OBJECTIVES, STRATEGIES AND PATTERN OF GROWTH IN SEVENTH PLAN
Objectives 3.1 The guiding principles of Indian planning are provided by the basic objectives of growth, modernisation, self-reliance and social justice. Within this framework, each five-year plan involves some directional changes to take into account new constraints and new possibilities. The Seventh Plan, as stated in the Approach Paper approved by the National Development Council, seeks to emphasise policies and programmes which will accelerate the growth in foodgrains production, increase employment opportunities and raise productivity. At the present stage of development, these three more immediate objectives are central to the achievement of the long-term goals put forward in the development perspective outlined in the previous chapter.
Strategy 3.2 The central element in the development strategy of the Seventh Plan is the generation of productive employment. This will be achieved through increase in cropping intensity made possible by increased availability of irrigation facilities, extension of new agricultural technologies to low' productivity regions and to small farmers, through measures to make the rural development programmes more effective in the creation of productive assets, through the expansion of labour intensive construction activities for providing housing, urban amenities, roads and rural infrastructure, through the expansion of primary education and basic health facilities and through changes in the pattern of industrial growth. With this emphasis on the generation of productive employment, the Seventh Plan aims at a significant reduction in the incidence of poverty and an improvement in the quality of life for the poor in the villages and towns. There is also a need to generate employment opportunities for educated youth in rural areas. The expansion of education and health facilities will open up job opportunities and the spread of credit institutions and other developmental activities will create opportunities for self- employment.
3.3 The increase in the spending power of poor households will lead to a more rapid expansion in the demand for mass consumption goods, most particularly foodgrains, clothing and shelter. The availability of these goods has to increase commensurately if inflation is to be avoided. Hence the Seventh Plan strategy requires that special attention be paid to increasing the production of foodgrains, edible oils, sugar, textiles, cooking fuel and other articles of mass consumption and rapid expansion in housing. In fact, a more rapid increase in the production of these goods would also reinforce the efforts to generate productive employment for the poor.
3.4 An increase in foodgrains production plays a particularly important role in the Seventh Plan. Any shortfall in foodgrains production will tend to reduce rural incomes and generate inflationary pressures that will hurt the poor and erode public resources. These risks are greater with an employment-oriented development strategy. Hence an expanded food security system, based on rapid increases in foodgrains production, especially in the undeveloped regions, public procurement, buffer stocking, and public distribution is a key component of the Seventh Plan.
3.5 One of the major weaknesses that has emerged in the Indian economy is low productivity resulting from several factors which are interrelated. One major cause of low productivity is the inefficiency in the use of capital: the increases in output in several sectors have not been commensurate with the scale of investment undertaken. The Seventh Plan places particular-emphasis on obtaining more output out of assets that have been built up over the years. This emphasis on efficiency in the use of capital is doubly necessary at the present stage when the resources available for public investment are well short of requirements. It would obviously be an unsound policy to undertake investments in new capacity in order to cover shortfalls arising from the poor utilisation of existing investments. The cost of creating assets has often been raised in the past because of delays in implementation and insufficent attention paid to efficient management and to the adoption of cost effective methods. Improvements in capacity utilisation and efficient project implementation in all areas, especially in irrigation, power, transport and industry, are essential for achieving the basic objectives of the Seventh Plan and for putting the Indian economy on a high growth path.
3.6 Improvements in productivity and efficiency will help reduce the costs of capital intensive and resource intensive goods and services, most of which are intermediates used widely in all sectors of the economy.
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This reduction is essential for expanding the scale of the domestic market and for improving the international competitiveness of the Indian economy. Hence the Seventh Plan shifts the focus of planning for industry away from massive investments in new facilities to capacity and productivity enhancing improvements in existing facilities.
3.7 The emphasis on productivity and efficency is also linked to the balance of payments prospects confronting the country at present. The inflow of concessional assistance is shrinking and is already limited in relation to our requirements. Hence, the management of balance of payments in the Seventh Plan is critically dependent on a sizeable improvement in our earnings from exports and from invisibles. If export earnings are increased to a significantly higher level on a sustainable basis, not only will the management of the balance of payments be made easier but the scale of operations in the concerned sectors could be increased, thereby reaping economies of scale and reducing costs and prices which would, in turn, expand the domestic market. But a breakthrough in exports cannot be realised if the exports 'sector' is treated as a separate enclave distinct from the rest of the economic structure. Hence, the Seventh Plan postulates the integration of export policy with all policies and programmes that affect productivity and costs. In this context, special attention needs to be paid to the scale of operations and to the reform of the system of taxation of inputs with a view to reducing costs.
3.8 Efficiency and employment generation are closely linked with measures for human resource development. The attention paid to education and manpower development in the past plans has ensured the availability of a substantial infrastructure for education and technical training. Skill formation has also been provided for in various beneficiary-oriented programmes. The primary task now is qualitative improvements in curricula and teaching methods to ensure relevance and impart to students, workers and artisans the values, knowledge and the skills required for emerging developmental tasks. Besides this, human resource development also includes measures to improve health status and steps to improve the participation of vulnerable groups like scheduled castes, scheduled tribes, women and disabled persons in the development process. The development strategy for the Seveneth Plan involves an accelerated effort at human resource development in this wide sense.
3.9 Given the twin emphasis on employment and productivity in the Seventh Plan, the objective is to expand employment opportunities consistent with increases in productivity. The potential of direct employment generation in large scale industries and in much of the infrastructural sectors is not high because these industries are fairly capital-intensive. However, expansion of industries creates a large volume of down stream employment through forward linkages. In particular, the expansion of small scale and medium industries would add significantly to the growth of productive employment opportunities. Promotional measures designed to improve the access of this sector to modern technology, supply of inputs, credit and risk capital would help to enhance its productivity and competitiveness. Taking all these factors into account, the Seventh Plan provides for a faster industrial growth than during the Sixth Plan.
