12th Five Year Plan of India

Prepared by Gourav Kumar Vani

PALB 2103

Prepared by Gourav Kumar Vani

PALB 2103

Economic Planning Economic Planning

• Process in which the limited natural resources are used skillfully so as to achieve the desired goals.

• The concept of economic planning in India, is derived from Russia.

• 1947- committee on economic planning constituted under chairmanship of Pundit J. L. Nehru, which suggested Planning Commission .

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Source: Modern Economic Theory by K.K. Dewitt

•March,1950-Planning commission was constituted.•Planning commission is a non constitutional and advisory corporation. The Indian constitution do not provide for the formation of planning commission.

Table No.1Five year plan Period Target growth rate of

GDP (%)Achievement (%)

Model

First plan 1951-56 2.1 3.6 Herod Domor Model

Second plan 1956-61 4.5 4.21 Prof. P.C. Mahalanobis

Third plan 1961-66 5.6 2.72 Sukhomy Chakraborty and Prof. Saddy

Fourth plan 1969-74 5.7 2.05 Ashok Rudra and Alon S. Manney

Fifth plan 1974-79 4.4 4.83 Investment model of planning commission

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Table No. 2

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Table No. 3

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Table No.4

12th Five Year Plan • The government on 4th October approved the 12th five year plan (2012-17)

document that seeks to achieve annual average economic growth rate of 8.2 per cent, down from 9 per cent envisaged earlier, in view of fragile global recovery. The theme of the Approach Paper is “faster, sustainable and more inclusive growth” .According to officials the projected average rate gross capital formation in the 12th Plan is 37 per cent of GDP. The projected gross domestic savings rate is 34.2 per cent of GDP and the net external financing needed for macro economic balance has been placed at 2.9 per cent of GDP. During the 11th Plan (2007-12), India has recorded an average economic growth rate of 7.9 per cent. This, however, is lower than the 9 per cent targeted in 11th Plan. Besides other things, the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 percent. The total plan size has been estimated at Rs.47.7 lakh crore, 135 per cent more that for the 11th Plan (2007-12).

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TWELFTH FIVE YEAR PLAN: GROWTH RATE TARGETSTWELFTH FIVE YEAR PLAN: GROWTH RATE TARGETS

Sl.No. Sectors 11th FYP (achieved) (in %)

12th FYP (in %)

1 Agriculture, Forestry & Fishing 3.7 4.0

2 Mining & Quarrying 4.7 8.0

3 Manufacturing 7.7 9.8

4 Elect. Gas & Water Supply 6.4 8.5

5 Construction 7.8 10.0

6 Trade, Hotels & Restaurant+Transport, Storage & Communication

9.9 11.0

7

8 Financing, Insurance, Real Estate & Business services

10.7 10.0

9 Community, Social & Personal Services

9.4 8.0

10 Total GDP 8.2 9.0

11 Industry 7.4 9.6

12 Services 10.0 10.0Source: 12th plan Approach paper, Planning Commission of India.

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Table No. 5

Targets (in %)for Broad Macro Economic ParametersTargets (in %)for Broad Macro Economic Parameters

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Table No. 6

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Indian Fiscal System

Revenue BudgetRevenue Budget Capital Budget Capital Budget

Current revenue or revenue receipts

Current revenue or revenue receipts

Current expenditure or

revenue expenditure

Current expenditure or

revenue expenditure

Capital receipts Capital receipts

Capital expenditure

Capital expenditure

Tax Revenue

Tax Revenue

Non Tax Revenue

( fees, grants, fines, penalties etc)

Non Tax Revenue

( fees, grants, fines, penalties etc)

Non Debt Receipts Non Debt Receipts

Receipts from Debts Receipts from Debts

Expenditure on Administration ,judicia

ry, Welfare Programmes and

Transfer Payments

Expenditure on Administration ,judicia

ry, Welfare Programmes and

Transfer Payments

Expenditure on infrastructure,

technology , new capital assets and loans & grants etc

Expenditure on infrastructure,

technology , new capital assets and loans & grants etc

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Expenditure of Central Govt.

Plan Expenditure (agriculture, rural development, irrigation and flood control, energy, industry and minerals, transport, communications, Science and Technology, Environment and Economic Services etc )

Non-Plan Expenditure(Interest payments, defense, subsidies, police, pensions, economic services, loans to public enterprises and loans as well as grants to state governments, union territory governments and foreign governments.)

Plan Expenditure includes both revenue and capital expenditure of the government on the Central Plan, Central assistance to state and union territory plans. It forms a sizeable proportion of the total expenditure of the Central government.

Expenditure of State Govt.

Development Expenditure

Non-Development Expenditure

Some concepts neededSome concepts needed

1. Gross Budgetary Support (GBS)

• The Gross Budgetary Support (GBS) is an important component of the Central Plan of the Government of India.

