In this article we will discuss about the Eleventh Five Year Plan in India. After reading this article you will learn about: 1. Subject-Matter of Eleventh Five Year Plan 2. Approach Paper of the Eleventh Plan 3. Background of Development 4. Issues and Priorities of the Eleventh Plan 5. Vision, Objectives and Targets of the Eleventh Plan and Others.
Subject-Matter of Eleventh Five Year Plan:
The draft of the Approach Paper of the Eleventh Plan was presented by the Planning Commission in January 2006. On the basis of the observations made by the National Development Council (NDC), the Commission prepared the final version of the Approach to the Eleventh Plan entitled “Towards faster and More Inclusive Growth”
The Planning Commission, in its full meeting, held on 18th October, 2006 unanimously approved this final draft of the Approach Paper of the Eleventh Five Year Plan (2007-2012) for placing the same at the meeting of National Development Council (NDC).
Again the National Development Council (NDC) in its 52nd meeting held on 9th December 2006 finally approved the Approach paper for the Eleventh Five Year Plan setting an ambitious target of 10.0 per cent growth rate to be attained by the end of the Eleventh Plan.
In the meeting of the Planning Commission, Chairman of Planning Commission, Prime Minister Manmohan Singh stated that the Eleventh Plan is going to be historic in many ways………………………… we could have not asked for a better part……………. we would be finally emerging into the front ranks of fast growing developing countries.
While listing out the strength of the economy including buoyant FDI flows, moderate inflation, a comfortable external position as also current account deficit and foreign exchange reserves, Dr. Singh stated that “This is the first time since the planning process began that we will be aiming for a growth rate of 10 per cent in the final years of the plan.”
Such high growth rate is based on a prescription encompassing doubling of farm growth and massive employment generation.
Accordingly the Planning Commission envisaged seven crore new jobs during the Eleventh Plan period and doubling of per capita income in 10 years—a feat that would greatly reduce poverty and result in “inclusive growth”. Such achievements would make the growth process more inclusive, but require the economy to grow at 10 per cent by the end of Eleventh Five-year Plan.
In order to reduce the number of people living in poverty, the Planning Commission suggested doubling the per capita income in the next ten years, which would require achieving 10 per cent economic growth rate by the end of Eleventh Plan and sustaining it through Twelfth Plan.
The Planning Commission feels that if these targets are achieved it would result in reducing the number of people living in poverty by 10 percentage points by the end of Eleventh Plan.
The Commission gave special emphasis on the social sector development. Accordingly, the Commission is of the view that a Central part of the vision of the Eleventh Plan must be to extend access to essential public services such as health, education, clean drinking water, sanitation among others, which are again currently denied to large parts of the population of our country.
Approach Paper of the Eleventh Plan:
The Approach Paper of the Eleventh Plan was unanimously approved by the National Development Council in its meeting held on 9th December, 2006. The Planning Commission, in its Approach Paper, has set an ambitious target of 9.0 per cent annual average growth rate in gross domestic product during the Eleventh Plan and to achieve a 10 per cent economic growth target by the end of the Eleventh Plan.
The approach paper focuses on the need for revamping of resource structure and also for reorienting expenditure management so as to achieve its other targets set for the Eleventh Plan, especially with regard to agricultural development, reducing the number of people living in poverty by 10 percentage points, reduction of gender gaps and raising the sex ratio, reduction of unemployment through growth related infrastructural and social sector development programme.
The Approach paper of the Eleventh Plan has given higher priority on more broad-based and inclusive growth with a special thrust to—reduces poverty, create employment opportunities, reduction of gender gaps, raising literacy and target robust agriculture growth at 4 per cent annually, so as to reformulate the strategy related to these breeding factors.
Background of Development:
The Eleventh Five Year Plan (2007-12) is being prepared against backdrop of high expectations arising from some aspects of the recent performance of the economy along with some long drawn problems faced by the economy of the country.
The Approach Paper of the Eleventh Plan mentioned that “the Indian economy on the eve of Eleventh Plan is in a much stronger position than it was a few years ago. After slowing down to an average growth rate of about 5.5 per cent in the Ninth Plan (1997-2002), it has accelerated in recent years and the average growth rate in the Tenth Plan period (2002-07) is likely to be 7 per cent. This is below the Tenth Plan target of 8 per cent but it is the highest growth rate achieved in any plan period.”
“While this performance reflects the strength of the economy in many areas, it is also true that large parts of our population are still to experience a decisive improvement in their standard of living. The percentage of the population below the poverty line is declining, but only at a modest pace. Far too many people still back access to basic services such as health, education, clean drinking water and sanitation facilities without which they cannot be empowered to claim their share in the benefits of growth. These problems are more severe in some states than in others, and in general they are especially severe in rural areas.”
a. Strength of the Economy:
The strengths of the economy are well known and are reflected in the macro-economic indicators of the country at the end of Tenth Plan as compared with that of Ninth Plan. The growth of the economy has accelerated compared with the Ninth Plan and our macroeconomic fundamentals are sound at this moment. Domestic savings rate have been rising and had reached 32.4 per cent of GDP in 2005-06.
The combined fiscal deficit of the Centre and State Governments is higher than it should be, but has been falling and the Budget estimates for 2006-07 suggest it may be down to 7 per cent. Inflation has been moderate, despite the sharp hike in international oil prices. The current account was in surplus during the first two years of the Tenth Plan and turned into a deficit to the extent of 1.0 per cent of the GDP in 2004-05.
The deficit is estimated to have risen to around 1.3 per cent of the GDP in 2005-06. This reflects the revival of investment and also the impact of high oil prices, but a deficit of this order is eminently financeable. The foreign exchange services are at a very comfortable level of $ 165.3 billion as on August 25, 2006.
An important source of strength is that the economy has matured in several important respects responding to the economic reforms implemented by successive governments over the past two decades. Our economy is now much more integrated with the world economy and has benefitted from this integration.
The outstanding success of IT and IT—enabled services (ITES) first demonstrated what Indian skills and enterprise could do, given the right environment. Similar strength is now evident in other sectors also such as pharmaceuticals, auto components and more recently even textiles.
Another important benefit derived from global integration is the increased flow of foreign direct investment. FDI increased from an average of $ 3.7 billion in the Ninth Plan period to average of $ 5.4 billion in the first four years of the Tenth Plan.
