8th Five Year Plan (Vol-1)
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Objectives and Orientation || Development Perspective || Macro Economic Dimensions || Policy Framework || Financing the Plan || Employment Perspective


1.1.1 The launching of the First Five Year Plan in April 1951 initiated a process of development aimed not only at raising the standard of living of the people but also opening out to them new opportunities for a richer and more varied life. This was sought to be achieved by planning for growth, modernisation, self-reliance and social justice. We have come a long way over the past forty years. A largely agrarian feudal economy at the time of independence has been transformed into one based on a well developed and a highly diversified infrastructure with immense potential for industrialisation. Income and consumption levels have significantly risen. Consumption basket has diversified. Incidence of poverty has visibly declined. The average life expectancy has gone up. The death and the birth rates have declined. Literacy has improved and the educational base has widened.

1.1.2 We now have a robust and resilient agricultural economy with near self-sufficiency in food production. We have built a diversified industrial and service structure. We have a large pool of skilled manpower and ample entrepreneurial capabilities. The growth performance of atleast a decade preceeding the Eighth Plan has been impressive. We have the wherewithal for further progress. Hence, the task before the Eighth Plan is to use these advantages for further growth and lay strong foundations for even higher growth in the future.

1.1.3 The economy has passed through difficult circumstances during the last couple of years. The growing fiscal gap and the sudden depletion of foreign exchange resources created a situation which put severe strains on the economic system leading to drastic import curbs, high rate of inflation and recession in industry. This in turn has led to the projection of very low growth in 1991-92, which happens to be the base year of the Eighth Plan. Corrective measures have already been initiated by way of planned fiscal reforms and policy changes. The Eighth Plan will thus have to reorient some of the development paradigms, since its objective is to lay a sound foundation for higher growth and to achieve the most significant goals, namely, improvement in the levels of living, health and education of the people, full employment, elimination of poverty and a planned growth in population.

1.1.4 The public sector was assigned a place of commanding height in the Indian economic scene. It was expected to create the basic infra-structure for development, be a pace setter in taking risk and nurturing entrepreneurship, take care of the social needs, help the poor and the weak and create an environment of equal opportunities and social justice. The public sector has expanded considerably. Its expanse and its influence may not be measured just by the size of its contribution to GDP or its share in investment, but by the fact that it touches every aspect of life. In the process, it has made the people take the public sector for granted, oblivious of certain crucial factors like efficiency, productivity and competitive ability. This has eroded the public sector's own sense of responsibility and initiative. Many of the public sector enterprises have turned into slow moving, inefficient giants. A certain amount of complacency has set in which is not conducive to growth. While there are several social and infrastructural sectors where only the public sector can deliver the goods, it has to be made efficient and surplus generating. It must also give up activities which are not essential to its role. The Eighth Plan has to undertake this task of reorientation.

1.1.5 The Eighth Plan will have to undertake re- examination and reorientation of the role of the Government as well as the process of planning. It will have to work out the ways and means of involving people in the developmental task and social evolution. It will have to strengthen the people's participatory institutions. In keeping with these objectives, the process of planning will have to be re- oriented so as to make planning largely indicative. This, in turn, will imply a somewhat changed fole for the Planning Commission. The Planning Commission will have to concentrate on anticipating future trends and evolve integrated strategies for achieving the highest possible level of development of the country in keeping with the internationally competitive standards. In place of the resource allocation role which very largely characterised the working of the Planning Commission in the past, it will have to concentrate on optimal utilization of the limited available resources. This will call for the creation of a culture of high productivity and cost efficiency in the Government both at the Centre and the States and the Planning Commission will have to play the role of a change agent. At the same time, it must provide the broad blue-print for achieving the essential social and economic objectives and indicate the directions in which the economy and the various sub-sectors should be moving. It should pin-point areas in which advance action should be taken to avoid serious bottlenecks. Planning must thus proceed from a vision of the society to be created, and through an appropriate mix of policy instruments influence the decisions of the various economic agencies to achieve the desired goals. In this sense, indicative planning is a more difficult exercise.

1.1.6 The Eighth Plan is being launched at a time which marks a turning point in both international and domestic economic environment. All over the world centralised economies are disintegrating. On the other hand, economies of several regions are getting integrated under a common philosophy of growth, guided by the market forces and liberal policies. The emphasis is on autonomy and efficiency induced by competition. We cannot remain untouched by these trends. We have to draw lessons from the development experience of other nations during the last four decades. Development economics was largely theoretical when India started her planning in 1951. It has now acquired considerable empirical knowledge based on the rich applied experience of many nations, among whom there are success stories as also failures. Indian planning needs to draw on some of these lessons. It also needs to be guided by its own experience, gained during the last four decades. If planning has to retain its relevance, it must be willing to make appropriate mid-course corrections and adjustments. In that process, it may be necessary to shed off some of the practices and precepts of the past which have outlived their utility and to adopt new practices and precepts, in the light of the experience gained by us and by other nations.

The Development Performance

1.2.1 The Indian economy, which was stagnant during the first half of this century, started growing after the Five Year Plans were launched. However, the growth rate in Gross Domestic Product (GDP) remained lower than expected and hovered around 3.5 per cent per annum for the first three decades of the developmental phase. It was only in the eighties that a clear break from this was observed. The growth rate in the eighties was nearly 5.5 per cent per annum. This change was accompanied by a perceptible rise in the growth in agricultural income, a significant increase in the rate of growth of per capita consumption and a decline in capital output ratio indicating more efficient use of capital (Table 1.1). These are mutually reinforcing trends.

1.2.2 The finances needed for development were raised mainly through domestic savings which contributed between 90 and 95 per cent of investment in different periods. The rate of savings increased from an average of 10.3 per cent of GDP during 1951-56 to 21.7 per cent during 1976-81 (Table 1.2). It, however, declined in the eighties, averaging around 20 per cent. In the last two to three years again, the savings increased to levels ranging between 21 and 22 per cent of GDP. Household sector was the largest contributor to domestic savings, with its share rising over the years. On the whole, performance of the Indian economy in the area of savings has been good as compared to many other developing countries. There have, however, been certain disturbing trends in this sphere in recent years. The public sector saving was declining, and in the Government sector, particularly, the savings turned negative in 1983-84. Since then, the gap has been widening.

1.2.3 A rising saving rate sustained a rising rate of investment. The rate of investment increased from about 10.7 per cent of GDP in the period 1951-56 to about 23 per cent in 1985-92. The biggest increase in the rate of investment occured in the public sector. The share of public sector increased from 27 per cent of total investment in 1950-51 to a little over 46 per cent in the Seventh Plan. However, the growth rate of the economy was not commensurate with the rising levels of investment in the first three decades of planning. The capital output ratio was increasing. The deterioration in the mcre-

Table 1.1 GDP Growth, Rates of Investment and Incremental Capital Output Ratio
(ICOR) in Indian Economy(1951 -1990)


Growth in GDP at Factor Cost %

Investment Rate % ICOR
0 1 2 3 4
1. 1951-52to 1955-56 3.61 10.66 2.95
2. 1956-57 to 1960-61 4.27 14.52 3.40
3. 1961-62 to 1965-66 2.84 15.45 5.44
4. 1966-67 to 1970-71 4.66 15.99 3.43
5. 1971-72 to 1975-76 3.08 17.87 5.80
6. 1976-77 to 1980-81 3.24 21.47 6.63
7. 1981-82 to 1985-86 5.06 20.98 4.15
8. 1985-86 to 1989-90 5.81 22.70 3.91
9. 1985-86 to 1991-92* 5.31 23.17 4.36

Note: Etimates are based on the New Series of National Accounts Statistics, Central Statistical Organisation.
*: The average growth rate, investment rate and ICOR for a seven year period (1985-86 to 1991-92) has been worked out by including the estimates of growth and investment rate for 1990-91 as reported in the Quick Estimates of CSO (released in Feb. 1992), and by assuming a growth rate of 2.5 % for 1991-92 (as projected in Economic Survey 1991-92).

