APPROACH, OBJECTIVES AND EMERGING ISSUES
1.1 The Ninth Plan will be launched in the 50th year of the independence of our country. This is an opportune moment to take stock of the success of our planning process (is well as its failures, and to provide appropriate direction for the socioeconomic development of the country. The principal task of the Ninth Plan will be to usher in a new era of people-oriented planning, in which not only the Governments at the Centre and the States, but the people at large, particularly the poor, can fully participate. A participatory planning process is an essential precondition for ensuring equity as well as accelerating the rate of growth of the economy.
1.2 Although the macro-economy performed reasonably well in the Eighth Five Year Plan, some major weaknesses have also emerged. In particular, the growth pattern has not benefited the poor and the underprivileged. The Ninth Plan needs to be designed to remedy the weaknesses in such a manner as to ensure that the benefits of growth reach the poor.
1.3 The country has been blessed with good agricultual seasons during the Eighth Plan, but its agricultural potential has not been nurtured. Investments in the agricultural sector, particularly towards creation of irrigation potential., has fallen short of targets. The strain on the agricultural economy is now beginning to show The production of foodgrains for 1995-96 has declined and wheat procurement was well below target. Grain price rise in the last year has continued. Inspite of efforts to reverse this trend by schemes like the Additional Irrigation Benefit programme in the Annual Plan 1996-97, the percentage of shortfall in irrigation capacity expansion during Eighth Plan will be one of the highest during any Five year plan.
1.4 The Ninth Five Year Plan has to make a serious effort to redress this situation with a set of concrete measures to raise the level of agricultural and rural incomes, to target these with programmes which aim at small medium and marginal farmers and landless labourers Provision of irrigation water, provision of inputs or a widespread basis in different agro-climatic regions of India, backed up by suitable policy measures for creating infrastructure, will be the most important components of the entire development programme. It is a matter of serious concern that the actual capacity realisation in practically all the infrastructural sectors during the Eighth Plan has fallen far short of the targets. For example, as against envisaged capacity addition of 30538 MW in power generation
1
capacity, the actual achievement during the first four years of the Plan has been as low as 1.4798 KW. These deficiencies will need to be rectified during the Ninth Plan.
1.5 Large States of the country, like Bihar and U.P., which account for a very substantial part of population have shown negative or constant per capita growth of incomes in real terms. Stagnation or decline of per capita income in these populous States of India accentuate regional disparities and have serious consequences for poverty levels.
1.6 A sustained and long lasting solution to the problem of poverty depends on the creation of adequate employment opportunities through a broad based programme of development and economic growth. This is of particular importance since the labour time unemployment rate for male workers has gone up in a significant manner.The very poor are heavily dependent on the slender work opportunities available to them in terms of labour days, and if this comes down, the con-sequences are very severe.
1.7 Economic growth and employment opportunities in themselves may not be sufficient to improve the living conditions of the poor. They need to be accompanied by measures which enhance the quality of life. For concretising this approach, a number of steps have already been taken which provide the initial outlines of the larger initiatives that will be contained in the Ninth Five Year Plan. At a conference of Chief Ministers held in July, 1996, it was decided to implement a programme for the achievement of total coverage of seven Basic minimum Services in a time bound manner. It was agreed to raise the outlays of these programmes by 15% in spite of stringent fiscal Situation. The Ninth Five Year Plan will continue this commitment in real terms through each of the five years. While the objectives of this program have been decided through the process of mutual consultation, the States have been given full opportunity to decide on the phasing of the target for each specific sector. The Achievement of these targets will be jointly monitored by the State and the Central Governments. This approach is an ideal blend of national commitments with local initiatives.
1.8 The method of planning for agriculture related infrastructure, irrigation and water planning, other infrastructure like power, railways, communication and information technology and science & technology will be a variant of the methods developed for the Basic Minimum Services Programme. Plans will be set up with well defined target set at the national level in detailed consultation with States. Policies" will be explored in each sector to provide for more investments from the private sector, from cooperatives and voluntary organisations and international private investments. However the slack in these selected
2
sectors will be taken by public investment. The objectives will be defined nationally but the States and local governments will be given much larger freedom for choice of programmes, phasing of schemes and choosing appropriate instruments of finance.
1.9 The process of development that is being contemplated will need to empower all the disadvantaged sections of the population, especially SCs, STs and OBCS, Minorities and women and to integrate them in the mainstream. In pursuance of this objective, as a first step, a programme for disabled persons has been launched by setting up regional centres and special cells in district hospitals and for enforcing reservations and monitoring of programmes.
1.10 The financial requirements for achieving the specified objectives of the Plan will necessitate a degree of determination and willingness to take difficult decisions. The stability and sustainability of the growth process require determined efforts to cut down the revenue deficit of both the Central and the State Governments and to achieve a degree of fiscal balance. It is imperative that the ongoing process of economic reforms be implemented expeditiously during the Ninth Plan to ensure that the benefits of such reforms actually flow to the poorer sections of the society.