This is still below our potential. The NCMP stated that the country needs and can absorb three times the amount of FDI that it gets. This remains a reasonable target and can be achieved in the Eleventh Plan.
In the longer run we have another important potential strength arising from our demographic trends. Our dependency rate (ratio of dependent to working age population) is falling whereas it is rising in industrialized countries and even in China.
Properly handled, with an emphasis on human resource development and an economy capable of absorbing them in productive employment, the presence of a skilled young population in an environment where investment is expanding and the industrial world ageing would be a major advantage.
b. Disparities and Divides:
The Approach Paper of the Eleventh Plan has also mentioned about the problem of disparities and divides faced by the country. We must also deal with broader perceptions that development has not only failed to bridge the divides that afflict our country, it may even have sharpened some of them. The Eleventh Plan must seek to bridge these divides as an overarching priority.
There are many divides, all of which are demanding equal attention. Foremost among these is the divide between rich and poor. To address this problem the pace of poverty reduction must be accelerated.
There is also dividing between those who have access to essential services and those who do not, which leads to large disparities in health and nutritional status, in education and skills, as also in availability of clean water and sanitation.
There are also excluded groups in our society such as SCs, STs and OBCs and some minorities who continue to lag behind the rest. Another important divide is the gender discrimination which is reflected by declining sex ratio, literacy differential between girls and boys and the high rates of maternal mortality.
Special, focused efforts must be made to address this problem by empowering the economic and social status of women.
The divide between urban and rural India has become a truism of our times. The Central Government has adopted a multi-pronged strategy to reduce this divide in its various dimensions. These include Bharat Nirman, NREGA, SSY, NRHM etc. All these programmes are meant to give a new deal in rural India.
Regional backwardness is another issue of concern. The differences across states have been a cause of concern but increasingly there is recognition of the problem of severe imbalances within states. There are evidences of intra-state imbalance and neglect.
The Centre and the states together must deal with the problem on a priority basis. The Backward Regions Grant Fund provides a new instrument to deal with this problem.
Issues and Priorities of the Eleventh Plan:
Finalization of issues and priorities is considered as an important part of formulation of plan. Considering the condition of the economy prevailing, the Eleventh Plan has finalised its issues and priorities in the following manner:
1. Important Issues: Sustainable and Inclusive Growth:
Presently the economy of the country appears to have decidedly taken off and moved from a phase of moderate growth to a new phase of high growth. In order to move from a rapid growth to a sustained high growth trajectory it requires careful consideration of two issues i.e., the sustainability of high growth with moderate inflation and the inclusive nature of such high growth.
The first issue is of sustainability of high growth and running into high inflation. Presently various indicators suggests that the current growth phase is sustainable.
Firstly, higher growth of the economy together with the demographic dividend in the form of growing proportion of the population in the working age group is likely to enhance the savings rate for financing more investment.
Secondly, improvements of efficiency in the economy since 1999-2000 reinforce the confidence in high growth phase.
Thirdly, opening up of new avenues in services, beyond the already well known IT and ITES will bloster the confidence in the new high- growth phase.
Fourthly, rapid growth in capacity addition through investments can solve the problem of capacity constraints.
Fifthly, infrastructure of the country appears to be improving presently and the signs of tangible progress is visible in areas like power, roads, airports and ports.
The second issue is related to the nature of this high growth in terms of inclusiveness. Putting more people in productive and sustainable jobs lies at the heart of inclusive growth. However, success in achieving inclusive growth will depend on the success in attaining and maintaining high growth.
Moreover, the inclusive nature of growth itself will be conditioned by the progress that is made in the areas of education, health and physical infrastructure.
2. Priorities of the Eleventh Plan:
At the moment, the economy of the country, while finalising its Eleventh Plan, finalised three important priorities. The first priority is to rise to the challenge of maintaining and managing high growth. Fostering the momentum of growth in India continues to be a top priority. By adopting appropriate policies, it is possible to maintain and manage high growth without inflation.
The second priority is bolstering the twin pillars of high growth, i.e., fiscal prudence and high investment. The experience of growth during the past few years has clearly demonstrated the benefits of fiscal prudence along with FRBMA lines. Moreover, policies have to be designed in a flexible manner for enhancing investments in the economy to lay a robust foundation for growth.
Here we need investment, both public and private, domestic and foreign.
The third priority is improving the effectiveness of government intervention in critical areas especially in the social sector. Accordingly, the goal of attaining inclusive growth can be achieved only through effective government intervention in the areas of education, health and support to the needy, through proper designing and monitoring of the programme.
Thus the Economic Survey, 2006-07 rightly observed, “A sense of optimism characterizes the current economic conjuncture. Fostering the momentum of growth continues to be a top priority. Sustainability of such growth will depend on carefully calibrating policies to tame inflation without dampening growth, formulating appropriate supply-side measures, particularly in agriculture; better design and more effective delivery of social services, such as education, health and poverty alleviation, to make the growth more- inclusive; putting fresh impetus behind infrastructure.”
Thus the priority areas of the Eleventh Plan were shortlisted as agriculture, irrigation, health, education, poverty alleviation and schemes for the backward sections of population.
Vision, Objectives and Targets of the Eleventh Plan:
The Planning Commission has finalised the vision and objectives of the Eleventh Plan keeping in Conformity with the National Common Minimum Programme (NCMP) of the UPA Government. The draft Approach Paper of the Eleventh Plan has outlined its vision and objectives in the following lines.
The Eleventh Plan provides an opportunity to restructure policies to achieve a new vision of growth that will be much more broad based and inclusive, bringing about a faster reduction in poverty and helping bridge the divides that are currently the focus of so much attention.
The first steps in this direction were initiated in the middle of the Tenth Plan based on NCMP adopted by the Government. These steps must be further strengthened and consolidated into a strategy for the Eleventh Plan.
Rapid growth has to be an essential part of the strategy since it is only in a rapidly growing economy that we can expect to raise incomes of the masses sufficient to bring about a general improvement in linking conditions. Fortunately, the growth objective is now more achievable than it has ever been.
Work done by the Planning Commission and elsewhere suggests that the economy can grow between 8 per cent and 9 per cent on a sustained basis provided appropriate policies are put in place. With population growing at 1.5 per cent per year, this would ensure that the real income of the average Indian would double in ten years.