Table 1.2 Rates of Savings (1951 - 1990)

S.NO Period Household
Private Corporate
All Sectors
0 1 2 3 4 5 6 7
1. 1951-52 to 1955-56 7.57 1.03 1.49 0.19 1.68 10.28
2. 1956-57 to 1960-61 8.59 1.21 1.55 0.38 1.93 11,73
3. 1961-62 to 1965-66 8.37 1.71 2.59 0.54 3.13 13.21
4. 1966-67 to 1970-71 10.64 1.31 1.70 0.70 2.40 14.35
5. 197l-72 to 1975-76 12.40 1.64 2.15 1.09 3.24 17.27
6. 1976-77 to 1980-81 15.71 1.61 2.86 1.46 4.32 21.65
7. 1981-82 to 1985-86 14.02 1.69 1.20 2.45 3.65 19.36
8. 1985-86 to 1989-90 16.01 2.03 -0.87 3.21 2.34 20.37

mental capital-output ratio (ICOR) could be attributed to a variety of factors. Some of them were the consequences of the very process of development, like changes in the composition of investment (e.g., from engineering to chemical industries) and rising real costs in certain sectors like irrigation and mineral development where the easier opportunities had been exhausted first. The changes in the composition of output do not, however, fully explain the rise in ICOR. There were other avoidable factors and most of these could be grouped together under the expression "inefficiency in resource use". There were substantial time and cost overruns in execution of several projects. Also, the low level of capital utilisation was due to lack of adequate synchronisation in the implementation of inter-linked projects. However, the growth performance of the economy improved significantly in the decade of the eighties and correspondingly the ICOR also declined. The build-up of the infrastructures and other capabilities over the earlier three decades certainly was used to advantage in sustaining the growth in the eighties. There is yet scope for improving the resource use in the economy in order to bring down the ICOR further and the all-round cost of production.

1.2.4 Given the structure of Indian economy, the growth in the national income has largely been determined by the trends in agricultural production. The reason is that agriculture is the largest component of GDP and has overall impact on other sectors via input linkages, employment and incomes. The average performance of the agriculture sector has shown some improvement in the eighties as compared to the earlier decades (table 1.3). As other sectors have come up, the share of agriculture in GDP has now stabilised at about 33 per cent as compared to about 55 per cent in the early fifties (table 1.4). It is still quite large. Agriculture has been subject to wide year-to-year fluctuations due to the weather factor. Wherever irrigation and power are available on an assured basis, agriculture has performed remarkably well in terms of its response to the high-yielding varieties, intensity and diversification. These trends need to be strengthened particularly in the Eastern region and in the dry belt. Combination of agri-busi-

Table 1.3 Sectoral Growth in Gross Domestic Product
( Percent per annum, based on GDP series at 1980-81 prices)

S.NO. and Sector 1951-52 to 1955-56 1956-57 to 1960-61 1961-62 to 1965-66 1966-67 to 1970-71 1971-72 to 1975-76 1976-77 to 1980-81 1981-82 to 1985-86 1985-86
1 Agriculture 2.88 3.35 -0.28 5.36 2.33 1.33 3.16 3.59
2 Mining And Quarrying 4.40 6.96 6.76 1.31 5.38 4.53 6.91 7.03
3 Manufacturing 5.84 6.28 6.62 3.96 3.33 4.86 6.99 6.72
3.1 Registered 6.18 8.24 8.34 4.67 2.39 5.28 8.56 6.30
3.2 Unregistered 5.62 4.38 4.60 3.16 4.61 4.39 4.88 7.41
4 Electricity
Gas and Water Supply 8.68 12.00 12.84 9.54 6.83 6.91 8.41 9.60
5 Construction 6.80 6.70 6.83 4.36 1.47 5.11 3.36 4.06
6 Trade Hotels and Restaurants 4.79 5.77 5.39 4.22 4.10 4.49 5.96 6.57
7 Transport,Storage and Communications 4.38 6.99 6.27 4.72 6.54 5.78 6.81 8.04
8 Financing, Etc. 3.12 2.83 3.31 3.54 3.61 4.56 6.39 8.27
9 Public Admn. and Defense 3.45 6.83 8.97 6.83 4.89 5.89 6.76 8.69
10 Other Services 2.79 3.32 4.24 3.61 2.95 3.00 4.56 6.12
11 Total 3.61 4.27 2.84 4.66 3.08 3.24 5.06 5.81


Table 1.4 Sectoral Distribution in Gross Domestic Product
(Percentage share)

  1951-52 to
1956-57 to
1961-62 to
1966-67 to
1971-72 to
1976-77 to
to 1985-86
1985-86 to
1 Agriculture 54.91 51.86 46.61 43.76 42.04 38.75 36.48 32.82
2 Mining And Quarrying 1.15 1.18 1.39 1.45 1.38 1.46 1.69 1.76
3 Manufacturing 11.88 13.47 15.77 16.17 16.95 18.02 18.85 20.00
3.1 Registered 5.50 6.78 8.65 9.14 9.63 10.35 11.25 12.11
3.2 Unregistered 6.38 6.69 7.12 7.03 7.32 7.67 7.60 7.89
4 Electricity
Gas and Water Supply 0.38 0.53 0.79 1.11 1.33 1.62 1.84 2.14
5 Construction 3.37 3.89 4.56 5.32 4.74 4.91 4.64 4.43
6 Trade Hotels and Restaurants 8.62 9.38 10.46 10.82 11.05 11.89 12.21 12.67
7 Transport, storage
and Communications 2.51 2.84 3.23 3.53 3.90 4.42 4.77 5.26
8 Financing, Etc. 8.88 8.56 8.29 8.20 8.45 8.83 9.02 9.84
9 Public Admn. and Defence 2.24 2.48 3.05 3.63 4.17 4.42 4.84 5.48
10 Other Services 6.07 5.82 5.84 6.01 5.98 5.69 5.65 5.60
11 Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

ness, with farming, has to be encouraged in order to raise the average level of agricultural incomes, to increase the export possibilities and raise value-added component in exports. The Eighth Plan will devote itself to these tasks.

1.2.5 Manufacturing will occupy a crucial position in future economic development. The nation's ability to grow fast, export, be competitive and create an expanding base for direct and indirect growth of productive employment will depend upon the growth and efficiency of the manufacturing sector. This sector needs the support of the best of technology. In turn, it will help create a wider technological base in the country. After a good start in the Second and the Third Plans, the growth performance of the manufacturing sector declined during the late sixties and the seventies, but picked up again during the eighties (table 1.3). The performance during the eighties was supported by initiation of steps towards liberalisation in import and industrial policies, besides relatively better performance of the infrastructure sectors, particularly energy and transport. Due to the foreign exchange crisis and curbs on imports and general resource crunch constraining demand, the manufacturing sector experienced a recession in 1991-92. But, given the efficacy of corrective steps already under implementation, the industrial growth is expected to pick up again. The Eighth Plan will concentrate on building a sound foundation for industrial growth, modernisation and productivity improvements. To do this effectively, the areas of comparative advantage must be clearly identified.

