As mentioned above, India opted for planned economy.

Since Independence, India has followed a path of planned development. By and large, the track record has not been bad.

We have managed to decisively reverse the trend of falling per capita income that had characterised the first 50 years of this century, and have steadily accelerated our growth rates from an average of 3.5 per cent per year during the 30 year period from 1950s to 1980s with 5.5 per cent during the Eighties and further to 6 per cent during the Nineties.

Achievements of Five-Year Plans in India: Against the background of the high savings rate in the historical sense, the First Five Year Plan achieved a growth of around 3.5 per cent. The rate of growth has actually doubled to seven per cent as revealed by the latest National Accounts Statistics.

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This rate of growth has been made possible by an increase in the investment rate from almost 12 per cent during the First Five Year Plan to over 25 per cent in early 990s. Alongside the rate of growth, the country has achieved self-sufficiency in food and also revolutionised agricultural sector through the infusion of mod­ern technologies in selected states and selected crops.

The country has gradually built a fairly diversified industrial sector though mainly under the aegis of the public sector.

Efficiency Considerations: The resilience of the economy is explained not only by the rates of growth in the agricultural and the industrial sectors, and high savings and investment rates but also the efficiency with which these scarce resources are utilised. From this angle, the achievement is not very encouraging.

The incremental capital output ratio, which measures the efficiency of productivity of capital, has grown very slowly after long phases of stagnation in the past four and half decades.

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Sectoral context

Agriculture: Through all Five Year Plans, agriculture was accorded high priority to provide food security to the people. It also remained the most important sector for economic development, as a substantial part of the national income came from agriculture.

Agriculture growth in India was about 3.2 per cent till mid-60s. This was attributed to expansion of area under cultivation; the growth rate increased by about 2.2 per cent in the 70s, mainly due to increase in the yields.

From 1980-81 to 1993-94, the acceleration of the rate of growth in agriculture at around 3.4 per cent has been both due to high-yielding varieties and improved technologies.

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Industrial Policy – Past and New: Having adopted a ‘mixed economy’ model, where the public and private sectors could co-exist, the former dominating the core sectors or the commanding heights of the economy, the Government articulated its industrial policy through various Industrial Policy Resolutions.

Modern industry formed only six to eight percent of national income in 1950, with small-scale enterprises and mining contributing 12 to 14 per cent.

Distributive Justice: Problems of Inequality and Poverty: India’s development experience points to certain weaknesses in the sphere of correcting skewed income distribution despite targeted poverty alleviation schemes and measures. The richest 30 per cent of the population accounts for 52 percent of the private consumption expenditure in rural areas and 54 per cent in urban areas. The poorest 30 per cent have had a disproportionately low share of 15 per cent in total consumption in the rural areas and 14 per cent in urban areas.

Leakages: A large number of studies have indicated that the programmes of poverty alleviation, irrespective of whether they focused on employment generation or asset creation or asset maintenance, suffered from implementation and a host of other problems which defeated the very purpose of these programmes.

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In large number of cases, the beneficiaries were wrongly identified, the schemes were too rigid to adapt to the local skills and resources and suffered from bureaucratic approaches. Those managing the delivery systems lacked the basic commitment towards the potential beneficiaries. Outcome of all these was leakages and less than optimal results.

Not only in the context of poverty alleviation programmes, but also in other schemes there is a widespread feeling that the benefits intended to be delivered to the people through development programmes in various social sectors have not fully reached the beneficiaries because of the weaknesses in administrative planning and the delivery mechanism.

However, the government did respond to this scenario and brought basic changes, which were required to improve the overall effectiveness of such programmes and make planning more relevant to the needs of the toiling masses.

Government has taken various measures to control the situation. They are:

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1. Strengthening the Panchayati Raj Institutions (PRIs) so that power is devolved to the lower tiers of the government;

2. Move towards transferring a large number of Centrally-sponsored schemes to the respective State Governments along with funds;

3. Special measures related to empowerment of women;

4. Special Package for the girl child;

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5. Making primary education a fundamental right; and

6. Emphasis on the basic minimum services so that an integrated approach can be followed in pursuing the basic minimum requirements of the people residing in the rural areas.