It is also possible to adopt policies that will ensure that this growth is broad-based, benefitting all parts of the county, and especially the rural areas. This must be accompanied by a major effort to provide access to basic facilities such as health education, clean drinking water etc. to large parts of our population which do not have such access at present.
Governments at different levels must ensure provision of these services. Improved levels of health and education are in fact critical inputs that determine the growth potential in the longer term. Even if we succeed in achieving broad based and inclusive growth, there are many groups that may still be marginalized.
These include primitive tribal groups, adolescent girls, children in the age group 0 to 3 and others who do not have strong lobbies to ensure that their rights are guaranteed. The Eleventh Plan must pay special attention to the needs of these groups.
The private sectors, including farming, small scale enterprises and the corporate sector, has a critical role to play in achieving the objective of faster and more inclusive growth. This sector accounts for 70 per cent of the total investment in the economy and our policies must aim at creating an environment in which entrepreneurship can flourish.
However, it will also call for a substantial increase in the allocation of public resources for plan programmes in critical areas. These resources will be easier to mobilise if the economy grows rapidly. The growth component of its strategy is therefore important for two reasons:
it will contribute directly by raising income levels and employment for the population in general and it will also help to finance programmes that are necessary to ensure that growth is more broad based and inclusive.
There is need for self critical look at our programmes and policies to see what is working and what is not. Programmes designed to achieve particular objectives often fail to do so even though substantial expenditure may be incurred on them.
We need to move away from a focus on outlays to a hard look at outcomes. Thus the Approach Paper suggests a broad Approach to tackling this problems in the Eleventh Plan by building on our strengths and countering the weaknesses of our economy.
Objectives of the Plan:
Thus the declared objective of the Eleventh Plan is “Faster and More Inclusive Growth”. The Approach Paper of the Eleventh Plan states that the Plan “will aim at putting the economy on a sustainable growth trajectory with a growth rate of approximately 10 per cent by the end of its period.”
Other objectives of the Plan are:
(a) Growth of 4 per cent in the agricultural sector,
(b) Faster employment generation,
(c) Reducing disparities across regions and
(d) Ensuring access to basic physical infrastructure as well as health and education services to all.
Monitor-Able Targets of the Plan:
Approach Paper of the Eleventh Plan has finalised following targets to be achieved during the plan:
(i) To attain faster annual average growth rate of 9 per cent in GDP so as to reach 10 per cent growth rate by the end of the plan.
(ii) To attain more inclusive growth so as to spread the benefits of development to all sections of people.
(iii) To attain 4 per cent growth in Agriculture.
(iv) To reduce the educated unemployment rate below 5 per cent.
(v) To arrange Electricity for all by 2009.
(vi) To arrange telephone services in all villages of the country by November 2007.
(vii) To improve the sex ratio or male-female ratio at the earliest.
(viii) To ensure access to basic physical infrastructure as well as health and education service to all.
(ix) To ensure all weather road connection to all habitation with population 1,000 and above (500 in hilly and tribal areas) by 2009, and ensure coverage of all significant habitation by 2015.
(x) To create 70 million new work opportunities.
(xi) To increase literacy rate for persons of age 7 years or more to 85 per cent.
(xii) To lower gender gap in literacy to 10 percentage points.
(xiii) To reduce infant mortality rate (IMR) to 28 and material mortality rate (MMR) to 1 per 1000 live births.
(xiv) To reduce total fertility rate (TFR) to 2.1.
(xv) To provide clean drinking water for all by 2009.
Financing of the Eleventh Plan:
The NDC in its 52nd meeting on December 9, 2006 approved the Approach Paper to the Eleventh Plan setting a “faster, more broad-based and inclusive” growth at the average annual rate of 9 per cent for the five years starting from 2007-08.
In order to fulfil this growth objective it requires a substantial increase in the allocation of public resources for plan programmes in critical areas; including education, health, agriculture and infrastructure.
It also requires an improvement in government savings from around (-) 1 .5 per cent of GDP in 2005-06 to at least + 1.0 per cent to support-without a balance of payment problem—an increase in the total investment rate (as proportion to GDP) from 30.1 per cent in 2005-06 to 35.1 per cent on average during the Eleventh Plan.
The Paper also “Call for additional public sector plan expenditure about current levels, of about 1 percentages point of GDP in 2007-08, rising to about 2.5 percentage points of GDP in 2011-12.”
The Approach Paper notes that “Preliminary exercises suggest that the fiscal deficit reduction in the Eleventh Plan period to attain FRBM target will be achieved consistent with an increase in GBS for the Plan by 2.3 percentage points of GDP for the Plan period as a whole. This would require an adjustment through lower non-plan expenditure or additional taxation by around 0.2 percentage points of GDP. However, meeting the fiscal deficit target will limit the scope for increasing plan expenditure in the first two years unless the reduction in non-plan expenditure can be significantly front loaded.”
Thus for proper financing of the Eleventh Plan, the Planning Commission suggested that the government needs to increase tax revenue, slash subsidies and impose user charges on public services to fund investment in key areas like infrastructure, irrigation for higher economic growth in the next five years.
In its Approach Paper, the Planning Commission states that even if the twin approach to raise tax revenue and prune non-plan expenditure by curtailing subsidies is successful, it may not be easy for the Centre to eliminate revenue deficit by 2008-09 as per FRBM target.
The Commission also pointed out that large investments in infrastructure, irrigation, education and healthcare would require an increase in budgetary resources for the plan from an average of 7.15 per cent of GDP in the Tenth Plan to an average of around 9,7 per cent in the Eleventh Plan.
Thus the resources needed for this purpose can be mobilised by an increase in tax revenue through improvement in tax administration and tax compliance and fall in non-plan expenditure, including explicit and hidden subsidies.
Growth Targets and Macro-Economic Indicators of the Eleventh Plan:
The Approach Paper of the Eleventh Plan approved in the 52nd meeting of NDC on December % 2006 finalised its growth targets. Accordingly, the Approach Paper observed that the task of achieving an average growth rate of 9.0 per cent in the Eleventh Plan is macro-economically feasible with a strong fiscal effort and is difficult but not impossible.
It is, therefore, proposed that the target growth rate for the Eleventh Plan be placed at 9.0 per cent per annum.
