Service sector growth rate for XII five year plan is 9.72
Plan resources for centre = IEBR + Central plan Gross Budgetary Support =Central Assistance to states and union territories + Central Plan
12th five year plan of India
12thFive Year Plan of IndiaPrepared byGourav Kumar VaniPALB 2103Prepared byGourav Kumar VaniPALB 2103
Economic PlanningEconomic Planning• Process in which the limited natural resourcesare used skillfully so as to achieve the desiredgoals.• The concept of economic planning in India, isderived from Russia.• 1947- committee on economic planningconstituted under chairmanship of Pundit J. L.Nehru, which suggested PlanningCommission .215-05-2013Source: Modern Economic Theory by K.K. Dewitt
•March,1950-Planning commission was constituted.•Planning commission is a non constitutional and advisory corporation. The Indianconstitution do not provide for the formation of planning commission.Table No.1Five year plan Period Target growth rate ofGDP (%)Achievement(%)ModelFirst plan 1951-56 2.1 3.6 Herod DomorModelSecond plan 1956-61 4.5 4.21 Prof. P.C.MahalanobisThird plan 1961-66 5.6 2.72 SukhomyChakraborty andProf. SaddyFourth plan 1969-74 5.7 2.05 Ashok Rudra andAlon S. ManneyFifth plan 1974-79 4.4 4.83 Investment modelof planningcommission315-05-2013
12thFive Year Plan• The government on 4th October approved the 12th five year plan (2012-17)document that seeks to achieve annual average economic growth rate of 8.2 percent, down from 9 per cent envisaged earlier, in view of fragile global recovery.The theme of the Approach Paper is “faster, sustainable and more inclusivegrowth” .According to officials the projected average rate gross capital formationin the 12th Plan is 37 per cent of GDP. The projected gross domestic savings rate is34.2 per cent of GDP and the net external financing needed for macro economicbalance has been placed at 2.9 per cent of GDP. During the 11th Plan (2007-12),India has recorded an average economic growth rate of 7.9 per cent. This,however, is lower than the 9 per cent targeted in 11th Plan. Besides other things,the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 percent.The total plan size has been estimated at Rs.47.7 lakh crore, 135 per cent morethat for the 11th Plan (2007-12).15-05-2013 7
TWELFTH FIVE YEAR PLAN: GROWTH RATE TARGETSTWELFTH FIVE YEAR PLAN: GROWTH RATE TARGETSSl.No. Sectors 11thFYP (achieved) (in %) 12thFYP (in %)1 Agriculture, Forestry & Fishing 3.7 4.02 Mining & Quarrying 4.7 8.03 Manufacturing 7.7 9.84 Elect. Gas & Water Supply 6.4 8.55 Construction 7.8 10.06 Trade, Hotels & Restaurant+Transport, Storage & Communication9.9 11.078 Financing, Insurance, Real Estate &Business services10.7 10.09 Community, Social & PersonalServices9.4 8.010 Total GDP 8.2 9.011 Industry 7.4 9.612 Services 10.0 10.0Source: 12thplan Approach paper, Planning Commission of India.815-05-2013Table No. 5
Targets (in %)for Broad Macro Economic ParametersTargets (in %)for Broad Macro Economic Parameters915-05-2013Table No. 6
15-05-2013 11Expenditure ofCentral Govt.Plan Expenditure (agriculture, ruraldevelopment, irrigation and flood control, energy,industry and minerals, transport, communications,Science and Technology, Environment and EconomicServices etc )Non-Plan Expenditure(Interest payments, defense,subsidies, police, pensions, economic services, loans to publicenterprises and loans as well as grants to state governments,union territory governments and foreign governments.) Plan Expenditure includes both revenue and capital expenditureof the government on the Central Plan, Central assistance to state andunion territory plans. It forms a sizeable proportion of the totalexpenditure of the Central government.Expenditure ofState Govt.Development ExpenditureNon-Development Expenditure
Some concepts neededSome concepts needed1. Gross Budgetary Support (GBS)• The Gross Budgetary Support (GBS) is animportant component of the Central Plan of theGovernment of India.• The Governments support to the Central plan iscalled the Gross Budgetary Support. The GBSincludes the tax receipts and other sources ofrevenue raised by the .The share of the GBS inCentral Plan has been rising since 2008-09.15-05-2013 12
2. Central Plan2. Central Plan• It consists of the Governments budgetsupport to the Plan and the internal and extrabudgetary resources raised by publicenterprises.15-05-2013 13
