DEVELOPMENT STRATEGY AND POLICY PRIORITIES
3.1 The macroeconomic considerations discussed in evaluating the likely growth paths are a part of the overall development strategy that needs to be addressed in the Ninth Plan. This chapter discusses some of the other issues which are of economy-wide significance. The more detailed sectoral policy issues are taken up in the next chapter.
3.2 At macro level the planning model in the Planning Commission is used to allocate resources among economic sectors. The implicit logic of allocation in the model is the need for consistency in the mutually supporting role of these economic sectors to make feasible a target rate of growth and demand pattern. However, the allocation of resources to the social. sectors like health, education, welfare, minimum needs and poverty alleviation, etc. is done mainly on the basis of the perceptions of the policy makers and planners as to the need in these sectors within the overall constraints of available resources.
3.3 There is no standard set of criteria for deciding allocation of funds to programmes, schemes and projects within a sector. The schemes which take the shape of a Project in energy, transport, irrigation and communication, etc. have to pass the minimum standards of financial and/or economic rates of return. However, there are no ways of making a choice from amongst a large number of projects or schemes which would pass the same standard. Programmes and schemes which are not amenable to such cost-benefit analysis do not have to pass through even this type of scrutiny. Therefore it is necessary to evolve certain guidelines for the selection of programmes, schemes or projects from among the many which are possible at a given time. The following tests are proposed:
i) Then schemes which are of larger benefit to the poor as compared to the rest of the population should have a priority.
ii) The schemes which benefit the women, children and the weaker sections of the society more than the population as a whole should have a priority.
iii) The schemes which are of larger benefit to the backward region should have a priority.
iv) Schemes which are non-displacing, empowering and labour-intensive should have priority.
v) The schemes which give long term sustainable benefit should have a priority over scheme which
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give a little higher benefit but only of a transitional nature.
vi) The schemes which help the creation of productive assets (personal assets or economy-wide assets) should have a priority over those which only help to raise the current level of income or well being.
vii) Service-oriented schemes (except those in the category of basic minimum services), which require high level of subsidisation, should have low priority and effort should be made to encourage commercial operation of such services.
viii) Schemes which require creation of enabling environment by way of systemic reforms, changes in legislative framework, institutional development, .promotion of participatory approaches and selfgovernance should have a high priority.
Sustainability of Development
Population 3.4 Population stabilisation is an essential prerequisite for sustainability of development process. The National Family Planning Programme was launched in 1952 with the objective of "reducing birth rate to the extent necessary to stabilise the population at a level consistent with requirement of national economy". The technological advances and improved quality and coverage of health care resulted in a rapid fall of mortality rate from 27 in 1951 to 9.8 in 1991. In contrast, the reduction in birth rate has been less steep declining from 40 in 1951 to 29.5 in 1991. As a result them annual exponential population growth has been over 2% in the last three decades. During the Eighth Plan period the fall in birth rate has been steeper than that in the death rate; consequently annual growth rate is around 1.9% during 1991-95. The rate of decline in population growth is likely to be accelerated during the Ninth Plan period.
3.5 Though the decline in birth and death rates have occurred in all states, the rate of decline was slower in some states like U.P. and Bihar; even within the same state there are substantial differences between districts. The Family Welfare Programme, therefore needs to be reoriented to remove or minimise the inter- and intra-State differences with emphasis on improved access and quality of reproductive and child health services through PHC based decentralised area specific microplanning without recourse to specific centrally fixed targets.
3.6 It is imperative that adequate data-base is available at PHC level on yearly basis, both for the need
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assessment as also to provide an independent mechanism for impact assessment and midcourse correction. This can be achieved only through complete registration of all births and deaths. For this, it is necessary to strengthen the Civil registration system through involvement of ICDS workers, Panchayati Raj institutions, as well as health personnel.
3.7 Simultaneously, the Ninth Plan will launch an intensive drive to promote health education so that India builds a sound foundation for a successful preventive and promotive national health paradigm. Basic principles of hygiene, sanitation, nutrition, and prevention of illness and disease will be promoted through not only the educational institutions and the adult education programme but also through the ICDS programme, through counseling offered by the health workers at all levels, and the mass media.
Natural Resource Management 3.8 The second important element of sustainability pertains to the protection of the environment and preservation of the natural resource base of the nation. Rapidly growing population, urbanisation, changing agricultural, industrial and water resource management, increasing use of pesticides and fossil fuels have all resulted in perceptible deterioration in the quality and sustainability of the environment. It needs to be realised that environment protection does not only involve a prevention of pollution and of natural resource degradation, but has to be integrated with the over-all development Process and the well-being of people. This approach has been articulated in the Agenda 21 of United Nations Conference on Environment and Development. The steps outlined in this document need to be adopted and integrated with the development strategy. A synergy between health, environment and development is recognised.