The process of decentralisation and grant of autonomy does not stop at the State level but has to be carried forward by State Governments to the regional and sub-regional levels.

Enabling PRIs to Discharge Planning Function – Evaluation of Revenue-Raising Power: The State Governments are further required to endow the Panchayats with necessary power and authority to enable them to function as institutions of self-government with the responsibility of preparing plans for economic development and social justice, and implementing them.

Plan Formulation and Revenue-Raising Power to Urban Local Bodies: As per 74th Constitutional Amendment Act, the urban local bodies and public municipalities are expected to prepare plans for development or urban areas.

The municipalities will be the focal institutions for provision of urban infrastructure and delivery of services and States would have to endow them with commensurate financial and functional powers and responsibilities.

While the urban local bodies would have a share in the revenue of the States, they would have to be permitted to levy their own taxes and cusses at the local level. These could include professional tax, property tax, entertainment tax, motor vehicle tax, etc. In addition, they could levy user-charges and license fees, wherever feasible. Some municipalities could also mobilise resources in the market through issue of bonds.

Emphasis on Employment-generating Growth, Strengthening of Infrastructure and Improved Basic Services: Experience from all over the world reveals that employment-generating growth and not the ‘jobless growth’ is the most effective way of reducing poverty and helping the people.

Our policies and programmes must accord the highest priority to encouraging growth of sustainable and productive job opportunities in all sectors.

Reducing cost of administering development programme

The reorientation of Planning has been attempted in the recent past keeping in view this broad perspective. The Planning Commission has initiated the process of transferring various Centrally- sponsored schemes to various States in a phased manner.

India has inherent advantages in achieving and sustaining high rates of growth propelled by:

1. Stable macro-fundamentals with modest inflation, high foreign exchange reserves, rising growth rate in industry, sustained growth of services sector, self-sufficiency in foodgrains making us less susceptible to exogenous vulnerabilities.

2. Large reservoir of skilled manpower with 700 million Indians in the younger age group whose energies can be harnessed if human resource development programme are properly managed, and which can contribute to undertake activities in this country which the rest of world due to ageing population and social pressures may not find it possible.

3. Government’s new emphasis on Knowledge economy will harness the country’s skills for the ICE economy in areas like Information Technology, IT Enabled Services, e-medicine, bio-technology and enabling us to quickly move to a society based on science & technology and innovation.

4. An external sector which is robust and will continue to impart confidence to foreign investors as the country calibrates its movement towards full convertibility based on fiscal consolidation and improved financial intermediation.

5. Infrastructure which is being rapidly modernized to meet global challenges – Telecom rates are internationally competitive, road connectivity is improving dramatically, turn-around time in ports are no more a strain on international trade, and the power sector is bracing itself for a major reform.

6. Harnessing the advantages of India becoming a large common agricultural market based on dismantling regulations which hinder free movement of foodgrains and other agricultural products, permitting farmers flexibility in their operations by eliminating cumbersome regulations, strengthening the agro-processing sector by a modern Food law and increased diversification in production patterns in consonance with changing consumer preferences.

7. Reforms of the health and education sectors in which beneficiaries will have a greater role in the management of primary schools and health centers and fostering some competition between public and private institutions to broaden consumer choice.

8. The 73rd and 74th amendment of the Constitution, which delegates administrative and financial powers to local bodies, should make this increasingly possible.

9. Deregulation of the Urban and the Construction sector through computerisation of land records, modern tenancy regulations, rationalization of stamp duty, easier access to housing finance should free up the latent energy of the construction sector, which according to some studies like the McKinsey’s can nearly contribute an incremental 1.5% to GDP growth.

10. The completion of the on-going reforms, itself a daunting task, will make a decisive and qualitative impact on overall growth.

This covers areas like the full implementation of the Narasimham’s Committee recommendations on Banks and Financial Institutions, the power sector reforms, sorting out the transitional problems to take the full advantage of the Telecom deregulation process, and the initiatives on privatization to be completed within the stipulated time.