current five year plan of India

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current five year plan of India

  1. 1. AN ASSIGNMENT ON CURRENT FIVE YEAR PLAN OF INDIA SUBMITED TO: SUBMITTED BY: Harpreet Singh Mekuanint Abera Lecturer in Marketing Management Roll No, 130423543 SCHOOL OF MANAGEMENT STUDIES DEPARTMENT OF MBA, PUNJABI UNIVERISTY, PATIALA PATIALA, PUNJABI APRIL, 2014
  2. 2. 2 TWELFTH PLAN: AN OVERVIEW INTRODUCTION India’s 1.25 billion citizens have higher expectations about their future today, than they have ever had before. They have seen the economy grow much faster in the past 10 years than it did earlier, and deliver visible benefits to a large number of people. This has understandably raised the expectations of all sections, especially those who have benefited less. Indian people are now much more aware of what is possible, and they will settle for no less. The Twelfth Five Year Plan must rise to the challenge of meeting these high expectations. The preparation of a Five Year Plan for the country is an opportunity to step back, take stock of the ‘big picture’, identify the strengths that can be leveraged to enable the country to move forward, and the constraints that could hold it back, and on this basis develop a strategic agenda. THE INITIAL CONDITIONS Though expectations have mounted, the circumstances in which the Twelfth Plan has commenced are less favorable than at the start of the Eleventh Plan in 2007–08. At that time, the economy was growing robustly, the macroeconomic balance was improving and global economic developments were supportive. The situation today is much more difficult. The global economy is going through what looks like a prolonged slowdown. The domestic economy has also run up against several internal constraints. Macro-economic imbalances have surfaced following the fiscal expansion undertaken after 2008 to give a fiscal stimulus to the economy. Inflationary pressures have built up. Major investment projects in energy and transport have slowed down because of a variety of implementation problems. Some changes in tax treatment in the 2012–13 have caused uncertainty among investors.
  3. 3. 3 These developments have produced a reduction in the rate of investment, and a slowing down of economic growth to 6.5 per cent in 2011–12, which was the last year of the Eleventh Plan. The growth rate in the first half of 2012–13, which is the first year of the Twelfth Plan, is even lower. The downturn clearly requires urgent corrective action but it should not lead to unwarranted pessimism about the medium term. India’s economic fundamentals have been improving in many dimensions, and this is reflected in the fact that despite the slowdown in 2011–12, the growth rate of the economy averaged 7.9 per cent in the Eleventh Plan period. This was lower than the Plan target of 9 per cent, but it was marginally higher than the achievement of 7.6 per cent in the Tenth Plan. The fact that this growth occurred in a period which saw two global crises, one in 2008 and another in 2011, is indicative of the resilience which the economy has developed. THE POLICY CHALLENGE The policy challenge in the Twelfth Plan is, therefore, two-fold. The immediate challenge is to reverse the observed deceleration in growth by reviving investment as quickly as possible. This calls for urgent action to tackle implementation constraints in infrastructure which are holding up large projects, combined with action to deal with tax related issues which have created uncertainty in the investment climate. From a longer term perspective, the Plan must put in place policies that can leverage the many strengths of the economy to bring it back to real growth potential. This will take time but the aim should be to get back to 9 per cent growth by the end of the Twelfth Plan period. The preparation of a Five Year Plan for the country is an opportunity to step back, take stock of the ‘big picture’, identify the strengths that can be leveraged to enable the country to move forward, and the constraints that could hold it back, and on this basis develop a strategic agenda. In developing such an agenda, the Planning Commission has relied on four key elements.  First, the strategy must be firmly grounded in an understanding of the complexities of the development challenges that India faces, recognizing the transformation that is taking place in the economy and in the world. This understanding of the ground reality must be used to identify the critical leverage points where government action could have the maximum impact. The focus must be on identifying the strategic leverage points where
