1.16. While the difficulties of the last few years have unquestionably risen from factors beyond control there are still a number of lacunae which have evoked legitimate criticism. Despite larger outlays. actual development have often fallen short of targets. In many key sectors, delays in construction, escalation of costs and the failure to utilise capacity full have added to the difficulties. Many of the projects undertaken in the public sector represent new and complex ventures and, to an extent, initial difficulties are only to be expected. But even after allowing for this, the fact remains that the concern for speed, economy and efficiency has not been as per- vasive as it ought to be. The public sector has the responsibility to set better standards of performance and it has yet to fulfil its role of generating adequate surpluses for investment,

1.17. In order to present a balanced picture it is necessary to draw attention to certain long-term favourable features of the developments during this period. Agriculture has always enjoyed a high priority in Indian planning and emphasis on irrigation. improved practices and community development and cooperation has marked all Plans. However, progress in agricultural production was unsatisfac- tory during the Third Plan. A number of circumstances, have changed the situation during recent years. Successful research in plant breeding using

APPROACH AND POLICY 5

foreign genetic material has resulted in the establishment of highyielding, varieties of cereal seeds. With a new awarness of the importance of irrigation, intensive use, of subsoil water in many areas has emerged. There has been much greater demand and increasing use of chemical fertilisers, insecticides 'and other inputs. Higher prices have made farmers in many parts of the country readily receptive to new practices and inputs. The possibility of an upward surge in agricultural production seems to have been established.

1.18. In industry the notable feature has been be continuous increase and diversification of production capacity which has go one on in spite of fluctuations and the near stagnation of recent years. Gains have been registered in many important fields. Increases in capacity have been most notable in production if steel and aluminium, a wide range of machine tools, industrial machinery, electrical and transport equipment, fertilisers, drugs and pharmaceuticals. petroleum products, cement, minerals and a variety of consumer goods. There has also been a large increase in the manufacturing capacity for power generators. All this has contributed to the strengthening of the industrial structure and a valuable potential for sustained industrial progress in the future has been created.

1.19. The situation regarding costs and prices is improving. Though the recent rise in prices increased costs generally, the prevailing stagnation induced, at the same time, considerable cost consciousness. Devaluation increased the cost of imports. The existence of unutilised capacity has forced on the attention of industry the need to seek export outlets for goods in a situation of poor demand in the domestic market. The recent increase in "non-tra- ditional" exports indicates that with continued awareness of cost and given some incentives, our industrialists can compete in the international market. If internal prices are stabilised and as a con- Sequence there is no further increase in the level of dearness allowances, it should be possible to reach, during the Plan period, a balance in relative internal and external costs and prices.

Social Situation

1.20. In the matter of social justice and equality there are two aspects to be considered. Reduction of concentration. and a wider diffusion of wealth. income and economic power is one improvement in the condition of the common man and the weaker sections, especially through provision of employment and education, is the other. As regards the former, in the rural sector the land reform$ legislation, including the ceiling on 'land holdings' has been a notable achievement. In the urban industrial sector the expansion of the public sector, industrial licensing and taxation measures have bee the main instruments used.

1.21. There has been considerable progress in relation to education and public health. it is true that the constitutional direcive regarding free and compulsory education up to the age of 14 has yet to be fulfilled and that in some States the gap in this regard is very wide. Also, facilities like those of primary health centres have yet to cover the whole country adequately and the quality of the services they afford needs urgent improvement. However, by and large, there has been marked progress in the extension of health and educational facilities which is reflected in the striking increase in the' expectation of life at 'birth from 35 years in 1950-51 to 52 in 1967-68, and the impressive increase in school enrolment from 23.5 million in 1950-51 to 74.3 million in 1968-69. The rapid spread of the facilities for secondary and higher education has been mainly responsible for facilitating vertical mobility of labour. Special programmes have been devised for amelioration of conditions of scheduled castes and tribe's and also in relation to some groups among the weaker sections. Assistance has been given to village and small industries in a variety of ways and come relief afforded through ac- tivities, of the Khadi and Village Industries Commission. Minimum wages have been prescribed for many categories of labour and considerable progress made in legislation regarding industrial relations and labour welfare.

1.22. In the refashioning of institutions for establishing socio- economic democracy the most notable achievement has been the abolition of intermediaries in areas where landlords predominated. The "land to the tiller" legislation in some ryotwari regions was also radically conceived. Legislation intended to afford security to tenants and the imposition of ceiling on landholding have been enacted in most States. Community Development Programmes which were initially considered as main instruments of rural transformation were found to be too official-oriented and emphasis shifted to the creation of Panchayati Raj institutions. A comprehensive programme of rural co- operativisation was also launched with the beginning of the Second Plan.

1.23. In terms of regional development there has been a natural tendency for new enterprises and investments to gravitate towards the already over crowded metropolitan areas because they are better endowed with economic and social infraturcture. Not enough has been done to restrain this process. While a certain measure of dispersal has been achieved, a much larger effort is necessary to bring about greater dispersal of industrial activity.