3.9 Regeneration of the forest cover is an important component of environmental sustainability. This not only requires attention to the preservation of existing forests, Particularly in the fragile eco- regions of the Himalayas and the Ghats among others, but also a greater effort to create forest cover in a wide-spread manner. It is proposed that every district in the country should reserve at least 2 per cent of its available area as forest.
3.10 One of the main problems in taking a rational decision on natural resource use is the lack of an appropriate information system and a methodology for natural resource accounting. As a result, the depletion of the national asset base is simply not taken into account while evaluating alternative strategies. The Ninth Plan will lay great stress on evolving such natural resource accounting
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methodologies so that decisions can be taken on the basis of the full cost to the Nation.
3.11. The most important methodology for preventing undue depletion of natural resources is by ensuring their efficient use at all levels. This has two important dimensions. First, exhaustible or vulnerable natural resource should be priced appropriately in order to prevent over-exploitation. In 'India, since a large proportion of natural resources are subjected to administered prices, there has been a tendency to under-price resources quite significantly. This approach needs to be changed urgently. Second, technologies which conserve the use of natural resources need to be developed and promoted vigorously.
3.12 Food and nutrition security as well as poverty alleviation are inalienable components of sustainable development. In view of the fact that the net sown area is likely to decline in the future in order to preserve the ecological balance, emphasis will have to be placed on increasing the productivity of land use. There is therefore need to enhance the flow of resources to agriculture from both public and private sources and to vigorously promote the implementation of land reforms so that the productivity of land use is enhanced. In addition, steps will need to be taken towards more efficient use of soil and water resources. A start has been made in this process by encouraging a diversified growth of agriculture by agroclimatic regions. This would have to be carried forward vigorously. New initiatives will need to be developed for intervention on the basis of agro-economic categorisation. In the lean agricultural season, upto 100 days of assured employment will be provided under the Employment Assurance Scheme, which is being universalised.
Technology 3.13 In order to strengthen the technological capabilities of the Indian industries, both for meeting the national needs and for providing global competitiveness, a number of new initiatives have been launched. A Technology Development Board has been established in 1996 with a mandate to facilitate development of new technologies and assimilation and adaptation of imported technologies by providing catalytic support to industries and R&D institutions to work in partnership. Matching grants to R&D institutions showing commercial earnings through technology services was also introduced in 1996 and will be carried forward and broadened. Already a long-term perspective called Technology Vision for India 2020 has been prepared, which could form the basis of technology development programmes.
3.14 Issues of natural resource conservation and agricultural growth cannot be effectively tackled in the
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absence of an appropriate technological base. In addition, technology is essential for increasing the competitiveness of the Indian economy in international markets. Indigenous development of technology is therefore of the highest importance and deliberate planned steps need to be taken to increase technological self-sufficiency of the Nation.
3.15 Rapid technical progress is altering fundamentally the skills, knowledge, infrastructure and institutions needed for the efficient production and delivery of goods and services. So broad and far- reaching are current technological developments that many see the emergence of another industrial revolution driven by a new technological "paradigm". This paradigm involves, not only new technologies and skills in the traditional sense, but also different work methods, management techniques and organisational relations within firms. As new transport and communications technologies shrink international 'economic space', it also implies a significant reordering of comparative advantage, and trade and investment relations, between countries.
3.16 In India also, there is considerable technological activity in a wide spectrum of firms. what is most impressive is the number of small and medium sized enterprises that are investing in new technology based ventures, and often striking out in world market as exporters. However, the rest of the industrial sector still needs to invest on technology upgrading. Experience of many developing and industrialised countries suggests that a rapid acceleration of industrial technology development calls for a deliberate 'strategy', in the sense that it requires the government to coordinate and guide an essentially market- driven process. Free markets suffer from various kinds of market failures', they may not throw up the appropriate amounts of infrastructure, skill, information and institutional support, and mere exposure to market forces, while getting rid of inefficient policies, may not suffice to create the technological dynamism that continued industrial growth needs.
3.17 Indian technology policies are undergoing significant changes, and on the whole have improved greatly in recent years. They are not, however, ideal. A coherent technology strategy In India must address a number of interconnected elements in the incentive regime and the relevant factor markets and institutions. The following approach should guide future policies in technology:
skills : Technology development calls for both general and specific forms of human capital, and emerging technologies are highly skill intensive in both technical and managerial terms. While India is endowed at present with large amounts of high-level human capital, investments in the creation of new skills (as measured by enrolment levels in technical
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subjects at all levels) are low. In addition, firm level investments in training are highly variable, and large parts of industry invest very little in training. The SME sector in particular suffers from very low levels of skill, while industrial training institutes are often unresponsive to their needs.
