Annual Report 1998-1999
Introduction
11 The year 1998-99 marks the second year of the Ninth Five Year Plan (1997-2002). The Approach paper to the Ninth Five Year Plan envisaged abase line growth scenario of 6.2 per cent per annum on the average for the Ninth Plan period. It was also indicated that an accelerated growth scenario of 7 per cent per annum was feasible provided certain policy decisions were adopted by the Centre and the States. In its meeting held on January 16, 1997, the NDC approved the Approach Paper and directed the Planning Commission to formulate the Ninth Five Year Plan with a target growth rate of 7 per cent per annum. A Draft Ninth Five Year Plan was prepared by the Planning Commission on the basis of the approved Approach Paper. It was released to the public by the then Deputy Chairman, Planning Commission on 1.3.1998.
1.2 With the formation of the new Government in March, 1998, the work of re-drafting the Ninth Five Year Plan was taken up. The process of re-drafting the Plan was guided by three broad directions laid out by the Government. These were : (a) The Approach Paper as approved by the NDC in January, 1997 would continue to form the basis of the Ninth Plan; (b) The Plan would take into account the priorities of the Government as laid down in the National Agenda for Governance (NAG) and the directions of the Prime Minister; and (c) The annual performance of the economy in 1997-98 and the emerging trends for 1998-99 would be taken into account in formulating the Plan.
1.3 In the course of reviewing the Ninth Plan, it was found that the 7 per cent growth target approved by the NDC would not be feasible in light of the performance of the economy in the first two years of the Plan. It was, therefore, proposed to reduce the target for the entire Ninth Plan period to 65 per cent, which would imply that the economy would have to grow at over 7 per cent in each of last three years of the Plan
1.4 In order to incorporate the priorities of the Government, Special Action Plans (SAPs) were drawn up for the identified sectors with committed fund allocations and performance milestones, which were integrated into the overall Plan structure. The Draft Ninth Five Year Plan, as revised was approved by the full Planning Commission and by the Union Cabinet for being placed before the NDC at its next meeting.
1.5 The performance of the economy in the first two years of the Plan which have necessitated the change in the growth target of the Ninth Plan are described in the following sections
Growth and Sectoral Output
1.6 The overall rate of economic growth in 1997-98 reduced to 5.0 per cent from 7.8 per cent in 1996-97 The decline in the rate of economic growth is mainly due to the slow down of agriculture. After an impressive increase of 9.6 per cent in 1996-97, the agricultural GDP registered a negative growth of 1.3 per cent in 1997-98 Foodgrain production declined to 193.1 million tonnes in 1997-98 from 199.3 million tonnes in 1996-97. The decline in GDP originating in the agriculture sector was mainly because of a steep fall in the production of wheat, coarse
cereals, pulses, oil seeds and cotton during 1997-98 as compared to the previous year. The growth rate of 5.0 per cent in GDP during 1997-98 has been achieved mainly due to high growth in registered manufacturing, electricity, gas and water supply, trade, hotels and restaurants, communication, banking and insurance and community, social and personnel services The advance estimates ofCSO indicate that the rate of growth of GDP in 1998-99 is likely to be 5.8 per cent.
17 On the industrial front, the rate of growth of the index of industrial production in 1997-98 is marginally higher at 66 per cent as compared to 5.6 per cent in 1996-97. The basic goods sector has performed well in 1997-98 with a growth of 16.5 per cent.
Savings and Investment
1.8 Gross Domestic Savings (GDS) constituted 23.1 per cent of GDP at market prices in 1997-98. This is less than the savings rate of 24.4 per cent realised in 1996-97. These are also less than the domestic savings rate of 26.1 per cent assumed in the Ninth Five Year Plan Gross Domestic Investment as a proportion of GDP averaged 24.8 per cent in 1997-98 as against 25 7 per cent in 1996-97.
Fiscal Development
1.9 A high level of fiscal deficit continues to be an area of concern for the policy planners. Ever since economic reforms were initiated, attempts have been going on to restrict the fiscal deficit to a manageable limit. But progress in this area is still limited. The fiscal deficit to GDP ratio was estimated as 6.1 per
cent in 1997-98 The revenue deficit of the central government was 3.1 per cent in 1997-98. These resulted in a primary deficit of 1 5 per cent of GDP for the Central Government. The difference between the fiscal deficit and the primary deficit, which represents the interest burden of the government as percentage of GDP, has remained around 4.5 per cent during the last few years.