1.11 Radical economic reforms will be designed and effectively implemented, including achievement of efficiency-oriented tariff levels. Capital account convertibility will be sought to be achieved by ensuring that the pre-requisites for such convertibility are attained. In addition, removal of domestic hindrance to competition and productivity will have to be steadfastly pursued in order to improve the return from the investments made. These policies will lower the incremental capitaloutput ratio.
1.12 The Ninth Plan will target at breaking the structural backwardness of the economy, raising the income levels of its agricultural workers, small and marginal farmers and artisans and all the historically disadvantaged groups in a decisive manner. Obstacles to this process will need to be eliminated by forthright decisions and policies. This document elaborates the broad approach for the formulation of policies and programmes for the Ninth Plan. Before doing so it is necessary to take stock of the developments during the Eighth Plan which will end in March, 1997.
Background of the Economy 1.13 The Eighth Five Year Plan (1992-97) was launched against the backdrop of a severe balance of payments crisis
3
triggered off by financial profligacy and excessive borrowings of the Government which started in the early 1980s. The trade balance deteriorated sharply after the Gulf War in 1990, and remittances from Indian workers in the Gulf also wont down. The net result was an almost US$ 3 billion decline in the current: account balance and a sharp reduction in the foreign exchange reserves, which declined to only about US$1.1 billion by June 1991. In response to the emerging crisis, in July 1991, the Government initiated series of stabilisation measures to bring the situation under control. The first step was a substantial devaluation of the rupee while retaining the import controls that had earlier been imposed by the Reserve Bank of India (RBI). addition, the fiscal deficit of the Central Government was curtailed from 8.3 per cent in 1990-91 to 5.9 per cent in 1991-92. The Government also initiated a process of structural reforms in trade arid industrial policies in 1991 which was aimed at correcting the macroeconomic imbalances and other distortions that had developed during the previous years. These measures included dismantling the licensing domestic investment, removing much of the controls on foreign trade, particularly reforming the financial sector and tax system and reducing the high rates of tariffs and taxes.
1.14 At the time the Eighth plan was formulated, the set-backs suffered by the economy in 1990-91 and 1991-92, the programme of structural reforms and the need for fiscal discipline had to be taken into account. It was, therefore, observed that : "... in view of the impact of structural adjustment programme, the resource crunch which the public sector is facing and the need for correcting the fiscal imbalances, it would be prudent to plan more or less for the growth rate achieved during the decade and lay down foundations for higher growth in the future". Thus the growth target (5.6 per cent per annum), and the macroeconomic parameters supporting it, were set at relatively conservative levels compared to what may have been possible on the basis of the performance of the economy during the seventh plan period, particularly in view of the low base year values attained in 1991-92.
1.15 The actual growth performance of the economy, presented in Table-1, appears to have surpassed the expectations. In the first four years of the Eighth plan, it has averaged over 5.7 per cent annum, and there is every likelihood that the plan may end with and average of 5.6 per cent. Much of this growth performance reflects the successive good performance of the agricultural sector, which has averaged a growth rate of 3.8 per cent per annum during the four years despite a set-back in 1995-96, and may average 3.5 per cent over the full plan period, as compared to the target of 3.1 per cent growth per annum. The industrial sector has also recovered strongly in 1994-95 and
4
1995-96 after slow growth in the first two years of the plan, and may marginally fall short of the target of 7.6 per cent by the end of the plan.
Table 1: Macro Indicators
S.No. Rate of Growth VII Plan VIII Plan
Target Likely
1 GDP at factor cost 6.04 5.6 5.92
i) Agriculture 3.35 3.1 3.5
ii) Industry 7.54 7.6 7.24
iii) Services 7.46 6.1 6.66
2 Prices
i) WPI 6.66 - 9.24
ii) CPIIW 7.96 - 9.34
iii) CPIAL 7.49 - 9.63
Note: The data on prices is upto 1995-96.
WPI = Wholesale Price Index
CPIIW = Consumer Price Index for Industrial Workers
CPIAL = Consumer Price Index for Agricultural Labourers
1.16 Insofar as prices are concerned, the performance of the economy has been a mixed one. Initially, following the stabilisation measures, the over-all inflation rate as measured by the Wholesale Price Index (WPI) fell from a peak of 16 per cent in August 1991 to an average of 10 per cent in 1992-93 and further to 8.3 per cent in 1993- 94. However, it again accelerated to 10.9 per cent in 1994-95. During 1995-96, the rate of inflation averaged 7.8 per cent after recording a low of 5 per cent in January 1996. Thus the average inflation rate during the Eighth Plan period is likely to be about 8.8 per cent per annum as measured by the WPT. As far as cost of living as measured by the CPI are concerned, the inflation rate is considerably higher being in the range of 9.3 to 9.6 per cent per annum.
