A basic objective in the strategy of development is to create the conditions in which dependence on external assistance will disappear as early as possible. A very large expansion in exports is essential for this purpose. The programme for the development of exports in the Third Plan aims at laying a strong foundation for a much larger export effort in the Fourth and the Fifth Plans. It involves restrains on consumption, measures to make available the surpluses required for exports and policies designed to raise productivity and reduce costs of production and distribution.
17. External assistance.-In the transitional period, the effort to develop the basic and heavy industries and machine-building capacity, without which the growth of the national economy would itself be retarded, accentuates the balance of payments problems. Replacement of imports is essentially a question of developing the necessary capacity for production within the country. A developing economy, which for its part endeavours to mobilise its own resources to the utmost extent possible, faces the difficulty that its develop- mental effort may entail a large increase in import requirements for specialised capital equipment and for raw materials and components, for which, for a period, it is unable to pay from its own export earnings. The need for external assistance is implicit in this situa- tion. Such assistance has already done a great deal to hasten India's economic growth and its value can scarcely be overestimated. Assist- ance from international agencies and from one country to another has a significance no less for the economic progress of the less developed countries than for the building up of a world community in which each country contributes to the development of others according to its capacity. This is an obligation which India fully accepts and, as her own economy develops, within the limits of her resources, she will endeavour to share her experience with other developing nations.
III
OUTLOOK FOR 1961-76 18. At an earlier stage in the work on the Third Plan, following the suggestion in the Second Plan, a sustained rate of growth of 5 per cent per annum. was visualised. With the rate of growth of population, which was assumed five years ago, this implied an increase in per capita
LONG-TERM ECONOMIC DEVELOPMENT 15
income of a little less than 4 per cent per annum. It is now anticipated that over the next 15 years, population is likely to increase at more than 2 per cent per annum. Over this period the economy will be required to meet large and expanding demands in many fields-foodgrains and raw materials, cloth, steel, coal, power, transport, employment, education and other social services, and trained manpower. In the circumstances, it is considered that development over the next 15 years should be conceived in terms of a cumulative rate of growth as close as possible to 6 per cent per annum. This consideration has been generally kept in view in formulating physical programmes and targets for the Third Plan. If these were achieved fully and within the five year period as planned, the increase in the aggregate national income would be of the order of 34 per cent or about 6 per cent per annum. Among the important condi- tions to be met are the maintenance of conditions of economic stability and keeping down of the costs of living for the bulk of the population, adequacy and timely availability of external resources, mobilisation of domestic savings of the order of over 12 per cent of the national income, fully co-ordinated execution of connected programmes under industry, transport and power, efficient implementation, at all levels, of agricultural and other programmes and, finally, improved techniques for planning and for the evaluation of performance. While it vital to the success of the Third Plan that efforts in these directions should be intensified, the actual rate of growth will depend upon the measure in which the various conditions are fulfilled
19. Taking a broad view of the development of the Indian economy, it is reckoned that, at 1960-61 prices, the national income should rise from about Rs. 14,500 crores at the end of the Second Plan to about Rs. 19,000 crores at the end of the Third Plan, about Rs. 25,000 crores at the end of the Fourth and about Rs. 33,000 to 34,000 crores at the end of the Fifth Plan. Allowing, for the increase in population, on these estimates income per head should go up from around Rs, 330 at the end of 1960-61 to about Rs. 385, Rs. 450 and Rs. 530 in 1966, 1971 and 1976. Increase in the volume and rate of investment implied in these estimates of national and per capita incomes will not be easy to achieve. However, against the background of resources and knowledge which science and modern Technology provide and the greater understanding of social and economic processes now available, it is considered that the objectives set forth above are well within the range of practical fulfilment.