Considering the growth scenario attained during the last four year of the Tenth Plan, it seems that the present momentum will push the economy towards attaining annual average growth rate of 9.0 per cent during the Eleventh Plan (2007-12) and also put the economy on a sustainable growth trajectory with a growth of approximately 10 per cent by the end of the plan period.
The key macro-economic values as finalised in the Approach Paper consistent with a growth target of 9.0 per cent are presented in the Table 11.9.
Table 11.9 reveals macroeconomic indicators for the Tenth Plan and also the projected rates for the Eleventh Plan. The annual growth rate of GDP for the Eleventh Plan is projected at 9.0 per as compared to that of 7.2 per cent during the Tenth Plan.
The growth rates of agriculture, industry and services sector are projected at 4.1 per cent, 10.5 per cent and 9.9 per cent respectively for the Eleventh Plan as compared to that of 1.7 per cent, 8.3 per cent and 9.0 per cent respectively attained during the Tenth Plan.
Moreover, the investment rate as per cent of GDP in projected at 35.1 per cent for the Eleventh Plan as compared to that of 27.8 per cent during the Tenth Plan. The projected saving rate as per cent of GDP is estimated at 32.3 per cent for the Eleventh Plan period as compared to that of 28.2 per cent during the Tenth Plan.
Besides, for the Eleventh Plan, the current account balance is estimated at (-) 2.8 per cent of GDP, government revenue balance at (-) 0.2 per cent of GDP and the government fiscal balance is estimated at (-) 6.0 per cent of GDP.
Eleventh Plan’s Policy and Approach towards Sectoral Development:
Simultaneous development of various sectors is quite important for attaining sustainable growth. Thus framing a proper policy for sectoral development under the Eleventh Plan has become very much crucial. The Approach Paper of the Eleventh Plan is also stated that the transition towards faster and more inclusive growth calls for significant new initiatives in many sectors.
In some, we need to build on policies that is Working Well but need further strengthening in Critical areas to build the additional momentum needed. In others, we need a more comprehensive restructuring since it is evident that business as usual will not meet the purpose. It would now be better to study the sectoral policy initiatives undertaken under the Eleventh Plan.
Eleventh Plan’s Approach towards Agricultural Sector:
Although the agricultural sector of the country is having a great potential but the growth rate of the sector is very low. The greatest challenge before the Eleventh Plan is to double the growth rate of agriculture so achieved in the Tenth Plan. This will require steps both on the demand side as well as the supply side.
On the demand side there is evidence that farmers face adverse demand conditions. Not only the agricultural growth has been low in the last decade but the prices received for the agricultural products have also failed to keep pace with the costs or the general price level and as a result profitability of the sector has declined.
The Approach Paper of the Eleventh Plan is of the view that some of the steps already taken such as introduction of National Rural Employment Guarantee Programme (NREGP) along with expansion of public sector schools and health facilities would directly and indirectly generate demand support for agriculture.
Moreover, improved rural connectivity envisaged through Bharat Nirman can also trigger growth of an integrated national market where rural areas are more able to meet each other’s demand.
Such expanded rural—rural trade is likely to be important in the initial years along with other efforts of demand support such as promoting agricultural exports, or strengthening support to agricultural diversification for domestic processing which are likely to attract private corporate investment into rural areas.
The supply side challenge of doubling agricultural growth is also formidable. This is mainly because no dramatic technological breakthrough comparable to the green revolution is presently visible. We are also not initiating or exploiting the potential of existing technology.
In fact, most of the growth required in cereals, pulses and oilseed is possible merely through plausible yield increase in currently low yield regions untouched by green revolution.
The National Commission on Farmers has also drawn attention to the knowledge deficit which constrains agricultural productivity. In order to overcome this problem farmer will need effective links to universities and best practices through a good extension system. The problem of lack of credit facilities needs to be addressed.
Accelerated agricultural growth will require diversification into horticulture and floriculture, effective marketing linkages supported by modern marketing practices adopted through grading post-harvest management, cold-chains, etc. to be established for expanding domestic market and also the export market. There is also the need for risk management through expansion of crop insurance.
The government must devise the viable policy packages to cover all agro-climatic zones. There is also the need for stimulating agricultural research to address the newer and more formidable challenges. The contract farming is a potentially effective way of attracting corporate investors to help establish linkages with markets and also provide farmers with necessary inputs, extension and other support and advice.
Moreover, there is also need for better water management and effective irrigation facilities. Watershed management, rainwater harvesting and ground water recharge can also help in augmenting water availability in rainfed areas. Side by side, there is also the need for developing animal husbandry and fishery activities to revive agricultural dynamism.
However there is urgent need for taking agriculture into a higher growth trajectory of 4 per cent annual growth and such target can only be met with improvement in the scale as well as of quality of agricultural reforms undertaken by the various states and agencies at the various levels.
These reforms must aim at efficient use of resources and conservation of soil, water and ecology on a sustainable basis and in holistic framework which must incorporate financing of rural infrastructure such as water, roads and power.
The Approach Paper to the Eleventh Plan has aptly highlighted such holistic framework and suggested the following strategy to raise agricultural output:
(a) Doubling the rate of growth of irrigated area;
(b) Improving water management, rain water harvesting and watershed development;
(c) Reclaiming degraded land and focusing on soil quality;
(d) Bridging the knowledge gap through effective extension;
(e) Diversifying into high value outputs, fruits, vegetables, flowers,, herbs and spices, medicinal plants, bamboo, bio- diesel, but with adequate measures to ensure food security; (f) promoting animal husbandry and fishery;
(g) Providing easy access to credit at affordable rates;
(h) Improving the incentive structure and functioning of market, if necessary, through state intervention for improving the prices of agricultural produce and
(i) Refocusing on land reforms issues. National Commission on Farmers has already laid the foundation for such a framework.
Moreover, R&D expenditure on agriculture in India is low by international standard despite its high social return. Increased R&D expenditure backed by modern technologies and compatible institutions must be focused in the coming years.
With proper implementation, the National Agricultural Innovation Project initiated in July, 2006 for enhancing livelihood security in partnership mode with farmers’ groups panchayati raj institutions and private sector would go a long way in strengthening basic and strategic research in frontier agricultural sciences.
Eleventh Plan’s Approach towards Industrial Sector:
Over last fifteen years the industrial sector has gained in strength as a result of liberalizing industrial controls and the gradual integration with the world economy. However, there are numerous constraints that limited the industrial performance which need to be addressed.