3.10 The implementation of the Seventh Plan will necessarily require the development and introduction of new technologies in several sectors of the economy. The plan envisages the implementation of a set of science and technology missions in which domestic technological capabilities would be fully developed to achieve well- defined goals. At the same time, in other areas, access to relevant foreign technologies will be improved alongwith emphasis on adequate absorption and development.
3.11 The Seventh Plan aims at extending the green revolution to new areas through its emphasis on raising the productivity of rice in the eastern region and in rainfed and dryland agriculture. This should lead to faster growth in agricultural output in areas which, in the national context, are economically backward. The special role of human resource development in the Seventh Plan strategy will also help correct regional imbalances in social development. These elements in the Seventh Plan strategy alongwith existing programmes and policies on resource transfers, location of industries, area development and provision of minimum needs would reduce regional imbalances in economic and social development.
3.12 The induction of new technologies and the pursuit of economic growth should not be at the expense of the environment. In the long run, environmentally sound policies are also developmentally sound ones. Hence, environmental protection is an important component of the development strategy of the Seventh Plan. This Plan includes several new initiatives in pursuit of this objective. In this context, a special mention ought to be made of a major new inter- disciplinary programme for the control and prevention of pollution of the river Ganga.
3.13 The Seventh Plan can be implemented successfully only with the involvement of the people. The Plan proposes to do this through effective steps for the decentralisation of planning and development administration as well as by increasing the involvement of voluntary agencies in the implementation of plan programmes, particularly in the rural areas.
3.14 The supplementary contribution which voluntary agencies could make to the overall development of rural
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areas and the role they can play in the implementation of various anti-poverty and Minimum Needs Programme have not been fully appreciated. By virtue of the type and scope of work they do, voluntary agencies, as a rule, are unorganised. That is their basic strength as well as weakness. It has been generally accepted that Government by itself cannot reach all the families living below the poverty line. Besides, alternative methods and approaches to the problems of rural and urban development and of poverty alleviation as tested in the voluntary sector contain lessons which can be usefully learnt. Voluntary agencies have been traditionally working in the areas of relief and rehabilitation, education, health and social welfare. But they can also play a useful role in supplementing Government's efforts in other areas such as the provision of drinking water, release and rehabilitation of bonded labour, ground water surveys, development of alternative sources of energy and many other activities relating to rural development and poverty alleviation. Several voluntary agencies have acquired, over the years, professionalism and expertise to provide competent technical services and yet the services of voluntary agencies have not been fully exploited by governmental agencies for the implementation of programmes of welfare and poverty alleviation. This is partly because there is no institutional forum where voluntary agencies and Govern- ment can come together. Such forums need to be established. They 2will provide lines of communication between the official sector and the voluntary sector; also they will enable smaller village-based groups to receive funds from the Government and the Government, in its turn, would be able to obtain valuable information on the progress and problems of different development programmes.
3.15 To sum up, the development strategy of the Seventh Plan aims at a direct attack on the problems of poverty, unemployment and regional imbalances. It requires for its success substantial improvements and economy in resource use. These improvements will be achieved through the accelerated development of human resources, greater selectivity in the development and use of domestic technological capabilities, the widespread induction of new technologies in our farms, factories and offices, stronger emphasis on capacity utilisation and better project implementation and the pursuit of policies that would cut down costs of production particularly in the industrial sector.
Macro Dimensions 3.16 The development strategy outlined in the previous section has been spelt out in quantitative terms, taking into account demographic factors, the constraints imposed by the availability of domestic and foreign resources, linkages between different sectors of the economy, the impact of redistributive policies, and the effects of improvements in efficiency and changes in technology.
3.17 The growth rate of gross domestic product (at factor cost) is expected to be 5 per cent over the Seventh Plan period. This rate is in line with the growth rate achieved in the Sixth Plan and a little higher than the average for the past decade. It may also be noted that the Seventh Plan is aiming at 5 per cent growth rate on a base year, 1984-85, which by an large, was normal, unlike the Sixth Plan, for which national income in the base year, 1979-80, was well below normal.
3.18 The sectoral growth pattern expected over the Seventh Plan is presented in Table 3.1 which gives growth rates of the value of output (which includes material input costs) and of value added. The growth rate of agricultural output is expected to be around 4 per cent. This is consistent with the growth in consumption brought about by income growth and by emphasis on the removal of poverty and unemployment. The output of minerals and industrial goods is expected to increase at an annual rate of nearly 8.3 per cent, of electricity, gas and water supply at 12 per cent and of transport services at 8 per cent. Thus the Seventh Plan envisages a significant acceleration in the growth of industry and infrastructure.
TABLE 3.1
Projected Sectoral Growth Rates of Value of Gross output and Gross
Value Added at Factor Cost 1989-90/1984-85
(Per cent per annum)
Sl. Sector Gross Value of
No. Value gross
added output
1. Agriculture 2.5 4.0
2. Mining and manufacturing 6.8 8.3
(a) Mining 11.7 13.0
(b) Manufacturing: 5.5 8.0
(i) Food products 3.2 6.4
(ii) Textiles 2.8 5.0
(iii) Wood and paper products 5.3 8.5
(iv) Leather and rubber products 2.9 4.3
(v) Chemical products 6.7 9.5
(vi) Coal and petroleum products 4.8 6.2
(vii) Non-metallic mineral products 3.1 5.6
(viii) Basic metals 5.5 8.1
(ix) Non-electrical engineering products 8.2 11.8
(x) Electrical engineering products 9.5 12.5
(xi) Transport equipment 8.2 10.8
(xii) Misc. industries 8.7 9.8
3. Electricity, gas and water supply 7.9 12.0
4. Construction 4.8 4.8
5. Transport 7.1 8.0
6. Services 6.1 6.6
Total 5.0 6.6
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3.19 The pattern of sectoral growth envisaged will help maintain the pace of structural transformation. The composition of national income in 1984-85 and 1989-90 is given in Table 3.2. Agriculture and related sectors are expected to contribute 33 per cent of GDP in 1989- 90 while the shares of mining, manufacturing, construction electricity and transport will be 34.4 per cent. Thus, by the end of the Seventh Plan, the contributions of the agricultural sector, the industrial sector and the service sector will, in terms of income generated, be of roughly equal proportions, i.e., about one third each.
