Foreword || Preface || Planning Commission

PREFACE

1.We are launching the Eighth Five Year Plan in the backdrop of widespread changes which have altered the international social and economic order. Centralised economies are opening up to free market forces and competition. We are also witnessing an eventful release of people 's power for creative freedom and active involvement in restructuring the economic order for human development. This tidal wave of change has not left India untouched. In these trying and turbulent times, we have to respond and adjust to the changes quickly and creatively.

2. The challenges before us are many. Fiscal problems restrict the ability of the Government to provide needed resources to maintain the impetus of growth. At the same time, we have to ensure that the stimulus for sustaining the long-term growth of the economy is strengthened in the immediate future. The process of economic reforms and structural adjustments has to be carried forward without sacrificing the imperatives of development. This calls for a delicate balancing of options in the formulation of the Plan.

3. We have to start rolling back the Public Sector investment from those sectors of the economy where the private sector can move in and step up our investment in the social sector. At the same time, we have to ensure that the infrastructure needed for economic development continues to grow in this transitional period.

4. A third of our population lives in conditions of poverty, denied of the basic minimum needs. We cannot have the ambivalent attitude of the developed market economies which can afford to provide social security to its people. We do not have those kind of resources. So, we have to move with caution. Those very processes, which stimulate growth, sometimes tend to neglect the poor. I would like to quote the Prime Minister who summed up the issue in the following words: "There is, however, one danger which we must recognise and guard against in the "opening up" process. This could lead to wider disparities within the society. To meet this situation, we have to enable the under-privileged sections also to derive the benefit of the new opportunities. This process would naturally need some time to fructify. Until that happens, there has to be a by-pass arrangement whereby benefits reach the lowest rungs of the social pyramid directly from the State.We are doing this".

The Eighth Plan has been formulated in the face of these challenges. This makes it a Plan with a difference. It is a Plan for managing the change, for managing the transition from centrally planned economy to market-led economy without tearing our socio-cultural fabric.

The New Role

5. In line with ihe changed circumstances, we have redefined the role of the Planning Commission. From a highly centralised planning system, we are gradually moving towards indicative planning. Through clear prioritisation of goals, efforts will be made to reduce the bottlenecks, making higher rates of growth possible. If each sector can clearly visualise what is expected of it, then it can gear up to meet the set target. Througn" the instrument of indicative planning, it will be possible to provide a clear picture of the effects on the entire economy of any change in governmental policy.

6. The Planning Commission will play an integrative role and help in the development of a holistic approach to the policy formulation in critical areas of development. The Planning Commission will play a mediatory and facilitating role for managing the change smoothly and creating a culture of high productivity and efficiency in the Government.

7. In addition to the resource allocation role, the Planning Commission will concern itself with resource mobilisation for development as well as with efficient utilisation of the funds. The key to efficient utilisation of resources lies in the creation of appropriate self-managed organisations at all levels. In this area, the Planning Commission will play a systems change role and provide internal consultancy for developing better systems.

Salient Features of the Plan

8. This Plan has some features, which distinguish it from other plans and which, in my view, form its essence.

9. Those features are:

• This Plan is indicative in nature. It concentrates on building a long-term strategic vision of the future and sets forth the priorities of the nation. While for the public sector, the Plan goes into the details examining the alternatives and identifying the specific projects in various sectors, for the rest of the economy it works out sectoral targets and tends to provide promotional stimulus to the economy to grow in the desired direction.
• The Plan recognises "human development" as the core of all developmental effort. It is only healthy and educated people who can contribute to economic growth and this growth, in turn, will contribute to human well being. The priority sectors of the Plan that contribute towards realisation of this goal are health, education, literacy and basic needs, including drinking water, housing and welfare programmes for the weaker sections. In the Eighth Plan, Governments at the Centre and in the States will expand their role in this sphere.

No society in the long run can sustain the welfare of its people without economic growth. For rapid economic development, the priority sectors identified for the growth of infrastructure are power, transport and communications. The basic assumption is that if we can provide these three essential ingredients in the urban and rural areas, it will lead to accelerated economic growth.

The Plan attempts to correct the fiscal imbalances from which the Sixth and the Seventh Plan suffered. The funding of the Plan has to be done in a non-inflationary manner by avoiding the debt trap, both internally and externally. This calls for reduction in Government's dissavings, higher resource mobilisation both by the Centre and the States and improvement in the performance of public sector units.