1.17 On the external, front too the economy appears to have performed reasonably well. Foreign exchange reserves have been steadily built up from the low level of US$ 1.1 billion in July 1991 to above US$ 18 billion at present. The current account deficit, which had averaged 2.4 per cent of GDP during the Seventh Plan and had reached a high of 3.2
5
per cent in 1990-91, is likely to average about 1.5 per cent during the Eighth Plan, which is more or less at the postulated level. This has been achieved to a large extent by the acceleration in the growth rate of exports which has averaged 15.8 per cent in US dollar terms during the first four years of the Plan as compared to the target of 1.3.6 per cent. Growth rate of imports, however, has also accelerated and is expected to be about 17.3 per cent average in dollar terms during this period.
1.18 The first four years of the Eighth Plan, therefore, have witnessed reasonably good performance as revealed by the macroeconomic indicators of the economy in terms of higher than expected growth rate of GDP accompanied by a sustainable current account balance, reasonably comfortable foreign exchange reserves and a moderation in the rate of inflation. Confidence of international investors in the Indian economy also appears to have been restored. The macroeconomic performance, however, hides a number of areas of vulnerability and weakness which would have to be explicitly addressed while formulating the strategy for the Ninth Plan.
1.19 The first major area of vulnerability is the prospect for sustained growth of agriculture. Much of the recovery and high growth in both output and employment experienced during the Eighth Plan was the outcome of a stronger than expected performance of the agricultural sector. This was permitted by eight good monsoons in a row - a circumstance which cannot be assumed to obtain in the longer run. Indian agriculture continues to remain vulnerable to weather related shocks and determined efforts would have to be made to reduce this vulnerability. This cannot be achieved without accelerating agricultural investment and credit availability which, as shown in Table2, has more or less remained stagnant, growing by only about 2.8 per cent per annum, in real terms since the beginning of the 1980s. Public investment, particularly in irrigation, has in fact dropped sharply. Secondly, in view of the constant, and perhaps even declining, area available for cultivation, agricultural growth can come about only through rapid increase in productivity and changes in cropping patterns. These require substantial investment in water and land improvement and in technology development and dissemination.
6
Table 2: Investment and Credit to Agriculture
(Rs. crores at 80-81 prices)
84-85 89-90 92-93 93-94 94-95
1. Fixed
Capital 4287 4191 5259 5550 5886
formation (8.63) (7.16) (8.30) (8.47) (8.55)
2. Credit - 4390 4915 4998 5890
(a) Short Term - 2684 3270 3415 3964
(b) Medium and - 1706 1645 1583 1926
Long Term
Note: Figures in brackets are percentages to GDP in Agriculture
1.20 There has been a substantial increase in food prices during the Eighth Plan period partly as a result of sharp annual increase in procurement prices. Food grain prices increased by 11.1 per cent annually and procurement prices for farmers increased by 13 to 14 per cent annually during the Plan period. The increase in procurement and food prices have helped to improve the terms of trade for agriculture although they remain below the base-year level. At the same time, however, these have had an unfavourable Impact on the living standards of the poor, particularly, the landless, who are net buyers of food. The agricultural year is from July to June. The wheat price in June 1996 was 10 per cent higher than in June 1995 and the rice price 7.2 per cent. In the first four months of the agricultural year 1996-97, wheat prices increased by 18.4 per cent and rice prices by 9.4 per cent, which are higher than the increase in procurement prices.
1.21 There is also evidence of a deterioration of interregional disparities in per capita incomes. Some of the populous and less developed States have experienced growth rates which are lower than the national average. In Bihar, the per capita income as measured by the State Domestic Product, declined from Rs.1204 in 1990-91 to Rs.1067 in 1994-95 at 1980-81 prices. Per capita income in Uttar Pradesh stagnated during this period, rising from Rs.1652 in 1990-91 to only Rs.1663 in 1994-95. This would have had an adverse impact on the population below the poverty line in these States.
1.22 The Eighth Plan envisaged an average growth of 2.6 per cent to 2.8 per cent in employment which was expected to generate 8 to 9 million jobs in the first half of the Plan and 9 to 10 million jobs during the second half. The latest data are available, only for the first two years of the
7
Eighth Plan (i.e. upto 1993-94). Between 1987-88 and 199394 the annual growth in employment was 2.23 per cent, falling short of the anticipated growth in the first half of the Eighth Plan. Of much greater concern is the increase in current daily status unemployment rate of male workers which has gone up from 5.54 per cent in 1987-88 to 5.91 per Cent in 1993-94. This is so since this measure is the only estimate of person day utilisation of labour time. The rural male worker current daily status unemployment rate has also gone up from 4.58 per cent to 5.64 per cent.
1.23 Certain changes in the structure of employment and unemployment between 1987-88 and 1993-94 need to be rioted. Table 3 shows that the rate of growth of female employment declined, and this decline was particularly pronounced in rural areas. Further, the rate of growth in employment in rural areas, both males and females, during this period was significantly lower as compared to the urban areas.