TABLE 3.2
Sectoral Composition of Gross value Added 1984-85 and 1989-90
(Per cent)
Sl. Sector 1984-85 1989-90
No.
1. Agriculture 36.86 32.68
2. Mining and manufacturing: 18.13 19.76
(a) Mining 3.47 4.73
(b) Manufacturing 14.66 15.03
(i) Food products 1.67 1.53
(ii) Textiles 2.52 2.27
(iii) Wood and paper products 1.05 1.06
(iv) Leather and rubber products 0.39 0.36
(v) Chemical products 1.99 2.16
(vi) Coal and petroleum products 0.72 0.71
(vii) Non-metallic mineral products 0.80 0.73
(viii)Basic metals 2.04 2.09
(ix) Non-electrical engineering products 0.98 1.15
(x) Electrical engineering products 0.77 0.95
(xi) Transport equipment 0.82 0.95
(xii) Misc. industries 0.91 1.07
3. Electricity, gas and water supply 2.00 2.29
4. Construction 6.21 6.16
5. Transport 5.60 6.19
6. Services 31.20 32.92
Total 100.00 100.00
3.20 The rate and pattern of growth envisaged for the Seventh Plan will require a total investment of Rs. 322,366 crores of which 94 per cent will be financed from domestic resources. Macro economic aggregates for the base and terminal years of the Plan are given in Table 3.3. The rate of domestic savings is expected to go up from 23.3 per cent of GDP in 1984-85 to 24.5 per cent in 1989-90 which implies a marginal savings rate of 28.4 per cent. A more detailed analysis of the assumptions underlying the projection is given in the Chapter on Financing the Plan.
TABLE 3.3
Macro-Economic Aggregates
(Rs. crores at 1984-85 prices)
1984-85 1989-90
GDP at factor cost 1,93,428 2,46,881
Indirect taxes less subsidies 24,334 35,064
GDP at market prices 2,17,762 2,81,945
Net factor income from abroad (-)681 (-)500
Other current transfers 2,799 3,000
Disposable income 2,19,880 2,84,445
Gross domestic savings 50,738 68,997
Consumption exp. total 1,69,142 2,15,448
Private 1,46,308 1,85,285
Public 22,834 30,163
Gross domestic capital formation 53,388 72,997
Foreign savings 2,600 4,000
Rate of domestic savings 23.3 24.5
Rate of investment 24.5 25.9
Marginal rate of savings 28.4
3.21 The rate of gross investment would rise from 24.5 per cent of GDP in 1984-85 to 25.9 per cent in 1989-90. The incremental capital output ratio (ICOR), which relates the increase in GDP at market prices to the total investment over the Plan period, is expected to be around 5 in the Seventh Plan. This is a little higher than the ICOR realised in the Sixth Plan but lower than the trend value of 5.5. The lower value is expected to be realised because of the emphasis on efficiency which is a crucial part of the Seventh Plan Strategy.
3.22 The Plan outlay in the public sector will be Rs. 180,000 crores which includes current development outlays of Rs. 25,782 crores and gross investment of Rs. 154,218 crores. The figures show a marked increase in the allocations for infrastructure and human resource development since these are crucial for the growth in productivity. The share of the public sector in total investment over the Plan period will be 48 per cent. The private corporate sector will account for 17 per cent and unincorporated enterprises and households for 35 per cent of the total investment.
Sectoral Allocation of Public Sector Outlay 3.23 Tables 3.4(a), 3.4(b) and 3.4.(c) give the sectoral allocation of public sector outlays during the Seventh Plan. It will be seen that the largest shares in allocation go to the energy sector (30.45 per cent), agriculture including rural development, special area programmes and irrigation (22.09 per cent) and social services (16.31 per cent), which together account for over two-thirds (68.85 per cent) of total public sector outlay. Thus the plan is heavily oriented towards power, agricultural and rural development, and social services and human resource development.
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3 For Konkan Railway.
4 Includes Rs. 0.15 crore for ropeway.
5 Includes Rs. 0.75 crore for inter-model transport studies and Rs. 1.50 crores for City Bus Terminals and Parking.
6 Includes Rs. 0.80 crore for inter-model transport study and Rs. 0.35 crore for motor vehicle wing.
7 For modernisation of wireless equipments in Gujarat.
8 For Radio-telephone link in Lakshadweep.
9 Includes Rs. 231.08 crores for State Capital Projects.
10 Includes Rs. 63.50 crores for State Capital Projects.
11 For rehabilitation in A & N Islands.
12 Includes Rs. 0.80 crore for National Small Savings and Rs. 0.20 crore for Parliamentary Affairs.
13 Includes Rs. 0.05 crore for Small Savings Schemes and Rs. 0.07 crore for strengthening of Accounts and Goa Gazetteers.
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3.24 The pattern of public investment taken together with private investment is designed to sustain the rate of growth of 5 per cent per annum. In allocating investible funds in the public sector, in view of the resource constraint, areas where the rates of return are higher or the needs of additional capacity are more immediate have been given preference over new projects which will yield output only after the Seventh Plan. Another major consideration has been to lay stress on increases in productivity of the existing capital stock through investment in replacements, balancing equipment and modernisation. Finally, an attempt has been made to ensure balance among the infrastructure sectors, the rest of the production sectors and the sector of human resources development including poverty alleviation programmes. It is, however, recognised that in order to sustain the growth momentum in the Eighth Plan, it may be necessary to make additional allocations for new projects in sectors such as power, coal and railways. It may also be necessary to make some additional allocations for roads of national importance, civil aviation, agricultural research and. storage facilities. Depending on the progess of the economy, decisions in these matters could be taken at the time of annual plan reviews and the mid-term appraisal of the Seventh Plan.