This is an integrative Plan. If the results of our developmental activities so far have not been commensurate with the investments made, one of the main reasons has been our fragmented approach. Too many agencies trying to do too many things with a thin spread of resources has led to poor results. If we can integrate our developmental efforts, the results can be much more impressive even with these levels of investment. I think the time has come for us to take a close look at the structure of the Government particularly in the priority areas of Rural Development, Energy and Transport and bring together the various departments/agencies dealing in each of these areas under one umberalla for coordinated policy formulation and implementation.

The Eighth Plan recognises the essential need to involve people in the process of development. The attitude of passive observance and total dependence on the government for developmental activities has become all-pervasive. It has to be altered to a pro-active attitude of people taking initiative themselves. In the process of development, people must operate and the Government must cooperate. In this Plan, therefore, for the first time a new direction is being given to achieve these objectives by the adoption of institutional approach. The Planning Commission has now worked out institutional strategies which will mean creating or strengthening various peoples' institutions at the district, block and village level in order to synthesise the purposes of investment, envisaged in the central plan with optimisation of benefits at the grassroots level by relating these programmes to the needs of people. Panchayats and Nagar Palikas, elected by the people, will have to play a larger role in formulating and implementing the developmental projects in their areas. They should be vested with adequate financial resources, technical/managerial inputs and decision making authority. Involvement of voluntary agencies and other peoples' institutions is essential for effective micro-level participatory planning.

This Plan is performance oriented. It concentrates not so much on its allocative role, but on how to utilise the allocations optimally. The stress is on performance improvement, quality consciousness, competitiveness, efficiency of operations and completion of the projects on time. In order to provide an incentive for good performance and bring in result orientation the formula for giving central assistance to states has been suitably amended.

The Eighth Plan pays special attention to employment in the rural areas. If people can get adequate earning opportunities where they reside normally, they would not migrate to the urban areas. Such an expansion of employment opportunities calls for a shift in emphasis in the rural development programmes from the creation of relief type of employment to the building up of durable productive assets in the rural areas. These assets can enhance productivity and create more job opportunities, leading to sustained development.

This is a flexible Plan with scope for change, innovation and adjustment. In the outlays, that we have proposed for the States and some of the Central Ministries, there is a fairly large component of resources that the States and Central Ministries have to raise themselves. Unless these resources become available, it will not be possible for us to fund this Plan. Also, there are some sectors like power, transport and communications which, we feel, should have got higher outlays in line with the priorities accorded to them. This resource gap is sought to be filled by private sector investment in these areas. We intend to undertake mid-course review both with the States as well as the Central Ministries and, if need be, take remedial measures.

Macro Dimensions

10. The Plan proposes a growth rate of 5.6 per cent per annum on an average during the Plan period. The level of national investment is proposed at Rs. 798000 crores and the public sector outlay at Rs.434,100 crores. Consistent with the expected resource position, the size of the Plans of the States and Union Territories is projected at Rs. 186,235 crores and of the Central Plan at Rs.247,865 crores. This may be compared with the Seventh Plan outlay ofRs. 180,000 crores, comprising Rs. 89,466 crores for the States and UTs and Rs. 95,534 crores for the Centre.

11. The outlays in the public sector are financed by budgetary support and domestic and foreign borrowings. The total budgetary support in the Eighth Plan is Rs. 188,475 crores at 1991-92 prices, which is 43.4% of the outlay. Budgetary support becomes a crucial factor in determining the outlays of sectors which do not have any access to internal resources or borrowings. Besides, in the physical infrastructure areas such as power and transport including railways, a certain minimum budgetary support has to be made available even though they may have access to internal resources and borrowings.

Plan Allocation

12. A look at the allocations made to the priority sectors in the Eighth Plan shows that nearly 81.7 per cent of the total budgetary support to the Central Ministries has now gone to the social, infrastructure and agricultural sectors. This compares with 70 per cent in the Seventh Plan.

13. The total Plan outlay of States, including Area Programmes, will be Rs. 179,985 crores. The total budgetary support to the State Plans will be Rs. 78,500 crores, which includes normal Central assistance, Central assistance against externally-aided programmes as well as Plan revenue deficit grants. What we have now planned for the States is a little more than twice the Seventh Plan level.

14. The investment on the agriculture sector in the economy has been declining as a proportion of the total investment. Agriculture has to keep growing under the constraint of limited availability of land for which non-agricultural demands are also increasing. The burden of feeding a growing population lies on agriculture. We should also not lose sight of the fact that about two-thirds of employment is provided by agriculture and a large segment of our export earnings come from this sector. Therefore, the agricultural sector needs to be given a high priority. The private investment in this area can flourish only in the backdrop of a good infrastructure created by the efforts of the public sector. Major developmental responsibilities in agriculture lie with the States and greater efforts will have to be directed towards the development of agriculture and rural infrastructure. In this context, I must draw particular attention of those States, which have not so far experienced the benefits of green revolution -—the States in the Eastern region.