1 10 The share of direct taxes as a proportion of GDP has gone up in recent years. However, this has been more than offset by a decline in the share of indirect taxes to GDP Between 1992-93 and 1997-98 the ratio of income tax to GDP has gone up from 1 12 per cent to 2.01 per cent (the figure for 1997-98 is inclusive of VDIS receipts) and/that of corporate tax has increased from 1.26 per cent to 1.50 per cent. During the same period the ratio of customs duties to GDP came down from 3 37 per cent to 2 87 per cent and that of excise duties came down from 4 37 per cent to 3 34 per cent. The gross tax revenue of the Central Government remained around 10 per cent of GDP in 1997-98
Inflation
1.11 The Ninth Plan envisages a reasonable degree of price stability. The average inflation rate measured by changes in Wholesale Price Index (WPI) was 4.8 per cent in 1997-98. This is considerably less than the inflation rate of 6.5 per cent in 1996-97. This moderation in the rate of inflation in 1997-98 was achieved against a relatively high rate of monetary expansion and also increases in the administered prices of certain petroleum products
1.12 The rate of expansion in money supply (M3) has been high during the last two years. M3 recorded a growth of 16.2 per cent
in 1996-97 and 17.6 per cent in 1997-98. This should be seen in comparison with a target growth of money supply of about 15 0 per cent set by RBI during recent years The high rate of increase in M3 during 1997-98 was a result of increase in both domestic credit and net foreign exchange assets of the banking sector
Balance of Payments
1.13 The current account deficit increased from 1.2 per cent of GDP in 1996-97 to 1.7 per cent of GDP in 1997-98 Trade deficit (RBI data) also increased to 4.3 per cent of GDP in 1997-98 from 4.1 per cent in 1996-97.
1.14 In U.S. dollar terms, exports recorded only a marginal growth of 1.5 per cent in 1997-98 as compared to 5.3 per cent in 1996-97. In U.S. dollar terms, imports in 1997-98 increased by 4.2 per cent as compared to 6.7 per cent in 1996-97.
1 15 Despite widening of the current account deficit from 12 per cent of GDP in 1996-97 to 1.7 per cent of GDP in 1997-98, the foreign exchange reserve position has improved. India's foreign exchange reserves increased from 26.4 billion U.S dollar at the end of March, 1997 to 29.4 billion US dollar at the end of March, 1998.
PLAN PROGRESS
FIVE YEAR PLANS
2.1 Planning in India was intended, in the words of the resolution of March, 1950 "to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community" Since 1950, eight Five Year Plans have been implemented and presently we are in the middle of the Ninth Five Year Plan The Approach Paper to the Ninth Five Year Plan was unanimously approved by the National Development Council (NDC) in its meeting heldonl6.01.1997. The detailed Ninth Plan Document has been reviewed by the present Government and is being placed for the endorsement of the National Development Council in a meeting convened on 19.02 1999 at New Delhi.
2.2 The preparation of Five Year Plans involves simultaneously (a) appraisal of the past trends and performance; (b) assessment of resources; (c) identification of major problems and constraints; and (d) determination of measures and policies for future growth. The National Plan comprises of the Central and State Governments' Plans, as well as. Plans for the private sector, more especially, for the corporate sector.
2.3 The preliminary exercise for preparation of a Five Year Plan starts with the consideration of an approach to the Plan Evaluation studies are undertaken with the help of Programme
Evaluation Organisation, Central Statistical Organisation a various other institutions. The Working Groups and Steeri Committees constituted by the Planning Commission for varic sectors carry out exercises to provide input for formulation of 1 Plan Discussions are held by the Planning Commission, at b( expert-level and political level. The dimensions of the St:
Plans are designed in consultation with individual State Ch Ministers. Simultaneously, discussions are also held with Cent Ministries, to arrive at a public investment programme which consistent with Plan priorities, known and anticipated constrain and available resources.
2.4 Meetings of the Internal and Full Planning Commission, fn time to time, assess the progress of formulation of the Plan a also deliberate in detail on its content and scope. The Five Y< Plan Document is considered by the Union Cabinet, thereaft final approval is given by the NDC chaired by the Prii Minister and comprising members of Union Council of Ministi and State Chief Ministers, Governors/Lt. Governors.
