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Overview of the Plan

The Ninth Five Year Plan (1997-2002) launched in the 50th year of India's Independence is based on a careful stock taking of the strengths of the country's past development strategy as well as its weaknesses and seeks to provide appropriate direction and balance to socio-economic development of the country. As the millennium draws to a close, a time has come to re-dedicate and consolidate the developmental efforts especially in the social and economic spheres, so that the country will realise its full economic potential and the poorest and the weakest will be able to shape their destiny in an unfettered manner. This will require not only higher rates of growth of output and employment but also a special emphasis on all-round human development, with a stress on social sectors and a thrust on eradication of poverty.

The Plan is based on the concept of cooperative federalism whereby much greater freedom would be given to states to determine not only their own priorities but also modalities of public intervention and provision of goods and services. In this endeavour, not only the governments at the Centre and the States but the people at large, particularly the poor, can become affective instruments of a participatory planning process. The principal task of the Ninth Plan, therefore, will be to usher in a new era of growth with social justice and active participation of people at the grass root level.

The Ninth Five Year Plan has accorded priority to agriculture and rural development with a view to generate adequate productive employment and eradication of poverty, accelerating the growth rate of economy with stable prices, ensuring food and nutritional security for all, particularly the vulnerable sections of the society and providing the basic minimum services of safe drinking water, primary health care facilities, universal primary education, shelter and connectivity to all in a time bound manner.

Towards meeting these objectives, the Plan emphasized that adequate quantity, quality and reliability of infrastructure are essential preconditions for economic growth and development. Traditionally, infrastructure has been provided largely by the public sector but the investment needs of infrastructure development greatly exceed the resources likely to be available with the public sector. In order to supplement the public sector effort, all major infrastructure sectors have already been opened to private investment and a number of private sector projects are being implemented in power generation, telecommunication services, ports and even roads and airports.

Despite considerable efforts, provision of social infrastructure and services remain inadequate under the pressure of population growth. Primary education, primary health care, safe drinking water, nutrition and sanitation require heavy investment which has to be provided out of public funds. Concerted public action, both direct and towards awareness building is essential for creating the conditions by which the country can stabilize its population at a level that can be sustained in the long-term.

The economic development in India in 1998-99 has to be viewed against the backdrop of an exceptionally turbulent and unfavorable international economic environment. The year saw significant declines in the GDP of a number of East Asian Countries, continuing recession in Japan, severe financial crisis in Russia, unusual volatility in capital and forex markets of industrialised countries, continuing drought in capital flows to the developing countries, etc. The extension of the East Asian crisis to countries in other continents resulted in the slow down of industrial growth. World Trade growth also decelerated sharply. Against such background, the Annual Plan 1998-99 provides an opportunity for reviewing the experience of the first year in moving towards the objectives set out in the Ninth Five Year Plan.

Public Sector Plan

Economic growth is the outcome of numerous economic and social factors interacting with each other. For resource constrained developing countries like India, capital accumulation or investment is the most important factor for increasing the productive capacity of the economy. For determining the overall rate of investment or its sectoral distribution, market forces, relative prices and incentives play much important roles than direct allocation of resources by public authorities. With the steady reduction in the share of public investment, both planned and actual, in total investment as shown in Table 2.1, the ability of the government to determine the structure of the economy through its own investment behavior has eroded significantly. The significant feature of the pattern of investment is that the share of private sector is increasing rapidly in the regime of liberalisation and economic reforms established since 1991. The almost complete abolition of industrial licensing, relaxation of FERA and MRTP restrictions, opening up of major infrastructure sectors like electricity generation, telecommunication, transport etc. which had earlier been reserved for the public sector, all had contributed to an unprecedented increase In private investment opportunities in the country. On the face of it, the private sector did respond positively to these policy measures. The average growth rate of private investment during the Eighth Plan was 14.4 per cent per annum which was more than double that of any period in the past.

2.8 The share of Public Sector in total investment is projected to be 33.4 per cent during the Ninth Five Year Plan as shown. The sectoral priorities in Public Sector investment during the Eighth and Ninth Five Year Plans are given at Table 2.2.

As compared to the Eighth Plan, Public Sector investment during the Ninth Plan is projected to have higher shares for sectors such as construction, transport and services thereby providing space for more dynamic participation of private investment in sectors like mining and quarrying and power.

The total outlay provided for the Public Sector during the Ninth Five Year Plan is of the order of Rs. 859200 crores at 1996-97 price as indicated in Annexure 2.1 . While providing the outlays, priority has been accorded to social and physical infrastructure sectors like Rural Development, Social Services and Transport which is in tune with the Ninth Plan objective of raising quality of life of the people of the country. Sector-wise distribution of public sector outlays during the Ninth plan are given in Table 2.3.

2.11 The approved Public Sector outlay for the Eighth Plan was in the proportion of 57.10 per cent, 41.46 per cent and 1.44 per cent among Centre, States and UTs respectively. Distribution of outlays in the Ninth Plan among Centre, States and UTs is in the ratio of 57.0 per cent, 40.8 per cent and 2.2 per cent respectively which is more or less at the same levels as provided in Eighth Five Year Plan. A disturbing development in recent years is the inability of the States to mobilise resources as targeted leading to a shortfall in the share of States in the total Public Sector Plan outlay. When the states' share declines, the sectors which suffer more severely are agriculture, basic minimum services, health, education, women and child development, welfare and also economic infrastructure such as electricity. In view of the emphasis that is being placed on the importance of these sectors, this trend needs to be halted and reversed. The plan wise (from Fifth Plan) share of State Plan outlay in the total Public Sector outlay is shown in Table 2.4.