1.2.6 A major strength of the economy has been the large base of natural resources. The strategy for self reliance in food and basic industries was pursued through large allocation of investible resources to the development of irrigation, energy and transport sectors. With experience in project execution, the period of project completion i.e. the time lag between investment and benefits, could be reduced. The shortfalls in Plan targets of power, railways, coal, oil, etc., were sharply reduced during the eighties. This also contributed to a reduction in ICOR. The capabilities to manage the operations of the projects, in technical as well as in financial terms, however, did not come upto the assumptions made at the time of investment decisions. Since the operation was not in a "free market" situation,, the cost consciousness was lacking. The goods and services were provided generally at prices determined on the cost-plus basis. The system of administered prices generally pursued in these sectors was not effective to check inefficiency. The policy of subsidising specific groups of consumers had two effects. First, the subsidy element could not become transparent enough to be reflected clearly in terms of costs and social benefits flowing therefrom. Secondly, the rise in the demand for services of infrastructure from certain sections of the consumers was high, leading to persistent shortages. The net result of the lack of cost consciousness and business outlook in operations was the inability of these sectors to generate the resources required for their own expansion, let alone producing a surplus for the others.

1.2.7 In more recent years these sectors have been mobilising their capital directly from the market at prices which more closely relfect the scarcity of capital. At the enterprise level, the cost consciousness is building up. Another important development has been the emphasis on modernisation and system improvement in these sectors. An efficient operation of infrastructure sectors is a must for development.

1.2.8 Growth has brought about a structural change in the economy. This has surfaced in the form of a shift in the sectoral composition of production, diversification of activities, advancement of technology and a gradual transformation of a feudal and colonial economy into a modern industrial nation. The composition of national income has changed steadily over the planning era (Table 1.4). While the share of agriculture and allied activities in the GDP has declined, that of the tertiary sector has increased. The expansion of services has not only been conducive for employment generation but also for better efficiency of the system and better quality of life. It should be noted that education, health care, extension work, research and its application are all part of the services sector. They all contribute to the quality of life as well as productivity. As regards the secondary sector, the increase in its share in GDP is due mainly to improved performance of the infrastructure like electricity, gas and water supply and the growth of registered manufacturing sectors. Though the share of agriculture sector in the rate of growth of GDP is still quite large, for the first time, in the Seventh Plan it was less than the contribution of tertiary sector. This is one of the consequences of significant step-up in the pace of growth.

1.2.9 The country has succeeded in creating a good base for scientific and industrial research. In agriculture, an integrated system involving research institutes, agricultural universities and an extension machinery has been set-up. In industry, there is a network of industrial research laboratories. Research and Development divisions have been established in major enterprises and consultancy firms have come up for project consultancy and design engineering. The basis for this advance lies in the rapid expansion of higher and technical education. India now has the third largest scientific and technical work force in the world. However, we still have a long way to go to catch up with the better placed countries of the world. We also have to strengthen considerably the capacity of our system to absorb the modern technology fully and make further advances in it. The ultimate aim of technological progress is improvement in productivity, efficiency in the use of basic resources like land, water and minerals and increase in income and employment.

Imperatives for Change

1.3.1 Starting with a poor base and getting further heated in the process of growth, the Indian economy was beset with scarcities of resources and materials from the very beginning. The scarcity situation was sought to be tackled through a regulatory framework. Licences for production and imports, control of distribution, a regime of administered prices and subsidies were its main features. This regulatory mechanism did manage to save the economy from extreme difficulties like debt trap and the social unrest that arise from the breakdown in supplies of basic consumption goods. The economy could sustain through the wars, the droughts and the oil shocks. Yet, those who got the allocation of resources through the regulatory regime benefited more than the others. Vested interests got established. The regulatory framework was expected to protect the consumer against those who obtained the resources for production through the same mechanism. But, the latter often gained through the system atthecost ofthe consumer and the common man.

1.3.2 The equity objective was sought to be pursued through redistribution of assets. But, land reforms could not be implemented effectively. The problem of poverty could not be tackled through growth, which itself was slow over a long period of time. Hence, direct intervention through poverty alleviation programmes became necessary. Self-employment and wage-employment programmes were taken up in the Government component of the public sector plan. But the constraints of Government resources permit only a limited role for such programmes. Moreover, the orientation in these programmes has shifted from building assets of durable nature to providing relief jobs, and the programmes are beset with substantial leakages.

1.3.3 A sustained high growth rate has pushed the Indian population to unsupportable numbers. The 1991 Census revealed a population of 844 million. Such dizzying rate of population growth negates whatever gains the nation has been able to achieve in agricultural, industrial and services sectors. Also, this leads to an unbearable burden on health, education and housing sectors. If this trend is not halted, it will never be possible to render social and economic justice to millions of our masses. The current rate of population growth is simply not sustain-able.

1.3.4 The growing unemployment has been a major problem of the eighties and is going to be even worse in the nineties. Provision of employment to all the job-seekers is going to be a major challenge for the planners during this decade.

1.3.5 The entire popultion does not have access to all the basic necessities of life - drinking water and health facilities, in particular. Infant mortality is still high and literacy levels, particularly among the women are low. The social infrastructure has to be attended to with a degree of urgency in the next phase of development.

1.3.6 There has been a marked acceleration in urbanisation over the past two decades. If the present trends continue, urban population may account for about one-third of the total population by the turn ofthe ceiitury. Urban infrastructure, even at a minimum level, for this size of population will need considerable resources.

1.3.7 Although in the eighties some signs of improvement in certain less advanced States have been observed, regional disparities continue to exist. Development institutions and organisational capabilities in the backward regions ofthe country and the delivery system for development programmes would need to be strengthened to deal effectively with the problems of development and redistributive justice.

1.3.8 Technological change in agriculture has led to increases in cropping intensities. But, in areas of developed agriculture, further absorption of labour is declining and there is need for greater economic diversification. In the face of the shrinking size of average holdings, the special needs of inputs, capital, processing and marketing for small land holdings should be paid attention.

1.3.9 From the point of view of long-range sustainahility, the need for greater efficiency in the management of natural resources-land, water, minerals, etc. - has become urgent. A vigorous effort has to be made for recovering the wastelands and extending the green cover. A package of incentives to promote efficiency in the use of nature-based resources needs to be devised as a matter of priority. Energy use efficiency and energy conservation need particular attention in view of expanding needs and shrinking sources of fossil fuel.

1.3.10 On an overall stock taking, we find that at the threshold of the Eighth Plan, there is a high backlog in the provision of social consumption needs of the people, particularly the rural people and the poor. There is a reduced, but still unacceptably high level of poverty and hunger in the country, with high concentration in some regions. Illiteracy, particularly among women, is very high. There is high incidence of infant mortality. Decadent social practices like scavenging still prevail in large parts ofthe country. The widening gap between growth of labour force and growth of employment is assuming serious proportions.