Formulation of Annual Plans
2.5 The Five Year Plan gets operationalised through 1 mechanism of Annual Plans. In the course of formulating < Annual Plan, the Planning Commission assesses previous yez Plan performance in various sectors and suggests a reorientati of policies and modifications of strategies consistent with 1 changing requirements so as to ensure achievement of the lor term objectives.
2.6 In the third quarter of each financial year, the Planni Commission indicates to State Governments and Cent
Ministries important objectives that should be kept in view while formulating the Annual Plan for the following year and to furnish their Plan proposals, including physical targets and the corresponding financial outlays required, within the overall framework of their respective Five Year Plans. The State Governments are also advised to furnish their forecasts of financial resources, including proposals for mobilising additional resources, for their Annual Plans. The resource estimates of the State Governments, thus furnished, are discussed in-depth in a series of meetings generally during November-December with senior officers of the State Governments. Similarly, in-depth discussions are held with senior officials of the Central Ministries/Departments on their Annual Plan proposals, during October-December of each year.
2.7 The Plan outlays arrived at in the meetings between the Deputy Chairman and State Chief Ministers/Lt. Governors in respect of State Plans and at meetings taken by Member Secretary, Planning Commission with the Secretaries of Central Ministries/Departments, regarding the Central Plan forms the basis for budgetary provisions for the Plan for the ensuing year.
The Ninth Five Year Plan (1997-2002)
2.8 The Planning Commission in its meeting held on 19 8.1996 decided that the Ninth Plan would start from 1 4 1997 as per schedule. As a first step for the formulation of the Plan, a number of Steering Committees and Working Groups dealing with various sectors were constituted by the Planning Commission These Steering Committees and Working Groups, comprising sectoral experts, academicians and concerned officials, undertook detailed exercises and submitted their respective
reports which, in turn, formed a major input in the formulation of the Ninth Five Year Plan. In all, 23 Steering Committees and 116 Working Groups were set up for the Ninth Five Year Plan.
2.9 The preparatory work for the Plan culminated in the finalisation of the "Approach Paper to the Ninth Plan (1997-2002) in the form of broad guidelines for the preparation of the detailed Plan. The Approach Paper was approved unanimously by the National Development Council in a meeting held on 16.1.1997. Inter-alia, it included the following salient features.
In this regard, to curb the proliferation of Centrally Sponsored Schemes with the necessary funds along with the schemes to be transferred to the States and Panchayati Raj bodies.
2.10 A detailed draft Ninth Five Year Plan document (1997-2002) was prepared, discussed and approved in the internal meetings of the Planning Commission. This draft was released to the public by the then Deputy Chairman, Planning Commission on 1.3.1998. The present Government, which came to power after the General Election in March, 1998, has reviewed this draft so as to suitably reflect the altered priorities as enunciated in the National Agenda for Governance, in general and the Prime Minister's Special Action Plan (SAPs), in particular. Accordingly, the Plan document has been revised. The revised Ninth Plan envisages an average target growth rate of 6.5 per cent per annum in GDP as against the growth rate of 7 per cent approved earlier in the Approach Paper. The scaling down of the target was necessitated by the changes in the national as well as global economic situation in the first two years of the Plan. During 1997-98, the first year of the Ninth Five Year Plan there was a slow down in the growth rate of Indian economy to 5.1 per cent. In the current year also, i.e., the second year of the Plan the economy is expected to grow by about 6 per cent. There is a sharp decline in the export growth. In addition, there has been significant revenue shortfall in the first two years of the Ninth Plan and a sharp deterioration in the State Government's finances. Taking these developments into account, the Full Planning Commission in its meeting held on 10.11.1998, decided to recommend to the NDC that the Growth target be scaled down to 6.5 per cent per annum while retaining the broad approach approved by the National Development Council in January, 1997. Implicit in this target is an average growth rate of more than 7 per cent over the last three years (1999-2002) of the Ninth Plan.