3.25 The distribution of investments by broad sector of economic activity is given in Table 3.4(d). The share of agriculture, irrigation and allied sectors in total investment will be 19.1 per cent, of mining and manufacturing 32.5 per cent, of electricity, transport and communication 24.2 per cent and of services 24.2 per cent. Almost the entire investment in electricity, railways and communication, 45 per cent of the investment in agriculture, irrigation and allied sectors and 41 per cent of the investment in mining and manufacturing will be in the public sector. This investment allocation has been computed by using sectoral capital output ratios estimated on the basis of past data and information on recent trends.
3.26 The balance of payments prospects for the Seventh Plan are discussed in greater detail in a later chapter. A summary of the broad parameters is given in Table 3.5. At 1984-85 prices, imports are expected to grow at 5.8 per cent and exports at 6.8 per cent. Allowing for net earnings from invisibles, the current account deficit is expected to be Rs. 20,000 crores which will have to be financed by the inflow of aid and other borrowings. These projections include a provision for contingency imports and allow for a small increase in reserves.
TABLE 3.5
Balance of Payments
(Rs. thousand crores)
Seventh Plan
1985-90
Sl. (at 1984-85
No. Item prices)
1. Exports 60.7
2. Imports 95.4
3. Balance of trade -34.7
4. Invisibles (net) 14.7
5. Balance on current account -20.0
6. Net aid and other borrowing 20.9
7. Use of foreign exchange reserves -0.2
8. Loss from decline in the import
purchasing power of exports -0.7
9. Current account deficit as per cent of GDP 1.57
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Impact on Poverty and Unemployment 3.27 There is now evidence to suggest that the process of economic growth and the anti-poverty programme have made a significant dent in the problem of poverty. Estimates of the incidence of poverty based on the provisional results of the latest National Sample Survey have been presented in the first Chapter. In the light of this information one can conclude that around 36 million people crossed the poverty line between 1977-78 and 1983-84.
The concepts and methods used will be explained in the Technical Note to the Seventh Five Year Plan.
3.28 The development strategy of the Seventh Plan and the pattern of growth emerging from it are expected to lead to a reduction of poverty at an even faster rate. The impact of economic growth and plan programmes on the incidence of poverty is presented in Table 3.6. The percentage of population with a consumption standard below the poverty line is expected to come down from an estimated 36.9 per cent in 1984-85 to 25.8 per cent in 1989-90. In absolute terms, the number of poor persons is expected to fall from 273 million in 1984-85 to 211 million in 1989-90, the bulk of this improvement being in the rural areas. The expected decline in the poverty ratio is the combined result of the contemplated growth pattern and more effective implementation of various poverty alleviation programmes. At present the National Rural Employment Programme (NREP), the Integrated Rural Development Programme (IRDP) and Rural Landless Employment Guarantee Programme (RLEGP) constitute the major elements of the anti-poverty programmes. It is, however, necessary to emphasise that these anti- poverty programmes cannot by themselves be expected to remove poverty on a sustainable basis. It is only in the framework of an expanding economy and dynamic agricultural sector that we can hope to make a lasting impact on the problems of poverty and under-development. The various anti-poverty programmes are designed to supplement and strengthen the favourable impact of faster agricultural growth on the level of living of the rural poor. A major task ahead is to integrate various beneficiary oriented programmes, sectoral programmes and area development schemes into a consistent design of comprehensive development of each district/block taking into account its specific resource endowment. needs and development potential.
3.29 The impact of the proposed pattern of growth on employment is given in Table 3.7. The employment potential generated by the targeted levels of economic activity is calculated in terms of man- days of work and then expressed in terms of standard person years, each of which is equal to 273 man days of work at the rate of 8 hours a day. Over the Seventh Plan, employment potential is expected to increase by 40 million standard person years against an increase in labour force of around 39 million persons. Employment potential will grow at 4 per cent per year, as compared to the expected growth rate of 2.6 per cent per year in the labour force.
TABLE 3.7
Employment Profile of the Seventh Plan
(Million standard person years)
Estimated Projected Increase in
employment employment employment
Sector in 1984-85 in 1989-90 in Seventh
Plan
1 Agriculture 96.108 114.092 17.984
(a) Crop sector 58.750 65.720 6.970
(b) Non-crop sector 37.358 48.372 11.014
2 Mining and quarrying 1.153 1.494 0.341
3 Manufacturing 26.790 33.466 6.676
4 Construction 10.427 12.624 2.197
5 Electricity 1.031 1.498 0.467
6 Railways 1.544 1.688 0.144
7 Other transport 9.440 11.810 2.370
8 Communications 0.951 1.224 0.273
9 Other services 39.261 49.165 9.904
Total 186.705 227.061 40.356
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3.30 The bulk of the growth in employment potential is in the agricultural sector, and within the sector, in subsidiary activities other than crop production. The annual growth rate of employment potential in this sector is 3.5 per cent which is significantly higher than the growth rate of the rural labour force which is expected to be around 2 per cent. Thus the Seventh Plan would provide fuller employment in rural areas. In the non-agricultural sector employment potential is expected to increase at nearly 4.5 per cent per year which should lead to some shift in labour force out of agriculture into non-agricultural activities.
3.31 The employment strategy underlying these projections is described in a later chapter. In essence the strategy is based on the premise that even with a high rate of industrial growth, the excess rural population cannot be fully absorbed in the organised industrial sector and additional employment has to be generated in rural areas through intensification of agriculture and village and rural industries, diversification of rural economic activity and a large programme of construction and capital formation. The employment projections of the Seventh Plan reflect this orientation of development strategy.