1.3.11 The imperatives of growth irkthe face of these challenges require an innovative approach to development which is based on a reexamination and reorientiaton of the role of the Government, the harnessing of the latent energies of the people through people's involvement in the process of nation building and the creation of an environment which encourages and builds up people's initiative rather than their dependence on the Government and which sets free the forces of growth and modernisation. The State has to play more of a facilitating role and has to concentrate on protecting the interests of the poor and the underprivileged.

1.3.12 The need to restructure the systems of economic management has become unavoidable if India is to emerge as a vibrant and internationally competitive economy in the 90's. Systems of control and regulation, developed for good reasons in the past have outlived their utility and some positively stand in the way of further progress. Such dysfunctional systems have to be overhauled in the light of emerging realities.

1.3.13 The industrial regulatory environment of the past has led to certain unintended results which in turn have contributed to the weaknesses in our industry. Domestic competition has often been restricted, leading to lack of quality and cost consciousness in segments of industry. The level of protection offered to Indian industry, by way of quantitative import restrictions and tariffs, has been too high leading to high costs of production and inadequate technological dynamism. These weaknesses have to be removed in the context of the scarcity of resources, which puts a premium on efficiency, and also in the context of global economic trends which require a high degree of competitiveness. Indian industry is now ready to face the full pressure of domestic competition and the measures already taken in the sphere of industrial policy should help to achieve this objective. Indian industry must also be readied to face international competition in a phased manner.

1.3.14 Steps have already been taken to reduce the degree of quantitative licensing in trade and industrial policy and it is proposed to do away with quantitative restrictions altogether over a period of about three years. We have also made a start with reducing tariff levels. The tariff rates must be reduced in a phased manner so that they become comparable with those in other industrializing developing countries within a few years. This is essential to make Indian industry internationally competitive.

1.3.15 The Eighth Plan has to meet these challenges in the various sectors against the background of certain critical imbalances which have emerged recently, rather sharply. These are:

  1. increasing fiscal and budgetary deficits, mounting public debt and severe constraints on the resources of the Government and the public sector to undertake the essential developmental activities,
  2. a critical situation in the balance of payments, and
  3. a high rate of inflation.

Thus, the Eighth Plan, while providing a new orientation to planning consistent with the new thrusts in economic policy, has to ensure that the public sector investment rests on a sound resource base and that the current account deficit is limited to a level sustainable by normal capital flows.

1.3.16 The Balance of Payment situation has been continuously under strain for over almost a decade. During the Seventh Plan period the ratio of current account deficit to GDP averaged 2.4 per cent - far above the figure of 1.6 per cent projected for this period in the Plan document. This deterioration in the Balance of Payments occured despite robust growth in exports in the last three years. The already difficult Balance of Payment situation was accentuated in 1990-91 by a sharp rise in oil prices and other effects of the Gulf War. With access to commercial borrowings going down and the Non-Resident deposits showing no improvement, financing the current account deficit had become extremely difficult. Exceptional financing in the form of assistance from IMF, the World Bank and the Asian Development Bank had to be sought. While the immediate problems have been resolved to some extent; it is imperative that during the Eighth Plan steps are taken to curb the fundamental weakness in India's Balance of Payments situation so that it does not cause serious disruption to the economy. It is, therefore, necessary to plan on a drastically reduced inflow of resources from outside.

1.3.17 Prices rose somewhat moderately during the Seventh Plan. The annual increase in the wholesale price index was seven per cent. However, the last two years have seen a sharp increase in the prices, more particularly of the primary articles. Maintaining a reasonable degree of price stability is essential for the smooth functioning of the economic system. In the context of the Eighth Plan, price stability is essential both to protect the interests of the poor and to prevent any deterioration in the mobilisation of resources. In the past, it has been found that while any increase in the price leads to corresponding increases in Government expenditure, a similar increase in revenue does not occur. As a consequence, the resource gap widens. Deficit financing in terms of the Central Government borrowings from the Reserve Bank must, during the Eighth Plan, be kept at a level consistent with a reasonable degree of price stability.

1.3.18 The ability to sustain a level of investment that is necessary to ensure the fulfilment of the objectives of Eighth Plan rests on the feasibility of mobilising the necessary resources. In the Seventh Plan, balances from current revenues and contribution of public enterprises, both inclusive of additional resource mobilisation, were to finance nearly 40 per cent of the total public sector investment. However, it turned out ultimately that these two sources financed no more than 20 per cent of the total public sector investment, resulting in greater recourse to borrowing. Public sector investment was thus financed in a manner which was neither envisaged nor healthy for the economy. The public sector investment of the order envisaged in the Eighth Plan requires that the dissavings of the Government must come down sharply. Improved fiscal management, leading to the generation of more savings by Government, is one of the fundamental premises underlying the financing pattern of public sector investment in the Eighth Plan. The recent trend of increasing dissavings of the Government needs to be reversed.


1.4.1 In the light of the trends outi ined above, the approach to the Eighth Plan will have the following fourfold focus:

  1. Clear prioritisation of sectors/projects for investment in order to facilitate operation-alisation and implementation of the policy initiatives taken in the areas of fiscal, trade and industrial sectors and human development;
  2. Making resources for these priority sectors available and ensuring their effective utilisation; and completion of projects on schedule avoiding cost and time overruns;
  3. Creation of a social security net through employment generation, improved health care and provision of extensive education facilities throughout the country; and
  4. Creation of appropriate organisations and delivery systems to ensure that the benefits of investment in the social sectors reach the intended beneficiaries.

1.4.2 Based on this approach, the following objectives will be accorded priority :

  1. Generation of adequate employment to achieve near full employment level by the turn of the century;
  2. Containment of population growth through active people's cooperation and an effective scheme of incentives and disincentives;
  3. Universalisation of elementary education and complete eradication of illiteracy among the people in the age group of 15 to 35 years;
  4. Provision of safe drinking water and primary health care facilities, including immunisation, accessible to ai! the villages and the entire population, and complete elimination of scavanging;
  5. Growth and diversification of agriculture to achieve self-sufficiency in food and generate surpluses for exports;
  6. Strengthening the infrastructure (energy, transport, communication, irrigation) in order to support the- growth process on a sustainable basis;

1.4.3 The Eighth Plan will concentrate on these objectives keeping in view the need for (a) continued reliance on domestic resources for financing investment,(b) increasing the technical capabilities for the development of science and technology, (c) modernisation and competitive efficiency so that the Indian economy can keep pace with and take advantage of the global developments.

Human Development

1.4.4 Human development will be the ultimate goal of the Eighth Plan. It is towards this that employment generation, population control, literacy, education, health, drinking water and provision of adequate food and basic infrastructure are listed as the priorities. The provision of the basic elements, which help development of human capital, will remain the primary responsibility of the Government.


1.4.5 The phenomenon of growing unemployment has, of late, emerged as a major problem and therefore expansion of employment opportunities has to be the central objective of the planning effort. An accelerated expansion of employment opportunities is necessary both for poverty alleviation and effective utilisation of human resources for economic and social development of the country. During the past two decades, employment has grown at a rate of about 2.2 per cent per annum, but due to a faster increase of labour force at about 2.5 per cent, the backlog of unemployment has been rising. A declining trend in the employment elasticity with respect to GDP growth in recent years has made the task of accelerating the growth of employment more difficult. A deliberate and conscious effort towards employment orientation of the growth process is therefore essential.