2.11 The present draft assumes an Incremental Capital-Output Ratio (ICOR) of 4.3, which implies an assumption of average domestic savings and investment rates of 26 1 per cent and 28 2 per cent ofGDP. The Plan proposes an investment of Rs.2171 thousand crore during the period 1997-2002 at 1996-97 prices, most of which (92.6% amounting to Rs.2011 thousand crore) can be financed from domestic resources. Investment in the public sector would be Rs.726 thousand crore constituting 33 per cent of the total investment against the level of 34.3 per cent realised during the Eighth Plan period. The public sector outlay is proposed to be Rs.859,200 crore, out of which the Central Plan will have an outlay of Rs.492,221 crore, which includes provision to implement the additional requirements of Special Action Plans The Central Budgetary Support to the Plan is targeted at Rs.374,000 crore at 1996-97 prices.
2.12 The draft Ninth Five Year Plan document, in two volumes. was approved by the Cabinet in a meeting held on 9.1.1999 for placing before the NDC for its endorsement. The first volume indicates the plan objectives, development perspective within which it is set, its macro-economic policy framework, the employment perspective it envisages and the manner in which it can be financed. The second volume details programmes, policies and issues in the various sectors of the economy.
The 48th Meeting of the National Development Council
2.13 The primary agenda for the National Development Council is to consider the draft Ninth FiveYear Plan document. However, there are a few other items pending consideration of the NDC. Taking into account the status of preparation of these other agenda issues, the Planning Commission proposed the following items for consideration of the 48th Meeting of the NDC convened on 19th February, 1999.
2.14 The total Plan outlay for revised estimates for Annual Plan 1997-98 for the Central Sector and States including UTs has been fixed at Rs. 81033.9 crore and Rs. 58591.95 crore for Centre and State sectors respectively. The details of the Plan outlays by broad heads of development for Centre, State and UTs for the Annual Plan 1997-98 are given in Annexure 2.2.
Annual Plan 1998-99
2.15 The total plan outlay for Annual Plan 1998-99 for the Centre Sector has been fixed at Rs. 105187.16 crore in the budget estimates. This represents an increase of about 30 per cent over the revised outlay of Rs. 81033.9 crore for the Centre Sector for Annual Plan 1997-98. The details of the Plan outlays for the Annual Plan 1998-99 by broad heads of development for the Centre Sector are given in Annexure 2.3.
Annual Plan -1999-2000
2.16 Annual Plan proposals for 1999-2000 of Centre Sector have been finalised after due consideration and in-depth discussions at the level of Principal Advisers/ Advisers/Heads of Division and, selectively, at the level of Member-Secretary and the concerned Secretaries of Ministries/Departments. Given the resource constraints and with a view to incorporate priorities of the Government as reflected in the Prime Minister's SAPs, the Ministries/Departments were clubbed into three categories, namely, SAP, Non-SAP Ministries/ Departments where meetings were convened by the Member-Secretary and the remaining Non-SAP. The allocation of Gross Budgetary Support (GBS) has been made on the basis of assessment of programmes of each Ministry/Department also keeping in view their performance as reflected in the Revised Estimates for 1998-99.
2 17 Efforts are being made to complete State Plan discussions for the Annual Plans of the State Governments at the earliest possible. The priorities of the Government as reflected in the draft Ninth Plan document would be suitably reflected in finalising State Plans in the ensuing year.