  4. 4. 4 successful action could trigger many supportive reactions rather than fixing everything everywhere.  Second, progress will be achieved through a combination of government action in both policies and public programs, and the efforts of many private actors that are important in the economy. Much of the inclusive growth we hope to achieve depends on investment in the private sector which accounts for over 70 per cent of total investment. This includes not only the organized corporate sector, but also Micro, Small and Medium Enterprises (MSMEs), individual farmers and myriads of small businessmen who add to Gross Domestic Product (GDP) and create jobs. The dynamism of this segment, and its ability to seize economic opportunities, is critical for inclusive growth and the Plan must address the constraints faced by all these private actors in achieving better results.  Third, the outlay on government program has to increase in many areas but this must be accompanied by improved implementation. For this, it is necessary to focus on capacity building and governance reforms, including system change that will increase accountability in the public sector. The Twelfth Plan must back this focus by making specific allocations to improve the ability of government to work better.  Finally, the planning process must serve as a way of getting different stakeholders to work together to achieve broad consensus on key issues. These stakeholders include (i) Different levels of the government sector: Centre, States and Panchayati Raj Institutions (PRIs)/Urban Local Bodies (ULBs); (ii) The private sector, both big companies and small businesses, whose investments will drive our growth and (iii) Citizens’ groups and the voluntary sector, which bring the key element of people’s participation and can greatly help, improve the quality of government action. The Planning Commission has consulted widely over the past two years with other Ministries, with State Governments, with experts and also with Civil Society Organizations (CSOs). As many as 900 CSOs have been consulted through workshops and other. Several expert groups were set up to advice on various aspects of the economy and their reports are important inputs. These include the High Level Expert Group (HLEG) on Health, the HLEG on Transport, the Expert Group on Infrastructure Financing, the Expert Group on the Low Carbon Economy, the
  5. 5. 5 Expert Group on Venture Capital and Angel Investors, and the Expert Group on Management of Public Enterprises. VISION AND ASPIRATIONS The broad vision and aspirations which the Twelfth Plan seeks to fulfill are reflected in the subtitle: ‘Faster, Sustainable, and More Inclusive Growth’. The simultaneous achievement of each of these elements is critical for the success of the Plan. THE NEED FOR FASTER GROWTH Planners are sometimes criticized for focusing too much on GDP growth, when the real objective should be to achieve an improved quality of life of the people across both economic and non- economic dimensions. The Twelfth Plan fully recognizes that the objective of development is broad-based improvement in the economic and social conditions of Indian people. However, rapid growth of GDP is an essential requirement for achieving this objective. There are two reasons why GDP growth is important for the inclusiveness objective. First, rapid growth of GDP produces a larger expansion in total income and production which, if the growth process is sufficiently inclusive, it will directly raise living standards of a large section of the people in the country by providing them with employment and other income enhancing activities. Our focus should not be just on GDP growth itself, but on achieving a growth process that is as inclusive as possible. For example, rapid growth which involves faster growth in agriculture, and especially in rain-fed areas where most of the poor live, will be much more inclusive than a GDP growth that is driven entirely by mining or extraction of minerals for exports. Similarly, rapid growth which is based on faster growth for the manufacturing sector as a whole, including MSME, will generate a much broader spread of employment and income earning opportunities and is therefore more inclusive than a growth which is largely driven by extractive industries. The second reason why rapid growth is important for inclusiveness is that it generates higher revenues, which help to finance critical programmes of inclusiveness. There are many such programmes which either deliver benefits directly to the poor and the excluded groups, or increase their ability to access employment and income opportunities generated by the growth process. Examples of such programmes are the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Sarva Siksha Abhiyan (SSA), Mid Day Meals (MDMs), Pradhan