1.24. For Government to take a more dynamic role in accelerating the pace of development spreading its benefits widely, seeking to mitigate inequalities or to correct regional imbalances, it must have greater command over the economic resources of the country. While there has been progress In this

6 FOURTH FIVE YEAR PLAN

direction, much remains to be done to strengthen the financial, capability of the Centre and States to discharge these responsibilities of any modern government. However, even in the existing situation it is possible to frame suitable policies which if consistently followed over a series of years, will make for significant progress in the desired directions.

1.25. In respect of the objectives of equality, sufficient data are not available to base a definite statement about income inequality. Available information does not indicate any trend towards reduction in the concentration of income and wealth. Nor is there any indication that there has been any lessening of disparity in the standards of living of various classes. There is also the complaint that even in institutions like the cooperatives which were fashioned to promote socio-economic democracy, the propertied classes and the rich dominate. Problems of low income, unemployment and under-employ- ment remain sizeable. Regional imbalances in development have attracted attention.

1.26. The inability to mitigate in any significant measure, the inequalities of income and wealth is a reflection of the dilemma which arises in the present phase of development. It is possible in the short run to increase employment and income opportunities for people employed in traditional industries by restricting the expansion of the modern sectors. However over the long run increases in productivity and incomes of traditional industries, which ran result from Improvements in the economy as a whole require large capital intensive investments in building overheads and industries producing basic raw materials and capital goods. More important, the concern for achieving the desired increase producing basic raw materials and capital goods. More important, the concern for achieving the desired increase in production in the short run, often necessitates the concentration of effort in areas and on classes of people who already have the capability to respond to growth opportunities. This consideration shaped the strategy of intensive development of irrigated agriculture. Output increases more rapidly in areas which have the basic infrastructure. The operation of programmes of assistance related to size of production tends to benefit the larger producers in the private sector. A small number of business houses with experience and resources have been able to take greater advantage of the expansion of opportunities for profitable investment.

1.27. Analysis of the varied experience since the beginning of the Third Five Year Plan appears to lead to some conclusions which are relevant to the framing of a correct approach to the Fourth Plan. In the first instance the record of past years shows that the basic strategy of Indian planning as defined at the beginning of the Second Plan is not at fault. At the same time, the difficulties into which the economy has run emphasise the need, for firmer policy direction and the use of a number of supplementary measures and instruments to carry out the necessary adjustments. The most important lesson is the need to adopt measures which will maintain relatively stable conditions while development proceeds. In the Indian situation at present the supplies and prices of agricultural commodities, particularly of food, play a crucial role in attaining stability. Therefore, continuing increase in available supplies must have a pivotal position in Indian Plans. Better agricultural production and food supplies and careful management of food management alone would, however, not be sufficient. An important relevant factor is also the method of financing the development effort. Recent events have emphasised how the level of prices, the ability of Government to raise resources. Government Plan outlays and the tempo of industrial activity are closely inter-related and how all these depend on a stable supply of food and agricultural commodities.

1.28. Recent experience also underlines the need to take quick strides towards self-reliance. Increase in the total burden of foreign obligations has highlighted the heavy costs of servicing and repayment. it is time to think boldly of progressive reduction of net aid.

1.29. All these factors together point to very careful attention being paid in planning to stepping up domestic savings and resources in the hands of Government, maintaining an even balance of payments through increasing exports and keeping down imports and above all maintaining flexibility and adjustability in planning operations, so that fluctuations are adequately allowed for, and unforeseen difficulties met with effort in appropriate directions.

III

GENERAL APPROACH TO FOURTH PLAN

Tempo of Development

1.30. The Fourth Plan has to provide the next step forward in attaining accepted aims and objectives of Indian planning. In formulating it, note has to be taken of the successes and failures so far, the observed continuing trends in the economy and the specific experience of recent years. The most notable lesson is that the current tempo of economic activity is insufficient to provide productive employment to all, extend the base of social services and bring about significant improvement in living standards of the people. The continuity of even this mode, ate rate of growth is likely to be threatened if instability emerges because of the weakness on the food front and too great a dependence on foreign aid. The Fourth Plan aims at acceleration the tempo of development in conditions of stability and reduced uncertainties. It is proposed to introduce safeguards against the fluctuations of agricultural production as well as the uncertainties of

APPROACH AND POLICY 7

foreign aid ill the period of the Fourth Plan. Together with Programmes of increased agricultural Production the Plan provides for the' building of sizeable buger stocks to even out of supplies of foodgrains and other measures to stabilise foodgrain Prices and the price level in general. Further in regard to the financing of the Plan emphasis is being placed on additional mobilisation of internal resources in a manner which will not give rise to inflationary pressures. The outlays on the Plan are proposed to be closely related to the possibility of raising resources in a non-inflationary way. National self-reliance and growth with stability can be attained only if additional effort, is put forward at every level. Dependence on foreign aid will be greatly reduced in the course of the Fourth Plan. It is planed to do away with concessional imports of foodgrains under PL 480 by 1971. Foreign aid net of debt charges and interest payments will be reduced to about half by the end of the Fourth Plan compared to the current level. Planned increases in production of foodgrains, raw materials and manufactured goods are calculated to make it possible to limit the growth of other imports to manageable proportions. A sustained increase of exports by about 7 per cent a year is another essential element of strategy in the Fourth Plan to secure balance on foreign account and approach speedily towards the goal of selfreliance.