As stated in the Approach Paper to the Eleventh Plan, to “……………………. absorb all new entrants into labour force, non-agricultural employment would need to increase at over 6 per cent per annum during the Eleventh Plan. This poses as a major challenge not only in terms of generating non-agricultural employment but also in matching its required location and type.”
Thus generation of adequate employment is one of the crucial elements in the Eleventh Plan’s vision of “inclusive growth”. And this major target of employment generation in the non-agricultural sector is intimately linked with the growth of the industrial sector.
Thus, the Planning Commission has finally set the target of attaining 10.5 per cent annual average growth rate in the industrial sector during the Eleventh Plan and to attain this target, attainment of 12.0 per cent growth rate in manufacturing sector is necessary.
The most critical short term barriers to growth of the manufacturing sector are absence of world-class infrastructure and shortage of skilled manpower. The Eleventh Plan has given special emphasis on infrastructure and skill formation.
Moreover, in order to ensure the attainment of targeted growth rate of the industrial sectors, the crucial policy aspects which needs to be addressed are:
(a) Upgradation of infrastructure;
(b) An enabling fiscal structure with non-distortionary and internationally competitive taxes and duties;
(c) Technological modernisation and upgradation and building international partnership;
(d) Promoting infrastructure development in local areas such as of Special Economic Zones (SEZs);
(e) Amendment of labour laws and corporate laws to ensure greater flexibility;
(f) Progressive de-reservation of industries for SSI; enhanced accessibility to institutional credit;
(g) Creation of investment friendly climate by the state governments through a single window clearance of applications for establishment of industrial units;
(h) Promoting village and small industries (VSEs) by providing infrastructure and support services; and
(i) Identify and eliminate the constraints in the way of investments in mining activities.
Eleventh Plan’s Approach towards Infrastructural Sector:
Infrastructural facilities are very important for boosting developmental activities. Provisions of quality and efficient infrastructure services is quite essential to realise the full potential of growth impulses surging through the economy. But infrastructure inadequacies in both rural and urban areas are a major factor constraining India’s growth process.
The Approach Paper of the Eleventh Plan stated that “Preliminary exercises suggest that investment in infrastructure defined as road, rail, air and water transport, power generation, transmission and distribution, telecommunication, water supply, irrigation and storage will need to increase from 4.6 per cent of GDP to between 7 to 8 per cent in the Eleventh Plan period……………………. This will place a heavy burden on the public sector which will have to invest more in this area. Since public sector resources are scarce, an aggressive effort at promoting public-private partnership (PPPs) in infrastructure development will be needed.”
During the Eleventh Plan, an investment of Rs 14,50,000 crore or about US $ 320 billion would be required in infrastructure sector. These investments are to be achieved through a combination of public investment, public-private partnerships (PPPs) and exclusive private investments, wherever feasible.
Investment requirements by 2,012 estimated by the Committee on Infrastructure, headed by the Prime Minister in some of the sectors are Rs 2,20,000 crore for modernisation and upgradation of highways so as to include NHDP III to VII under the NHDP; Rs 40,000 crore for civil aviation; Rs 50,000 crore for ports; and Rs 3,00,000 crore (of which 40 per cent is expected to come from the private sector through PPP) for Railways.
In the power sector, NTPC and some state utilities have plans to go for adoption of 800 MW units during the Eleventh Plan. The Ministry of Power, Government of India has launched an initiative for development in coal-based Ultra-Mega-Power Projects (UMPPs). Nine sites have been identified by CEA in nine states for the proposed UMPPs.
The Government of India is also encouraging the use of hydel and wind energy sources which do not rely on fossil fuels and avoid carbon emissions. By the end of Eleventh Plan, a total of 650 million telephone Connection (including 66 million wired and 584 million wireless connections) are expected to be achieved.
In order to cope with massive problems related to rapid urban growth the Eleventh Plan has made substantial provision of funds for creating urban infrastructure under Jawaharlal Nehru National Urban Renewal Mission (JNURM).
Public Private Partnerships (PPPs):
The Eleventh Plan has also given importance on public-private partnerships (PPPs) mode in implementing the infrastructural projects on the basis of the principle of public interest.
This PPPs approach has been adopted by the Central Government for implementing projects related to roads, railways, airways, ports etc. State Governments are also advised to adopt a similar transparent approach for ensuring the success of PPPs projects in the infrastructure sector.
Eleventh Plan’s Approach towards Services Sector:
Services sector in India has been expanding at a considerable rate.
In this connection, the Approach Paper to the Eleventh Plan stated, “The Services Sector accounts for 54 per cent of GDP and is currently the fastest- growing sector of the economy, growing at 9 per cent per annum since the mid-1990s. This sector has the potential for creating 40 million jobs and generating additional $ 200 billion annual income by 2020. The sector has the unique opportunity to grow due to its labour cost advantage reflecting one of the lowest salary and wage levels in the world, coupled with a rising share of working age population. The Eleventh Plan must, therefore, put special focus on this sector so that its potential to create employment and growth in fully realized”.
The potential areas in the service sector which can contribute a lot towards employment and growth includes:
(a) Professional services,
(b) Construction powering and real estate,
(d) Retail trade and organised retail,
(e) Entertainment and media services.
Among all these services, the project of professional services is quite bright. The professional services include wide array, namely, IT services, customer relations management, health services, accountancy services, legal services, educational services, construction and engineering services, architectural and design services etc.
The Information and Communication Technology revolution has made it easy to provide such services all over the world and Indian professionals have made a mark in many fields leading India to being recognised all over the world as an important player in the knowledge economy.
India has attained a large, share of offshore market in this area with a 65 per cent share of global offshore IT services (i.e., outsourced software services) and 46 per cent of global business process off shoring (BPO) industry. Future prospects of IT/ITES sector along with tourism, housing and real estate etc. are quite bright in India.
Thus the planning commission in its Approach Paper to the Eleventh Plan gave due stress on these specific areas and set a target of attaining annual average growth rate of 9.9 per cent during the plan period as compared to that of 9.0 per cent attained during the Tenth Plan.