1.4.6 It is considered necessary and reasonable to set the goal of employment for all for achievement in a time span of the next ten years. Assessment of the present backlog of unemployment and likely additions to the labour force suggest that this goal will require generation of additional ten million employment opportunities per year on an average, or about a three per cent average annual growth of employment. A relatively high rate of economic growth combined with a pattern of sectoral growth yielding a higher aggregate employment elasticity will be necessary for achieving the rate of employment growth envisaged. Raising employment elasticity in aggregate will require faster growth of the sectors, the sub-sectors and the areas which have relatively high employment potential. A geographically and crop wise diversified agriculture, wasteland development for crop cultivation and forestry, rural non-farm sector, small scale manufacturing, urban informal sector, rural infrastructure, housing and services, have been identified as sectors and areas constituting the basic elements of an employment oriented growth strategy.

1.4.7 It also needs to be recognised that in addition to the generation of new stable employment opportunities of the order of 10 million per year, which will take care of the open unemployment, it should be ensured that those underemployed and employed at very low levels of earnings, are able to raise their productivity and income levels. Upgradation of technologies of the self-employment in the traditional and unorganised sectors and improved access to credit and markets would need to be ensured. It would also be necessary, in the meantime, to continue programmes for providing supplementary work to the underemployed poor in infrastructure building and other activities.

Population and Family Welfare

1.4.8 The rate of population growth during the eighties, though marginally slower than what it was during the seventies, was still around 2.1 per cent per annum, which implied an addition of around 18 million to the nation's population every year. The country will cross 1 billion mark by the year 2001. If this trend is not halted, it will never be possible to render social and economic justice to millions of our masses. The Eighth Plan will make vigorous efforts to contain the population growth.

1.4.9 To give a major thrust in this priority area, which constitutes the pivotal point for the success of all developmental efforts, a National Population Policy needs to be enunciated and adopted by the Parliament. Given the political commitment at all levels, it must generate a cascading effect to become a peoples' movement. Social determinants such as female literacy, age at marriage, employment opportunities for women, and their status in society are as important as achieving a reduction in infant mortality, improving health and nutrition of pre-school child, and providing a comprehensive package of maternal health care services. Such an intersectoral interaction, supported by political commitment and a popular mass movement, should constitute the approach to strategic interventions.

Literacy and Education

1.4.10 Expansion and utilisation of employment opportunities and increase in productivity are strongly influenced by education. In the process of development, education is, therefore, an investment. This investment has to be made well in time to derive full benefits from the overall developmental effort.

1.4.11 Recent efforts made in the state of Kerala, and in some districts of Tamil Nadu and West Bengal to achieve 100 per cent or near 100 per cent literacy are an example of what can be achieved through determination and people's involvement. There are wide variations in literacy rates across the States. The Eighth Plan sets the target of achieving 100 per cent literacy among the people of age group 15 to 35 years in all the States. This will involve changing the literacy status of about 110 million people. Students in colleges and universities, teachers and other motivated people will have to be mobilised for this mission. Far more vigorous efforts in this respect are needed in the states ofRajasthan, Haryana, Uttar Pradesh, Bihar, Madhya Pradesh and Orissa than in the other States.

i .4.12 The intensity of the problems of education and population growth corresponds to the degree of lack of development in the rural areas, inequitous distribution of assets in terms of land and water-supply in a given rural community, and educational deprivation of women. The broad priorities, therefore, are to prepare the ground for the spread of literacy and primary education through socio- economic justice and to remove the traditional constraints on the status and education of rural women, in particular. A demand for education, modernization and efficiency has to be stimulated through a general awakening and mobilisation of the rural communities especially in the educationally backward states.

1.4.13 The Eighth Plan will aim at universal primary education, both through full-time for mal schools and part- time, non formal arrangements for working children and girls in particular. Special programmes will be launched for education of tribal children with due regard to tribal culture, economic problems, and removal of disparities between tribal and non-tribal population groups, with substantial inputs of Science and Technology leading towards the reduction of isolation of the tribal people from the rest of society.

1.4.14 Higher Education needs to be extended in an equitable and cost effective manner mainly by large-scale expansion of distance education system and increased involvement of voluntary and private agencies. Apart from strengtheing of facilities and restructuring curriculam, the component of value education should he introduced as part of foundation programme. While an integrated approach to the development of higher education needs to be adopted, measures to promote excellence should be emphasised. Technical education including Management Education is one of the most potent means for creating skilled manpower required for developmental tasks. While this imples high costs of construction, laboratory equipment, library books and journals and h ;;h rate of obsolo-scence, such high cost, being directly related to development, should be viewed as an essential productive investment, yi-i ling valuable returns to the society. The qu and Sity of technical and management education needa to be. improved not only through moderoisalic'. and upgradation of infrastructures but also by adopting futuristic approaches and strengthening industry-institutional and R and D Laboratories inter- action.


1.4.15 The health facilities should reach the entire population by the end of the Eighth Plan The " Health for All" (HFA) paradigm must take into account not only the high risk vulnerable groups, i.e., mother and child (as done so far) but must also focus sharply on the underprivileged segments within the vulnerable groups. ' Towards Health for the Underprivileged' may be the key strategy for the H .F.A. by year 2000, a declaration to which India is a signatory.

1.4.16 The structural framework for the delivery of health programmes must undergo a meaningful reorientation in a way that the un-derprivi! 'ed themselves become the subjects of the process and not merely its objects. This can only be done through emphasising the community-based systems. Such systems must provide She base and basis of health planning, recognising health and education as the key entry points for harnessing community development efforts. These systems must be reflected in the planning of infrastructure, with about 30,000 population as the unit.

1.4.17 By providing valid information and by associating the pre-defined segments of population with not only the health planning process but also with the methods for the evaluation of programmes, the process of suggested reorien-tation can be initiated. In more than one way, it must be reflected in the planning process for the social sectors, and especially health, so that the people themselves bring about the solution of their problem.

1.4.18 The ethos and culture of the communities must provide the scaffolding for such community-based systems. In this context, the traditional systems of preventive medicine, including meditation, yoga and other health practices may find a better acceptability amongst communities, with distinct advantage of their cost-effectiveness. The practitioners of Indian systems of medicines can play a major role in this direction.

1.4.19 The oft-repeated pattern of providing for health needs in terms of curative services for those who are ill must now give way to an approach in terms of positive health, with emphasis on disease prevention and health promotion. At the other end of the spectrum, a responsiveness of the services towards rehabilitation of those with physical or other handicaps, would contribute to development of a system of comprehensive health care.

1.4.20 Major efforts shall be initiated to expand educational facilities for those categories of health care providers where the existing numbers and the annual turnout are far below the desired level. Incorporation of health related

courses as a part of vocationalisation of general education, shall be pursued vigorously. Reori-entation or retargetting of the process of education for all categories of health professionals, is essential. The quality of services is directly related to the content and type of education of the health professionals and their sense of com-mittment to respond with sensitivity to the needs of the people.