Table 3: Employment Scenario
1987-88 1993-94
Male Female Total Male Female Total
I. Annual Rate of Growth of Employment
Rural 1.43 1.52 1.46 2.25 0.87 1.84
Urban 2.97 2.95 2.97 3.57 3.64 3.59
Total 1.80 1.71 1.77 2.59 1.27 2.23
II. Unemployment Rate
UPS 3.60 4.19 3.77 2.60 2.44 2.56
CDS 5.54 7.61 6.09 5.91 6.33 6.03
Note : UPS = Usual Principal status
CDS = Current Daily Status
1.24 According to the 50th Round of the NSSO while 'open' unemployment rates declined in 1993-94 as compared to 1987-88 from 3.77 per cent to 2.56 per cent, the rate underemployment, at a little over 6.0 per cent, remained more or less unchanged. The States where the incidence of underemployment was over 10 per cent as per 1993-94 estimates are Goa, Kerala and Tamil Nadu.
1.25 Casualisation increased with a corresponding decline in self- employment, both in rural and urban areas Casual wage employment increased from 31.2 per cent in 198788 to 33.5 per cent in 1993-94, while self-employment declined from 53.6 per cent to 51.9 per cent. Regular salaried employment also declined from 15.2 per cent to 14.7 per cent.
8
1.26 Sustained growth of the economy depends on adequate availability of basic infrastructural facilities, such as power, transport and communications, of adequate quality. The Eighth Plan has fallen significantly short not only of the targets but also of the Seventh Plan, in these areas, as indicated in Table-4, primarily due to the slower pace of investment than had been contemplated. Although the negative effects have yet to be felt in their entirety due to the improved capacity utilisation of existing facilities, there is a limit to which these options can be pursued. In the longer run there is no alternative to creating the requisite capacity. Efforts at containing the fiscal deficit of the government have fallen disproportionately on public investment, particularly in those sectors which are more dependent on budgetary support. The share of capital expenditure in the total expenditure of the government has declined sharply from around 30 per cent at the beginning of the Eighth Plan to 24 per cent. Sectors which have the potential to raise their own investable resources have telecommunication have performed well and have raised greater resources than targetted. Power, transport and irrigation, on the other hand, have performed well below expectations in so far as generating investable surpluses are concerned.
Table 4: Performance of Infrastructure Sector
VII Plan VIII Plan(*)
1. Irrigation potential 11.3 10.6
(million ha.)
2. National Highway Network 1760 609
3. Power Generation Capacity 21401 17667
(MW)
(*)Anticipated
1.27 The programme of direct State intervention in poverty alleviation and development of the social sectors designed during the Seventh Plan continued with Changes in their content and scope. However, various rounds of the concurrent evaluation revealed that while the programmes implemented have been successful in providing incremental income to the poor and in providing supplementary wage, employment of over a million man-days per year, in most cases this was not enough to enable them to cross the poverty line. The performance of social sectors like education, health and family welfare, women and Child development, housing, waiter supply and urban development,
9
which depend exclusively on budgetary support for financing their Plan outlays, have shown shortfalls in expenditure, as indicated in Table- 5.
Table 5: Social Sector Investment
(At Seventh Plan Prices)
Sector Seventh Plan Eighth Plan
Target Actuals
1. Education 7686 13616 8553
(3.51) (4.52) (3.89)
2. Medical & Public 3687 5263 3553
Health (1.69) (1.75) (1.62)
3. Family Welfare 3121 4516 2962
(1.43) (1.50) (1.35)
4. Housing 2723 3663 2763
(1.24) (1.21) (1.26)
5. Urban Development 2113 3666 2598
(0.97) (1.22) (1.18)
6. Other Social 15629 24166 16218
Services (7.15) (8.01) (7.38)
7. Total 34960 54890 36647
(15.98) (18.20) (16.67)
Note: (a) Figures in brackets are percentage to Public Sector
Investment.
(b) Eighth Plan figures are for the period 1992-93 to 1995-96.
1.28 There has been a decline in the share of States in total Plan outlay. In the Eighth Plan it has declined to 36.4 per cent as compared to the projected 41.5 per cent What is at matter of concern is that when the states' share decline, the sectors which suffer more severely are agriculture, basic minimum services, health, education and electricity, as has been noted above.
1.29 The pressure on public resources has also been exacerbated by, the rapid increase in interest payments by the government, which has gone up from about 21 per cent of total. government expenditure to above 29 per cent during the Eighth Plan period. This has been caused partly by the substantial increase in net government borrowings since
10
1993-94 after having declined mildly in 1991-92 and 1992-93. There was larger debt-financing of deficits, although the fiscal deficit in nominal terms rose by Rs. 20,100 crores in 1993-94 over 1992-93, government borrowings rose by Rs. 21,700 crores. As a result, the extent of non-debt finance of the fiscal deficit dropped from about 30 per cent in 1992-93 (which was also roughly the average during the 1980s) to less than 18 per cent in 1993-94. In 1994-95, the fiscal deficit rose by only Rs. 800 crores but borrowings rose by Rs. 5,700 crores. In 1995-96 the trend was marginally reversed with the proportion of debt finance of the fiscal deficit declining somewhat
1.30 The high levels of government borrowings in recent years has also led to a sharp rise in interest rates, which has contributed significantly to the interest burden of the government. In particular, the interest rate on new public debt has risen from 11 per cent in 1990-91 to above 13.5 per cent at present. This has largely been on account of the decision to shift from fixed yields on government securities to market determined yields on all new issues in order to reduce the burden on the banking sector as part of the financial sector reform process.