Technological effort : R&D in Indian industry has been rising, but the overall level is still low and over three quarters of research effort originates in the public sector. This is in contrast to Taiwan and Korea, where most of R&D is undertaken by industrial enterprises. It is important for the Government to analyse current technological trends in industry in order to formulate appropriate policies to encourage R&D.
Technology access : Technology upgrading requires that Indian enterprises of all types have information on relevant technologies in international markets and also within the country. Many countries have well-developed systems of computerised on-line technology information and dissemination services, often backed up with consultancy and financial assistance for small and medium enterprises to enable them to know about, test, and implement new technologies. The availability of similar facilities are weak in India. Note needs to be taken of the emerging trends of restrictions on access to technology through stringent intellectual property restrictions and on "dual use" technologies by certain. groups of industrially advanced countries. Special efforts have to be made to ensure that such restrictions do not inhibit progress in high technology sectors.
Technology institutions : India has a large infrastructure of technology support institutions, some of which are undergoing reform to make them more relevant to industrial needs. A number of universities, especially the IITs, are interacting increasingly with industry on technological matters, while others are outside this circle. There is a need to strengthen 'Technology Foresight Programmes' to analyse the implications of emerging technologies, analyse domestic strengths and weaknesses and target future technologies for local development.
Other infrastructure : Technology development generally requires the setting up of clusters of industries that can share information and skills, as in science parks' or dedicated industrial estates. some such facilities exist in India, but their efficacy and functioning need to be strengthened.
Integration of Regions 3.18 Finally, an important component of sustainability of the development process is in the achievement of a high
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level. of integration between the various parts of the country so that the benefits of rapid and sustained growth can be spread widely in order to improve both regional balance and the economic opportunities available to the people. The most important components for achieving this end are transport linkages and communications. The Ninth plan will place great emphasis on providing the requisite connectivity to all parts of the country.
3.19 Although the Government can increase the connectivity of villages through public works and employment generation programmes by involving the local bodies, major road network development would still require a considerable amount of resources. Fresh initiatives need to be taken in this direction by coordinate action between the various tiers of Government and with assistance from private agencies and financial institutions. Innovative methods of combining Public and private resources would need to be worked out in order to make such inveStments productive and viable.
3.20 Similarly, in so far as communications are concerned, it is unlikely that the resources available with the Government would be sufficient to expand the telecommunications network to the extent desired. The initiatives that have been taken to supplement the public sector efforts need to be carried forward, and a proper enabling environment needs to be created. This is essential since communications are as essential an infrastructural input as they are critical for integration.
The Fiscal Imperative 3.21 In light of the macro-economic constraints being faced by the economy and the analysis of the feasible growth paths, it appears that a sustained acceleration in the growth rate of the economy will have to be associated with a determined effort at raising public savings, mainly by reducing the revenue deficit and improving the performance of public sector enterprises. This is necessary in order to provide both the necessary level of investible resources and prevent the re- emergence of balance of payments unsustainability. Steps would also have to be taken to ensure that private savings increase in a sustained manner.
3.22 In respect of public savings, while the rate of growth of revenues must be increased, the rate of growth of revenue expenditure too should be slowed down. The Government will mobilise financial resources by utilising all sources which have remained untapped so far. At the same time, the structure and manner of deployment of public expenditure should be altered significantly in order to ensure the maximum positive impact on poverty alleviation and the social sectors.
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3.23 It is to be noted that the ratio of total revenues of the Centre and the States to GDP had reached 23.8 per cent in 1989-90, but declined thereafter and came down to 22.6 per cent in 1990-91 and stayed at the level in 1993-94. However, there is a major difference between the behaviour of revenues between the Centre and the States. The gross revenues of the Centre declined steadily from 14.4 per cent in 1989-90 to 12.2 per cent in 1993-94, whereas in the case of the States, it increased steadily from 9.4 per cent in 1989-90 to 10.4 per cent in 1993-94. The ratio of total tax revenues of the government sector to GDP had reached 16.9 per cent in 1989-90 but declined thereafter and reached 15.3 per cent in 1993-94 (it is estimated to have reached around 16 per cent of GDP in 1995-96). In view of this, it would be reasonable to aim at raising the tax ratio by about 1.5 to 2.0 percentage points of GDP so that it reaches the level of 17.5 per cent in the post-Plan period. This would only mean slightly exceeding the ratio that had already been reached in 1989-90.