Employment Generation

15. If we are to reach ultimately the goal of full employment by the turn of the century, we will have to concentrate on creating job opportunities, particularly in the rural areas. The Central Plan has made a substantial step-up in the outlay for Department of Rural Development from Rs. 4900 crores approved in the Seventh Plan, (against which the actual expenditure was about Rs. 10,800 crores) to Rs. 30,000 crores in the Eighth Plan. In this context, the rural development programmes will have to be revamped in order to become more effective and more productive.

16. The emphasis has to shift from the creation of relief type of employment 10 the building up of durable productive assets in the rural areas. The productive assets, which contribute to the overall development of the rural areas, are: all-weather rural roads; minor irngaiion worics like percolation tanks etc; land levelling and prevention of soil erosion/improvement of soil; social forestry; school buildings and buildings for primary health centres; vocational training and production centres etc. Any additional resources for generation of wage-employment should be restricted to the identified ^'backward' districts.

Infrastructure

17. The Sixth and the Seventh Plans made a determined effort to improve power supply. While we have not been able to electrify all homes, we have, by and large, been able to provide power to productive activities particularly in industry, agriculture and commercial sectors. This was possible because of the leading role played by the Centre. The Central Plan contributed 45 per cent of the capacity addition during the Seventh Plan as compared to 6 per cent in the Fifth Plan. The Central projects have enabled the creation of regional grids which are being enmeshed into a national grid. The priority of the Central Plan in the power sector now will be towards integrating the national power supply system so as to improve its utilisation and to correct the present adverse hydel-thermal mix which has reached so low as to threaten the optimal utilisation of thermal capacity. To make this possible, States will have to assume a greater role in power capacity addition and the associated distribution net work in the short and medium term. I would urge the States to allocate adequate resources for the power sector to match the expansion in demand during the Eighth Plan and the early years of the Ninth Plan. These resources have to be generated from within the State Electricity Boards and the Electricity departments and not by borrowings from the State Governments.

Financing the Plan

18. While working out the financing pattern of the Eighth Plan, one of our major concerns was to avoid the trap that we had got into during the Seventh Plan. At the time of formulation of the Seventh Plan, it was envisaged that nearly 40 per cent of the total public sector outlay would be financed by the balance from the current revenues and by the contribution from public enterprises, both inclusive of additional resource mobilisation. Ultimately, the contribution from BCR and public sector enterprises turned out to be only 20 per cent of the total outlay and the balance was met through borrowings. That created an internal debt-trap and acute BOP crisis. We want to avoid that situation and confine the Public Sector outlay to an irreducible minimum level essential for ensuring the targetted growth.

19. To achieve that, we have to reduce the government's dis-savings drastically from 2.3 per cent of G.D.P. recorded in 1991-92 to an average of 1.1 per cent ofG.D.P. for the Eighth Plan period. Generation of more savings by the Government is a crucial element underlying the financing pattern of the public sector investment in the Eighth Plan. It is essential that the contribution from Balance from Current Revenue (BCR) during the Eighth Plan is not less than 8 per cent of the public sector outlay, as against 3 per cent during the Seventh Plan. The contribution from State Public enterprises must improve substantially. The Plan must be funded in a non-inflationary manner and by avoiding debt-trap -— both internal and external. Hard decisions, both in relation to resource mobilisation and containment of expenditure including subsidies, are called for in order to achieve this.

Assumptions

20. The success of the Eighth Plan rests on achieving some targets. These are : a reasonable degree of price stability ; exprot growth rate of 13.6% in volume terms; limiting imports to a growth rate of 8.4% of the GDP ; savings rate of 21.6% and limiting of government dis-savings to 1.1 per cent. The present inflationary trend in the economy has to be contained. Determined efforts to augment our resources have to be made. A surplus in current revenue must be generated to fund developmental expenditure by drastically reducing non- developmental expenditure. We must seriously consider how long the sectors, which have the capacity to pay, should be allowed to remain untapped for contributing to the exchequer to overcome the resource crunch and restore fiscal balance. While reducing the non- developmental expenditure, we must look critically at the expenditure on defence, subsidies and establishment costs. Resources necessary to improve the conditions of the weaker sections would just not be available if the relatively affluent sections are not made to share the burden of financing the poverty alleviation programmes.