Eleventh Plan’s Strategic Initiatives for Inclusive Development and Social Sector Development:
The Planning Commission in its Approach Paper to the Eleventh Plan strongly advocated for more broad-based and inclusive growth with a view to reduce poverty, create employment and target robust agricultural growth at 4 per cent per annum. However, the key to achieve inclusive growth lies on providing basic facilities such as health, education clean drinking water and other basic facilities to the vast majority of the people.
The Approach States that “Along with Sectoral policies aimed at improving livelihood support and increasing employment, a strategy of inclusiveness and broad based participation in the development process calls for new emphasis on education, health and other basic public facilities. Inadequate access to these essential services not only directly limits the welfare of large sections of our population, but also denies them the opportunity to share fully in the benefit of growth. Indeed by limiting the quality of human resource development, it limits the growth process.”
Thus, the country should take necessary initiatives for attaining inclusive development along with social sector development.
Thus in order to attain inclusive development, the Eleventh Plan Approach Paper suggests following strategic initiatives:
(a) Empowerment through education:
By providing education to all children as they are capable of getting, irrespective of parent’s ability to pay, is quite important for empowerment of people. This would require continuation of Sarva Shiksha Abhiyan (SSA) at the elementary education in a most effective way by reducing dropout level and by increasing attendance through continuation of Mid-Day Meal Scheme.
In order to improve secondary education, the Eleventh Plan proposed to introduce SSA-2 to cover up to class X. This would also require expansion of technical/vocational education and skill development. Thus vocational training of both men and women has been accorded top priority in the Eleventh Plan.
Moreover, the higher education system also needs to be expanded in order to cover more people for enrolment. The Eleventh Plan has also given due importance on adult literacy programme to increase adult literacy to 85 per cent by the end of the plan.
(b) A comprehensive strategy for better health:
In order to improve the primary health care system, the Eleventh Plan will lay emphasis on integrated district health plans and later on block specific health plans which will ensure involvement of all health related sectors and emphasise partnership with NGOs. A seven year National Rural Health Mission (NRHM) which spans the duration of the Eleventh Plan has been launched to address infirmities and problems across rural primary health care.
(c) Clean water for all:
Clean drinking water is vital to reduce the incidence of disease and also to reduce malnutrition. The Eleventh Plan envisages provision of safe drinking water to all rural habitations. A major programme—”Accelerated Rural Water Supply Programme (ARWSP)” is being implemented since 1972-73 to achieve this objective.
With an investment of over Rs 66,000 crore, more than 4.2 million hand pumps and 2.1 lakh piped water schemes have been installed in the rural areas.
On April 1, 2006, 97.02 per cent of rural habitations were fully covered and 2.73 per cent were partially covered. Prior to Bharat Nirman, about 2.8 lakh habitations have slipped back from either fully covered category. Another 2.47 lakh habitations have problems with the quality of water, with about 60,000 habitations facing the serious problems of salinity or arsenic and fluoride contamination.
However, as on April 1, 2006 the problem of lagging states and contamination due to arsenic, salinity, fluoride, iron etc. in 1,95,813 habitations needs to be addressed on a priority basis. Under Bharat Nirman, it is also proposed to tackle the habitations that have slipped back or have problems with water quality. The Eleventh Plan must emphasise full and timely realisation of Bharat Nirman Targets.
Rural Sanitation is another basic problem which needs proper attention. With the launch of the Central Rural Sanitation Programme in 1986 followed by Total Sanitation Campaign in 1999, 540 districts are covered and about 35 per cent of the population are also covered under this programme till the end of Tenth Plan. The Eleventh Plan have also given due stress on this issue.
Eleventh Plan’s Social Sector Development:
Progress on the social sector front, however, continued to be slow as reflected in India’s latest HDI ranking being lower by two compared to 2000. Under the present circumstances, there is the paramount need for making rapid strides in living standards, health, education, gender justice, welfare and development of SCs, STs and OBCs.
The Approach Paper of the Eleventh Plan categorically states that the Plan will seek to reduce poverty, disparities across regions and communities by ensuring access to basic physical infrastructure as well as health and education for all, and recognise gender as a cutting theme across all sectors.
While the Approach Paper provides the assurance, some major initiatives consistent with the broad outlines of social sector development agenda laid down by the National Common Minimum Programme (NCMP) have already been taken in 2006- 07.
These include—NREGS, enhanced allocation on Bharat Nirman, health and education, Mid-Day-Meal scheme, Rajiv Gandhi National Drinking Water Mission, NRNM, JNURM, NSAP, schemes for welfare and development of SCs and STs.
Eleventh Plan’s Approach towards Poverty and Employment:
India has been suffering seriously on twin problems of poverty and unemployment. This has resulted a problem of great divide between rich and poor. Concern is often expressed that the process of growth in recent years has not generated employment at the pace required for absorbing the additional entrants to the labour force.
In order to accelerate the reduction in poverty and increase in employment, a number of poverty alleviation, employment generation and basic services programmes are being implemented at present. The Government has also set up the Ministry of Panchayati Raj to carry forward the process of empowerment of Panchayati Raj Institutions.
The Government had also created Backward Regions Grant Fund (BRGF) for the 250 most backward district of the country and allocated Rs 3,750 crore for the purpose in 2006-07.
Generation of employment opportunities for the growing number of unemployed and new entrants to labour force is a great challenge. Doubling the growth of agricultural GDP to 4 per cent per annum will improve employment conditions in agriculture by raising real wages and reducing the number of underemployed in agricultural sectors.
The Approach Paper to the Eleventh Plan targets generation of additional employment opportunities in services and manufacturing, in particular, labour intensive manufacturing sectors such as food processing, leather products, footwear and textiles and in service sectors such as tourism and construction.
It also calls for elimination of distorting fiscal incentives which foster capital intensity, infrastructure investment, removal of distortions that hinder competition, prevent entry and discourage graduation from unorganised to organised status; and greater emphasis on vocational training and skill development to improve employability of youth.
As Village and Small Scale Enterprises (VSE) will have to provide most of the employment during the Eleventh Plan, the Approach paper also calls for redressing the problems faced by VSE units and home based workers, especially women which include non-availability of timely ‘and adequate credit, unreliable or absence of power supply, requirement of permission from a number of government agencies and burden of multiple inspections.
However, some direct employment will be available in the social sector, i.e., on health and education. Besides, the wage employment programme like NREGS will also improve employment scenario considerably. Thus in order to achieve inclusive development priority on resources would be given to agriculture and social sector development.