3.32 The Seventh Plan also envisages the continuance and expansion of the National Rural Employment Programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) which were started in the Sixth Plan. These Programmes are expected to generate 2,458 million mandays of additional employment (9.04 million standard person years) in rural areas. They are particularly important in providing additional incomes to landless labour households who lack a resource base in the form of land. Depending on the food situation in the country and the position of food stocks with the public sector agencies, the employment promotion programmes could be expanded at a faster rate than is indicated by the current provision of outlays in the Seventh Plan.
3.33 While the great majority of the poor people are to be found in rural areas, one has also to take note of the growing incidence of poverty in urban areas. The persistent migration from the rural hinterlands has led to rapid growth of slums in many of our cities and towns. It has also led to considerable amount of overcrowding in relatively unskilled and low paid jobs in the informal sector. The programmes of urban development included in the Seventh Plan lay considerable emphasis on improvement in the living conditions of slum dwellers. However, to be effective, the problem of urban poverty requires a multi-pronged strategy designed, among others to:-
(a) provide gainful employment to the unemployed, particularly women and youth,
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(b) raise the earnings of those already employed in low paid jobs,
(c) step up the productivity and earnings of those who are self-employed workers, and
(d) improve the access of the urban poor to basic amenities like education, health care, sanitation and safe drinking water.
To this end, it is proposed to take up a few pilot projects in selected urban areas. These pilot projects will help identify the type of programmes and support mechanisms (training, extension, credit, marketing and infrastructure) which could make a significant dent on the problem of urban poverty. Wherever possible, the assistance of voluntary agencies will be enlisted for the implementation of these projects.
3.34 The impact of the Seventh Plan on poverty and unemployment will bring about an important qualitative change in the economy. At present the top 30 per cent of the population accounts for over half of the consumer expenditure both in rural and urban areas and for the bulk of the demand for manufactured consumer goods. By the end of the Seventh Plan, with the expected decline in the proportion of the population below the poverty line and with the reduction in the backlog of unemployment, there will be a significant increase in the demand for food articles and for many manufactured consumer goods and services. This increase in the size of the domestic market can provide a base for rapid industrial advance, which in turn will further accelerate the growth in employment. Hence the Seventh Plan strategy which focuses attention on employment generation and poverty reduction will also help strengthen growth impulses in the economy.
SECTORAL GROWTH PROFILES
Agriculture 3.35 During the Seventh Plan, the agricultural sector is expected to grow at an average annual rate of 4.0 per cent in terms of gross output and 2.5 per cent in terms of value added. This is significantly higher than the growth rate achieved during the Sixth Plan after correcting for the low base of 1979-80. This higher growth rate is justified on the basis of likely demand generation and for maintaining self-sufficiency in foodgrains. Correspondingly, on the supply side, increased provision of fertiliser and irrigation has been stipulated. Table 3.8 gives output projections for the principal agricultural commodities and Table 3.9 gives the assumptions about area and yield rates that Underlie the output projections for the principal crops.
3.36 The growth in agricultural production, if properly directed, can reinforce the attack on poverty and unemployment. In keeping with this approach, the Seventh Plan envisages that a substantial part of the additional produc-
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tion will come from small and marginal farmers and from rainfed and dryland areas. It also envisages a special effort at raising agricultural productivity in rice growing tracts in Eastern and Southern India. The quantitative projections presented in this Chapter have been framed in the context of this strategy.
3.37 Effective implementation of land reforms is essential for achieving higher agricultural growth and for the successful attack on poverty and unemployment. Efforts will be intensified during the Seventh Plan for the strict enforcement of the existing legislation relating to ceiling on land holdings, especially in the newly irrigated areas. Security of tenure to informal tenants through proper recording of their rights and regulation of rents would be necessary to induce them to intensify the use of modern inputs. Consolidation of land holdings and bringing together of small and marginal holdings into contiguous blocks of land would facilitate the exploitation of ground-water and the provision of various services economically. Updating of land records is necessary to protect the interests of farmers, particularly for improving their access to credit and inputs. Efforts will, therefore, be stepped up during the Seventh Plan to accomplish all these tasks.
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3.38 There is now only a limited potential for an increase in agricultural production based on an expansion in the area under cultivation. The net sown area is not expected to change much over the Plan, and will remain at around 143 million hectares. However, during the Plan, irrigation potential will increase by 13 million hectares. This will help to increase the area under short duration high yielding-varieties, facilitate multiple cropping and raise cropping intensity from 1.26 in 1984-85 to 1.33 in 1989-90. Thus the gross cropped area is expected to go up from 180 million hectares in 1984-85 to 190 million hectares in 1989-90, which implies an annual growth rate of around 1 per cent. The limited potential for area expansion means that we have to depend largely on yield improvements for meeting the output targets specified in the Plan. These yield increases have to come from the spread of better seeds and farming practices, the expansion in irrigation which has been referred to above and the growth in fertilizer consumption from 8.4 million tonnes in 1984-85 to 13.5-14.0 million tonnes in 1989-90.
3.39 In order to attain the growth pattern described above, special efforts will be made for effecting a break-through in rice output, especially in the eastern region, for enhancing the productivity and reducing the instability of production in dry land areas by laying emphasis on development of water sheds and adoption of improved practices, for intensification of research and management programmes for production of oilseeds and pulses and for raising the productivity of small and marginal farmers. Programmes for afforestation will also receive special attention during the Seventh Plan. In this context, special mention ought to be made of the role of the newly established Wasteland Development Board which has been charged with the responsibility of drawing up a plan for the development of wastelands through a massive programme of afforestation and tree planting. Other associated aspects of the agricultural strategy are a substantial increase in the area under high yielding varieties, increased consumption of chemical fertilizers (with emphasis on improvement in the efficiency of fertiliser-use), strengthening of institutional arrangements for timely delivery of key inputs intensifying pest and disease surveillance arrangements and timely control operations, and strengthening of the extension net work on the pattern of Training and Visit system (T&V) for quick and effective transfer of technology to the farmers.