• The Government's support to the Central plan is called the Gross Budgetary Support. The GBS includes the tax receipts and other sources of revenue raised by the .The share of the GBS in Central Plan has been rising since 2008-09.

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2. Central Plan2. Central Plan

• It consists of the Government's budget support to the Plan and the internal and extra budgetary resources raised by public enterprises.

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3.Fiscal Deficit3.Fiscal Deficit

• The fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowing).

• The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, that is mainly from banks).

• Primary Deficit: Fiscal Deficit- interest payments, it shows how much is government borrowing to pay for expenses other than interest payments.

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4. IEBR Internal and Extra Budgetary

Resource

4. IEBR Internal and Extra Budgetary

Resource • IEBR is an important part of the Central plan

of the Government of India and constitutes the resources raised by the PSUs through profits, loans and equity.

• Expenditure is not same as Payments in Accounting. We can make expenditure even without paying for the goods and/or services we use i.e., on credit basis.

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5. Revenue Deficit 5. Revenue Deficit

• It refers to the excess of revenue expenditure over revenue receipts.

• Revenue Expenditure: It is meant for the normal running of government departments and various services, interest charges on debt incurred by the government and subsidies. Broadly speaking, expenditure which does not result in creation of assets is treated as revenue expenditure. All grants given to state governments and other parties are also treated as revenue expenditure even though some of the grants may be for creation of assets.

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Projection of Centre’s Resources for 12th Five Year Plan

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Sl.No.

Description 2011-12

( base year )

2012-13

2013-14

2014-15

2015-16 2016-17 12th Plan total

1 Tax Revenue net to centre

6.6 4(7.40)

8.37 (8.14)

10.04 (8.53)

11.75 (8.72)

13.63 (8.83)

15.74 (8.91)

59.55 (8.68)

2 Non tax revenue

1.25 (1.40)

1.12 (1.10)

1.28 (1.09)

1.46 (1.09)

1.51 (0.98)

1.5 (0.88)

6.94 (1.01)

3 Non debt capital receipts

0.55 (0.60)

0.56 (0.54)

0.54 (0.46)

0.551 (0.41)

0.559 (0.36)

0.567 (0.32)

2.78 (0.41)

4 Fiscal deficit 4.128 (4.60)

4.216 (4.10)

4.120 (4.35)

4.04 (3.30)

4.63 (3.30)

5.30 (3.0)

22.31 (3.25)

5 Aggregate resources(1+2+3+4+5)

12.57 (14.00)

14.27 (13.88)

15.99 (13.59)

17.81 (13.21)

20.43 (13.18)

23.17 (13.11)

91.60 (13.34)

Table No. 7 ( values in Rs. Lakh Crore & in parenthesis as % of GDP)

Source: 12th plan Approach paper, Planning Commission of India.

Continued…….Continued…….

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Sl.No.

Description 2011-12 ( base year )

2012-13

2013-14

2014-15

2015-16

2016-17

12th plan total

6 Non plan expenditure

8.16 (9.09)

9.21 (8.96)

10.16 (8.63)

11.09 (8.23)

12.08 (7.83)

13.00 (7.36)

55.56 (8.09)

7 Gross budgetary support for plan

4.41 (4.92)

5.06 (4.92)

5.83 (4.95)

6.71 (4.98)

8.25 (5.35)

10.16 (5.75)

36.03 (5.25)

7a Central Assistance to states or union territories

1.06 (1.18)

1.21 (1.18)

1.40 (1.19)

1.61 (1.20)

1.91 (1.25)

2.30 (1.30)

8.45 (1.23)

7b Central Plan 3.35 (3.74)

3.84 (3.74)

4.43 (3.76)

5.10 (3,78)

6.33 (4.10)

7.86 (4.45)

27.57 (4.02)

8 IEBR 2.56 (2.86)

2.93 (2.86)

3.35 (2.85)

3.83 (2.84)

4.38 (2.84)

5.00 (2.83)

19.52 (2.84)

9 Plan resources for centre

5.92 (6.60)

6.78 (6.59)

7.78 (6.61)

8.93 (6.63)

10.71 (6.94)

12.87 (7.28)

47.09 (6.86)

10 Gross domestic product

89.80 102.83

117.74 134.81 154.36

176.74

686.49

Table No.8 (values in Rs. Lakh Crore & in parenthesis as %of GDP)

Incremental Capital Output Ratio (ICOR)

Incremental Capital Output Ratio (ICOR)

• Efficiency in resource use captured through the ICOR (incremental capital output ratio) deteriorated significantly during the 11th Plan. Compared to an ICOR of 4.1 for the 10th Plan, the 11th Plan achieved an ICOR of 4.5, indicating erosion in resource use efficiency. The 12th Plan does not explicitly mention the likely ICOR. However, the ICOR can be derived implicitly from the ratio of fixed investment plus stocks as per cent of GDP to the growth rate. The 12th Plan projects an average fixed investment rate of 34 per cent and stocks at 3.5 per cent of GDP.