2.13 While the Annual Plan 1998-99 provides for the Public Sector outlay of Rs. 185907 crore at current prices, the outlay for the State sector is Rs. 77192 crore, which is 41.5 per cent of the total Public Sector outlay. In the first two years 1997-99 of the Ninth Plan, assuming that the actual expenditure will be same as the revised estimates for 1997-98 and the budget estimates of 1998-99, the Public Sector outlays for the Centre and State Plan work out to 34.9 per cent and 34.8 per cent of the Ninth Plan provisions at constant (1996-97) prices.

2.14 The Eighth Plan envisaged mobilisation of resources in the ratio of 43.6 : 56.4 (Central Assistance : Own Resources) in financing the State Plan as shown in Table 2.5. The performance of State sector, in mobilisation of their own resources, however, remained much below expectation. In the first two years of the Ninth Plan also, assuming that the approved assistance materialises, the actual mobilisation of own resources by the states sector remains below target which again may lead to decline in expenditure of the state sector by 4 per cent of its provision.

Central Plan

2.15 An outlay of Rs. 489361.58 crore has been provided for the Central Sector during the Ninth Five Year Plan at 1996-97 prices as indicated in Annexure 2.2. Energy, Transport, Industry and Minerals together constitute around 59 per cent of the total outlay. In the Annual Plan 1997-98, against the allocation of Rs. 91839 crores for the Central sector, the Revised Estimates are Rs. 81034 crore indicating a shortfall of about 12 per cent. The shortfall has been significant In sectors like Energy, Transport, Communications and Social Services. For the Annual Plan 1998-99, an outlay of Rs. 105188 crore has been allocated indicating an increase of 14.5 per cent over the previous year. In real terms, there has been step up in outlays provided to sectors like Agriculture, Energy, Communications, Science and Technology and social services.

2.16 Assuming that the Revised Estimates of 1997-98 and the provision for 1998-99 materialises, the Central Sector expenditure would be about 35 per cent of the total Ninth Plan outlays provided for the Central Sector. While Communication, Agriculture, Social Services and Industry and Minerals have utilised over 35 per cent of their Ninth Plan allocations, expenditure is unsatisfactory in most of the sectors (Annexure 2.2).

2.17 Rs.42464 crore have been provided as budgetary support for the Central Sector for the Annual Plan 1998-99 indicating a step up of 17.5 per cent over the previous year as indicated in Annexure 2.3. Higher budgetary support has been provided for Social Services (38.4 per cent), Rural Development (13.9 per cent), Transport (11.9 per cent) and Energy sector (10.6 per cent) respectively which is almost of the same order as provided in 1997-98. This trend endorses the Ninth Plan objective of tackling the problem of poverty and strengthening of infrastructure. The average utilisation of Budgetary Support during the first two years of Ninth Plan period was 40 per cent which is slightly lower than the provision as seen in Table 2.6.

States Plan

2.18 In the Annual Plan 1997-98, only ten states have shown good performance in terms of revised estimates as compared to approved outlays as indicated in Annexure2.4. These states include Andhra Pradesh, Gujarat, Himachal Pradesh, Jammu and Kashmir, Karnataka, Maharashtra, Mizoram, Rajasthan, Sikkim and Tamil Nadu. Out of these, Himachal Pradesh and Rajasthan have overspent 21 per cent of their approved outlays. In the case of West Bengal, however, the Revised Estimates fell short of Budget Estimate by 41 per cent followed by Meghalaya (32 per cent), Uttar Pradesh (28 per cent) and Madhya Pradesh (27 per cent). The remaining states experienced a shortfall ranging from 5 to 21 per cent. The overall shortfall in expenditure for all states put together was 9 per cent of its allocation. The shortfall in States own resource in this year from Rs. 35401 crore to Rs. 29718 (RE) is a cause of concern. (Annexure 2.1).

2.19 Rs.77192 crore were provided as state plan outlay for the Annual Plan 1998-99 indicating a step up of about 26 per cent over the previous year. The step up was highest in the case of Bihar (66 per cent) followed by Haryana and Himachal Pradesh (43 per cent) and Uttar Pradesh (42 per cent). The North Eastern States of Arunachal Pradesh, Assam, Manipur, Meghalaya and Nagaland have however been allocated outlays with marginal increase over previous year.

2.20 The State Plan expenditure has been showing a declining trend during Annual Plans in real terms. In the first two years(1997-99), allocation of outlays to states constituted about 36 per cent of the total Ninth Plan provision for the States Sector. Assuming that the approved outlay for 1998-99 materialises, about 35 per cent of the total outlay envisaged for the Ninth Plan would have been utilized in the first two Annual Plans (1997-99) as shown in Annexure 2.5. The declining trend in the utilisation of outlays in North Eastern States such as Arunachal Pradesh, Assam, Manipur, Meghalaya and Nagaland is a cause of concern. The shortfall In expenditure is mainly due to shortfall in the generation of internal resources by the concerned State Governments for financing their plans.