Unit 13
Indian economics
Introduction
• After independence, one among the foremost difficult choices that the leaders had to form was to make a decision the sort of financial system that was capable enough to market welfare equally across the country.
• Among differing types of financial system , Pandit Nehru , the primary Prime Minister of India, suggested Socialist Economy; however, it had been not an equivalent that was practiced within the USSR.
• After great efforts, the design committee decided to adopt a mixed financial system − a judicious mixture of both socialist and capitalist systems.
• Mixed economy was finally chosen with the assistance of commercial Policy Resolution of 1948 and Directive Principle of Indian Constitution.
• Planning Commission was found out in 1950, and therefore the Prime Minister of India was made the chairperson of the commission.
Five-year Plans
• The First Five-Year Plan was one among the foremost important because it paved for the event of the country then and for the years to return .
• Five-Year Plans are formulated very systematically during which all the issues are considered and addressed on priority basis. For instance , agriculture development wasthe most vital after independence, hence, the primary five-year plan was drafted to strategically propel its growth and development.
Goals of Five-year Plan
Any plan should have a selected goal to fulfil. The goals of the Five-Year Plans are mentioned within the following image
Growth
• This goal was directed towards a rise in Gross Domestic Product (GDP) of the country. The various sectors of the economy — the agricultural sector, the service sector, and therefore the industrial sector are considered when a country’s GDP springs .
Modernization
• For the swift growth and also to extend the productivity, modernization was necessary; hence, new agricultural technology (use of machinery and hybrid seed varieties) also as advanced machinery for factories were used.
• Apart from the fashionable technology, social station of girls was also considered and that they were granted equal rights.
Self-Reliance
• To develop all the sectors and make India a self-reliant country, only indigenous resources and technology were promoted during the primary seven five-year plans.
• Another purpose of self-reliance was − India didn't want to depend upon the other country for food and important technologies, because it might be a threat to country’s sovereignty also .
Equity
The above mentioned goals wouldn't be fruitful or cause the betterment of the people unless there's equality.
To ensure equity, the subsequent steps are taken −
• Implementation of the Land Reforms Act was a turning point under which, the govt abolished the prevailing ‘Zamindari’ system and therefore the tillers (farmers) were made the owners of the respective land.
• Land Ceiling was another commendable act under which the utmost size of land plots a private can own was fixed.
• The purpose of land ceiling was to stop the concentration of land ownership within the hands of few people.
• There were some loopholes within the land ceiling law and therefore the implementation methods were also poor; therefore, the land ceiling wasn't as successful because it should are . Only Kerala and West Bengal adopted this policy with full commitment.
• The revolution marked a big change within the field of agriculture in India. It promoted the utilization of High Yielding Variety (HYV) seeds. This further increased the yield of wheat and rice.
• Primarily, the utilization of HYV seeds was limited to a couple of states — Punjab, Andhra Pradesh , and Tamil Nadu , but after the late 1970s, many other states also started benefitting from the utilization of HYV seeds and improved the agricultural production on their fields.
• Use of HYV seeds benefited farmers within the sort of market surplus, i.e., farmers were now producing sufficient grains that would even be sold into the market.
• For the equal distribution and fair opportunity among rich and poor farmers, the govt made a policy to supply agricultural loans to farmers at subsidized rates.
• Debate on Subsidy − Many economists accepted that the subsidies are good for the grass root level development, but there have been a couple of who questioned it. However, unquestionably, subsidies brought change in India and proved beneficial for the farmers.
• A major drawback is that about 65 percent of the population remains occupied within the agriculture sector and isn't finding employment in the other sector.
• Because of several problems and issues including poor infrastructure, lack of proper policy, lack of skilled human resources, the economic sector couldn't undergo development until independence. Over a period of your time , formulation of several industrial policies and therefore the development of infrastructure merged in to mark the progress of the economic sector in India.