In this connection, Prime Minster Dr. Manmohan Singh while Chairing the meeting of the full Planning Commission to finalize the approach of the Eleventh Plan stated. “With over two-third of the rural population still directly dependent on agriculture, it is imperative that we inject fresh dynamism into agriculture if we have to achieve inclusiveness that we seek in our growth.”
The Economic Survey, 2006-07 also made an observation in this regard. Sustained and high levels of economic growth in recent years provide an unique opportunity and momentum for faster social sector development. The buoyant economy should not only generate adequate employment but also provide adequate and need based resources for large interventions in the critical areas of social sector.
The recent resurgence of manufacturing also bodes well for employment generation.
Critical Analysis of the Eleventh Plan’s Approach:
After having a thorough discussion on the Approach Paper of the Eleventh Plan it would now be better to make critical analysis on its approach. Although the Eleventh Plan Approach Paper gave due stress on “Faster and more inclusive growth” but it is being questioned how far the approach of the plan will become successful to redressing the problem of poverty, unemployment and disparities.
The Eleventh Plan’s Approach has fixed a target of attaining an average growth rate of 9.0 per cent which can be attained if agriculture can attain 4 per cent growth and the industry and services sector can attain above 10 per cent and 9.9 per cent growth rate during the plan period. Thus the very success of the Eleventh Plan depends on attainment of consistent growth of these three sectors.
Moreover, another most important target of attaining inclusive growth would also depend on the rapid reduction of poverty and unemployment. The Plan document observed that the poverty ratio in 2004-05 stands at 28 per cent and the Eleventh Plan wants to reduce the same ratio to 10 per cent by 2017, which is no doubt a viable proposition.
But the problem related to poverty is now being questioned from different corners regarding the very definition of poverty line in term of calories. Mohan Guruswamy et al. has raised the question in this context.
“While the definition of hunger in terms of calories can remain constant, the definition of poverty is relative to the present levels of general prosperity the present official poverty line is based only on calories and hence accounts for little else but the satiation of one’s hunger. It would have been more accurate to define this as a starvation line, as that is exactly what it is”.
Under the present circumstances, poverty line concept needs to be redefined in terms of meeting basic needs. Accordingly, India should adopt the International Poverty Line of $ 2 per day for determining poverty ratio.
As per Human Development Report (2005), taking $ 1 per day poverty line concept, the percentage of people lying below the poverty line in 1999- 00 was 34.7 per cent and taking the same concept to $ 2 per day, the poverty ratio in India would be about 80 per cent.
Thus instead of following a false notion of poverty, the Planning Commission should redefine the poverty line concept rationally and take necessary steps to reduce poverty in an effective number.
About the problem of unemployment, the Approach Paper of the Eleventh Plan has estimated that the new addition to work force will be 65 million during the Plan and the new addition of job during the Plan will also be 65 million leading to maintaining the same backlog of unemployment to the level of 35 million, as it was at the end of Tenth Plan.
Thus the problem of unemployment is getting its serious proportion.
Thus following the idea forwarded by the Special Groups headed by S.P. Gupta it can be stated that since 93 per cent of the labour force is employed in the unorganised sector thus necessary attempts must be made to improve productivity and job quality of the unorganised sector and also for attaining higher growth in the unorganised sector.
The prospect of generating considerable additional employment in the organised sector is also not at all bright. Moreover, the attempt for attaining flexibility in labour laws as mentioned in the Approach Paper of the Plan on the ground of introducing the policy of hire and fire and to encourage the employers of the organised sector for expanding employment is also questioned for its applicability.
In order to accelerate the growth rate of the agriculture to 4 per cent from the existing 2 per cent various measures like attainment of farm income security through diversification of agriculture, providing remunerative prices of crops for farmers through better marketing strategy and support, developing irrigation facilities, watershed development, rural infrastructure, rural electrification and improving access to institutional credit to farmers needs to be undertaken seriously.
But attainment of targeted growth in agriculture in the present context is a very difficult proposition.
The Approach Paper has again failed to give due stress on building social infrastructure i.e., in the form of adequate investment in education and health as pledged in the NCMP to the level of 6 per cent of GDP and 2 to 3 per cent of GDP respectively.
The Approach Paper of the Eleventh Plan has also neglected the determination of required financial pattern for financing the Eleventh Plan. Moreover, the policy followed for raising the level of current account deficit as a means for arranging the component of increasing foreign savings along with increased flow of domestic savings is also very much questionable.
The Approach Paper is also quite silent on some important issues like food security, creation of price stabilisation fund for agricultural commodities, strengthening of price support system, universalizing crops insurance, land reform and protecting the farmers from subsidized imports of agricultural commodities as raised by Polit Bureau of CPM.
Finally, the Planning Commission has also failed to prepare a straight blue print for eradicating the problems of poverty and unemployment with the attainment of 9 per cent high growth path in its GDP.
Draft Plan Document of the Eleventh Plan:
On November 8, 2007, the Planning Commission under the Chairmanship of Prime Minister Dr. Manmohan Singh has cleared the draft plan document. The full commission approved the draft for the Eleventh Plan which aims at raising average GDP growth rate to 9.0 per cent as compared to that of 7.6 per cent attained during the Tenth Plan (2002-07) Period.
The Planning Commission has fixed the total outlay for the Eleventh Plan at Rs 36,44,718 crore which is more than double the amount of outlay finalised for the Tenth Plan, i.e., Rs 15,27,000 crore. The plan document seeks to make growth inclusive by increasing the outlay for priority sector programmes.
Again on 9th December, 2007, the National Development Council (NDC) approved the draft plan document of the Eleventh Plan as cleared by the Planning Commission.
Other important highlights of the draft of the Eleventh Plan include—reduction of poverty by 10 per cent, generation of 70 million new jobs, and ensuring electricity connection to all villages. The main thrust of the plan rests on social sectors, agriculture and rural development.
Among the social sectors however, education will be the biggest gainer with the plan proposes to increase its allocation to 19.36 per cent of gross budgetary support from just 7.7 per cent of the Tenth Plan.
It is to be mentioned that the government has already drawn an extensive plan to improve primary, secondary and higher education which includes technological and management institutions. Moreover, investment in infrastructure development in the Eleventh Plan is slated to rise from 5 per cent of GDP to 9 per cent of GDP, out of which almost 35 per cent of the expenditure will be financed by private sector.