1.31 on the external front, the positive developments that have been witnessed during the Eighth Plan need to be tempered with some caution. In particular, although the growth rate of imports in terms of US dollars has been 17.3 per cent per annum during the first four years of the Plan, the quantum index of imports has risen at an average rate of 34.1 per cent. The difference is accounted for mainly by a decline in the unit values of some bulk items of import. it would not be desirable to plan on the basis of such fortuitous occurrences, particularly in view of the fact that petroleum prices, for instance, have firmed tip significantly in recent months.
1.32 The maintenance of balance of payments stability would also depend upon the growth rate of exports that can be achieved on a reasonable basis. It needs to be realised that over 90 per cent of Indian exports originate from the manufacturing sector. Therefore, unless a substantial shift can be effected in the export basket, the rate of growth of exports would be limited by the infrastructure constraints and the profitability of manufactured exports versus profitability of domestic sale of manufactured goods. In view of the faster growth rate of imports that is expected, there is need to revitalise the export oriented schemes so that the average export propensity of manufacturing rises significantly. In addition measures would have to be implemented to diversify the export basket, particularly for agricultural products.
1.33 The Eighth Plan has witnessed improvement in technology levels in the country, particularly in the
11
industrial sector. However, much of this development has been based on repeated import of technology rather than on adequate development of technological capabilities within the country. This process cannot be carried on in the longer run and steps will need to be taken to enhance the technological capabilities of the nation. To this end, it is necessary to evolve a technology policy which would not only ensure adequate growth in productivity and quality, but would enhance the competitiveness of Indian products in the international market.
Approach to the Ninth Plan 1.34 The Planning Commission believes that the principal task of planning in a federal system is to evolve a shared vision of and a shared commitment to the national objectives and the development strategy not only in the Government at all levels but also among all other economic agents. No development strategy can be successful unless each component of the economy works towards a common purpose with the full realisation of the role that has to be played within an overall structure of responsibilities. The principal function of the approach to the Ninth Plan is to evolve such a shared vision.
1.35 Based on such a shared vision, the principal task during the Ninth Plan is to build on the successes of the Eighth Plan, while tackling the problems that have emerged, particularly in areas such as capital formation in agriculture, living standards of the poor, infrastructure, social sector, regional disparity, and fiscal deficits. Despite the considerable progress that has been made by the Indian economy in both economic and social spheres, the development task is far from complete and resources continue to be limited. Moreover, as has been indicated, the Indian economy is still vulnerable and the operation of a more open economic system has to be tempered by judicious public interventions to ensure that these vulnerabilities are gradually overcome.
1.36 In light of the emerging situation, sectoral investment planning continues to form an important component of the planning process. The planning process also needs to take stock of the resources for development and to indicate methods by which these resources can be augmented in a sustained manner. Since planning is done for the entire nation, the strategies for resource augmentation need to cover not only the government at all levels but also those which would be available to other sections of people.
1.37 Balanced regional development has always been an essential component of the Indian development strategy in order to ensure the unity and integrity of the nation. Since not all parts of the country are equally well endowed to take advantage of growth opportunities, planned
12
intervention is required to ensure that large regional imbalances do not occur.
1.38 The Indian economy still has a large number of its citizens who live in acute poverty both in rural and urban areas. Special employment programmes targetted to these people will continue in the Ninth Plan. Special attention will need to be paid to unorganised labour, particularly the agricultural landless labour, who are the most vulnerable among the poor.
1.39 Further, large disparities exist across various social groups. The disadvantaged groups include members belonging to scheduled castes and scheduled tribes, other backward classes and minorities. In addition, women and children and the physically handicapped and disabled are also vulnerable. For these sections of society planned state intervention is required in order to provide them with adequate opportunities for education and employment in an attempt to involve them productively in the development process.
1.40 At present therefore the role of Planning continues to be highly relevant, although the nature of the instruments available to implement the Plan has changed. The planning process today also needs to focus on planning for policy so that the signals that are sent to the economic system induce the various economic agents to behave in a manner which is consistent with the national objectives. In particular, investment patterns would be determined by sectoral policies.
1.41 Finally, recognising the federal nature of the Indian system, the planning process has to develop a common policy stance which would be adopted both by the Centre. and the States. The role of planning would therefore involve considerable degree of policy coordination between the centre and the States, between the States, and between the States and the sub-State level tiers of Government.
1.42 The Eighth Plan had identified peoples, initiative and participation as a key element in the process of development particularly in improving the effectiveness of development outlays which has been declining over the years. It had also recognised that the role of the Government should be to facilitate the process of peoples, involvement by creating right types of institutional infrastructure, particularly in rural areas. The progress on this front has not been entirely satisfactory principally due to the fact. that the other tiers of the Government were not fully integrated into the development strategy. The process of social mobilisation and development of peoples' initiatives cannot be achieved without the active support and involvement of the political system at all levels. In the
13
Ninth Plan the Panchayati Raj bodies in rural areas and municipalities in urban areas will be directly involved in the development process. People's involvement via their elected representatives will be realised through genuine democratic decentralisation.