• The projected investments juxtaposed with the projected growth rate in the best case scenario yields an ICOR of 4.6 for the 12th Plan. Thus, the macroeconomic framework suggests a further deterioration in resource use efficiency in the 12th Plan even in the best case scenario.

1915-05-2013Source: http://www.thehindubusinessline.com/opinion/the-growth-euphoria-is-over/article4241907.ece

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• 12th plan envisage Universalisation of Secondary Education by 2017.

• In 11th plan, the total public spending on health (combined of state and centre) was less than 1% of GDP. 12th plan aims to increase it to 2.5% of GDP by the end of 12th plan.

• India has evolved National Action Plan for Climate Change with eight component mission. 12th plan considers it for implementation to achieve target of 20% to 25%reduction in emission intensity of GDP over 2005 levels by 2020.

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• IMR (infant mortality rate) was 47 in 2010 and 12th plan aims to bring it down to 25 per 1000 live birth by the end of plan period.

• 12th plan aims to bring down MMR ( maternal mortality rate) to 1 per 1000 live birth by the end of plan period.

• Not even single Indian university figures in list of top 200 universities in the world.12th plan aims to get 5 Indian university in the list.

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• Even after 65 years of Independence, we have 45% of households do not have electricity connections.

• 11th plan added 55,000 MW of generation capacity which was short of target set and 12th plan envisages to add 88,000 MW by the end of plan period.

• 12th plan envisages to add 30,000 MW of renewable energy capacity.

• 12th plan envisages to electrify all the villages and to reduce AT & C losses to 20% by the end of 12th plan.

• The total investment in infrastructure in 12th plan is estimated to be Rs. 55.7 lakh crore ,which works out to be $1trillion at prevailing exchange rates.

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• The share of private investment in total investment in infrastructure rose from 22% in Tenth Plan to 36.6% in 11th Plan. it will have to increase to 48% in 12th plan to meet infrastructure investment target.

• More than 40% of household avail no banking facility at all in country. insurance premia account for less than 1% of GDP, which is just one third of international average.

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• We have capacity to treat only 30% of human waste we generate.

• Just two cities, Delhi and Mumbai, which generate 17% of country’s urban sewage have about 40% of total installed capacity.

• 12th plan envisages that no water scheme in urban Indian will be sanctioned without integrated scheme for sewage treatment.

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• Every state in 12th plan must have an average growth rate preferably higher than achieved in 11th plan.

• Head count ratio of consumption poverty is to be reduced by 10% points over the preceding estimates by the end of this plan.

• Generate 50 million new job opportunities in non-farm sector and provide skill certification to equivalent no. during 12th plan period.

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• Mean year of schooling to increase to 7 years by the end of 12th plan.

• Enhanced access to higher education by creation of 2 million additional seats cohort aligned to the skill needs of economy.

• Eliminate gender and social gap in school enrolment by the end of 12th plan .

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•Improve child sex ratio (0-6) to 950 by the end of 12th plan.

•Reduce fertility rate to 2.1 by the end of 12th plan.

•Reduce under nutrition among children aged 0-3 to half of the NFHS-3 level by the end of 12th plan.

•Increase investment in infrastructure to 9% of GDP by the end of 12th plan.

•Increase Gross Irrigated area from 90 million hectares to 103 million hectares by the end of 12th plan.

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• Connect all villages with all-weather road by the end of 12th plan.

• Upgrade national and state highways to minimum two-lane standard by the end of 12th plan.

• Complete Eastern and Western Dedicated Freight Corridor by the end of 12th plan.

• Increase rural tele-density to 70% by the end of 12thplan. Currently it is 40.81%.

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• Ensure 50% of rural population has access to 40 lpcd piped drinking water supply and 50% of Gram Panchayat achieve Nirmal Gram Status by the end of 12th plan.

• Increase Green Cover (as measured by Satellite Imagery)by 1 million hectare every year during 12th plan period.

References• Approach Paper 12th Five Year Plan, Planning Commission, Government of India• Banking, Public Finance and International Trade by D.M. Mithani, 2008 edition,

Himalaya Publishing House, New Delhi.• Facts of Indian Economy,2012,Unique Publishers, New Delhi.• Indian Economy At a Glance,2012,

New Vishal Learning Media, New Delhi.• Lucent’s General Knowledge Book, 2011.• Modern Economic Theory by K.K. Dewitt,2010 edition, S. Chand & Sons Publishers,

New Delhi. • Pratiyogita Darpan, Indian Economy 2012,Upkar Prakashan, Agra.• 12th Five Year Plan Draft, Planning Commission, Government of India.• http://www.simplydecoded.com/2012/10/13/summary-of-approved-12th-five-ye

ar-plan/• http://www.thehindubusinessline.com/opinion/the-growth-euphoria-is-over/articl

e4241907.ece

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