While capital-output ratio has remained at 3.72 per cent, investment rate is estimated at 35 per cent of GDP with public sector contributing 10.4 per cent and private sector generating more than 24 per cent.
As against this, domestic savings have been estimated to be of the order of 33 per cent of GDP with household savings contributing to 23 per cent and the other two the corporate sector and the public enterprise sectors contributing 7 per cent and 3 per cent respectively.
Eleventh Plan draft document has allocated Rs 14,21,711 crore for social sector out of which allocation on education is fixed at Rs 2,75,000 crore which shows an increase of more than three times of the Tenth Plan allocation. Side by side, the draft document has also proposed to raise its allocation on irrigation development, drinking water supply and infrastructural sector.
On the other hand, the targeted growth rate of different sectors has also been enhanced. Accordingly, the targeted growth of the agriculture sector has been enhanced from 2.13 per cent to 4 per cent and for the industry the same growth rate has been enhanced from 9 per cent to 11 per cent.
Total Outlay and Plan Allocations by Heads of Development in the Eleventh Plan Public Sector Outlay:
The Planning Commission has fixed the total outlay for the Eleventh Plan at Rs 36,44,718 crore which is more than double the amount of outlay finalised for the Tenth Plan, i.e., Rs 15,27,000 crore.
The allocations of public sector plan outlay under different heads gives a clear picture about the strategy of the plan. The following table shows the proposed public sector plan outlay and the plan allocations under the different broad heads.
Table 11.10 given above reveals the total provisional outlay of the Eleventh Plan and its sector-wise allocations during the plan. The sectoral allocation of the outlay also reflects priorities of the plan. Total provisional public sector outlay of the plan is Rs 36,44,718 crore.
It is observed that among all the heads, the Eleventh Plan has allocated the maximum amount of outlay on social services, i.e., Rs 11,02 327 crore which is around 30.2 per cent of the total outlay, followed by Energy to the extent of Rs 8,54,123 crore which is around 23.4 per cent of the total outlay.
Eleventh Plan has allocated 15.7 per cent of total outlay on transport, 8.3 per cent on rural development, 5.8 per cent on irrigation and flood control, 3.7 per cent on agriculture and allied activities, 4.2 per cent on industry and minerals, 2.6 per cent on communications and 2.4 per cent on science, technology and environment.
It is also evident from the table that about 42.7 per cent of the total outlay is earmarked on energy, transport and communications considering the’ huge shortage of infrastructure facilities.
Moreover, out of the total public sector plan outlay of Rs 36,44,718 crore, the Central Plan outlay is fixed at Rs 21,56,571 crore (59.2 per cent) and that the State and UT Plans is fixed at Rs 14,88,147 crore (40.8 per cent).
However, at the end of the plan period, actual realization of outlay of the Eleventh Plan is estimated at Rs 35,82,767 crores as compared to the projected outlay of Rs 36,44,718 crore.
In conclusion it can be observed that a distinct departure in the Approach of the Eleventh Plan is that the Plan wanted to achieve faster but more inclusive growth that should look for a jump is standard of living reducing the proportion of people lying below the poverty line and increased access of people to basic amenities of life.
The Eleventh Plan, has to meet some worrying feature relating mainly to ever- mounting subsidy burden, an increasing pressure on availability and prices of basic food items and inadequate allocation on health services and basic needs of poor people resulting from fuel and food subsidy of more than Rs 1,00,000 crore per year.
In this connection Prime Minister Manmohan Singh while presiding over the meeting of Planning Commission observed “we need to address the problem of mounting subsidies in food, fertilizers and now, in petroleum which is a recent phenomenon.”
He further, observed that such large outgo on subsidies mean “fewer schools, fewer hospitals, fewer scholarships, lower public investment in agriculture and poor infrastructure.”
Mr. Singh further observed that simply by raising the allocation on the social sector, the target of inclusive growth cannot be attained. Considering the growing number of poor people, it is to be ensured that the additional resources allocated for the social sector should be utilised properly so as to ensure that the benefits of such allocation should reach the target groups of people.
Thus the Commission is of the view that the plan would try to make growth more inclusive so as to reach the benefits of the ongoing economic reforms to neglected sections of the society especially in rural areas.
Concluding Observation on Eleventh Plan’s Approach and Strategy:
After making a detail study of the Approach Paper of the Eleventh Plan it is imperative on our part to make some concluding observations. The Eleventh Plan had finally set a target of 9.0 per cent growth rate per annum which now seems to be achievable considering the current growth trend.
However, the achieving 9 per cent growth rate depends strictly upon the performance of the agricultural sector and infrastructure sector.
It is almost accepted from all corners that attaining higher growth rate in agriculture, to the extent of 4 per cent is the key factor to attain 9 per cent growth rate for the economy.
It is also amazing that the growth rate of agriculture during the last five years remained highly erratic and has not been able to stabilise its growth process. So all efforts should be made to stabilise the growth rate of agriculture to the level of 4 per cent. Side by side, infrastructure sector especially power needs a special care so that it can provide necessary support to the growth process.
The Approach Paper of the Eleventh Plan has called for “inclusive growth strategy” to address the multidimensional problems of poverty, unemployment, social sector imbalances etc.
This seems to be a timely approach. In this connection, the Approach Paper of the Plan itself rightly stated in its concluding part, “India’s economic fundamentals have improved to the point where we now have the capacity to make a decision impact on quality of life of the mass of our people, including especially the poor. We can do this by aiming at doubling the real income of the average Indian is less than ten years time and also committing ourselves to reducing poverty to less than 10 per cent in the same period. This calls for a target growth rate or GDP of around 9 per cent in the Eleventh Plan combined with policies to ensure that the growth is broad -based than in the past. A major element of the strategy must be the effort to empower the poor by expanding access to health and education and by special livelihood programmes.”
However, the economists while dealing with this inclusive strategy are of the opinion that the Approach Paper has not taken up seriously the issues required for inclusive growth. Noted Economist C.H. Hanumantha Rao expressed his concern at the slippages in recurring plans for inclusive growth.
Thus unless we take up these aforesaid issues seriously and develop a strategy to reform and speed up the growth process of agriculture and infrastructure sectors, the realisation of target of attaining faster, broad based and more inclusive growth will be somewhat difficult.