3.40 A key element in the agricultural strategy is the rapid expansion of irrigation facilities. The emphasis will be on early completion of on-going schemes which are in an advanced stage of construction, and on speedy utilisation of potential created by improvement in water management. New starts will be restricted to medium irrigation schemes in drought prone, tribal and backward areas and to minor irrigation schemes. Under the minor irrigation programme, priority would be given for the development of ground water in the eastern and northeastern states, where the exploitation so far has been at very low levels. This would also enable rice production in these areas to be stepped up by better water management and conjunctive use of surface and ground waters.
3.41 Specific targets for the principal crops are dealt with in what follows:
Rice: An increase in rice production, particularly in the eastern region is a key component of the agricultural strategy for the Seventh Plan. By the end of the plan, about half the area under rice will be irrigated and this irrigated area will account for about two-third of total production. The overall yield rate is expected to improve by 16 per cent, mainly through productivity gains in the eastern region and aggregate production is likely to go up from 60.0 million tonnes in 1984-85 to 73-75 million tonnes, by the end of the plan.
Wheat: More than 80 per cent of the area under wheat is expected to be under irrigation. The increase in yields is expected to be 10 per cent since the major gains from varietal improvement, irrigation and fertiliser application have already been achieved. The total production of wheat is expected to go up from 45 million tonnes in 1984-85 to 56-57 million tonnes in 1989-90.
Coarse cereals: In keeping with past trends, the area under coarse cereals is expected to go down. However, with the emphasis on dryland farming, an increase in yields of around 10 per cent is expected and this will raise production from 32 million tonnes in 1984-85 to 34-35 million tonnes in 1989-90.
Pulses: Pulses are a major source of protein for poor house-holds and, hence, the Seventh Plan proposes to raise production through an expansion in the area under pulses and a 9 per cent increase in yields. This will raise production from 13.0 million tonnes in 1984- 85 to 15-16 million tonnes in 1989-90.
Oilseeds: Shortfalls in the availability of edible oils have posed major problems in the Sixth Plan and hence the Seventh Plan incorporates a special effort at increasing the production of oilseeds. The area under major oilseeds is expected to go up by 1.5 million hectares and yields are expected to increase by 28 per cent. As a result, the total production of major oilseeds is targeted to go up from 13 million tonnes in 1984-85 to 18 million tonnes in 1989-90.
Sugarcane: The production of sugarcane is expected to go up mainly because of a 17 per cent yield increase and will rise from 180 million tonnes in 1984-85 to 217 million
34
tonnes in 1989-90. This increase in sugarcane production is consistent with the projected demand and production for sugar, gur and khandsari.
Cotton: The projected demand for cotton arising from the anticipated cloth demand and the availability of alternative fibres is expected to be 95 lakh bales of 170 kg each. This includes a small export demand of 3.1 lakh bales. The production of cotton is targeted to reach this level from its 1984-85 level of 75 lakh bales through some expansion in area and a 19 per cent increase in yield.
Mining and Manufacturing 3.42 The output of minerals and manufactured goods is expected to increase at the rate of 8.3 per cent per annum over the Seventh Plan period. Production targets for important industrial sectors are presented in Table 3.10. In certain sectors, the expected level of consumption differ from the production target because of planned imports, exports or stock changes. Material balances for some critical commodities where this is the case are presented in Table 3.11.
35
* Estimated
** Include toll smelting.
@ Included in imports
3.43 The industrial strategy for the Seventh Plan lays special emphasis on: (a) improvement in infrastructural facilities particularly power; (b) greater attention to modernisation and maintenance of assets; (c) upgradation of technology; (d) improvement in productivity; (e) reduction in cost and improved competitiveness; (f) introduction of new products; and (g) a special effort at accelerate development in selected industries in which the country has comparative advantage.
3.44 Industrial production is also expected to benefit from the emphasis on productivity, improved capacity utilisation, easy availability of intermediates and the greater scope for initiative and enhanced production resulting from recent changes in industrial, trade and fiscal policies. The financial projections on which the Plan is based allow for the required flow of credit to the industrial sector.
36
3.45 The linkages among various sub-sectors in mining and manufacturing have been taken into account in making projections of output, imports and exports. Since most minerals and industrial products are tradeable, bottlenecks in raw material availability can be corrected through contingency imports. However, there are certain inputs like electricity where this option is not available. As stated in an earlier chapter, the availability of power has been a major constraint on industrial growth in the Sixth Plan. Hence in the Seventh Plan, power supply to industrial consumers is planned to rise at 12.6 per cent per annum, a rate which is well above the 7.8 per cent growth rate of power supply to industry observed during the Sixth Plan.
3.46 Certain specific features of the projections of mineral and industrial output are dealt with in what follows.
(a) Crude oil: Crude oil production increased nearly three-fold in the Sixth Plan mainly because of the growth in production from Bombay High. There is now no similar oilfield awaiting exploitation, and production increases in the Seventh Plan are likely to be more modest. The domestic output of crude oil is expected to go up from 29 million tonnes in 1984-85 to 34.5 million tonnes in 1989-90, the bulk of the increase coming from onshore areas in the Cambay basin and the north-east. Taking crude and petroleum products together, the ratio of net imports to total consumption will rise from 31.0 per cent in 1984-85 to about 38 per cent in 1989-90. But even at this latter level, the ratio will still be very much lower than what it was at the beginning of the Sixth Plan. With the development of the South Bassein field, natural gas will emerge as an important energy source and production is expected to increase from 7.2 billion cubic metres in 1984-85 to 14.9 billion cubic metres in 1989-90.*1
(b) Coal: To achieve the plan targets for thermal power generation based on coal, iron and steel, railway transportation and other industries, and the demand for coal in the household sector, Coal production will have to be raised from 147.44 million tonnes in 1984-85 to 226 million tonnes in 1989-90. A major part of the increase in output will come from opencast mines in areas like the Singrauli field. Many of these are directly linked to power stations either existing or projected. The total demand for coal is estimated to reach 236.7 million tonnes by 1989-90. The gap between demand and production will be met by drawing on the coal stocks and through some import of coking coal. The import of coking coal is also necessary for conservation of coking coal and for improving the quality of indigenous coal fed to the steel plants. Table 3.15 gives the material balance for coal.