• The focus of the second five-year was industrial growth. All major industries, that drove the progress of the Indian economy were within the public sector and therefore the government’s control over these increased during this era .
Industrial Policy
Industrial Policy Resolution may be a resolution adopted by the Indian Parliament in 1956. It had been formulated under the Second Five-Year Plan.
• This resolution categorized industries into three sectors −
o State owned industry;
o Mixed i.e. state and personal individual running industry together; and
o Private sector.
• According to the economic policy, the private sector (industry) was also kept under the state control. To open a replacement industry or to expand an existing one, the primary prerequisite was to get a license from the govt . Small Scale Industry.
• In 1955, Village and Small-Scale Industries Committee (which is additionally referred to as Karve Committee) proposed to market small-scale industries for rural development.
• To found out a small-scale industry in those days, maximum investment one could make was Rs.5 Lakh. The limit has gone up to Rs.1 Crore now.
Trade Policy
• As self-reliance was the first objective, national trading policy wasn't in favour important of foreign goods.
• Import taxes of varied goods were very high. This thereby, increased the value of the products within the target market.
• In addition to the above discussed conditions, quotas were also imposed and these quotas had an impact on the availability of those imported goods.
• This system was practiced only to guard domestic firms from the foreign competition.
• Thanks to those policies, results were also positive; GDP increased from 11.8 percent (1950-51) to 24.6 percent (1990-91) and therefore the industrial rate of growth was an interesting 6 percent.
• After the implementation of the national trading policy , industries were no more limited to only jute and textile, rather, they expanded their operations and new units were started.
• In spite of a big growth, many economists criticized the policy , because it was largely controlled by the govt . For instance , within the telecommunication sector, people wont to submit their applications months before they might actually get the connection.
• There was an enormous debate on public vs private sector. Many believe, emphasis on public sector restrained the potential economic process of India.
• On the opposite hand, the regulation of personal sector through licensing system (which people call permit license raj) curtailed the economic growth potential of the country.
• High import tax and restriction on foreign trade also drew criticism.
• With the introduction of the new liberal policy of 1991, Indian economy addressed the prevailing economic problems through the subsequent −
o Liberalization
o Privatization
The Planning Commission of India supervised the five-year plan for the economic development of the country. However, in 2014, the 65-year-old committee was dissolved and a think factory – NITI Aayog (National Institution for Transforming India) took its place. During this article, we'll check out the aims and objectives of the NITI Aayog.
Factors affecting productivity of Frames in India
The NITI Aayog
The Prime Minister appoints a CEO and a Vice-Chairperson of the NITI Aayog. Further, it's some full-time also as part-time members along side four Union Ministers serving as ex-officio members. It also features a governing council which incorporates all State Chief Ministers and Lt. Governers of the Union Territories.
The council works towards fostering cooperative federalism for providing a national agenda to the middle and therefore the individual States. Additionally, there are specific regional councils and therefore the Prime Minister invites some special invitees who are experts and specialists in various fields too.
Since it is a think factory of the govt or as a directional and policy dynamo, it provides advice on strategic policy matters to the governments at the middle and therefore the States. Further, it includes economic problems with both domestic and international importance.
The Introduction to NITI Aayog in India:
NITI Aayog or National Institution for Transforming India Aayog is essentially a policy think factory of state of India and State Governments that replaces 65-year old committee . Union Government of India had announced formation of NITI Aayog on 1st January, 2015.
The NITI Aayog will have a governing council comprising all State Chief Ministers and Lt. Governors of Union Territories and can work towards fostering a ‘Co-operative federalism’ for providing a “national agenda” to the Centre and States.
The body is comprised of a CEO and a Vice Chairperson, to be appointed by the Prime Minister, additionally to some full-time members and two part-time members, while four Union Ministers would function ex-officio members. Besides, there would be specific regional councils, while experts and specialists from various fields would be called as special invitees nominated by the Prime Ministers.