1.43 other forms of peoples' participation also need to be strengthened. From the early days of planning, cooperatives have been perceived as the most important form of peoples, institution for promotion of equity, social justice and economic development. Every effort will be made to make the cooperatives work. They need to be liberated from tight bureaucratic control. Self-help Groups, Associations of workers or Small Producers, etc. are other forms of institutions which will be encouraged. Government will seek active partnership with the voluntary sector in organising and promoting these institutions.
1.44 The fiscal deficit, particularly the revenue deficit, must be a central concern of macro economic management. The Ninth Plan will recognise explicitly the need to restore the fiscal health of the government at all levels and to regulate its borrowings programme in such a manner as to maximise the productive potential of the economy. An important component of this effort is to avoid excessively unrealistic projections of public resources at all levels of the government, and to adhere as closely as possible to these budgetary limits.
1.45 The Ninth Plan will lay great stress on evolving long-term fiscal policy stance in order to reduce and, eventually eliminate the revenue deficits of the government, both Centre and States. Commitment at all levels to implement these proposals is a prerequisite for successful implementation of the proposed development strategy.
1.46 The need to contain the revenue deficit of the government has to be seen within the context of ensuring health and optimal utilisation of existing public, assets and increasing the effectiveness of social schemes/programmes The Ninth Plan will be based on the premise that such measures, including emphasis on maintenance, are likely yield much greater dividends than outlays on new projects or schemes. Such proposals will need to be strictly implemented and carefully monitored to ensure that the benefits of public expenditures are maximised.
1.47 The Ninth Plan will stress the crucial importance of sound foreign trade and investment policies in order to promote rapid and sustained export growth. It will seek to enhance the technological strength and economic efficiency of our domestic production, and to ensure a smooth and effective transition to a more open economy. The industrial and financial policy framework will also also have to be streamlined to promote rapid expansion of forein direct
14
investment flows in order to augment domestic investment and reduce reliance on external borrowings to the extent possible. The Common Minimum Programme of the Government has set a target of US$ 10 billion per annum in this regard. Tile Ninth Plan will take steps to attain this target. Domestic entrepreneurship, which is the backbone of the development process, will be fully encouraged through measures to enhance their competitive strength and to facilitate their growth and efficiency. In particular, the small scale and village and home industries will be provided the proper environment for growth and diversification.
1.48 Adequate quantity, quality and reliability of infrastructure are essential pre-conditions not only for economic growth and development but also to make the country internationally competitive and attractive for investment. The investment needs in this sector are of a magnitude that are beyond the resources available to the Government. There is an imperative need, therefore, to motivate the private sector to participate in the development process, if the infrastructure gap has to be bridged. The public sector which has carried the burden of infrastructure development so far will also benefit by the competition and partnership With the private sector. Successful development of this crucial sector will require bold policy initiatives, framing of schemes and setting up of an institutional environment which would provide a level playing field to all competitors whilst simultaneously safeguarding the rights of consumers. Legislative backing to these institutional reforms would also require to be given. While new initiatives are being taken for additional investment, optimum utilisation of the existing infrastructure should not be neglected. This needs to be done by technology upgradation, system improvement and ensuring public utilities function on commercial lines most importantly, care should be taken to ensure that in the provision of these services, the rural areas are provided their due share both in terms of magnitude as well as technology stated to their needs.
1.49 Over the years a number of subsidies, both direct and hidden, have come into existence. Fixation of administered prices on extra- economic considerations is an important element of non- transparent subsidies. Such subsidies are open-ended and in some cases have accrued to those who are not envisaged to be the real beneficiaries. The Ninth Plan will emphasise the need to move to a System of transparent subsidies directed towards specific, target groups in a selective manner.
1.50 In recent years the problems of rapid urbanisation has become acute. There has been a progressive decline in the availability of essential services as well as in the quality of life in urban areas. The urban poor have been the worst affected segment in this process of decline. The health and environmental consequences of increasing
15
population density, lack of safe drinking water at-id inadequate urban sanitation are likely to become further aggravated unless steps are initiated during the Ninth Plan to improve the situation through a well considered and articulated urbanisation policy with identified programme components including those for disease surveillance, epidemic control and urban solid and liquid waste management.
1.51 The Indian planning process has always laid emphasis on measures to ensure sustainability of the development process not only in economic terms, but also in terms of social and environmental factors. Much of measures adopted in the Agenda 21 of the United Nations Conference on Environment and Development already find reflection in the Indian plans. The Ninth Plan will carry this tradition further and consolidate on the creation of conditions for sustainable development.