Outlays for the petroleum sector will be kept under contineous review and will need to be adjusted if warranted by discoveries of larger oil reserves.
(c) Sugar: Based on the projected output of sugarcane of 217 million tonnes, sugar production is expected to increase from 6.2 million tonnes in 1984-85 to 10.2 million tonnes in 1989-90, mainly through the better utilisation of existing capacities and the expansion of existing units to optimum scale. The projected level of output will eliminate the need for imports and also release an amount of 0.4 million tonnes for export in 1989-90. The realisation of the production target will require pricing policies which ensure an optimum distribution of cane between sugar mills and gur and khandsari manufacturers.
(d) Textiles: The aggregate output of cloth made from cotton, viscose and synthetic yarns is expected to go up from 11.95 billion metres in 1984-85 to 14.50 billion metres in 1989-90. The production target is intended to meet fully the domestic demand and also provide for export of 1.3 billion metres in 1989-90. The composition of planned production in terms of sectors, type of cloth and the related requirements of cotton yarn and manmade fibres is presented in Table 3.12. As far as cotton cloth is concerned, handlooms will be largest producer and account for 40 per cent of output. To enable the handloom sector to achieve the plan targets, it will be necessary to make effective arrangements for supply of yarn, credit, and assistance for marketing and design development to this sector. In the mill sector, modernisation and productivity improvement are a crucial component of the strategy for increased output. The role of man made fibres will increase and by the end of the Seventh Plan, blended, viscose and synthetic fabric will account for nearly 40 per cent of the total output of cloth (other than silk and wool).
TABLE 3.12
Production of Cloth and Requirements of Cotton Yam and Man-made
Fibres in 1989-90
Sl. Item Cloth Cotton Require-
No. Product- yarn ment
ion require- of
(million ment man-made
metres) (million Fibres
Kg.) (million
Kg.)
1. Pure Cotton Cloth 8,750 951.2 -
(1) Mills 3,050 381.2 -
(2) Power loom 2,200 220.0 -
(3) Handloom 3,500 350.0 -
2. Blends of cotton and man-
made fibres 2,414 138.2 141.2
3. Cloth (man-made fibres) 3,336 - 316.9
4. Yarn/fibre requirements
for other purposes - 103.7* 31.4
Total 14,500 1,193.1 489.5
* Includes exports.
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(e) Man-made fibres: The changing pattern of fibre use in the textile industry is reflected in the growth of the output of man-made fibres which will increase from 261,700 tonnes in 1984-85 to 489,500 tonnes in 1989-90, which will meet the projected demand in that year so that imports will not be required. With the growing emphasis on the setting up of economic sized plants, the scope for cost reductions should also increase. By the end of the Seventh Plan polyester, nylon and viscose will meet roughly 30 per cent of the fibre requirements for cloth production (excluding silk and wool).
(f) Jute manufactures: Jute manufactures are used as packaging materials in the form of sacks and hessian. Keeping in view the output levels of different commodities where sacks and hessian are used as packing materials and taking into account the likely substitution by synthetic packaging materials and bulk handling, the domestic demand for jute manufactures is placed at 1,355,000 tonnes in 1989-90. The export demand for jute manufactures has been assessed at 270,000 tonnes in 1989-90. Given the potential to raise jute and mesta production from 75 lakh bales in 1984-85 to 95 lakh bales in 1989-90, the production of jute manufactures will rise from 1,300,000 tonnes in 1984-85 to 1,625,000 tonnes in 1989-90. This level of production will suffice to meet both domestic and export demand.
(g) Fertilisers: During the Seventh Plan, the total demand for fertilisers is expected to increase from 8.4 million tonnes to 13.5- 14.0 million tonnes, which implies a growth rate of about 10 to 10.8 per cent. Based on likely commissioning schedules, domestic production is expected to increase. by 11 per cent per annum and will reach 8.75 million tonnes by 1989-90. The absolute level of imports will increase but imports as a percentage of total consumption will come down from 41.2 per cent in 1984-85 to 35.2-37.5 per cent in 1989- 90. The bulk of the increase in production will come from the gas- based fertiliser units being set up along the gas pipeline from the west coast to Uttar Pradesh. Capacity utilisation in the existing nitrogenous fertiliser industry is expected to improve from 74.5 per cent in 1984-85 to 79.5 per cent in 1989-90.
(h) Petrochemicals: The Seventh Plan will see a major expansion in the petrochemical industry. The growth in the production of man- made fibres has already been dealt with above. The production of major plastic raw materials (LDPE, HDPE, PP and PVC) is expected to go up from 257,400 tonnes in 1984-85 to 623,000 tonnes in 1989-90 which implies an annual growth rate of about 19 per cent. This large increase will come from the Indian Petrochemicals Complex at Baroda and the new gas based company in Maharashtra.
(i) Cement: The demand for cement is expected to grow at the rate of nearly 10 per cent per year during the Seventh Plan and reach a level of 49 million tonnes by 1989-90. The capacity required for this production has already been licensed. It is expected that domestic production will be fully able to meet the entire demand. The Plan envisages an improvement in capacity utilization in the cement industry from 70.8 per cent in 1984-85 to 81.7 per cent in 1989-90. This assumes adequate supplies of power and coal.
