Five-Year Plans of India - 15 Mints Seminar Notes

From 1947 to 2017, the Indian economy was premised on the concept of planning. This was carried through the Five-Year Plans, developed, executed, and monitored by the Planning Commission (1951-2014) and the NITI Aayog (2015-2017). With the prime minister as the ex-officio chairman, the commission has a nominated deputy chairman, who holds the rank of a cabinet minister. Montek Singh Ahluwalia is the last deputy chairman of the commission (resigned on 26 May 2014). The Twelfth Plan completed its term in March 2017.[1] Prior to the Fourth Plan, the allocation of state resources was based on schematic patterns rather than a transparent and objective mechanism, which led to the adoption for the Gadgil formula in 1969. Revised versions of the formula have been used since then to determine the allocation of central assistance for state plans.[2] The new government led by Narendra Modi, elected in 2014, has announced the dissolution of the Planning Commission, and its replacement by a think tank called the NITI Aayog (an acronym for National Institution for Transforming India).

First Plan (1951 - 1956)

Objective:

The First Five-year plan focused on the development of primary sector
1. Irrigation and energy
2. Agriculture and community development
3. Transport and communications
4. Industry
5. Social services
6. Rehabilitation of landless farmers
7. Other sectors and services

Second Plan (1956 – 1961)

Objective:

The Second Five-year plan focused on the development of the public sector and rapid Industrialization

Third Plan (1961 – 1966)    

Objective:

The Third Five-year Plan stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the defense industry and the Indian Army. In 1965–1966, India fought a War with Pakistan. There was also a severe drought in 1965. The war led to inflation and the priority was shifted to price stabilization.

Plan Holidays (1966 -1969)    

Objective:

1. Due to miserable failure of the Third Plan the government was forced to declare "plan holidays" (from 1966 to 1967, 1967–68, and 1968–69). Three annual plans were drawn during this intervening period.

2. During 1966–67 there was again the problem of drought. Equal priority was given to agriculture, its allied activities, and industrial sector.

Fourth Plan (1969 – 1974)    

Objective:

The Fourth Five-Year Plan adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power.

Fifth Plan (1974 – 1978)    

Objective:

1. The Fifth Five-Year Plan laid stress on employment, poverty alleviation (Garibi Hatao), and justice.

2. The plan also focused on self-reliance in agricultural production and defense. In 1978 the newly elected Morarji Desai government rejected the plan.

3. The Electricity Supply Act was amended in 1975, which enabled the central government to enter into power generation and transmission.

4. The Indian national highway system was introduced

Rolling Plan (1978 – 1980)    

Objective:

1.  The Janata Party government rejected the Fifth Five-Year Plan and introduced a new Sixth Five-Year Plan (1978–1980). This plan was again rejected by the Indian National Congress government in 1980 and a new Sixth Plan was made.

2. The Rolling Plan consisted of three kinds of plans that were proposed.

    i) The First Plan was for the present year which comprised the annual budget

   ii) The Second was a plan for a fixed number of years, which may be 3, 4 or 5 years. The Second Plan kept changing as per the requirements of the Indian economy.

  iii) The Third Plan was a perspective plan for long terms i.e., for 10, 15 or 20 years.

Sixth Plan (1980 – 1985)    

Objective:

1. The Sixth Five-Year Plan marked the beginning of economic liberalization.

2. Price controls were eliminated, and ration shops were closed. This led to an increase in food prices and an increase in the cost of living. This was the end of Nehruvian socialism.

3. The National Bank for Agriculture and Rural Development was established for development of rural areas

Seventh Plan (1985 – 1990)    

Objective:

1. The Seventh Five-Year Plan laid stress on improving the productivity level of industries by upgrading of technology.

2. The main objectives of the Seventh Five-Year Plan were to establish growth in areas of increasing economic productivity, production of food grains, and generating employment through "Social Justice".

Annual Plans (1990 – 1992)    

Objective:

The Eighth Plan could not take off in 1990 due to the fast-changing economic situation at the Centre and the years 1990–91 and 1991–92 was treated as Annual Plans.

Eighth Plan (1992 – 1997)    

Objective:

The Eighth Five-year plan majorly focused on the Modernization of Industries

Ninth Plan (1997 – 2002)

Objective:

The Ninth Five-year Plan tried primarily to use the latent and unexplored economic potential of the country to promote economic and social growth.

Tenth Plan (2002 – 2007)    

Objective:

The main objectives of the Tenth Five-Year Plan

1. Attain 8% GDP growth per year.

2. Reduction of poverty rate by 5% by 2007.

3. Providing gainful and high-quality employment at least to the addition to the labour force.

4. Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.

5. 20-point program was introduced.

