Business System Latest Five year plan, Study notes for Business Systems. Indian Institute of Information Technology (IIIT)
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Business System Latest Five year plan, Study notes for Business Systems. Indian Institute of Information Technology (IIIT)

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In this document topics covered which are Five Year Plans, Meaning of Plan, History of Indian Planning, Glances, What is the Planning Commission?, Whom does the Planning Commission report to?.
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First Plan

Five Year Plans

Meaning of Plan An economic plan may be described as a specific set of quantitative economic targets to be achieved in a given period of time.

Just as the goals of a political system are spelled out in a constitution, so the goals of an economy are spelled out in a Plan.

However, unlike the constitution the Plan is transitory.

History of Indian Planning National Planning Commission (1938)

British govt. set up an officer (1944)

Bombay Plan (15 years)

People’s Plan (10 years)

Gandhian Plan

Planning Commission

Glances The National Planning Committee with Jawaharlal Nehru as its chairman laid its emphasis on the need for fundamental changes in the social and economic structure.

Bombay Plan which emphasized industrialization was sponsored by India’s distinguished industrialists.

The People’s Plan promoted by M. N. Roy and the Indian Federation of Labour emphasized the expansion of the public sector in the economy.

Gandhian Plan prepared by S. Narayan emphasized on rural reconstruction involving massive development of agriculture and cottage industries.

What is the Planning Commission?

It was first set up by the Union government in March, 1950 to promote a rapid rise in the standard of living of the Indian people by efficient exploitation of national resources, increasing production and offering opportunities to all for employment in the service of the community.

The Planning Commission is charged with the responsibility of making assessment of all resources in the country, augmenting deficient resources, formulating plans for the most effective and balanced utilization of resources and determining priorities.

The prime minister is the chairman of the Planning Commission, but the Commission is actually run by the deputy chairman (who enjoys the rank of Cabinet minister or minister of state, depending on his years in public life), and members of the Commission.

Whom does the Planning Commission report to?

The Planning Commission works under the overall guidance of the National Development Council, India's prime policy-making body, which guides the nation on the development process.

The Commission advises and provides guidance for the formulation of India's Five-Year Plans, Annual Plans and state government plans. It also monitors plan programs, projects and schemes.

Objectives of Planning The resolution of the Planning Commission, singles out

three principles as special terms of reference in the preparation of a Plan: that the citizens, men and women, equally, have the right to an adequate means of livelihood; that the ownership and control of the material resources of the community are distributed in a manner that best serves the common good; and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

Five Year Plans First Plan 1951 - 56 Second Plan 1956 - 61 Third Plan 1961 - 66 Fourth Plan 1969 - 74 Fifth Plan 1974 - 79 Sixth Plan 1980 - 85 Seventh Plan 1985 - 90 Eight Plan 1992 - 97 Ninth Plan 1997 - 02 Tenth Plan 2002 - 07 Eleventh Plan 2007 - 12

Brief Overview of Five Year Plans The first Five-Year Plan was launched in 1951.

Two subsequent Five-Year Plans were drawn up till 1965, when there was a break because of the Indo-Pakistan war. Two successive years of drought, devaluation of the rupee in 1966, a rise in prices and erosion of resources disrupted the planning process.

After three Annual Plans between 1966 and 1969, the fourth Five- Year Plan was launched in 1969.

The Eighth Plan could not take off in 1990 due to the swiftly changing political situation at the Centre and the years 1990-1991 and 1991-1992 were treated as Annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of liberalization.

Continued…. For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but since the launch of the Ninth Plan in 1997, the emphasis on the public sector has become less pronounced and the current thinking on planning in the country, in general, is that it should increasingly be of an indicative nature.

First Plan (1951-56) Objectives

To restore the economy which had run down ,resist the prevalent inflationary pressures, build up the transport system and ease the food and raw material position. To build up appropriate viable administrative and other organizations for development purpose and future progress. To initiate measures of social justice on a wider scale.

Budget Public outlay 19.6

Agriculture 2.9 Irrigation 3.1 Power 2.6

Village ,small industries 0.4 Organized industries, mining 0.7 Transport & communications 5.2

Other social services 4.6 Budgetary resources of which 14.4

Additional taxation 2.6 Internal private savings 6.9

External assistance 1.9 Deficit financing 3.3

Rs bn

AchievementsFailures Increase in national income by 18%. Increase in per capita income by 11% The rate of investment as a proportion of national income rose by 2.4%. Important success of plan at agricultural front. (increase in food output by 20%)

Problem of poverty remained. Investment during this period was not sufficient to absorb new entrants into labour market. This added to backlog of unemployment and underemployment.

