planning has been successful in achieving its objectives during 1951-90. The assessment of planning in India can be studied under the following two broad categories 8.1 Major Achievements A brief account of the major achi ievements of the Indian plans is given below : 1. Increase in National Income : Since the beginning of planning our per capita income has increased al in national income has been arou! 2. Increase in Rate o! t the rate of 1.8 per cent per annum. Rate of increase ind 4 per cent per annum. { Capital Formation : During the planning period (1951-1991) rate of capital formation has significantly increased. Rate of capital formation depends upon formation increased from 015-16) it is 32.9 per cent of GDP. rates of saving and investment. In India rate of capital 10.2 per cent in 1950-51 to 26.7 per cent in 1989- : Our plans have contributed to the development following ways : plans, there has been substantial increase in the area the following facts: ing period (1951-1991) the overall i it 6.0 per cent per annum. structure during the plan period has beenit industria jor factor in our cor has emerged as & ™ai0! ae : Our public 8 a Gi) eonomic growth ie ae ain components of eco Development of icity, etc. are the mi EO ee : an ingarence ment and expansion ©! jeture. The men id i ture. : seme ie ic is the largest in Asia and ranks fourth ( railways netwo! ‘i ; pan iat ‘and Canada) in the worl a (after India has the second largest road netwo + In in Indi objective to attain self-reli 2 Fi ans in India set an ence one c 6. Self-eliance : 1% uso to eliminate or phase out sepeesten a ren a wane ay During the last four decades of planning, ee 4 gradually. During Te in achieving self-reliance. The country is gradual a a aR eitieiant economy in which modernisation has played q emerged oul pivotal role. Social Sector Development : There has been a lot of development of social 7 3 sector in the country during the five year plans. Social services like health ang education have expanded considerably. 8.2 Failures of Indian Plans Indian plans could not produce desired results as is clear from the following : 1. Slow Growth Rate : Economic growth has one of the major objectives of Indian planning, We have achieved some growth but it has not been adequate. Our actual growth rates have been lower compared to targeted growth rates. 2. Increase in Unemployment : Another important objective of Indian planning has been to create more and more employment opportunities for the growing labour force. But these have proved inadequate in relation to the requirements. of Self-reliance : During the last 35 years a si ificant eee Seems to have been made towards the athieveneny of this objective peer ee still depend upon the imports of the technology and heavy ‘ery for our modern industrial Plants. Furthermore, our failure i the field of elf reliance can best be judged from thes fact that our deficit in the belance of payments is widening ons Sera our deficit in the Snports over visible and invisil e the exce: isi ee ible exports, ‘ss of visible and invisible Goal of tive of Indian planning, Growth with social justice has been have achieved some se has been far from satisfactory, our performance in terms ofCommon Goals of Five Year Plans the field of agriculture during the planning period, Indian agriculture continues to suffer from the following problems: (a) Heavy pressure of population on agriculture. (b) Lack of irrigation facilities. (c) Limited use of modern inputs. 7. Inadequate Development of infrastructure: The present state infrastructure facilities is far from satisfactory. Even today in several parts of the country transport, communication and electricity are lacking. To sum up we may say that our plans have only made a limited progress. We have to go a long way to get desired results. We must look for the causes that are responsible for the limited success of planning in India. Important Facts AND EVENTS + India chose a path of mixed economy system in 1948 when the first industrial policy was announced. + Planning Commission was set up on August 15, 1950. +> The First Five Year Plan was launched on April 1, 1951, covering the period 1951-56. % M.Visvesvarya is known as father of Indian Planning. > PC Mahalanobis is regarded the architect of Indian planning and also ex-officio Chairman of NITI Aayog e present Vice-chairman of NITI Aa,‘Textbook of Indian Economic Development For Class XII that took place in the e the growth and development tl Peds of agriculture, industry and foreign trade during the early phase (upto 1990) of Indian planning. 