NITI Aayog will function a “think tank” of the govt as a “directional and policy dynamo” and would offer both to the governments at the centre and within the states with strategic and technical advice on key policy matters including economic problems with national and international importance.
Thus NITI Aayog will never plan, rather it'll formulate policy. By following these policies, various Ministries of the Central Government will prepare developmental projects considering the necessity of future development. NITI is in favour of cooperative federal structure where both the Centre and States jointly prepare developmental policies.
But NITI, at an equivalent time, wants to market healthy competition among the developing states.
Thus, the propulsive concept behind the new body would be “co-operative federalism” entailing that the states to possess their say in framing plans and policies for development. The NITI Aayog has been envisaged as a sort of inclusive think-tank embracing the Centre and States to offer strategic and technical advice on economic matters of national and global importance.
NITI Aayog will have regional councils to specialise in developmental activities on specific areas and is patterned on the National Reforms Development Commission of China.
While the design Commission had the facility to allocate funds to states for attaining regional development, the NITI Aayog won't have such powers. Rather, the task of allocating funds to states now being vested with the Finance Ministry’s Department of Expenditure.
Its primary job would be to undertake future policy and style frameworks and take necessary initiatives for attaining faster development and eventually to watch these activities sincerely.
Thus, NITI Aayog will actively monitor and evaluate implementation of the govt programmes and initiatives. The design Ministry of present NDA Government is of the view that “with central plan expenditure of the order of Rs 5.75 lakh crore was being channelized per annum for development, it had been absolutely necessary that there's concurrent, comprehensive, credible and reliable evaluation”.
This step mainly focuses on strategies to spread awareness about and use of evaluation as a tool for enhancing result from policies and programmes of excellent governance. So it had been time to think about developing a National Evaluation Policy that might provide direction to Monitoring and Evaluation (M & E) activities within the country, laying stress upon quality standards and sound ethical procedures and supply for appropriate institutional mechanisms.
NITI Aayog would therefore mean:
(a) a gaggle of individuals authoritatively entrusted by the govt to formulate/regulate policies concerning transforming India.
(b) it's a commission to help government in both social and economic issues.
(c) it's an institute of think factory with experts in it.
(d) it's an body to actively monitor and evaluate implementation of state programmes and initiatives.
The Formation of NITI Aayog:
The Formation of NITI Aayog:
The NITI Aayog comprises the subsequent members and bodies:
1. Prime Minister of India because the chairperson.
2. Governing Council comprising the Chief Ministers of all States and Union Territories with legislatures and Lieutenant Governors of other Union Territories.
3. Regional Councils are going to be formed to deal with specific issues and contingencies impacting quite one state or a neighborhood . The aim of the Regional Councils is to amicably settle disputes between two or more states facing a standard set of problems that sometimes delay the progress of developmental projects.
These councils are going to be formed for a specified tenure. The Regional Councils are going to be convened by the Prime Minister and can comprise of the Chief Ministers of States and Lt. Governors of Union Territories within the region for addressing specific issues. These Regional Councils are going to be chaired by the chairperson of the NITI Aayog or his nominee.
4. Experts, specialists and practitioners with relevant domain knowledge are going to be called as special invitees, to be nominated by the Prime Minister.
5. Full-time organizational framework (in addition to Prime Minister because the Chairperson) includes the subsequent positions:
(i) Vice-Chairperson.
(ii) Members: Two (2) Full-time.
(iii) Part-time Members: Maximum of two from leading universities, research organizations and other relevant institutions in an ex-officio capacity. Part-time members are going to be on a rotational basis.
(iv) Ex-officio Members: Maximum of 4 members of the Union Council of Ministers to be nominated by the Prime Minister.
(v) Chief military officer (CEO). To be appointed by the Prime Minister for a hard and fast tenure, within the rank of Secretary to the govt of India.
(vi) Special Invitees.
(vii) Secretariat as deemed necessary for its functioning.
