UPPSC Mains Paper III Updated 2019 Development Experience And Development Planning Of India .cs29D35F49{color:#000000;background-color:transparent;font-family:Arial;font-size:14pt;font- weight:bold;font-style:normal;} .cs3B54119A{text-align:justify;text-indent:0pt;margin:0pt 0pt 10pt 0pt;line-height:1.5} .csA7555675{color:#000000;background-color:transparent;font-family:Arial;font-size:12pt;font- weight:normal;font-style:normal;} .cs2020DE62{text-align:center;text-indent:0pt;margin:0pt 0pt 10pt 0pt;line-height:1.5} .csC57700C4{color:#000000;background-color:transparent;font-family:Arial;font- size:12pt;font-weight:bold;font-style:normal;} .cs7B3A08D0{text-align:justify;margin:0pt 0pt 0pt 3pt;line-height:1.5;list-style- type:square;color:#000000;background-color:transparent;font-family:Wingdings;font- size:12pt;font-weight:normal;font-style:normal} Development Experience and Development Planning of India Poverty, low per capita income, under-development, unemployment, prompted the newly established Indian polity to adopt economic planning for the development of the country. The idea of economic planning can be traced to 1934, when M. Visvesverayya in his book 'Planned Economy of India', advocated for planning to increase the national income. It was taken up by the Indian National Congress in 1938 when it formed the National Planning Committee under the chairmanship of Jawaharlal Nehru. The Bombay Plan, the People's Plan and Gandhian Plan, provided further impetus in the direction of economic planning. After independence, a Planning Commission was set up in March 1950 by a Cabinet Resolution with the Prime Minister as its ex-officio Chairman to formulate five year plans for the economic development of the country. Role of Planning In India Accelerating Economic Growth: There were two main features of India‘s economic policy that emphasized the role of planning and intervention by the State in the development process of the Indian economy in the first three decades of planning. First, to accelerate economic growth economists and planners recognized that raising the rate of saving and investment was essential to accelerate the rate of economic growth. Emphasis on Industrialisation, Second, the strategy of development, adopted since the adoption of Second Five Year Plan which was based on Mahalanobis growth model, laid stress on the Pscnotes.com Page 1 UPPSC Mains Paper III Updated 2019 industrialisation with an emphasis on the development of basic heavy industries and capital goods industries. To Compensate for Market Failures The dominant view in development economics in the fifties and sixties also laid stress on the planning by the State to compensate for ‗market failures‘. It was argued that while market mechanism was efficient in distributing a given stock of available goods, it was quite inefficient in allocating resources over time for investment. Regulatory Role of the State There is another important aspect of the role of State and planning in the development of the Indian economy which dominated economic thinking in the pre-reform period. Though the private sector was given an important role to play in the framework of mixed economy, to achieve optimal allocation of resources among different industries according to plan priorities, economic activities in the private sector were required to be regulated by the State. Further, to achieve other objectives of planning such as restraining the concentration of economic power in a few big business houses, the private sector was subjected to industrial licensing controls. Tackling the Problems of Poverty and Unemployment The other problem which makes role of planning and state intervention important is the need to tackle the problems of poverty and unemployment. Since the beginning of the seventies the Indian planners realised, especially in the Fifth, Sixth and Seventh Five Year Plans, that even if growth rate of GDP was raised to 5 to 6 per cent per annum, it was not possible to make a significant dent on the problems of mass poverty and unemployment prevailing in the Indian economy. India‘s rate of economic development has not been very impressive by most standards. But compared to what it was prior to independence, there is cause for celebration. At independence in 1947, India was an extremely poor country with an annual per capita income of only $50 for its 350 million people. Life expectancy was 32 years and literacy rate was 17 percent. National savings rate was around 10 percent. Agriculture accounted for 60 percent of GDP and 80 percent of employment. Per capita food production and per capita income had been declining continuously for nearly the prior fifty years. After independence, even under the growth-retarding effects of Nehruvian socialism and central planning, India‘s performance improved. In a study of cross-country growth experience of 85 countries from 1960 to 1992, India‘s