1. Agricultural Development 1.1 Importance of Agriculture ‘ be ; Agriculture is the backbone of the Indian economy. Agriculture is important in the Indian economy due to the following reasons : Livelihood : Agriculture in India is the source of livelihood 5 ea narye pechorn of country’s workforce. Country’s 72 per cent workforce was dependent on agriculture at the time of independence. Even today, a large proportion of the workforce is engaged in agriculture for its livelihood . About half of the country’s workforce (i.e., 42.7 per cent in 2017) derives its livelihood from agriculture. As against this, In UK and USA agriculture provides employment to just 2 per cent of the workforce. (ii) Contribution to GDP : A major portion of GDP in India comes from agriculture, 51.3% of national income in 1950-51, 59.0%. to 34.9%. in 1990-91 At present (2017) the share of agriculture in GDP is just 17%. Fall in percentage share of agriculture in national income does not imply fall in agriculture production. It only implies the faster growth of non-agriculture production. (ii) Source of Raw-material : It is a source of supply of some basic raw-materials for some of our leading industries like cotton textiles, jute, sugar, tea etc. (iv) Importance of Foreign Trade : A major portion of foreign trade is associated with agriculture and this helps us in earning foreign exchange. Agriculture holds a share of 13.7% in India’s total exports. Besides, goods made by agricultural raw material also contribute to country’s exports. Thus, agriculture holds more than 33% share in total exports of the country. {) Supply of Foodgrains : The most important contribution of agriculture is to Provide food supply to increasing population of the country. During planning period, due to agricultural development, India attained self-sufficiency i aiid ; elf-sufficiency in I: this chapter, we will analys (vi) Importance in Trade and Services : j ient cous aoe rss ree A major part of trade and services in the storage etc, are dependent on ae Many. Services like transport, banking, is very low as com, agriculture, use ofGrowth and mee mattieratn Industry and Foreign Trade (1947-90) [3.3 | ° rts peatule Sunes a produces various kinds of crops. It has coe area Because of large variation in climate and soil condition © country. However, a notable aspect of this multiplicity of crops is the predo: d System : i 4. Lani er ana Ero are cultivated by the tenants who are not the actual own . But, the bulk of the revenue is appropriated by the owners (the landlords). Tenants often get thi ini i the tenants, ge 1 bare minimum. Little or no surplus is left with 5. Seana Small Farmers : There are a large number of small and marginal fe country. About 80 per cent of the operational holdings in the country are small and marginal (i.e., holdings of less than 2 hectares each) Moreover, rapidly rising population is leading to sub-division and fragmentation a ae holdings in the country. As a result, farmers cultivate tiny pieces of 6. Semi-commercialised Farming : Agriculture in India is neither fully commercialised, nor completely subsistence in nature. It is a mixture of both, and hence can be called ‘semi-commercialised farming’. Commercial farming is one in which production is done primarily for sale in the market. A large part of non-foodgrains production is marketed in our country. On the other hand, subsistence farming is one, where production is meant for self-consumption. In India, bulk of foodgrains production is meant for self consumption by the farmers. 7. Dependence on Rainfall : Agriculture in India is heavily dependent on rainfall. ‘About 60 per cent of agriculture in India is rainfall depended. Accordingly, crop production is highly uncertain. Good rainfall means good crop and bad rainfall means bad crop. . Fluctuations in Agricultural Output : Another notable feature of Indian agriculture is that total agricultural output is subjected to wide fluctuations. Dependence of our agriculture on monsoons has been the major factor behind this fluctuation. Even today 60 per cent of the gross cropped area continues to ‘don rainfall. Therefore, agricultural operations in India are still considered the ‘gamble of monsoons’, as nature plays a major role in determining the | of agricultural production. al Policy since Independence ne equity in the agricultural i i ywth nor colonial rule, there was eit are ee had to address these issues. Indii icy makers after independence hac "the an poy ee Plan, the government of India focused on agri wnt, The main policies followed during 1950-90 were as follows : reforming the land rel agricultural sector. For ré rtant institutional refo PoE een tn the country Thee Far