Objectives of the Ninth Plan 1.52 The Eighth Plan had identified ,human development" as its main focus. There can be no two opinions about this being the ultimate goal of all public action, including planning and development strategy. The emphases and nuances, however, will, need to vary from time to time depending the objective conditions of the economy and the perceptions of the people. The objectives of the Ninth Plan arising from the Common Minimum Programme of the Government, the Chief Ministers' Conference on basic minimum services and the suggestions that have been put forward by the Chief Ministers of various states during extensive consultations are as follows :
(i) Priority to agriculture and rural development with a view to generating adequate productive employment. and eradication of poverty;
(ii) Accelerating the growth rate of the economy with stable prices;
(iii) Ensuring food and nutritional security, for all particularly the vulnerable sections of society;
(iv) Providing the basic minimum services of drinking water, primary health care facilities universal primary education, shelter, and connectivity to all in a time bound manner;
(v) Containing the growth rate of population;
(vi) Ensuring environmental sustainability of the development process through social mobilisation and participation of people at all levels;
16
(vii) Empowerment of women and socially disadvantaged groups such as Scheduled Castes, Scheduled Tribes and Other Backward Classes and Minorities as agents of socioeconomic change and development;
(viii) Promoting and developing people's participatory institutions like Panchayati Raj institutions.' cooperatives and self-help groups;
(ix) Strengthening efforts to build self-reliance.
1.53 The above objectives, which seek to achieve "growth with equity", need to be seen in the context of four important dimensions of state policy. These are : (a) quality of life of the citizens; (b) generation of productive employment; (c) regional balance; and (d) self-reliance.
(a) Quality of Life 1.54 Quality of life is multi-dimensional encompassing not only the economic opportunities available to the people, but also their ability to take advantage of these opportunities, and the existence of living conditions which permit a healthy and productive life. Eradication of poverty and provision of basic minimum services are integral elements of any strategy to improve the quality of life. No developmental process can be sustainable unless it leads to visible and widespread improvement in these areas.
1.55 There is by now enough evidence to show that rapid growth has strong poverty reducing effects and, given a public policy stance which is sensitive to the needs of the poor a focus on accelerated growth will also help in realising the objective of alleviating poverty. Nevertheless there are aspects of growth which can be displacing and impoverishing. There are also regions or pockets of poverty which are unable to benefit adequately from the over-all growth process. For the most part such pockets of poverty refelect the inadequate integration of the local economies in the wider growth process. Sustainable anti-poverty programmes would need to involve not only direct employment and income enhancing policies to tide over the immediate deprivation, but also measures by which the asset endowment of the poor can increase and such areas can become better Integrated with the rest of the economy for sustainable growth.
1.56 In some regions of the country, relatively high levels of income continue to be associated with low human development indicators and poor provision of social infrastructure, such as safe drinking water, primary health and primary education facilities. These are areas in which private initiatives are unlikely to play any major role, and
17
it would be the primary responsibility of the government to ensure that appropriate interventions are made. There is therefore a need to identify the minimum norms of availability of such infrastructure and to accelerate public investment for achieving these norms in a balanced and time bound manner. The problem of shelter for the poor both in urban and rural areas is particularly acute and a programme of providing assistance for construction of houses will need to be implemented.
1.57 It should be realised, however, that social indicators cannot improve merely through increased investment, but in addition require a significant change in social attitudes and behavioural responses of the people. In order to achieve these objectives, there is no alternative to social mobilisation and community participation. In this process the role of women is critical. The process of empowerment of women at the political level has already begun, but it needs to be carried forward into the social and economic spheres as well. Special emphasis would have to be placed on ensuring that control of social infrastructure in the public domain is vested in women and women's organisations.
1.58 In the past, food and nutritional security has been largely interpreted to mean adequate availability of basic food products in the country as a whole. The concept of food security now needs to be broadened to include peoples access to basic nutritional requirements, both physically and economically. This problem is particularly acute in the vulnerable sections of society and in the deficit and inaccessible regions of the country. The Ninth Plan will lay emphasis on developing strategies by which such inadequacies can be overcome by integrating the food production and distribution systems with the employment and poverty alleviation programmes. In particular, the Public Distribution System will be restructured in order to provide foodgrains at substantially lower prices to the poor in a focused manner and to ensure availability of such commodities in the remote and deficit areas of the country.
1.59 In view of the resource constraints being faced by the Government at all levels, the prioritisation of the various facets of quality of life would have to be carried out on a region specific basis. In particular, it will he necessary to identify those areas of the country where the growth process will more or less take care of the problem of acute deprivation. The focus of antipoverty programmes would have to be shifted to those other areas which are as yet inadequately benefited by the growth process.
(b) Employment 1.60 A primary objective of the Ninth Plan will he to generate greater productive employment in the growth process
18
itself by concentrating on sectors, sub-sectors and technologies which are more labour intensive, in regions characterised by higher rates of unemployment and under employment. The experience of the last decade has been that relatively rapid growth does generate adequate employment opportunities. However, the quality of employment in terms of the incomes received and the work environment leave much to be desired. It is therefore necessary to shift the focus of employment strategies towards creating conditions whereby employment opportunities lead to significantly better living and working conditions of the people and to uphold the dignity of labour. In particular, the incidence of scavenging and child labour which arise out of acute poverty need to be eradicated keeping in mind the requirement of maintaining family incomes.