  6. 6. 6 Mantri Gram Sadak Yojana (PMGSY), Integrated Child Development Services (ICDS), National Rural Health Mission (NRHM), and so on. This is also relevant for the sustainability objective since programmes aimed at making development more sustainable also involve additional costs. GROWTH PROSPECTS The Approach Paper to the Twelfth Plan, approved by the National Development Council (NDC) in 2011, had set a target of 9 per cent average growth of GDP over the Plan period. That was before the Eurozone crisis in that year triggered a sharp downturn in global economic prospects, and also before the extent of the slowdown in the domestic economy was known. A realistic assessment of the growth prospects of the economy in the Twelfth Plan period is given in the following. It concludes that the current slowdown in GDP growth can be reversed through strong corrective action, including especially an expansion in investment with a corresponding increase in savings to keep inflationary pressures under control. However, while our full growth potential remains around 9 per cent, acceleration to this level can only occur in a phased manner, especially since the global economy is expected to remain weak for the first half of the Plan period. Taking account of all these factors, the Twelfth Plan should work towards bringing GDP growth back to an inclusive 9 per cent in the last two years of the Plan, which will yield an average growth rate of about 8.2 per cent in the Plan period. The outcome is conditional on many policy actions as is described in scenario one. Within the aggregate GDP growth target, two sub-targets are especially important for inclusiveness. These are a growth rate of 4 per cent for the agricultural sector over the Twelfth Plan period and around 10 per cent in the last two years of the Plan for the manufacturing sector. Table No.1 Five year plan Period Target growth rate of GDP (%) Achievement (%) Model First plan 1951-56 2.1 3.6 Herod Domor Model Second plan 1956-61 4.5 4.21 Prof P.C. Mahalanobis
  7. 7. 7 Third plan 1961-66 5.6 2.72 Sukhomy Chakraborty and Prof. Saddy Fourth plan 1969-74 5.7 2.05 Ashok Rudra and Alon S. Manney Fifth plan 1974-79 4.4 4.83 Investment model of planning commission Sixth plan 1980-85 5.2 5.54 Based on investment Yojana Seventh plan 1985-90 5.0 6.02 Pranab Mukharji Eight plan 1992-97 5.6 6.68 John W. Miller Model Ninth Plan 1997-02 6.5 5.55 Planning commission Tenth plan 2002-07 8.0 7.8 Planning commission Eleventh plan 2007-12 9.0 7.9 Prof. C. Rangarajan Twelfth plan 2012-17 9.0 - Planning Commission Table No. 2 Five year plan % outlay on agriculture Theme or title Agricultural growth rate Industrial growth rate I 31 Agriculture 5.2 6.5 (7) II 20 Rapid Industrialization 3.9 7.3 (10.5) III 21 Self sustaining growth -2.0 8.2 (11) IV 23 Growth with stability and progress towards self reliance 2.8 4.2 (12)
  8. 8. 8 V 22 Poverty eradication and attainment of self reliance 5.4 6.2 (8) VI 24 Achieving economic and technological self sufficiency 6.3 6.4 (8) VII 22 Growth, Modernization, Self- Reliance and Social Justice. 3.5 8.5 (8.7) VIII 21 Development of Human Resource 3.4 7.4 (7.3) IX 20.5 Growth with social justice and equity 2.5 5 (8.2) X 20 Growth with equity and distributive justice 2.4 8.74 (8.90) XI 18.5 Towards faster and more inclusive growth 3.7 6.66 XII 3.6 Faster, more inclusive and sustainable growth - - TWELFTH FIVE YEAR PLAN: GROWTH RATE TARGETS Table No. 3 S/N Sectors 11th FYP (achieved) (in %) 12th FYP (in %) 1 Agriculture, Forestry & Fishing 3.7 4.0 2 Mining & Quarrying 4.7 8.0 3 Manufacturing 7.7 9.8 4 Elect. Gas & Water Supply 6.4 8.5 5 Construction 7.8 10.0 6 Trade, Hotels & Restaurant + Transport, Storage & Communication 9.9 11.0 7
  9. 9. 9 8 Financing, Insurance, Real Estate & Business services 10.7 10.0 9 Community, Social & Personal Services 9.4 8.0 10 Total GDP 8.2 9.0 11 Industry 7.4 9.6 12 Services 10.0 10.0 Source: 12th plan Approach paper, Planning Commission of India. TARGETS (in %) for broad macro Economic parameters Table No. 4 Serial .No. Economic Parameters 11th Plan 12th Plan 1 Investment rate (GCF) 36.4 38.7 2 Fixed Investment of which 30.9 33.5 1. Household sector 11.6 12.0 2. Pvt. Corporate sector 11.0 12.4 3. Public Sector 8.3 9.1 3 Savings rate of which 34.0 36.2 1. Household sector 23.2 24.0 2. Pvt. Corporate Sector 8.2 8.5 3. Public savings of which 2.5 3.7 A. Govt. Admin. -1.3 -0.5 B. Public Enterprises 3.8 4.0 4. Current Account Balance of which -2.4 -2.5 1. Trade Balance -5.0 -4.5
  10. 10. 10 2. Capital Account Balance 3.8 5.0 5. WPI inflation rate 6.0 4.5-5.0 SOME CONCEPTS NEEDED 1. Gross Budgetary Support (GBS) The Gross Budgetary Support (GBS) is an important component of the Central Plan of the Government of India. The Government's support to the Central plan is called the Gross Budgetary Support. The GBS includes the tax receipts and other sources of revenue raised by the. The share of the GBS in Central Plan has been rising since 2008-09. 2. Central Plan It consists of the Government's budget support to the Plan and the internal and extra budgetary resources raised by public enterprises. 3. Fiscal Deficit The fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowing). The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, which is mainly from banks). 4. Internal and Exter Budgetary Resource IEBR is an important part of the Central plan of the Government of India and constitutes the resources raised by the PSUs through profits, loans and equity.