Balance of Payments

21. Another area of critical concern relates to the balance of payments. It is imperative that, during the Eighth Plan, steps are taken to correct the fundamental weaknesses in the country's BoP position. Originally, it was felt that the current account deficit should be contained at a level equivalent to 1.4 per cent of the GDP. In a further assessment of the export prospects and import needs, it has been decided to keep the current account deficit at 1.6 per cent of the GDP during the Eighth Plan. Containing the current account deficit at this level is not going to be an easy task. We will need to pay special attention to restricting the imports of crude oil and petroleum products. This task has been made very difficult by the fall in output of crude oil much below the levels projected just about a year ago. We have to provide for adequate energy input to sustain economic growth. It is in this context that I urge a more concerted effort on tapping commercially viable sources of alternate domestic fuels, a close monitoring of consumption and an appropriate pricing policy.

Plan Implementation

22. Now let me turn to the vital area of implementation and operationalising the concepts presented in the Eighth Plan. How do we ensure that the benefits of Plan programmes like Minimum Needs Programme and employment generation schemes reach the intended beneficiaries? To my mind, this calls for large scale involvement of the people in the process of development. We had set up a task force to suggest various practicable institutional options for involving people in the task of development and for reducing their dependence on government for everything. The report has since been received and examined by us. As a first step towards the implementation of some of the recommendations made by the task force, I had called a meeting of the voluntary agencies in order to workout an action plan and also to seek their whole-hearted involvement in this process. The action plans formulated in this workshop are now ready for implementation. It is proposed to launch the experiment of micro-level participatory planning in 150 blocks during the first year of the Eightli Plan through creation of a three-tier institutional system. Tills system requires local communities at village, block and district level to diagnose needs, workout the priorities and implement plans using the collective wisdom of the people, knowledge of the experts and administrative skills of the government functionaries. This may require a change in the existing programme-oriented approach wherein we determine standardised activities to be undertaken in all the villages without any flexibility. Our accent on institutional approach is to provide a community instrument which would determine what people really need and how it can be achieved most effectively. The organisational structure has already been worked out and during the first year of the Plan we intend to start pilot projects in 150 Blocks. Depending upon the results, the experiment will be extended to 500 Blocks during the Eighth Five Year Plan.

23. Another initiative taken by us to bring together the farmers, business community, banking institutions, scientific institutions and various governmental agencies is reflected in the setting up of Small Farmers Agri-Business Consortium (SFAC). We had identified 10 areas where we have comparative advantage by global standards because of our agro-ecological and socio- economic conditions. These are: Food crops, Oilseeds, Cotton, Sugarcane, Horticulture, Sericulture, Dairy development, Poultry, Aquaculture and Agro-Forestry. By setting up this Consortium, we intend to improve the efficiency of production and post-harvest technologies and develop suitable marketing network. This will lead to creation of jobs as well as income generation. All the ground work for the setting up of this Consortium as a registered society has now been completed and it is hoped that the Consortium will start functioning soon.

24. We are also working out a monitoring system which will provide us timely signals of the performance of the State Governments in the priority sectors of the Plan. It is my hope that with all these measures we have initiated, it will be possible to monitor and implement the Plan more effectively.

25. In order to provide expert advice to the State Governments and Central Ministries, we propose to set up Consultancy groups in the areas of financial managment, population and rural health services, vocationalization of education, horticulture and micro-level planning. Each group will have a panel of experts drawn from Government agencies as well as educational and professional bodies. On invitation from State Governments and Central Ministries, these groups will work with them in chosen areas for development and problem solving. They will also act as "integrators" and build effective channels of communication and inter- action between main wings of the Government.

26. At the threshold of the Eighth Five Year Plan we have an India which posseses differentiated infrastructure with immense potential for industrialisation. Most of the villages have access to electricity and will shortly be within the reach of modern telecommunication net-work. Income and consumption levels have risen. The consumption basket has diversified. The incidence of poverty has declined. The average life expectancy has gone up. The death and birth rates have declined. Literacy has improved and the educational base has widened. We now have a robust and resilient agricultural economy with near self- sufficiency in food production. We have a large pool of skilled manpower and ample entrepreneurial resources. The growth performance of atleast a decade preceeding the Eighth Plan has been good. The liberalisation process initiated last year is gathering momentum offering new opportunities.

27. It is in this background that we launch the Eighth Plan. This Plan represents our shared commitment to the achievement of national priorities. This Plan is built on the edifice of promises that we have made to the nation. The success of this Plan will depend on how well we meet our commitments and keep our promises.

New Delhi
18th June, 1992

(PRANAB MUKHERJEE)

Deputy Chairman,
Planning Commission