performance is almost precisely average. This is poor in relation to the potential that India has given the degree of human, institutional, and natural capital at its command. Economists such as Jagdish Bhagwati have attributed that failure to the ―nearly three decades of illiberal and autarkic policies‖ before the reforms of the early 1990s. Some observers have called the change from an inward-looking autarkic economy to an open, market-driven one since 1990 as the Indian Growth Miracle. The neo-liberal economic reforms Pscnotes.com Page 2 UPPSC Mains Paper III Updated 2019 propelled India to become one of the fastest-growing economies in the world. Yet India should have been one of the fastest growing economies in the decades before 1990, and not just in the post 1990 period. It did not because its planners chose to insulate the economy from the global economy. That conferred some benefits in terms of shielding India from external shocks, but it paid a very high price in terms of foregone growth. From planning commission to NITI ayog Reflecting the spirit and the changed dynamics of the new India, the institutions of governance and policy have to adapt to new challenges and must be built on the founding principles of the Constitution of India, the wealth of knowledge from our civilizational history and the present- day socio-cultural-economic contexts. The aspirations of India and its citizens require institutional reforms in governance and dynamic policy shifts that can seed and nurture unprecedented change. In keeping with these changing times, the Government of India has decided to set up NITI Aayog (National Institution for Transforming India), in place of the erstwhile Planning Commission, as a means to better serve the needs and aspirations of the people of India. In essence, effective governance in India will rest on following ‗pillars‘: Pro-people agenda that fulfils the aspirations of the society as well as individual, Pro-active in anticipating and responding to their needs, Participative, by involvement of citizenry, Inclusion of all groups, Equality of opportunity to our country‘s youth, Sustainable development, by protecting environment, Transparency that uses technology to make government visible and responsive. Issues related to Poverty The World Bank defines poverty in absolute terms. The bank defines extreme poverty as living on less than US$1.90 per day> (PPP), and moderate poverty as less than $3.10 a day. Types of Poverty Absolute poverty measures poverty in relation to the amount of money necessary to meet basic needs such as food, clothing, and shelter. The concept of absolute poverty is not concerned with broader quality of life issues or with the overall level of inequality in society. The concept of absolute poverty is based on absolute norms for living (measured in terms of consumption expenditure) laid down according: to specified minimum standard and all such individuals or groups whose consumption expenditure is found to be below this standard are classified as poor. Under the relative concept of poverty, a family (or an individual) is deemed to be poor if its level of income or consumption expenditure falls below a predetermined level. Pscnotes.com Page 3 UPPSC Mains Paper III Updated 2019 Poverty in India is measured as the head-count ratio of the population living below the official ‗poverty line‘, which is calculated using the methodology prescribed by the Expert Group on Methodology for Estimation of Poverty appointed by the Planning Commission in order to arrive at a threshold consumption level of both food and non-food items. The methodology uses the Consumer Expenditure Surveys (CES) conducted by the National Sample Survey Office (NSSO) of India once every five years to attain the poverty line; and, hence, poverty figures in India are obtained once every five years. The Planning Commission‘s latest poverty line, using methodology suggested by the Tendulkar Committee in 2010, is apparently defined as the spending of Rs. 27.20 per capita per day in rural areas and Rs.33.40 per capita per day in urban areas. Unemployment is a phenomenon that occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy.Different types of Unemployment are as follows:- Structural unemployment focuses on the structural problems within an economy and inefficiencies in labor markets. Structural unemployment occurs when a labor market is not able to provide jobs for everyone who is seeking employment. Frictional unemployment is when workers leave their old jobs but haven't yet found new ones. Most of the time workers leave voluntarily, either because they need to move, or they've saved up enough money to allow them to look for a better job.Frictional unemployment is short-term and a natural part of the job search process. Cyclical unemployment is a type of unemployment that occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work.