Present Members of NITI Aayog:
Presently, following members are included within the NITI Aayog in several capacities:
1. Chairperson: Prime Minister Narendra Modi.
2 CEO: Sindhushree Khullar.
3. Vice Chairperson: Arvind Panagariya (Well known India born economist and Columbia University Professor)
4. Ex-officio Members: Rajnath Singh, Arun Jaitley, Suresh Prabhu and Radha Mohan Singh.
5. Special Invitees: Nitin Gadkari, Smriti Zubin Irani and Thawar Chand Gehlot.
6. Full-time Members: Bibek Debroy and V.K. Saraswat.
7. Governing Council: All Chief Ministers and elected official of Union Territories.
The Aims and Objectives of NITI Aayog:
The following are a number of the important aims and objectives of NITI Aayog:
1. NITI Aayog sets its aims to supply a critical directional and strategic input into the event process of the country.
2. NITI Aayog aims to function a “think tank” of the govt both at central and state levels with relevant strategic and technical advice on key policy matters including economic problems with national and international importance.
3. NITI Aayog now seeks to exchange the centre-to-state a method flow of policy framed by the design Commission by an amicable settled policy framed by a real and continuing partnership of states.
4. The NITI Aayog also will seek to place an end to slow and tardy implementation of policy by fostering better Inter-Ministry co-ordination and better centre-state co-ordination. It'll help evolve a shared vision of national development priorities, and foster co-operative federalism, so as to specialise in the view that strong states make a robust nation.
5. The NITI Aayog has set it objectives to develop mechanisms to formulate credible plans to the village level and aggregate these progressively at higher levels of state . This Aayog will ensure special attention to the sections of society which will be in danger of not benefitting adequately from economic progress.
6. The NITI Aayog, will create a knowledge, innovation and entrepreneurial network through a collaborative community of national and international experts, practitioners and partners. The Aayog will offer a platform for resolution of inter-sectoral and inter-departmental issues so as to accelerate the implementation of the event agenda.
7. The NITI Aayog will monitor and evaluate the implementation of programmes, and specialise in technology upgradation and capacity building.
Undertaking the above activities, the NITI Aayog will aim to accomplish the subsequent objectives and opportunities:
(i) an efficient administration paradigm during which the govt is an “enabler” instead of a “provider of first and last resort”.
(ii) Attaining progress from “food security” to specialise in a mixture of agricultural production also as attain actual returns that farmers get from their produce.
(iii) to make sure that India is a lively player within the debates and deliberations on the worldwide commons.
(iv) to make sure that the economically vibrant middle-class remains actively engaged, and its potential is fully utilized.
(v) Leverage India’s pool of entrepreneurial, scientific and intellectual human capital.
(vi) Incorporate the geo-economic and geo-political strength of the non-resident Indian Community.
(vii) Use urbanization as a chance to make a wholesome and secure habitat through the utilization of recent technology.
(viii) Use technology to scale back opacity and potential for misadventures in governance.
Moreover, the NITI Aayog aims to enable India to face complex challenges during a better way through the subsequent measures:
(i) Leveraging of India’s demographic dividend and realization of the potential of youth, men and ladies through imparting education, skill development, elimination of gender bias and also by providing employment.
(ii) Elimination of poverty, and therefore the enhance the prospect for each Indian to measure a lifetime of dignity and self- respect.
(iii) Redressal of inequalities supported gender bias, caste and economic disparities.
(iv) To integrate villages institutionally into the event process of the country.
(v) to supply policy support to quite 50 million small business which are considered as a serious source of employment generation.
(vi) To safeguard our environmental and ecological assets.
What’s new with NITI Aayog?
The centre-to-state one-way flow of policy, that was the hallmark of the design Commission era, is now sought to get replaced by a real and continuing partnership of states.
• NITI Aayog = more a “think tank” than a finance distributing agency.
• NITI Aayog will provide Governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of the policy.