20. Development on the scale described above, which must indeed be improved upon in actual achievement, has several important implications. It calls for intensive and continuous effort to utilise, fully the manpower resources of the country, to make the most efficient use possible of resources available for investment to mobilise domestic savings and channel them into appropriate directions, and to secure adequate surpluses from internal production for expanding export. Net investments as a proportion 4 national income would have to rise from about II per cent at present to 14-15, 17-18, and 1920 per cent per annum by the end of the Third, Fourth and Fifth Plans. In other words, as compared to about Rs. 10,500 crores postulated for the Third Plan, net investment over the Fourth and the Fifth Plan periods should be of the order of Rs. 17,000 crores and Rs. 25,000 crores. Domestic savings would have to rise in corresponding measure from about 8.5 per cent at present to about 11.5, 15.16, and 18.19 per cent of the national income at the end of the Third, Fourth and Fifth Plans. It is also implied that progressively external aid will form a diminishing proportion of the total investment, and by the end of the Fifth Plan the economy will be strong enough to develop at a satisfactory pace, without being Dependent on external assistance outside, of the normal in flow of foreign capital.
21. As stated earlier, a considerable part of the practical interest of long-term plans lies in the guidance they provide for current action and decisions and in the forward planning which they facilitate. These considerations are of special importance in the basic industries. In these technical and other problems involved in co-ordinated development, implications in terms of physical resources and foreign exchange, and questions relating to the location of eco- nomic activities call for prolonged study and preparation. In the course of preliminary studies on the Third Plan the following tenta- tive targets of capacity have been suggested for some important items for 1970-71:
Item unit Capacity
target
steel ingots million tons 18-19
pig iron million tons 3-4
aluminium thousand tons 230-250
electric power million kW 21-23
coal million tons 170-180
oil refining. million tons 18-20
nitrogenous
fertilisers million tons(N) 2.0-2.2
cement million tons 24-26
machine-building Rs. crores of
out- Put 1600
railway freight transport-
long distance originating
traffic million tons 380-420
foodgrains million tons 125
exports Rs. crores 1300-1400
These targets indicate the order of effort called for and could form a useful basis for further studies at the technical level.
* The suggestion in Chapters IV and V that the Plan should aim at securing an increase in national income of 'over 5 percent' per annum is in the nature of an overall judgement based on the consideration of these conditions.
16 THIRD FIVE YEAR PLAN
IV
PREPARATION OF A LONG-TERM DEVELOPMENT PLAN 22. In recent years considerable progress has been made in developing new techniques and concepts for the formulation of long- term plans of development. Their use for purposes of economic planning depends largely on the quality of the statistical and technical information available. Accordingly, in the Third Plan special steps are being taken to improve the available statistical and technical data. These will be particularly required for analysing the complex relationships, and correct proportions between different branches of the developing economy. In each stage of development the whole programme has to be viewed as a continuous physical process. The right quantities of raw materials, intermediate products, machinery and essential services such as power and transport as well as the requisite trained personnel have to be available at the right time; the outputs of all sectors of the economy have to be utilised either for investment or for consumption at the right time; the availability of domestic savings and of foreign exchange have to satisfy the requirements of production and consumption at the right time. A considerable amount of economic, technical and statistical analysis has to be undertaken. This would include estimation of the demand for goods and services by consumers at the end of each given period, studies of inter-industry relations with a view to ascertain- ing the demand for intermediate goods, raw materials, and technical personnel and determination of investment requirements as well as possibilities of import saving and the development of exports.
23. A long-term plan of development embodying specific programmes and policies is an essential condition of successful planning for a country with deep-rooted social and economic problems, a large and growing population and widely varying conditions. Such a plan should be conceived not merely in broad national terms but should take into account the possibilities of development of resources in different regions of the country so as to spread the benefits of deve- lopment as widely as possible without slowing down growth itself. The long-term plan should therefore supply a general pattern of economic and social development which would take into consideration the needs and possibilities of different areas and harmonise these into an integrated endeavour for national advancement. For working out a long-term plan on these lines, there is need for close and continuous collaboration between various Government agencies at the Centre and in the States and leading institutions engaged in scientific, economic and social research. The outline of the long-term plan will be filled in as more data and knowledge become available, and the Plan itself will be adjusted from time to time, in keeping with technological developments, greater knowledge of resources and the progress achieved in different branches of the economy. Work along these lines has already been initiated in the Planning Commission as well as by indepedent research institutions, and in the course of the next three years it is proposed to devote substantial resources to the preparation of an overall plan of development covering the period upto the end of the Fifth Plan.