3.Fiscal Deficit3.Fiscal Deficit• The fiscal deficit is the difference between thegovernments total expenditure and its totalreceipts (excluding borrowing).• The fiscal deficit can be financed by borrowingfrom the Reserve Bank of India (which is alsocalled deficit financing or money creation) andmarket borrowing (from the money market, thatis mainly from banks).• Primary Deficit: Fiscal Deficit- interest payments,it shows how much is government borrowing topay for expenses other than interest payments.15-05-2013 14
4. IEBRInternal and Extra BudgetaryResource4. IEBRInternal and Extra BudgetaryResource• IEBR is an important part of the Central planof the Government of India and constitutesthe resources raised by the PSUs throughprofits, loans and equity.• Expenditure is not same as Payments inAccounting. We can make expenditure evenwithout paying for the goods and/or serviceswe use i.e., on credit basis.15-05-2013 15
5. Revenue Deficit5. Revenue Deficit• It refers to the excess of revenueexpenditure over revenue receipts.• Revenue Expenditure: It is meant forthe normal running of governmentdepartments and various services,interest charges on debt incurred bythe government and subsidies.Broadly speaking, expenditure whichdoes not result in creation of assets istreated as revenue expenditure. All15-05-2013 16
Projection of Centre’s Resources for 12thFive Year Plan15-05-2013 17Sl.No.Description 2011-12( baseyear )2012-132013-142014-152015-16 2016-17 12thPlantotal1 Tax Revenuenet to centre6.6 4(7.40)8.37(8.14)10.04(8.53)11.75(8.72)13.63(8.83)15.74(8.91)59.55(8.68)2 Non taxrevenue1.25(1.40)1.12(1.10)1.28(1.09)1.46(1.09)1.51(0.98)1.5(0.88)6.94(1.01)3 Non debtcapitalreceipts0.55(0.60)0.56(0.54)0.54(0.46)0.551(0.41)0.559(0.36)0.567(0.32)2.78(0.41)4 Fiscal deficit 4.128(4.60)4.216(4.10)4.120(4.35)4.04(3.30)4.63(3.30)5.30(3.0)22.31(3.25)5 Aggregateresources(1+2+3+4+5)12.57(14.00)14.27(13.88)15.99(13.59)17.81(13.21)20.43(13.18)23.17(13.11)91.60(13.34)Table No. 7 ( values in Rs. Lakh Crore & in parenthesis as % of GDP)Source: 12thplan Approach paper, Planning Commission of India.
Continued…….Continued…….15-05-201318Sl.No.Description 2011-12( baseyear )2012-132013-142014-152015-162016-1712thplantotal6 Non planexpenditure8.16(9.09)9.21(8.96)10.16(8.63)11.09(8.23)12.08(7.83)13.00(7.36)55.56(8.09)7 Gross budgetarysupport for plan4.41(4.92)5.06(4.92)5.83(4.95)6.71(4.98)8.25(5.35)10.16(5.75)36.03(5.25)7a Central Assistanceto states or unionterritories1.06(1.18)1.21(1.18)1.40(1.19)1.61(1.20)1.91(1.25)2.30(1.30)8.45(1.23)7b Central Plan 3.35(3.74)3.84(3.74)4.43(3.76)5.10(3,78)6.33(4.10)7.86(4.45)27.57(4.02)8 IEBR 2.56(2.86)2.93(2.86)3.35(2.85)3.83(2.84)4.38(2.84)5.00(2.83)19.52(2.84)9 Plan resources forcentre5.92(6.60)6.78(6.59)7.78(6.61)8.93(6.63)10.71(6.94)12.87(7.28)47.09(6.86)10 Gross domesticproduct89.80 102.83117.74 134.81 154.36176.74686.49Table No.8 (values in Rs. Lakh Crore & in parenthesis as %of GDP)
Incremental Capital Output Ratio(ICOR)Incremental Capital Output Ratio(ICOR)• Efficiency in resource use captured through the ICOR (incrementalcapital output ratio) deteriorated significantly during the 11th Plan.Compared to an ICOR of 4.1 for the 10th Plan, the 11th Planachieved an ICOR of 4.5, indicating erosion in resource useefficiency. The 12th Plan does not explicitly mention the likely ICOR.However, the ICOR can be derived implicitly from the ratio of fixedinvestment plus stocks as per cent of GDP to the growth rate. The12th Plan projects an average fixed investment rate of 34 per centand stocks at 3.5 per cent of GDP.• The projected investments juxtaposed with the projected growthrate in the best case scenario yields an ICOR of 4.6 for the 12thPlan. Thus, the macroeconomic framework suggests a furtherdeterioration in resource use efficiency in the 12th Plan even in thebest case scenario.1915-05-2013Source: http://www.thehindubusinessline.com/opinion/the-growth-euphoria-is-over/article4241907.ece
15-05-2013 20• 12thplan envisage Universalisation ofSecondary Education by 2017.• In 11thplan, the total public spending on health(combined of state and centre) was less than1% of GDP. 12thplan aims to increase it to 2.5%of GDP by the end of 12thplan.• India has evolved National Action Plan forClimate Change with eight componentmission. 12thplan considers it forimplementation to achieve target of 20% to25%reduction in emission intensity of GDPover 2005 levels by 2020.