Drinking Water

1.4.21 The country has not yet been able to provide sustainable source of clean drinking water to all the people, particularly-in rural areas. Based on an identification done in 1980 and updated in 1985, the number of 'No Source Problem Villages' was estimated at 1.62 lakhs as on April, 1985. During the Seventh Plan period (1985-90), 1.54 lakh 'No Source Problem Villages' were provided v'.'ith a source of drinking water supply, thus reducing the number of such villages to 8365 by the end of the Seventh Plan. At the commencement of the Eighth Plan period, there will be about 3000 no source problem villages. However, there are a large number of villages which are only partially covered and a large number of habitations which have no source at all or have highly inadequate supply. While the norms which are presently adopted envisage a source within a walkig distance of 1.6 kms. or elevation difference of 100 metrers in hilly areas and at last one handpump/spot source for every 250 persons, the accessibility of drinking water supply to the people will have to be progressively improved upon. Special and specific measures are also needed to tackle quality problems, such as, guineaworm, excess fluoride, high iron content and salinity. Water quality monitoring is to be streamlined and given proper emp'.ias's to ensure safe drinking water. Simultaneously, steps will have to be taken for replacement and lejuve-nation of defunct handpumps/tubewells. Measures for conservation of water and recharge of aquifers have to be implemented on a larger scale to provide for sustained supply of water. Much greater efforts are, therefore, needed to provide adequate quantity and quality of water and to make the sources sustainable

Protecting the Weak and the Left-behind

1.4.22 Achievement of a high growth rate and sustaining .it over the decade will be an importa'i1 goal of the Eighth Plan. Employment generation and poverty alleviation objectives are ultimately related to growth. However, the growth has to be accompanied with a sharper regional focus of reduced disparity and more, dispersed benefits. The backward regions and the weaker sections of the society, if not protected fully, are more likely to be left behind in the natural process of growth. Adequate protection will have to be continued to be provided to the poor and the weaker sections of the society. Adequate food supply, control on inflation,, effective working of public distribution system and developmental programmes which generate adequate employment are among the main components of the strategy to take care of the poor. Similarly children and particularly the girl child need to be paid particular attention. One of the targets in this context would be to equalise the enrolment and retention rate of the girl child with that of the boy child through the elementary education period.

1.4.23 Scavenging by human beings is a scourge which must not exist any more. It is uk-most undignified work offered to the weakest in the society. Its elimination will require a two pronged effort (i) making provisions of flush latrines mandatory in every house in urban areas, and (ii) providing alternative work opportunities to those presently engaged in scavenging. This has to be a time bound programme to be completed within the period of the Eighth Plan.

Land Reforms

1.4.24 The aim of land reforms in the Eighth Plan must be fulfilment of all the five principles of National Land Reforms Policy, i.e., abolition of intermediaries, tenancy reforms with security to actual cultivators, redistribution of surplus ceiling land, consolidation of holdings and updating of land records. Landlessness is a root cause of rural poverty. In a country where agriculture is the principal means of livelihood, access to land is a major source of employment and income. This access could be achieved in two ways either by a more equitable redistribution of land or by providing security of tenure to tenants and share-croppers who are the actual cultivators. The scope with respect to redistribution is limited. After the imposition of the ceilings, 7.23 million acres of land was declared surplus of which 4.65 million acres had been distributed by the end of Seventh Plan. Of the remaining, a large proportion is under litigation. With the average size of holdings declining, there is no possibility of fresh ceilings. Hence efforts will have to be made to detect the surplus land hitherto unavailable, to distribute the existing surplus expeditiously and ensure that allottees retain pocession of land. The thrust in the Eighth Plan will be towards recording the rights of tenants and share- croppers with the objective of giving ihern security of tenure. In some States this lias already been done and it has led to imrease in boh employment and agricultural output, "''he allottees of surplus land and tenants would he provided a package of modern inputs so as to enhance the yields from land. This strategy would meet the twin objectives of poverty alleviation and output growth. The consolidation of land holdings has made progress in the States, while in others it is yet to make a beginning. Consolidation should be made compulsory in the   large irrigation proiccts.


1.4.25 The strategy for agricultural development in the Eighth Plan must aim at not only achieving self-sufficiency in food but also generating surpluses of specific agricultural commodities for export. Though the progress of agriculture in the recent period has been satisfactory, there are striking regional and crop imbalances. Productivity varies considerably from one region to another. The benefits of Green Revolution which remain confined at present to the north and north-west must spread to other regions, more particularly to the eastern and north-eastern region, which have adequate rainfall, fertile soil and unlimited scope for stepping up agricultural production. Since two-third of the cultivated area is still unirrigated, a more balanced regional development would call for a greater emphasis on dry land farming. Even though the progress in oilseeds production has been significant, the country is far from self-sufficiency with valuable foreign exchange being spent on the import of edible oils. A concerted effort towards increasing oilseeds production is essential. Agriculture and allied activities on which two- thirds of the wortforce are still dependant must continue to receive a major emphasis in our planning effort.


1.4.26 The physical infrastructure, particularly in the areas of energy, transport, communication and irrigation, has traditionally been provided by the public sector. Since the scale of construction in these areas is very large and these are of direct and indirect benefit to large sections of the society, the public sector will continue to play a dominant role in this area and will have the ultimate responsibility of meeting the demands. However, if private initiative comes forward to participate in creating such infrastructure like power plants, roads, bridges, medium and minor irrigation projects, social housing, industrial estates, on reasonable terms and with full protection of people's interests, such initiative must be positively encouraged.

1.4.27 Among the main components of infrastructure, energy needs particular attention during the Eighth Plan mainly because of the fast growing demand, the limits of our internal sources of energy and implications for balances of payments. The medium term energy plan has to be seen only as a component of a long term plan where the strategies of fuel substitution and shifts from non commercial sources of energy to commercial sources is clearly spelt out. It is only in the perspective of such a long term plan that a view about priorities and relative emphasis on use of petroleum based energy vis-a-vis coal and hydro based energy will emerge and will have to be pursued right from now through the Eighth Plan. While planning for energy development, equal emphasis will have to be given to improving the performance of the existing plants by enforcing higher efficiency norms. It should always be remembered that substantial improvement in the plant load factor can itself bring about sizeable additional electricity. Greater emphasis on developing non-conventional energy and on energy saving practices is also required.

1.4.28 The goals in the energy sector, inter alia, envisage elimination of power shortages in different parts of the country, achievement of a minimum hydel share of 40 per cent in the total installed capacity by the end of the Ninth Plan, restraining the growth in consumption of petroleum products without hampering economic development, elimination of the flaring of associated natural gas, stepping up the levels of output of coal and lignite, promotion of cost-effective technologies for the development of renewable and non- conventional energy resources and enlargement of the coverage of Integrated Rural Energy Project.

1.4.29 In the transport sector, the goals include strengthening of the road network, improvement of the condition of the existing roads, entry of the private sector in road transport, removal of all potential bottlenecks to smooth flow of railway traffic on trunk routes, stepping up of the pace of electrification of railways, creation . of adequate air cargo and shipping capacity, strengthening of the container network and development of inland waterways.

1.4.30 In the sphere of irrigation, the main objectives are to reduce time and cost overruns in all major and medium irrigation projects, step up irrigation efficiency levels, reduce losses on irrigation projects by recovering costs through higher irrigation rates and arrears collection, and expand installation of modern irrigation devices like drip etc.