Annexure 2.1 EIGHTH PLAN OUTLAY AND PROGRESS OF EXPENDITURE : CENTRE, STATES and UTs. (Rs. Crore)
Annual Plan at 1991-92 Prices |
|||||||
| Sl No | Sector | Eighth
Plan Outlay at 1991-92 Prices |
1992-93
Actual Exp |
1993-94
Actual Exp |
1994-95
Actual Exp |
1995-96
Actual Exp |
1996-97
Actual Exp |
| 1. | 2. | 3. | 4. | 5. | 6. | 7. | 8. |
| 1. | Centre | 247865 | 39903 | 46517 | 44823 | 44620 | 50915 * |
| 2. | States | 179985 | 25495 | 26538 | 28432 | 29546 | 322156 |
| 3. | Union Territories | 6250 | 1134 | 1149 | 1256 | 1295 | 1667 |
|
TOTAL | 434100 | 66532 | 74204 | 74511 | 75461 | 84838 |
* Revised Estimates
Annexure 2.2 PLAN OUTLAY BY BROAD HEADS OF DEVELOPMENT FOR ANNUAL PLAN 1997-98 (REVISED ESTIMATES) (Rs. Crore)
| Sl. No. | Heads of Development | CENTRE |
STATES and UT |
TOTAL |
|||
|
|
Outlay | %-age to Total | Outlay | %-age to Total | Outlay | %-age to Total | |
| 1 | Agriculture and Allied Services (*) | 3024.19 | 3.73 | 13834.78 | 23.61 | 16858.969 | 12.07 |
| 2 | Rural Devlopnant | 5314.91 | 6.56 | 4847.56 | 8.27 | 10162.471 | 7.28 |
| 3 | Energy | 21128.76 | 26.07 | 11439.78 | 19.52 | 32568.535 | 23.33 |
| 4 | Industry and Mineral* | 10771.34 | 13.29 | 1751.08 | 2.99 | 12522.422 | 8.97 |
| 5 | Transport | 12985.35 16.02 | 5654.24 | 9.65 | 18639.593 | 13.35 | |
| 6 | Social Serviced | 13748.78 | 16.97 | 17189.81 | 29.34 | 30938.594 | 22.16 |
| 7 | Othera(#) | 14060.57 | 17.35 | 3034.61 | 5.18 | 17095.178 | 12.24 |
| 8 | Area Progrmne>($) | 0 | 0.00 | 840.09 | 1.43 | 840.09 | 0.60 |
| GRAN) | TOTAL(6) | 81033.9 100 | 58591.9512 | 100 | 139625.85 | 100 | |
(*) Includes Agriculture and Irrigation
Sector.
(#) Includes Communications, Science Technology and Environment, General
Economic Services and General Services.
Annexure 2.3 PLAN OUTLAY BY BROAD HEADS OF DEVELOPMENT FOR ANNUAL PLAN 1998-99 (REVISED ESTIMATES) (Rs. Crore)
CENTRE |
|||
| Sl. No. | Heads of Development | Outlay |
%-age to Total |
| 1 | Agriculture and Allied Services(*) | 4238.69 | 4.03 |
| 2 | Rural Development | 5881.69 | 5.59 |
| 3 | Energy | 30081.90 | 28.60 |
| 4 | Industry and Minerals | 11550.92 | 10.98 |
| 5 | Transport | 16185.86 | 15.39 |
| 6 | Social Services | 18310.10 | 17.41 |
| 7 | Others(#} | 18938.00 | 18.00 |
| 8 | Area Programmes | 0.00 | 0.00 |
| GRAND TOTAL | 105187.16 | 100.00 | |
(*) Includes Agriculture and Irrigation
Sector.
{#) Includes Communications, Science Technology and Environment, General
Economic Services and General Services.
Note:- These are Budget
Estimates.; The figures for states/Uts are not yet available.
PLAN OUTLAY BY BROAD
HEADS OF DEVELOPMENT ANNUAL PLAN 1997-98 (Revised Estimates)
Rs. 139625.80 Crore
| A AGRICULTURAL SERVICES(#) B RURAL DEVELOPMENT C ENERGY D INDUSTRY and MINERALS E TRANSPORT F SOCIAL SERVICES G OTHERS (*) H AREA PROGRAMMES |
|
# AGRI and SERVICES
INCLUDES AGRICULTURAL and ALLIED SERVICES and IRRIGATION AND FLOOD
CONTROL
* OTHERS INCLUDE COMMUNICATIONS, SCIENCE, TECHNOLOGY and ENVIRONMENT,
GENERAL ECONOMIC SERVICES and GENERAL SERVICES
PLAN OUTLAY BY BROAD HEADS OF DEVELOPMENT
ANNUAL PLAN 1998-99
Rs, 105187.16 Crore
| A AGRICULTURAL SERVICES(#) B RURAL DEVELOPMENT C ENERGY D INDUSTRY and MINERALS E TRANSPORT F SOCIAL SERVICES G OTHERS (*) H AREA PROGRAMMES |
 |
* AGRI and SERVICES INCLUDES AGRICULTURAL
and ALLIED SERVICES and IRRIGATION AND FLOOD CONTROL
* OTHERS INCLUDE COMMUNICATIONS, SCIENCE, TECHNOLOGY and ENVIRONMENT,
GENERAL ECONOMIC SERVICES and GENERAL SERVICES