1.61 Improvements in the quality of employment can be achieved only in a situation of rapidly growing productivity to which the labour can lay a just claim. However, it is not enough to merely create the right kinds of employment opportunities, but also to provide the people with the human capital by which they can take advantage of these opportunities. Education and skill development are the essential features of such empowerment. Free and compulsory education of children supported by an adequate mid-day meal programme in schools is the first step towards this end. In addition, special programmes will have to be implemented to develop skills, enhance technological levels and provide marketing channels for people engaged in traditional occupations.
1.62 Recognising the high incidence of underemployment and increasing casualisation of labour, there is need to enhance employment of opportunities for the poor. In this context, the Ninth Plan will seek to implement a national Employment Assurance Scheme.
(c) Regional balance 1.63 With greater freedom and choice of location that is now available to industry, it is more than likely that some states would be able to attract more private investment than others. In such a situation it will be necessary to deliberately bias public investment in infrastructure in favour of the less well-off states. It will also have to be ensured that the states which benefit from this reorientation do not dilute their own efforts at generating investible resources or divert their resources to other uses.
1.64 The issue of regional balance operates at both the inter-State and the intra-State level and there is therefore the need to address it in a framework that is more flexible than the political and administrative boundaries of each individual state. Growth and development are intimately
19
related to the level of economic integration of the various parts of the country and the linkages that are formed between the backward and the more developed regions. In view of this, it is necessary to move away from the concept of competitive policy formulation to a framework of cooperative federalism, wherein neighbouring states adopt a common set of strategies for development of their backward areas in a coordinated manner.
1.65 The focus regarding the issue of backwardness and regional balance has traditionally been on industrialisation. The evidence, however, suggests that reduction in regional disparities, particularly in average standards of living may be better achieved through greater focus on agriculture and other rural activities. For this it is necessary to not only increase the productivity of agriculture in backward areas, but also to increase the degree of integration between the rural areas and the rest of the country through improved connectivity in terms of transport and communications.
(d) Self-reliance 1.66 India has embarked on a process of gradual and phased opening up of its economy to take advantage of new opportunities in trade and investment. While this process needs to be continued and taken forward, it should be from a Position of strength and not through either external compulsions or a lack of alternatives. In this sense, "self-reliance" must remain an important component of development policy and strategy. The Ninth Plan will address the issues of external vulnerability and develop suitable strategies for making India a strong and confident player in the international economy.
1.67 The first, and perhaps most important, component of self-reliance is to ensure balance of payments sustainability and avoidance of excessive external debt. This requires a commitment to sound and prudent macro- economic policies, particularly in fiscal and monetary management matters. The Ninth Plan will be based on a framework of prudent macro- management and greater reliance on non-debt creating external flows for financing balance of payments needs.
1.68 Accelerating the growth rate of the economy will require a significant step up in the availability of investable resources. Self-reliance demands that most of these resources should be generated domestically and recourse to external sources be resorted to the extent dictated by a sustainable proportion of extent liabilities. The Ninth Plan will link the inflow of external resources to the level of domestic savings and the long-run ability to service external liabilities.
20
1.69 Self-sufficiency in food is a basic element in any strategy of self-reliance. In view of the fluctuations in agricultural production arising out of weather-related factors, India will have to target a secular growth rate of agriculture higher than that dictated by the needs in order to prevent periodic large-scale imports and the vulnerability that it entails. In order to support such growth rates, it will be essential to plan for regular and sustained export of food products in normal years and to create the conditions necessary for facilitating such trade.
1.70 Natural resources are a patrimony of the nation and it would not be desirable to excessively deplete the natural resource endowments of the country and thereby expose future generations to vulnerabilities over which they may have no control. The Ninth Plan will lay stress on conservation and optimal utilisation of natural resources, including herbs and plants of medicinal value, keeping in view the international availability of such resources and the need to maintain a viable balance of payments position.
1.71 A critical element of self-reliance is self-reliance in technology. While it is desirable to access the best and most appropriate technologies from wherever they are, available, in the long-run it is necessary that domestic capacity is developed in respect of all critical technologies needed by the country. This aspect has gained further importance in view of the emerging restrictions being placed on a wide range of technologies on the grounds of "dual-use". A technology statement called "Vision 2020" has already been articulated, and the Ninth Plan will begin the process of its implementation.
1.72 In this background of the approach and objectives for the Ninth Five Year Plan, it is necessary to discuss certain specific aspects of the macro-dimensions, development strategies, policy priorities and important sectoral issues. In the context of the need for evolving a common and shared approach to development, it is also necessary to examine the manner in which cooperative federalism can be promoted. Finally, in order to ensure maximum possible return from all investments, a close look at project implementation and delivery system has become necessary. The following chapters deal with these aspects of development strategy in the Ninth Plan.
21