Science and Technology

1.4.31 Science and Technology efforts would have to be deployed widely to cover all the basic areas of development. The constraints of basic resources like land, water, minerals and sources of energy can be overcome only by productivity-raising innovations. The strategy for S and T development would be as follows:

  1. Laying greater emphasis on scientific and technological content of all programmes in the socio-economic sectors;
  2. Giving priority to implementation of pro-gr;;Times having most direct impact on society;
  3. Identifying and implementing national technology missions and S and T projects in a mission mode in selected areas;
  4. Aiming at improving the quality of S and T education and training at all levels;
  5. Providing for a significant thrust in selected areas of advanced research to reach international levels;
  6. Ensuring, through fiscal incentives, that research is carried out by, and within, the production and service sectors;
  7. Accelerating the process of commercialisation of research to induce greater degree of purposiveness and better links between research and industry;
  8. Taking appropriate steps, all round, for moving into the age of information/telematics.
  9. Encouraging research and innovation in the tools and techniques of traditional occupations (i.e., agriculture and rural artisan-ship) and inducing widespread adaptation.

Environment and Forests

1.4.32 Environment, ecology and development must he balanced to meet the needs of the society. In the interest of sustainable development it would be necessary to take measures to preserve, conserve and nurture, the fragile and critical eco systems. There is a need for decentralised approach in this area as well, so that the environmental considerations are taken note of in every sector with a definition of the appropriate technology and environmental options while formulating programmes and projects.

1.4.33 Environmental management principally includes planning for sustainable use of resources, protection and conservation of ecological system by education, training and awareness. Cooperation of both governmental and non-governmental organisations should be called for at all stages if environmental movement is to achieve success. It can only be accomplished with the fullest cooperation of the people. Cleaning of important rivers such as the Ganga will have to be accelerated.

1.4.34 Forest conservation and development must aim at preservation of biological and genetic diversity in terms of fauna and flora and protection of forest cover from further degradation. At the same time, meaningful projects are to be developed to utilize wastelands and to make them productive.


1.4.35 The overall magnitude of the housing problem confronting the country, viewed over a span of 20 years from 1981 to 2001, is estimated to be 23.3 million dwelling units in terms of backlog and 63.8 million new dwelling units 1.omprising of 32.6 million in rural areas and the balance 31.2 million in urban areas to meet incremental housing needs.

1.4.36 The role of the Government in this area would be to create an enabling environment, to remove constraints to housing activity of various sections of the population, to promote a substantial increase in the supply of housing and basic services, to support standardisation and upgra-dation of the housing stock and to stimulate rental housing. The State would address specifically to the needs of the houseless, poorer households, SC/ST, women and other vulnerable groups. The long term objective is provision of "Shelter for All". Givsn the competing demands on available resources, however, the achievement on this score will inevitably need to he spread over a reasonable span of time.

Urban Development

1.4.37 The present urban pattern, its form, composition and distribution is such that, unless positive public interventions are made, the present differential and disparities cannot be mitigated. A well-coordinated strategy for promoting development of the small and medium towns, together with a strategy for a sus-tainahle and self- supporting nature of development of metropolitan cities, should form the focus of urban development strategy for the Eighth Plan. An Action Plan to operationalise the development strategy for small and medium towns should consist of strengthening the regulatory/ organisational base of urban local bodies and providing an appropriate investment package on related infrastructure and employment promoting activities. This may require pooling of programmes of different sectors.

1.4.38 Financing of metropolitan development should, in principle, he through internal resources and self-sustaining in nature.' However, significant efforts are required in terms of institutional strengthening, resource mobilisation and also legislative support.

The Public Sector

1.4.39 The public sector has numerous achievements to its credit. The development of our crucial infrastructure sector has been pioneered by PSUs. Many other vital segments of the industrial sector have also been built up by public enterprises. The public sector has contributed richly to the widening and diversification of our industrial structure. The public sector will continue to perform a key role in the coming years. However, certain critical weaknesses that are now apparent will have to be addressed to. The public sector, as envisaged by Jawaharlal Nehru, was to contribute to the growth and development of the nation by providing surplus reinvestible resources. This has not happened as it should have. Many PSUs make substantial losses and have become a continuing drain on the exchequer, absorbing resources which are withdrawn from sectors where these are desperately needed to achieve other developmental goals. Apart from the fact that the present fiscal situation does not permit any more accumulation of unsustainable losses, there is also the fact that many loss making PSUs do not serve the goal for which they were set up.

1.4.40 It is clear that a strong and vibrant public sector cannot be one with financially weak foundations. For the public sector to perform the role expected of it in the 90s, the issue of loss making public sector enterprises will have to be squarely addressed. A policy of the Government meeting the cash losses of so many enterprises for all times to come is just not sustainable. This prevents scarce resources from being used in high priority social sectors or in economic activities that promise a return. Efforts must be made to restructure and revitalise public sector units which are potentially viable through infusion of new technology, rationalisation of labour and even infusion of resources for diversification or modernisation. Equally, patently unviable PSUs may have to be closed down with suitable social safety net mechanisms, including retrenching and redeployment, being devised to protect the interests of workers. It should be recognised that in many cases the very rationale of the public sector entering certain industrial areas needs to be re-examined. There may have been very good reasons in the past for the public sector to tak-the initiatives in industrial areas where the private sector would ordinarily either not enter or would hesitate to do so. This may not be- the case today and the restructuring of the public sector would essentially entail vacating such areas for private sector initiatives in coming years. Recent Government policies have already vacated large areas for private sector initiatives and this process of restructuring and reform would need to be carried further.

1.4.41 The public sector plan will have to become very selective in the coverage of activities and in making investments and should clearly define its objective principles. The following principles will have to be followed:-

  1. The public sector should make investments only in those areas where investment is of an infrastructural nature which is necessary for facilitating growth and development as a whole and where private sector participation is not likely to come forth to an adequate extent within a reasonable time perspective;
  2. The public sector may also withdraw from areas where no public purpose is served by its presence. The public sector should come in where the investment is essentially for preservation and augmentation of basic resources of the country, like land, forest, water and ecology, science and technology or for running key infrastructural activities. The public sector will have responsibility for meeting social needs or for regulating long-term interests of the society like population control, health, education, etc.
  3. In large parts of public sector operations where commodities or services are produced and distributed, unless it is necesary for protecting the poorest in the society, the principle of market economy should be accepted as the main operative principle. It means charging as per cost and costing with full efficiency in operations.

1.4.42 The process of adjustment and restructuring in Indian industry is bound to create some apprehension because of its implication for labour. The social cost of adjustment cannot be borne by labour alone. Institutions which provide a suitable safety net to mitigate the burden of adjustment should be created. Efforts must be made to avoid retrenchment wherever possible through mergers and suitable redeployment. Where retrenchment is unavoidable, it is essential to explore all possibilities of reabsorbing labour productively by effective re-training schemes and schemes to promote self-employment. All this must be accompanied by suitable mechanism for providing generous compensations.

Building Up People's Institutions

1.4.43 Our experience of development planning has shown that developmental activities undertaken with people's active participation have a greater chance of success and can also be more cost-effective as compared to the development activities undertaken by the Government where peole become passive observers. The non-involvement of people has also led to the implantation in them of an attitude of total dependence on government for everything so that there has been a lack of effort by the people and lack of accountability to the people in the system of administering developmental schemes.

