Bittersweet outcomes

In the last few articles, we have discussed and analysed the first eight five-year plans and their key features; and achievements and shortcomings in each sector as a whole. Before going on to discuss the Ninth Five-year Plan, it would be a good idea to take stock of the situation after 50 years of planning. From the first plan (1951-56) to the eighth plan (2002-2007), India came a long way, having achieved self-sufficiency in food grains, laid a foundation of basic industries, expanded the highway system and increased access to telephony, among many other achievements. There have been many shortcomings as well, mainly in the persistence of unemployment and poverty and in unequal distribution of income. The end of the eighth plan also marked 50 years of planning. In this article, we will highlight and analyse some of the achievements and shortcomings in detail.

Achievements

From the time of the first plan, when India had to address the problem of refugees, food shortage and high levels of inflation, much was achieved in the first 50 years. The first achievement had been the steady rise in the GDP and per capita income. While GDP rose from about Rs 1,30,000 crores to Rs 8,50,000 crores, per capita income rose from Rs 3,700 to Rs 9,000. However, the Indian economy moved away from the ‘Hindu growth rate’ (a term coined by Prof. Raj Krishna) of 3.5 per cent per annum only after the1980s. In the 1980s and the 1990s, India’s growth rate rose to 5.5 per cent per annum.

The second area of clear progress was in the agriculture and irrigation sectors. In agriculture, there was a steady increase in the use of fertilisers, pesticides, and high yielding varieties of seeds from the 1960s onwards. The area under irrigation also rose from 22 million hectares in 1950-51 to 81 million hectares in 1996-97. As a result of these efforts, foodgrain production rose from 51 million tonnes in 1950-51 to about 200 million tonnes in 1996-97. This rise was experienced mostly in the case of rice and wheat.

The progress in basic industries, which began as a part of the Mahalanobis strategy in the second plan, was sustained later and expanded to other industries such as chemicals and fertilisers, metallurgical industries etc.

There had been an improvement in social, physical and economic infrastructure. There had been a steady increase in the number of schools, colleges, and universities as well as hospitals. Enrolment at the primary level was around 85 per cent, middle level about 68 per cent and secondary level about 33 per cent (enrolment as a percentage of the 6-11 years, 11-14 years, and 14-17 years of population) by 1997. Enrolment in colleges and universities rose from about 3.6 lakhs in 1950-51 to 70.4 lakhs in 1996-97.

There was a large public outlay in the areas of transport and communications, generation and distribution of electricity, and building of national and state highways. The improved roads have expanded the market for agricultural products, irrigation has increased agricultural productivity and higher electricity output has led to rise in industrial activity and also to improved standards of living.

Another achievement was the conscious moving away from external assistance for financing the five-year plans and realisation of the adverse inflationary effects of excessive deficit financing. As we know, the first plan was successful in achieving self-sufficiency in food grains and keeping inflation under check. There was also the euphoria of a new nation and the active cooperation of the IMF, the World Bank and other foreign governments in extending assistance to India in economic development. With this in mind, the planners decided to have large plan sizes, with high levels of foreign aid and deficit financing. In the second and third five year plans, external assistance rose to 24 per cent and 28 per cent of the total outlay, and deficit financing rose to 20 per cent in the second plan before falling to 13 per cent in the third plan. It was not before long that the planners realised the negative effects of dependence on external assistance such as: dependence on PL480 food grains from the USA and Britain, and USA pressure against India during the 1965 war with Pakistan, IMF pressure to devalue the rupee in 1966 etc. As a result, the dependence on external assistance fell sharply to 13 per cent of the total outlay in the fourth plan and 5 per cent of the total outlay in the eighth plan. Similarly, deficit financing fell to 3 per cent in the fifth plan but rose again in subsequent plans.

Failures

It is evident from the GDP growth numbers that there was a marked uptrend only in the 1980s, i.e., in the sixth, seventh and eighth plans, when GDP grew at more than 5 per cent per annum. Before that, these numbers were around 3-4 per cent. Even in the 1980s, there were a number of areas that continued to be of concern. Prof Sukhamoy Chakravarty in his book ‘Development Planning — the Indian Experience’ (1987) has pointed three major failures of Indian planning:

* Inefficiency in the public sector, whether it be power generation, port operations or steel, cement, and fertilisers production;

* Failure to move large sections of the rural and agricultural population to industry; something that the developed countries, Korea, ASEAN countries and China have managed better;

* Failure to comprehend the implications of the Mahalanobis strategy. On one hand, there was an industrial push for basic industries, and on the other, there was no attempt at land reforms or to change the input base of traditional agriculture, which left the agrarian transition incomplete. Without this transition, the Mahalanobis strategy did face diminishing returns after a point

Apart from the above, some of the basic failures of Indian planning can be enumerated as under:

* Failure to eliminate poverty: This occurred despite the inclusion of explicit programmes towards such an objective from the fifth plan onwards. As Prof Lakdawala, the Chairman of the Expert Group on Poverty, stated, the proportion below the poverty level fell from 55 per cent in 1973-74 to 39 per cent in 1987-88. In 1996-97, this number was 36 per cent, meaning that there were still 320 million people below the poverty level. Prof Brahmananda attributed this to a focus on anti-poverty programmes rather than focus on a wage-goods model.

* Failure to reduce unemployment: Even after eight plans, the issue had remained, At the end of eighth plan, there were 7.5 million unemployed persons, as per a study of the then Planning Commission. This was perhaps because of a greater focus on growth and preference for capital-intensive production in heavy industries.

* Persistence of income and wealth inequality: This has been brought out in numerous studies. In a study in 1971, Dandekar and Rath noted that the condition of the bottom 20 per cent had deteriorated and the next 20 per cent had remained stagnant. This fact has also been highlighted by the World Inequality Data and the research done by Thomas Piketty. This inequality has manifested itself in the unequal access to education and health opportunities.

* Failure to bring institutional reforms which could have improved the delivery of services as well as led to greater empowerment of the people and, consequently, ensured more equal access to basic needs

Conclusion

While the first 50 years of planning had managed to create an industrial base for manufacturing capital goods, increased agricultural production, and expanded schools and colleges, poverty and unemployment continued to be a worry for the planners. Even though the 1991 economic reforms had led to liberalisation of economic policy in industrial licensing and reduction of tariffs, by the end of the eighth plan, India was still lagging behind in exports. This fact became clear as the next few plans rolled out. Without raising exports, higher growth rates were almost impossible. This was amply demonstrated by the ‘Gang of Four’ — Korea, Singapore, Hong Kong and Taiwan — in the 1970s and the 1980s when they used sustained export growth as a foundation for a strong industrial base.

The writer is Addl Chief Secretary, Dept of Mass Extension Education and Library Services, Govt of West Bengal.