(j) Steel: The demand for finished mild steel is expected to increase by about 5 per cent per annum and will reach 13.86 million tonnes by 1989-90. Improvements in capacity utilisation will help to raise production to 12.65 million tonnes by 1989-90 leaving a net gap of 1.21 million tonnes. However, there are imbalances between the pattern of demand and productwise capacities. Because of the delay in the comissioning of the Vishakapatnam Plant, demand will exceed capacity for non-flat products (other than railway materials), necessitating imports of around 1.2 million tonnes. In flat products, capacities are likely to exceed demand for plates, galvanised plain/galvanised corrugated sheets and tin plates and will be short of demand in the case of hot rolled sheets/coils, skelp and electrical steel sheets requiring imports of 0.39 million tonnes.
(k) Non-ferrous metals: The principal development in the non- ferrous sector in the Seventh Plan will be a large increase in the production of aluminium with the commissioning of the Orissa smelter. By 1989-90, aluminium production, may reach 499,000 tonnes which will be a little higher than the expected level of demand of 450,000 tonnes. Copper production will increase in pace with demand and the level of import dependence will remain at around 69 per cent. In the case of zinc and lead, domestic production is expected to increase so as to reduce import dependence from 56 per cent to 45 per cent for zinc and from 77 per cent to 66 per cent for lead.
(l) Engineering industries: The gross output of nonelectrical engineering industries is expected to grow at the rate of 11.8 per cent per annum over the Seventh Plan period, of electrical engineering industries at 12.5 per cent, of transport equipment industries at 10.8 per cent per annum. Major advances in product development in machine tool industry are expected in the Seventh Plan. The automotive sector is expanding rapidly and major changes in product quality and technology will be effected during the Seventh Plan period. In other areas of machinery manufacture, the Seventh Plan proposes to expand domestic capabilities in such critical areas as oil-field equipment and process plant equipment where import dependence is presently high. The Plan also emphasises the need for product development and
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technology induction for the better utilisation of existing facilities in the engineering industry.
(m) Electronics: The Seventh Plan envisages a rapid expansion of the electronics industry both for the application of electronics in production processes and offices and for meeting consumer needs. The aggregate output of electronic goods is expected to go up from Rs. 2,090 crores in 1984-85 to Rs 10,860 crores in 1989-90, which implies a growth rate of 39 per cent per annum. The Plan envisages a rapid expansion in the production of computers, telecommunication equipment, process control systems and consumer items like television sets.
Infrastructure: 3.47 The attainment of the production targets set for the Seventh Plan depends critically on the functioning of crucial infrastructural services like power supply and transportation. Bottlenecks arising from short-falls in these services have lead to underutilisation of capacity and loss of output in recent years. Hence the Seventh Plan lays great stress on ensuring that the investment and production targets for critical infrastructural services are met. At the same time, given the high capital intensity of these sectors we have also to emphasise measures to economise on the demand for these services through conservation measures. In order to economise in the use of electricity, greater caution is also necessary in the clearance of new power-intensive projects. Similarly, a well conceived policy of dispersal of industrial activities can lead to economy in the use of transport services.
3.48 Output projections for certain critical items are dealt with in what follows.
Electricity: The supply-demand balance for power supply in 1984- 85 and 1989-90 is presented in Table 3.13. The demand for electricity is expected to grow at 12.2 per cent per annum over the Seventh Plan and reach 223.23 billion (KWH) by 1989-90. The Plan envisages the commissioning of 22,245 MW by 1989-90 and the level of supplies available from utilities and from captive plants should be sufficient to meet demand. This assumes an improvement in the utilisation of thermal power capacity which stood at 50.1 per cent in 1984-85.
Railways: The demand for rail transportation in 1989-90 is presented in Table 3.14. In terms of originating freight traffic, the load on the railway systems is likely to be 340 million tonnes in 1989-90 as against 263 million tonnes in 1984-85. The average lead of hauls is expected to be around 680 km. The Plan envisages that the growth in passenger traffic will be restrained to 2 per cent per annum and that, within this, priority will be given to long-distance passenger traffic and high density suburban traffic. The outlays for the Railways will be kept under continuous review so as to ensure that transport bottlenecks do not hamper the growth of the national economy.
TABLE 3.13
Demand-Supply Balance for Electricity
(Thousand million kwh)
Sl. Item 1984-85 1989-90 Compound
No. annual
growth
rate
A. Demand
1. Industrial 75.0 139.30 13.2
2. Domestic 15.27 26.88 12.0
3. Agriculture 20.65 32.42 9.4
4. Others 14.82 27.63 13.3
Total: 125.74 223.23 12.2
B. Supply
1. Generated by utilities
(2 + 3 + 4) 156.70 280.40 12.3
2. Auxiliary consumption 10.86 18.23 -
3. T and D losses 29.17 52.44 -
4. Supply from utilities 116.67 209.73 12.5
5. Generation by non-
utilities (6 + 7) 10.37 15.00 7.7
6. Auxiliary consumption 1.30 1.50 -
7. Supply from non-utilities 9.07 13.50 8.3
8. Total generation (1 + 5) 167.07 295.40 12.1
Total Supply (4+7) 125.74 223.23 12.2
TABLE 3.14
Demand for Railway Traffic 1989-90
(Million tonnes of originating traffic)
Sl. Commodity 1989-90
No. (target)
1 2 3
1. Integrated steel plants
(i) Finished products from steel plants
(pig iron for sale and mild steel) 11.00
(ii) Raw materials for steel plants other than coal 28.00
Total: 39.00
2. Coal 152.00
3. Iron ore for export 12.00
4. Cement 23.00
5. Foodgrains 24.00
6. Fertilisers 15.00
7. POL products 22.00
8. Other goods 38.00
9. Railway materials 15.00
Grand Total: 340.00