1.4.44 In the Eighth Five Year plan, it is necessary to make development a people's movement. People's initiative and participation must become the key element in the whole process of development. A lot in the area of education (especially liteacy), health, family planning, land improvement, efficient land use, minor irrigation, watershed management, recovery of wastelands, afforestation, animal husbandry, dairy, fisheries and sericulture etc. can be achieved by creating people's institutions accountable to the community. Therefore the focus of attention will be on developing multiple institutional options for improving the delivery systems by using the vast potential of the voluntary sector.

1.4.45 Importance of decentralised local level planning and poeple's participation has been recognised. Yet results achieved so far have not been very impressive. In this plan, therefore a new direction is being given to achieve these objectives. So far, the approach to people's participation consisted in programme- based

strategies. In addition to such programmes the Planning Commission has now worked out institutional strategies which will mean creating or strengthening various people's institutions at the district, block and village level's so that they synthesise the purpose of investment envisaged in the Plan with optimisation of benefits at the grass-roots level by relating these programmes to the needs of people. This can only be achieved through the collective wisdom of the community combined with the latest know-how available. This work is promarily to be undetaken through NGOs with the support of Government.

1.4.46 Various models of people's institutions have been functioning successfully in the country. Studies show that effective institutions have the following essential ingredients:

  1. They are owned and managed by the users/stake holders, producers or beneficiaries themselves;
  2. They are accountable to the community;
  3. They have the capacity to become self-reliant over a period of time;
  4. They have the capacity to diagnose the needs of the areas, inter-act with the governmental agencies in order to draw need-based local level plans and to implement those plans in close cooperation with the adminstration; and
  5. They tend to bring about integration of various segments of the society for the achievement of common goals of development.

1.4.47 The role of the government should be to facilitate the process of people's involvement in developmental activities by creating the right type of institutional infrastructure, particularly in rural areas. These institutions are very weak particularly in those States where they are needed the most for bringing about an improvement in the socio-demographic indicators. Encouraging voluntary agencies as well as schools, colleges and universities, to get them involved in social tasks and social mobilisation, strengthening of the Panchayat Raj institutions, peorien-tation and integration of all the village-level programmes under the charge of the Panchayat Raj institutions, and helping the cooperatives to come up in the organisation and support of local economic activities, for example, are some of the steps which the Government must earnestly initiate. A genuine push towards decentralisation and people's participation has become necessary.

The Role of Planning

1.5.1 In the background of our experience of planning for development over the last forty years and under the strong imperatives for change as they have emerged now, it is quite pertinent to ask the question : "What will be the role of planning in future ?" In order to answer this, one has to see the nature of planning in India and what is expected from it in future.

1.5.2 When the term "planning" was, for the first time, officially defined in the First Five Year Plan document the term used was "democratic planning" as distinct from a "plan based on regimentation". The centralised planning of the type practised in socialist economies did not exist in India, ever. In practice, the market has determined allocations in a major segment of the economy. Public sector, of course, has expanded with a wide ranging influence on the economic life of the nation. The lack of cost consciousness of the public sector, its increasing ineffectiveness in achieving the targets and depletion of its resources crippling its ability to carry on its activities without high-cost borrowing have compelled us to define and limit its role and lay down the objective principles of its operations. It has also been discussed in the foregoing that the process of planning and the pattern of Government activities followed hitherto have dampened people's initiatives and their sense of responsibility towards building the nation. The process of planning needs to be corrected in this respect.

1.5.3 As a corollary to this, the role of Planning Commission needs to be redefined. It has to play an integrative role in developing a holistic approach to the policy formulation in critical and inter-sectoral areas of human and economic development. In the social sector, schemes have to be subjected to coordinated policy formulation. The existing multiplicity of agencies is not only wasteful but also counter-productive because of the long repetitive procedures and the diffusion of authority involved. An integrated approach can lead to better results at much lower costs.

1.5.4 So far, resource allocation has been the predominant role of the Planning Commission. This has to change. Instead of looking for mere increases in the Plan outlays we should look for increases in the efficiency of utilisation of the allocations being made and the prospects of a return on the investments. The Planning Commission has to play a mediatory and facilitating role among States and sometimes Central Ministries to manage the change smoothly and create a culture of high productivity cost efficiency and sound financial discipline in the Government. Through clear identification of goals and prior-itisation of schemes, efforts will be made to reduce bottlenecks, making higher rates of growth possible. If each sector can plainly see what is expected of it, then it can gear itself up to meet the set targets.

1.5.5 Planning in our country still has a large role to play. Planning is needed for creating social infrastructure and for human development. We need to build schools, hospitals institutions of excellence and scientific research. We have to plan and structure the system of education to cultivate necessary calibre, skills and value systems. Private sector participation in these efforts, within the framework of nationally desirable objectives and goals, will be welcome. But the private sector, as yet, is not capable of taking care of the entire needs of the society, particularly of the poor and the weak, in remote and the rural areas. Market mechanism may be able to bring an equilibrium between "demand" (backed by purchasing power) and supply even in this sphere, but market mechanism will not be able to bring a balance between the "need" and the supply. Therefore planning in this area will remain important.

1.5.6 Planning is necessary to take care of the poor and the downtrodden who have little asset endowments to benefit from the natural growth of economic activities. Poverty alleviation programmes have definitely helped in reducing poverty and generating employment. A vision about the structure and the pattern of future growth is important also for its implications for the rate at which employment can be generated in future.

1.5.7 The removal of large disparities in development between regions requires flow of resources across regions. The experience has shown that market forces have not achieved this in adequate measure. Planning process has to manage the flow of resources across regions for accelerated removal of regional disparities. At present, the Plan does provide for special area programmes such as the Hill Area Plan, Tribal Areas Plan and other schemes for backward areas. While these programmes aim at creating a basic infrastructure, the backlog of development is large and considerable efforts are to be made for integration of such regions into the mainstream of economic activity in the country.

1.5.8 Planning and more particularly public sector investment will have a major role to play in strengthening the physical infrastructure, i.e., energy, transport, communication and irrigation, etc., in order to support the growth process on a sustainable basis.

1.5.9 Obviously there are areas in which markets cannot play an allocative role. Market mechanism is never adequate for protecting environment, forests and ecology. Nor is it adequate in giving guidance about the use of scarce resources like, rare minerals, land and water. A long term perspective, and hence planning, is needed in these areas.

1.5.10 Planning and market mechanism should be so dovetailed that one is complementary to the other. Market mechanism must serve as an "efficiency promoting device", while planning will be the larger guiding force, keeping the long term social goals in the perspective.

1.5.11 So long as public sector investment is a significant proportion of the total investment, planning in so tar as it relates to the public sector has to be detailed, setting forth not only the objectives but also examining the alternatives and identifying specific projects in the various sectors. Besides, the pian of the Centre will have to be appropriately linked with the State Plans as both the Centre and the States have responsibilities in almost all areas. All this is analogous to corporate planning. For the rest of the system, however, the Plan will be indicative outlining the broad directions in which the economy should be growing. The Plan will, therefore, consist of (a) providing a vision of the future, (b) constructing medium term economic projections for the entire economy, (c) evolving a system of information pooling and dissemina-tion, (d) identifying areas of development where the country has strengths or where the country needs to build up strengths, (e) evolving appropriate policy measures to achieve the desired goals, and (f) ensuring a degree of consensus in the system through meaningful dialogue with v social partners' of the Government, namely, the farmers, the trade unions, the business group, etc. In a more deregulated environment, policy formulation and coordination will assume greater importance.

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