1.31. These measures which seek to limit the extent of foreign aid and to avoid inflationary financing have influenced. the total investment outlays proposed in the Plan. The resource position having improved it is possible to increase investment in public. sector industrial activity although the outlays will still be modest. It is hoped, however, that even with these outlays the tempo of economic activity will be stepped up significantly in the initial years of the Plan. If the performance is better, the Plan outlays in later years could be larger than provided for now. Success depends essentially on the extent of internal effort made in saving and investment and on the operational efficiency and economic discipline displayed by official and non-official agencies and establishments. In this context special attention needs to be paid to the public sector where investment is expected to reach 60 per cent of the total. The original expectation of an expanding public sector yielding, in due course, substantial resources for its continued development have not been realised.

1.32. Social Justice and Equality.-The process of development might lead,in the absence of purposive intervention by the State, to greater concentration of wealth and income overgrowth of metropolitan centres and uneven regional development, technological unemployment and rural underemployment. Therefore the attainment of objectives of equality and social justice requires more comprehensive planning and greater command of Government over resources than has been attempted so far. Preventing increase in concentration of economic power is a part of this problem. Action under the Monopolies Act, Government's powers of licensing and 'allocation judiciously used' and purposeful policies of public financial institutions and the nationalized banks are expected to play a significant role in this regard. A dilemma has to be faced. The largest corporate groups are the most advantageously placed to seek and obtain foreign collaboration and to expand or to initiate a number of large and new activities. Therefore, acting through them may appear the easiest and quickest way of industrial development. In the process there is inevitably an increase in concentration of economic power. Government have formulated the new licensing policy to control and regulate the concentration of economic power. While large corporate enterprises. would have scope for taking up new ventures in technologically challenging fields, deliberate encouragement will be given to wide dispersal of entrepreneurship.

1.33. Income Disparties.-To some extent income disparities can be reduced through fiscal measures, aiming at reduction of income at the top levels; but for us it is important to lay far greater stress, on positive steps for ameliorating the conditions of poorer people through planned economic development. In a rich country greater equality could be achieved in part by transfer of income through fiscal, pricing and other policies. No significant results can be achieved through such measures in a poor country, where whatever surpluses can be mobilised from the higher incomes of richer classes are needed for investment in the economy to lay the basis for larger consumption in the future. We have to reach the social and economic objectives through more rapid growth of the economy, greater diffusion of enterprise and of the ownership of the means of production, increasing productivity of the weaker units and widening opportunities of productive work and employment to the common man and particularly the less privileged sections of society. These measures have to be thought out in a number of different contexts and coordinated in to effective, integrated, programmes.

1.34. Local Planning.-all suggestions for such diffusion and growth of activity and employment involve detailed specific as also local planning and not only larger effort but also local planning and implementation. Their acceptance would require not only larger effort but also changes in planning procedures. Some studies have been initiated and some specific provisions made in this regard in the Central sector. In agriculture, schemes for area development planning and for helping small farm economy have been included in the Central sector of the Plan. Special attention is proposed to be given to the development of rural industries in the local area plans. The main work has to be done in the States. In some States experimentation in district or regional planning is already under way.

8 FOURTH FIVE YEAR PLAN

With successive Annual Plans district planning in the States-should become more general and detailed and coordinated programmes in various directions indicated above should be evolved. The Planning Commission has a responsibility in this behalf. It is equipping itself to be in a position to assist the States in the preparation and evaluation of individual projects and programmes and also in dealing with the overall problems of regional and district planning.

The Problems of Weaker Sections

1.35 Weaker Producers.-It is only the adoption of this approach to area and activity development that can enable the common man throughout the country to participate in and benefit from the growth of the economy. This by itself will, however, not suffice to meet the needs of the less privileged or the weaker sections or of those who have an inadequate productive base. These classes are composed of a large variety of categories whose problems and requirements are widely different. In the case of each of these, the handicaps which prevent them from taking advantage of existing general programmes will have to be studied and specific remedial measures adopted. This will have to be done in a number of directions. The, objective of the programme for all producer classes will be to make them in the first instance viable, and next to start them on the path of development Schemes of technical and financial assistance, and, of cooperative or other organisations for production, credit, and marketing will have to be specially adapted to the needs of these classes. Similarly, appropriate adjustments in procedures of financial institutions and of administrative departments will have to be effected. For each tradition village industry, a pattern or patterns of development pro- grammes must be evolved which provide for technical progress and economic viability. These must be capable of wide adoption once they have been experimentally established. A similar approach will have to be adopted for the numerous miscellaneous producer classes as of migratory shepherds or those living on the exploitation of forest produce.