Missing the mark
Due to a series of external shocks, neither the Fourth Plan could meet its ‘ambitious’ growth target nor could it ease the inflationary pressure — leaving much to be done in the next plan
The three Annual Plans spanned from 1966-69 and allowed the Indian economy some breathing space to get back on track after the debacle of the Third Five-Year Plan. The growth rate touched 6.9 per cent, the Green Revolution was launched and food grain production touched 95 million tonnes. The fourth plan was launched with this backdrop.
In this article, we will discuss the key features of the fourth plan and critically analyse the performance during the plan.
While the Annual Plans witnessed a higher growth rate than during the third five-year plan, the fundamental problems facing the Indian economy persisted. The after-effects of the massive devaluation of 1966, inflationary pressures and over-population fed into the high levels of poverty and unemployment. Moreover, there was a feeling that the first three Plans had passed large sections of the population and could not make any dent in the high levels of poverty, which persisted.
The political backdrop was, of course, that Indira Gandhi had taken control of the Congress Party after the famous presidential elections in which the official Congress candidate Neelam Sanjeeva Reddy was defeated by VV Giri after Indira Gandhi had exhorted everyone to cast a conscience vote. Amidst this political fight within Congress, Indira Gandhi’s government presented the first five-year plan. The general elections were also held during the execution of the plan where Indira Gandhi gave the slogan of ‘Garibi Hatao’, which saw her getting a clear majority in the Lok Sabha.
In such a scenario, DR Gadgil, who was a critic of the government’s economic policies, was appointed as the Deputy Chairman of the Planning Commission and the fourth plan was largely helmed by him. Gadgil suggested a new approach which would benefit the poorest and which would ensure that spending was spread to include people and areas which had been bypassed.
The main objectives of the Fourth Plan were: a GDP growth target of 5.5 per cent per annum, return to economic stability which included growth with low levels of inflation, achieve self-reliance in industry and agriculture and technology, ensure social justice and equality and promote regional and decentralised planning through Panchayati Raj institutions. These objectives were to be achieved through several programmes, such as:
* Drought Prone Area Programme by taking up schemes in drought-prone areas which would generate jobs;
* Agricultural Development Programme by expanding the HYV, irrigation and fertiliser use to increase food grain production so that dependence on the import of food grains under PL480 would end by 1971. To build up buffer stocks to ensure against inflation in food grain prices;
* Nutritional Programme for pre-school children;
* Vocational Training of women;
* Accelerated Rural Water Supply Programme through 100 per cent Grant in Aid;
Rural Employment Programme through Crash Scheme for Rural Employment aiming to generate 2.5 lakh man-days per year in each district;
* Social, educational and health initiatives by introducing schemes for expanding elementary education in backward areas and for girls, special schemes for backward classes, SCs and STs, improving and expanding the primary health care network etc.
A total outlay of Rs 24,882 crore was set aside for the Fourth Plan. Public sector outlay was Rs 15,902 crore and private sector investment was Rs 8,980 crore. In the public sector, Rs 13,655 crore was provided for investment and Rs 2,247 crore for the current outlay. The total investment for the creation of productive assets aggregated to Rs 22,635 crore. The Fourth Plan was keen to minimise dependence on external assistance and reduce deficit financing. Accordingly, 68 per cent of the budget was to come from domestic resources, 17 per cent from external resources and only 5 per cent from deficit financing (these numbers were 59, 28 and 13 in the Third Plan).
The first two years of the Plan began on a right note with continued efforts at achieving self-reliance, both in food grains production through continuing the Green Revolution strategy of using HYV seeds, intensive irrigation and fertilisers and expanding the domestic industrial base by using import substitution strategies. The target growth rate was also pegged at an ambitious 5.5 per cent. The following passage from the Fourth Plan document (page 26) summarises the ambition of the planners at the time:
‘On the basis of the program of investment proposed and the level of outputs expected to be reached in different sectors by 1973-74, it is estimated that the overall rate of growth during the Fourth Plan will be about five and a half per cent a year.
The national income is expected to increase from Rs 28,800 crore in 1968-69 to Rs 37,900 crore by 1973-74. Population is expected to grow at the rate of 2.5 per cent per year during the five-year period. The increase in per capita income over the Plan period will be about 3 per cent per year which will take the figure to Rs 636 by 1973-74 from Rs 546 in 1968-69. To realise the rate of growth postulated, the rate of savings will have to be stepped up from 8.8 per cent in 1968-69 to 13.2 per cent and that of investment from 11.3 per cent to 14.5 per cent by the end of the Plan.
The visualised increase in food grains output will enable the country to dispense with concessional food imports under PL 480 by 1971. Efforts will be made to limit the growth of non-food imports to 5.5 per cent per year, while securing an annual increase of 7 per cent in exports. As a result, the requirements of foreign aid, net of debt repayment and interest payments, in 1973-74 will be brought down to about half the level in 1968-69.’
Many noteworthy domestic and world events had a direct impact on the economy and the implementation of the Plan. Some of these were: the massive oil price increase in 1973 which led to raised fuel and fertiliser prices; the atomic tests carried out in 1974 and its aftermath; the 1971 war with Pakistan which saw the creation of Bangladesh and the inflow of many refugees into India. As a result of these events, the economy ended up growing at only 3.3 per cent per annum.
While the growth target was not met, there were some noteworthy achievements. Food grains production increased substantially in the first two years and the first steps of maintaining a buffer stock of food grains to address the harmful effects of fluctuations in agricultural output were taken. However, the food grain production in the fourth plan stood at around 105 million tonnes against a target of 129 million tonnes. The National Agriculture Commission and HUDCO were set up in 1970. The first Rajdhani Express was also flagged off in March 1969 from New Delhi to Howrah at the beginning of the Plan. The fourth plan also looked beyond five years and drew up a plan for the next 12 years.
On the whole, while the fourth plan could not achieve its growth targets, there were some achievements as noted above. Mostly, the reasons for the failure were external shocks such as the rise in oil prices in 1973, the 1971 war with Pakistan which led to a diversion of resources to defence, the influx of refugees from Bangladesh etc. When the fourth plan ended, inflationary pressures were high, growth targets were unmet as seen above and there were large fluctuations in agricultural and industrial output. Further, trickle-down of whatever little growth was not happening. The planners had their hands full for the forthcoming fifth five-year plan.
The writer is Addl Chief Secretary, Dept of Mass Extension Education and Library Services, Government of West Bengal.