  11. 11. 11 Expenditure is not same as Payments in Accounting. We can make expenditure even without paying for the goods and/or services we use i.e., on credit basis. 5. Revenue Deficit It refers to the excess of revenue expenditure over revenue receipts. Revenue Expenditure: It is meant for the normal running of government departments and various services, interest charges on debt incurred by the government and subsidies. Broadly speaking, expenditure which does not result in creation of assets is treated as revenue expenditure. All grants given to state governments and other parties are also treated as revenue expenditure even though some of the grants may be for creation of assets. PROJECTION OF CENTRE’S RESOURCES FOR 12th FIVE YEAR PLAN (Values in Rs. Lakh Crore & in parenthesis as % of GDP) Table No. 5 S/N Description 2011-12 base year 2012-13 2013-14 2014-15 2015-16 2016-17 12th Plan Total 1 Tax Revenue net to centre 6.6 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 tax revenue 1.25 (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 debt capital receipts 0.55 (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 Aggregate resources(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)
  12. 12. 12 6 Non plan expenditure 8.16 (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 budgetary support for plan 4.41 (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 Assistance to states or union territories 1.06 (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 for centre 5.92 (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 domestic product 89.80 102.83 117.74 134.81 154.36 176.74 686.49 Source: 12th plan Approach paper, Planning Commission of India.
  13. 13. 13 CONCLUSION 12th plan envisage globalization of Secondary Education by 2017. In 11th plan, the total public spending on health (combined of state and centre) was less than 1% of GDP. 12th plan aims to increase it to 2.5% of GDP by the end of 12th plan. India has evolved National Action Plan for Climate Change with eight component mission. 12th plan considers it for implementation to achieve target of 20% to 25%reduction in emission intensity of GDP over 2005 levels by 2020. IMR (infant mortality rate) was 47 in 2010 and 12th plan aims to bring it down to 25 per 1000 live birth by the end of plan period. 12th plan aims to bring down MMR (maternal mortality rate) to 1 per 1000 live birth by the end of plan period. Not even single Indian university figures in list of top 200 universities in the world.12th plan aims to get 5 Indian universities in the list. Even after 65 years of Independence, we have 45% of households do not have electricity connections. 11th plan added 55,000 MW of generation capacity which was short of target set and 12th plan envisages to add 88,000 MW by the end of plan period. 12th plan envisages to add 30,000 MW of renewable energy capacity.
  14. 14. 14 12th plan envisages to electrify all the villages and to reduce AT & C losses to 20% by the end of 12th plan. The total investment in infrastructure in 12th plan is estimated to be Rs. 55.7 lakh crore, which works out to be $1trillion at prevailing exchange rates. The share of private investment in total investment in infrastructure rose from 22% in Tenth Plan to 36.6% in 11th Plan. it will have to increase to 48% in 12th plan to meet infrastructure investment target. More than 40% of household avail no banking facility at all in country. Insurance premium account for less than 1% of GDP, which is just one third of international average. We have capacity to treat only 30% of human waste we generate. Just two cities, Delhi and Mumbai, which generate 17% of country’s urban sewage, have about 40% of total installed capacity. 12th plan envisages that no water scheme in urban Indian will be sanctioned without integrated scheme for sewage treatment Every state in 12th plan must have an average growth rate preferably higher than achieved in 11th plan. Head count ratio of consumption poverty is to be reduced by 10% points over the preceding estimates by the end of this plan. Generate 50 million new job opportunities in non-farm sector and provide skill certification to equivalent no. during 12th plan period. Mean year of schooling to increase to 7 years by the end of 12th plan. Enhanced access to higher education by creation of 2 million additional seats cohort aligned to the skill needs of economy. Eliminate gender and social gap in school enrolment by the end of 12th plan.
  15. 15. 15 References • Approach Paper 12th Five 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 & Sons Publishers, New Delhi. • Pratiyogita Darpan, Indian Economy 2012, Upkar Prakashan, Agra. • 12th Five 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/article4241907.ece

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