Taste of success
Implemented amid turbulent domestic and global situations, the twin sixth plan not just managed to achieve its growth target but also put a tab on inflation and improved balance of payment scenario
There were two sixth plans: one which was launched by the Janata Party government in 1978, and the other which was launched by the freshly re-elected Congress Party government in 1980. As we saw in the previous article on the fifth five-year plan, the fifth plan was rejected by the Janata Party government prematurely. In this article we will review the key features of the two sixth plans and take up a critical analysis of these.
Sixth plan of the Janata government: 1978-83
The first sixth plan was launched in 1978, but had to be terminated in 1980 after the general elections voted a new government to power. This plan was conceptualised as a series of rolling plans: meaning that there would be a review and assessment at the end of each year and the next year’s plan would be launched based on this. Further, there were three types of plans: the annual plan, the medium-term plan for about 3-5 years, and a long-term perspective plan for 10,15 and 20 years. The Janata plan blamed the Nehru model of growth for the growing unemployment and increased inequality. The focus of the plan was therefore to generate employment in agriculture and allied activities in rural areas, encourage small industries producing consumer goods for mass consumption, and to raise incomes of the poorest through the Minimum Needs Programme.
Two landmark schemes were launched in this period: the Integrated Rural Development Programme (IRDP) was launched on October 2, 1978; and Training for Rural Youth for Self-Employment (TRYSEM) was launched on August 15, 1979. As we know, IRDP was an ambitious programme which involved generating employment through rural development works and also involved credit linkages to the poor for taking up self-employment. IRDP continued for several forthcoming Plans. Similarly, TRYSEM involved the improvement of skills by imparting all kinds of training.
Even within this two-year period, there was constant political instability, with the leadership fighting off a challenge. Ultimately, Prime Minister Morarji Desai had to resign after some party factions pulled out of the coalition. In July 1979, Charan Singh became the Prime Minister with the outside support of Indira Gandhi. In this political scenario, the implementation of the sixth plan was tardy and lacklustre.
Sixth plan of the Congress government: 1980-85
In 1980, the Charan Singh government became a minority after the Congress withdrew support. Under these circumstances, general elections were called in 1980, and the Congress Party got a majority. A new government was formed and Indira Gandhi returned as the Prime Minister. However, Indira Gandhi was assassinated on October 31, 1984, and elections were held immediately thereafter in December 1984, in which Congress got a massive majority and Rajiv Gandhi became the Prime Minister.
The sixth plan was drawn up, keeping in mind the experiences of the earlier plans. The sixth plan document went into some detail by analysing the reasons for the shortfalls in growth. The sixth plan was also envisaged as a perspective plan from 1980-1995, covering broad objectives such as removal of poverty, employment generation and technological and economic self-reliance. A target growth rate of 5.2 per cent was considered feasible to achieve, and was in line with the broader objectives of the plan. Per capita income was to rise from Rs 1,484 in 1980 to Rs 1,744 in 1985 and Rs 2,534 in 1995. The following para from the Chapter 3 of the sixth plan document reveals the thinking behind the plan:
…the Sixth Five Year Plan has been formulated taking into account the achievements and failures of the past three decades of planning, recent economic developments which have a bearing on the growth prospects of the economy in the medium term as well as the vision of the future as reflected in the long term perspective. The removal of poverty is the foremost objective of the Sixth Plan even though it is recognised that given the magnitude of the task, it cannot be accomplished in a short period of five years. Inevitably, the pace of movement towards the long-term objectives of removal of poverty and the achievement of self-reliance and the nature of priorities in the immediate period ahead, are influenced by the current economic situation and the constraints operating in the economic system…
The objectives of the sixth plan were similar to other plans, namely:
* Increase growth, promote efficient use of resources and improved productivity;
* Reduce poverty and unemployment;
* Reduce income inequality;
* Balanced regional development;
* Balance growth objectives with environmental concerns.
The strategy to meet the objectives was through strengthening infrastructure for both agriculture and industry, and increased investments, output and exports. The sixth plan also promoted special programmes in rural areas that would generate employment and address minimum needs of the people.
The financial outlay for the sixth plan was Rs 1,58,710 crore, out of which Rs 97,500 crore was in the public sector and Rs 61,210 crore was in the private sector. Out of the public sector outlay, Rs 47,250 crore was for the Central sector and Rs 50,250 crore was meant for the States and the UTs. In the sectoral outlays, irrigation and flood control was allotted Rs 12,000 crore, Agriculture: Rs 5,600 crore, Rural Development: Rs 5,300 crore, Energy: Rs 26,000 crore, Transport: Rs 12,400 crore and Industry: Rs 15,000 crore.
The IRDP, National Rural Employment Programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) were some of the popular interventions in the sixth plan. NABARD was also created in 1982 to meet the credit needs of rural areas.
A critical analysis
It may be recalled that the sixth plan was launched in a very difficult economic environment: both internal and external. Inflationary pressures had been high since the rise of oil prices in 1979 because of the Iranian revolution and the sharp fall in oil output in Iran. Oil prices rose from USD 13 per barrel in April 1979 to USD 34 per barrel in April 1980. This had an impact on inflation in India as well. The internal economic environment was challenging because of the persisting inefficiencies in critical sectors such as power, coal, steel and railways and the continued dependence of agriculture on monsoons.
While drafting the sixth plan, it was also noted that the capital-output ratios in the earlier plans, especially third and fourth plans, were higher than anticipated: which led to shortfalls in the growth achieved as compared to the target.
The sixth plan learnt these lessons from previous experiences: mobilise more resources to raise investment levels, improve efficiency in industry, reduce dependence of agriculture on monsoons and expand modern agriculture, raise exports, and reduce dependence on energy imports.
The sixth plan was able to achieve its target of 5.2 per cent growth, and also put to good use the lessons learnt. Consequently, agricultural growth was steady, especially in food grains production. Foreign exchange reserves rose during the sixth plan on account of earnings from invisibles (mainly remittances) and inflation was kept under control. There was also an attempt to move towards self-reliance in energy through the accelerated oil production programme. Also, reduced external debt servicing, reduced dependence on aid and reduced import of strategic commodities such as food grains, petroleum, fertilisers etc. helped bring about a manageable balance of payments situation despite a difficult external environment.
The sixth plan also took baby steps towards liberalisation. One such step was the expansion of the OGL (Open General List) to include items such as machinery and raw materials. This was intended to raise productivity in the Indian industry. The second step was the de-canalisation of more items of imports (canalisation refers to monopoly rights of the government to import these items), which would allow entrepreneurs to import more machinery and raw materials. The third step was the steady depreciation of the rupee to reflect a more realistic effective exchange rate.
The sixth plan ended up achieving the growth target of 5.2 per cent per annum, kept inflation in check and managed a comfortable balance of payments situation. That this was achieved in the face of a difficult external and internal environment was creditable. The sixth plan also took initial steps towards economic liberalisation. The stage was set for the seventh five year plan.
The writer is Addl Chief Secretary, Dept of Mass Extension Education and Library Services, Govt of West Bengal.