• With NITI Aayog, there'll be multi-directional flow of policy (from Center to States, from States to Center, between ministries etc.)
• Better inter-ministry coordination.
• The NITI Aayog will develop mechanisms to formulate credible plans to the village level and aggregate these progressively at higher levels of state .
• The NITI Aayog will create a knowledge, innovation and entrepreneurial network through a collaborative community of national and international experts.
According to this plan, ‘It must be guided by a vision of India moving forward during a manner that might ensure a broad-based improvement within the living standards of all the people through a growth process which is quicker than within the past, more inclusive, and also more environmentally sustainable.‘ The objectives of this Plan are as follows:
• A rate of growth of 9 percent
• Focus on the agricultural sector and have a mean growth of 4 percent during the Plan period
• Restrain inflationary pressure
• For the expansion of GDP, make sure that the commercial energy supplies grow at a rate of 6.5-7 percent per annum .
• Develop a holistic water management policy
• Suggest new legislation for the acquisition of land
• Continue specialise in health, education, and skill development
• Large investments within the development of the infrastructure sector
• Emphasis on the method of fiscal correction
• Efficient use of obtainable resources
12th five year plan targets achievements and failures in India are:
Achievements of Planning:
1. Increased Growth Rate:
Economic planning targets at bringing about fast economic development altogether sectors.
It aims at increased rate of growth .
India’s macroeconomic results has been moderately good in terms of GDP rates.
2. Growth of Economic Infrastructure:
India’s leads to making required economic infrastructure is basically appreciated.
At inception of economic planning road kilometer was 4 lakh kms.
India has now 3 million km of road network making it one among largest within the world.
Other modes of transport like shipping, civil aviation have also widened phenomenally.
3. Development of Basic and Capital Goods Industries:
Major area of success of Indian planning is growth of basic and capital goods industries.
With Mahalanobis tricks for development during Second Plan few basic and capital goods industries like iron and steel has remarkable growth.
4. Higher Growth of Agriculture:
Most important aspect of India’s Five Year Plans is that the overall rate of growth of food production has now exceeded rate of growth of population.
Early years of designing agricultural performance was miserable showing the emergence of food crisis.Due to impact of bio-chemical revolution in Indian agriculture the food crisis seems to be of the past.
5. Savings and Investment: Rise in domestic savings rate from 10 p.c. Of GDP at initial stages of designing to around 19 p.c. In 1980-81 is certainly impressive.
Major Failures of Planning:
1. Inadequate Growth Rate:
Quantitative terms rate of growth of Indian economy could also be good but not satisfactory in any standards.
Except the primary and Sixth Five Year Plans real rate of growth remained below targeted growth rates of GNP and per capita income.
Only in recent plans actual rate of growth has exceeded the plan targets.
2. Whither India’s Socialistic Society:
Indian planning targets at making a ‘socialistic pattern of society’ otherwise capitalistic framework through various socialistic measures.
We haven't any important progress towards the aim of achieving socialistic pattern of society even after nearly 58 years of designing .
Concept of socialistic pattern of savings and loan has been discarded once we introduced new policy measures in mid-1991.
Indian economy moves on capitalistic path.
3. Economic Inequality and Social Injustice:
Twin aspects of social justice involves one hand i.e. reduction in economic inequalities and on other the reduction of poverty.
Rise in value with economic power in hands of few people isn't wished.
In a capitalist framework inequality the distribution of income and wealth is inevitable.
India’s socio-political set-up has vast inequalities exist.
Indian plans targets at lessening such inequalities in order that benefits of economic development percolate right down to lower group of the society.
4. Unemployment:
It never got the priority it required.
Employment generation programme has received a nasty shock and problem of unemployment is surging one after plan. Another.
References
1. Indian Economy - Rudra Dutt & Sundarram
2. Bhartiya Arthashastra – L. M. Roy
3. Indian Economy – Uma & Kapila