15-05-2013 21• IMR (infant mortality rate) was 47 in 2010and 12thplan aims to bring it down to 25per 1000 live birth by the end of planperiod.• 12thplan aims to bring down MMR( maternal mortality rate) to 1 per 1000live birth by the end of plan period.• Not even single Indian university figures inlist of top 200 universities in the world.12thplan aims to get 5 Indian university in thelist.
15-05-2013 22• Even after 65 years of Independence, we have 45% ofhouseholds do not have electricity connections.• 11thplan added 55,000 MW of generation capacity which wasshort of target set and 12thplan envisages to add 88,000 MWby the end of plan period.• 12thplan envisages to add 30,000 MW of renewable energycapacity.• 12thplan envisages to electrify all the villages and to reduceAT & C losses to 20% by the end of 12thplan.• The total investment in infrastructure in 12thplan is estimatedto be Rs. 55.7 lakh crore ,which works out to be $1trillion atprevailing exchange rates.
15-05-2013 23• The share of private investment in totalinvestment in infrastructure rose from 22%in Tenth Plan to 36.6% in 11thPlan. it willhave to increase to 48% in 12thplan to meetinfrastructure investment target.• More than 40% of household avail nobanking facility at all in country. insurancepremia account for less than 1% of GDP,which is just one third of internationalaverage.
15-05-2013 24• We have capacity to treat only 30% ofhuman waste we generate.• Just two cities, Delhi and Mumbai, whichgenerate 17% of country’s urban sewagehave about 40% of total installed capacity.• 12thplan envisages that no water scheme inurban Indian will be sanctioned withoutintegrated scheme for sewage treatment.
15-05-2013 25• Every state in 12thplan must have an averagegrowth rate preferably higher than achieved in11thplan.• Head count ratio of consumption poverty is tobe reduced by 10% points over the precedingestimates by the end of this plan.• Generate 50 million new job opportunities innon-farm sector and provide skill certificationto equivalent no. during 12thplan period.
15-05-2013 26• Mean year of schooling to increase to 7 yearsby the end of 12thplan.• Enhanced access to higher education bycreation of 2 million additional seats cohortaligned to the skill needs of economy.• Eliminate gender and social gap in schoolenrolment by the end of 12thplan .
15-05-2013 27•Improve child sex ratio (0-6) to 950 by the end of12thplan.•Reduce fertility rate to 2.1 by the end of 12thplan.•Reduce under nutrition among children aged 0-3to half of the NFHS-3 level by the end of 12thplan.•Increase investment in infrastructure to 9% ofGDP by the end of 12thplan.•Increase Gross Irrigated area from 90 millionhectares to 103 million hectares by the end of 12thplan.
15-05-2013 28• Connect all villages with all-weatherroad by the end of 12thplan.• Upgrade national and state highways tominimum two-lane standard by the endof 12thplan.• Complete Eastern and WesternDedicated Freight Corridor by the end of12thplan.• Increase rural tele-density to 70% by theend of 12thplan. Currently it is 40.81%.
15-05-2013 29• Ensure 50% of rural population has accessto 40 lpcd piped drinking water supplyand 50% of Gram Panchayat achieveNirmal Gram Status by the end of 12thplan.• Increase Green Cover (as measured bySatellite Imagery)by 1 million hectareevery year during 12thplan period.
References• Approach Paper 12thFive Year Plan, Planning Commission, Government of India• Banking, Public Finance and International Trade by D.M. Mithani, 2008 edition,Himalaya Publishing House, New Delhi.• Facts of Indian Economy,2012,Unique Publishers, New Delhi.• Indian Economy At a Glance,2012,New Vishal Learning Media, New Delhi.• Lucent’s General Knowledge Book, 2011.• Modern Economic Theory by K.K. Dewitt,2010 edition, S. Chand & SonsPublishers, New Delhi.• Pratiyogita Darpan, Indian Economy 2012,Upkar Prakashan, Agra.• 12thFive Year Plan Draft, Planning Commission, Government of India.• http://www.simplydecoded.com/2012/10/13/summary-of-approved-12th-five-year-plan• http://www.thehindubusinessline.com/opinion/the-growth-euphoria-is-over/article42413015-05-2013