Eleventh Plan (2007 – 2012)    

Objective:

The main objectives of the Eleventh Five-Year Plan

1. It aimed to increase the enrolment in higher education of 18–23 years of age group by 2011–12.

2. It focused on distant education, convergence of formal, non-formal, distant and IT education institutions.

3. Rapid and inclusive growth (poverty reduction).

4. Emphasis on social sector and delivery of service therein.

5. Empowerment through education and skill development.

6. Reduction of gender inequality.

7. Environmental sustainability.

8. To increase the growth rate in agriculture, industry and services to 4%, 10% and 9% respectively.

9. Reduce total fertility rate to 2.1.

10. Provide clean drinking water for all by 2009.

11. Increase agriculture growth to 4%.

Twelfth Plan (2012 – 2017)    

Objective:

The Twelfth Five-Year Plan of the Government of India has been decided to achieve a growth rate of 9% but the National Development Council (NDC) on 27 December 2012 approved a growth rate of 8%

Future (N/A)    

Objective:

With the Planning Commission dissolved, no more formal plans are made for the economy, but Five-Year Defense Plans continue to be made.

The latest would have been 2017–2022. However, there is no Thirteenth Five-Year Plan.

Presented by

Jayasree

TNPSC Student

Magme School of Banking

National Income - 15 Mints Seminar Notes

National income means the value of goods and services produced by a country during a financial year. Thus, it is the net result of all economic activities of any country during a period of one year and is valued in terms of money. National income is an uncertain term and is often used interchangeably with the national dividend, national output, and national expenditure. We can understand this concept by understanding the national income definition.

Concept of National Income

The National Income is the total amount of income accruing to a country from economic activities in a years time. It includes payments made to all resources either in the form of wages, interest, rent, and profits.

The progress of a country can be determined by the growth of the national income of the country

National Income Definition

There are two National Income Definition

•    Traditional Definition

•    Modern Definition

Traditional Definition

According to Marshall: “The labor and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.”

The definition as laid down by Marshall is being criticized on the following grounds.

Due to the varied category of goods and services, a correct estimation is very difficult.

There is a chance of double counting, hence National Income cannot be estimated correctly.

For example, a product runs in the supply from the producer to distributor to wholesaler to retailer and then to the ultimate consumer. If on every movement commodity is taken into consideration then the value of National Income increases.

Also, one other reason is that there are products which are produced but not marketed.

For example, In an agriculture-oriented country like India, there are commodities which though produced but are kept for self-consumption or exchanged with other commodities. Thus there can be an underestimation of National Income.

Simon Kuznets defines national income as “the net output of commodities and services flowing during the year from the country’s productive system in the hands of the ultimate consumers.”

Following are the Modern National Income definition

•    GDP
•    GNP

Gross Domestic Product

The total value of goods produced and services rendered within a country during a year is its Gross Domestic Product.

Further, GDP is calculated at market price and is defined as GDP at market prices. Different constituents of GDP are:

1.    Wages and salaries
2.    Rent
3.    Interest
4.    Undistributed profits
5.    Mixed-income
6.    Direct taxes
7.    Dividend
8.    Depreciation

Gross National Product

For calculation of GNP, we need to collect and assess the data from all productive activities, such as agricultural produce, wood, minerals, commodities, the contributions to production by transport, communications, insurance companies, professions such (as lawyers, doctors, teachers, etc). at market prices.

It also includes net income arising in a country from abroad. Four main constituents of GNP are:

1.    Consumer goods and services

2.    Gross private domestic income

3.    Goods produced or services rendered

4.    Income arising from abroad.

GDP and GNP on the basis of Market Price and Factor Cost

a) Market Price

The Actual transacted price including indirect taxes such as GST, Customs duty etc. Such taxes tend to raise the prices of goods and services in the economy.

b) Factor Cost

It Includes the cost of factors of production e.g. interest on capital, wages to labor, rent for land profit to the stakeholders. Thus services provided by service providers and goods sold by the producer is equal to revenue price.

Alternatively,

Revenue Price (or Factor Cost) = Market Price (net of) Net Indirect Taxes

Net Indirect Taxes = Indirect Taxes Net of Subsidies received

Hence,

Factor Cost  shall be equal to

(Market Price) LESS (Indirect Taxes ADD Subsidies)

Net Domestic Product

The net output of the country’s economy during a year is its NDP. During the year a country’s capital assets are subject to wear and tear due to its use or can become obsolete.

Hence, we deduct a percentage of such investment from the GDP to arrive at NDP.

So NDP=GDP at factor cost LESS Depreciation.

The Accumulation of all factors of income earned by residents of a country and includes income earned from the county as well as from abroad. Thus, National Income at Factor Cost  shall be equal to

NNP at Market Price LESS (Indirect Taxes ADD Subsidies)

Presented by,

Deekshitha

Banking Students

Magme School of Banking