Second Plan (1956-61)

Objectives Shifting emphasis from agriculture to industrial growth and that too heavy industries. Rapid industrialization with particular emphasis on development of basic and key industries (iron and steel) Reduction of inequalities in income and wealth and more even distribution of economic power. To increase country’s productive potential in a way that would make accelerated development in succeeding plan periods. It aimed at an annual increase of 5% in national income and a multifold increase in employment.

Budget Public outlay 46.7

Agriculture 5.5 Irrigation 4.3 Power 4.5

Village ,small industries 1.9 Organized industries, mining 9.4 Transport & communications 12.6

Other social services 8.6 Budgetary resources of which 25.6

Additional taxation 10.5 Internal private savings 14.1

External assistance 10.9 Deficit financing 9.5 Private Investment 31.0

Rs bn

COMPARISON:

A->AGRICULTURE, B->IRRIGATION, C->POWER, D->RURAL SMALL SCALE INDS.,E->ORGANISED IND.MINING,F->TRANSPORT&COMM,G->S.SERVICE

FIRST PLAN SECOND PLAN

AchievementsFailures A large no. of hydroelectric and thermal power plants were constructed. Industrial sector achieved remarkable progress and three huge cement and fertilizers industries were set up. Social services like health and education improved a lot. It showed welcome reorientation in favour of heavy industry.

Second plan was termed as crisis of ambitions. The plan was not ambitious in relation to needs of the people. It failed in creating job opportunities and unemployment was still prevailing. Lack of realism in assumptions upon which second plan proposals. (problem of inflation was grossly underestimated, prospects of agriculture exaggerated) Despite its double development expenditure than first plan it was a failure with deterioration in living standards , economic inequalities increased and agriculture remained more or less static. Increase in national income proved to be only 20% as against the target of 25%.

ThirdPlan (1961-66)

Objectives To increase agriculture production and achieve self-sufficiency in food grains. To utilize to the fullest possible extent, man power resources of the country and ensure a substantial expansion of employment opportunities. To give importance to external assistance in achieving self sustaining growth. To concentrate on expansion of capital goods and machine building industries.

Budget Public outlay 85.8

Agriculture 10.9 Irrigation 6.6 Power 12.5

Village ,small industries 2.4 Organized industries, mining 17.3 Transport & communications 21.1

Other social services 14.9 Budgetary resources of which 50.9

Additional taxation 28.9 Internal private savings 21.1

External assistance 23.9 Deficit financing 11.5 Private Investment 41

Rs bn

COMPARISON:

2ND PLAN 3RD PLAN

A:AG,B:IRR,C:POWER,D:RURAL SMALL SCALE IND.,E:ORGANISED IND.MINING

F:TRANSPORT&COMM,G:SOCIAL SERVICES

Failures Third plan was not able to improve economic and social conditions and it proved even more frustrating than second plan. Neither industry nor agriculture fared well in this plan. Rate of growth of national income was less than half of the rate it aimed at. Industrial production was lower than the target of 11% per annum. In many respects the third plan period was abnormal, two wars broke out (1962-China war and 1965 indo-pak war) in this period which disturbed the plan and the focus was shifted to defence activities.

At the end of third plan the situation was so gloomy and unsettled that the formulation of next five year plans was suspended. After third plan three annualplans were formulated from 1966-69 to overcome the failures of last plan. Efforts were made to solve immediate problems like restoring the economy to normal, to complete the work of projects already in progress.

Annual plans contd.

Green revolution’ was initiated during the annual plan(1967-68). Nationalization of 14 major banks in 1969. All these events were seen to impart strength to the economy, to achieve price stability and lend confidence to the government’s capacity to mobilize increased resources for planning.

Fourth Plan (1969-74)

Objectives To step up the tempo of the activity to an extent that would be compatible with maintaining stability and progress towards self reliance. To even out supplies of food grains and to stabilize prices through buffer stocks. To use monopoly legislation and appropriate fiscal policy for reducing concentration of economic power. To chart the course of industrial activity so as to provide for future technological advance and to bring about spatial distribution of industrial activity and enterprise.

Budget Public outlay 157.8

Agriculture 23.2 Irrigation 13.5 Power 29.3

Village ,small industries 2.4 Organized industries, mining 28.6 Transport & communications 30.8

Other social services 29.9 Budgetary resources of which 120.2

Additional taxation 42.8 Internal private savings 65.4

External assistance 20.9 Deficit financing 20.6 Private Investment 89.8

Rs bn

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