Indian economy is based on the concept of planning.

This is carried through the five-year plans, developed, executed and monitored by the Planning Commission. With the Prime Minister as the exofficio Chairman, the commission has a nominated Deputy Chairman, who has rank of a Cabinet Minister. The first five year plan was established in the year 1951-56 by Jawaharlal Nehru. And the first plan post-liberalisation was the Eight Five Year Plan in the year 1992-97. The two main pioneers of the Eight five year plan were P.V. Narasimha Rao was the ninth Prime Minister of the Republic of India and head of Congress Party, and Dr. Manmohan Singh, launched India's free market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning of privatisation and liberalisation in India. This plan can be termed as Rao and Manmohan model of Economic development. Before the 1990s, while the country was evolving and becoming industrialised and modern, it still remained ineffective both in formulation of public investment plans and implementation. 1989-91 was a period of economic instability in India. The economy was getting over-regulated as it came up with constraints to production and matching demand and supply. India had to rely on domestic resources with foreign aid playing a marginal role. Foreign exchange shortages were a recurring phenomenon. Higher costs of products added to the fiscal burden of people. The GDP growth in the first three decades was at a low average of 3.5%. Development policies failed to make a dent on unemployment. India's growth record turned impressive in the 1980s even with slow, cautious liberalisation of economic policies, as the then leadership began displaying pragmatism and taking note of the external realities. Higher growth though, came at a heavy price as the fiscal deficit ballooned and borrowings (internal and external) soared. The Gulf War, at the end of the decade, triggered a balance of payments crisis and, in bailing itself out, India was left with no option but to embark on tough fiscal adjustment and structural reforms programme to reduce macroeconomic imbalances and promote growth. The year 1991, thus, became a watershed in India's development saga when the economy was opened up and policies were overhauled to promote greater involvement of the private sector. Liberalisation and reforms covering trade, industry, investment, foreign exchange and financial sectors helped to move India on a higher growth path from an average of 5.7 per cent in the 1980s to over 6 per cent. The Government's inability to inject larger resources for productive purposes and social development, and the growing dependence on private investments -- domestic and foreign -- for infrastructure have turned the prospects for development. A stage has been reached when government expenditure can no longer be financed through debt and deficits, the limits having been reached in both. Recent years have seen an inexorable rise in government expenditure and borrowings, with the fiscal deficit close to 10 per cent and the debt-GDP ratio at 65 per cent (Centre and States combined). Putting the fiscal house in order, even in the best of times, would be difficult over a short period. Under Indian political conditions, unstable coalition governments have not been able to exercise their authority to control unproductive expenditure. Dismal as the fiscal scenario is, planning has ceased to retain the importance that successive governments till the mid-1990s had attached to national development. The Vajpayee Government's

commitment to planning is nebulous, and the Prime Minister is a greater believer in ad hoc approaches, given his repeated resort to Task Forces and Committees on any major issue that he is required to dwell on in his policy speeches. His Government is fancifully engaged in writing new policies which do not fall into a coherent framework of economic planning. The Commission is now reconciled to not achieving the average GDP growth rate of 6.5 per cent targeted under the Plan. The assumptions on domestic savings and investment, employment, infrastructure development and bringing down fiscal deficit of the Centre to 4 per cent of GDP are all being invalidated, judging from the trends of the Plan's first four years. In the 1990s, the public sector ceased to be the engine of growth of the economy, and the Eighth Plan (1992-97) acknowledged that planning would henceforth have to be indicative. Whatever the shortcomings in Plan implementation, the Indian economy has maintained a growth momentum in the 1990s -- thanks to policy liberalisations. Freed from the shackles of licensing and other regulations, productive sectors have begun to exhibit greater dynamism than in the halcyon days of public sector dominance. Objectives: The approach to the Eighth Plan will have the following fourfold focus: i. Clear prioritisation of sectors/projects for investment in order to facilitate operationalisation and implementation of the policy initiatives taken in the areas of fiscal, trade and industrial sectors and human development; Making resources for these priority sectors available and ensuring their effective utilisation; and completion of projects on schedule avoiding cost and time overruns; Creation of a social security net through employment generation, improved health care and provision of extensive education facilities throughout the country; and Creation of appropriate organisations and delivery systems to ensure that the benefits of investment in the social sectors reach the intended beneficiaries.

ii.

iii.

iv.

Based on this approach, the following objectives will be accorded priority: i. Generation of adequate employment to achieve near full employment level by the turn of the century; Containment of population growth through active people's cooperation and an effective scheme of incentives and disincentives; Universalization of elementary education and complete eradication of illiteracy among the people in the age group of 15 to 35 years; Provision of safe drinking water and primary health care facilities, including immunisation, accessible to all the villages and the entire population, and complete elimination of scavenging; Growth and diversification of agriculture to achieve self-sufficiency in food and generate surpluses for exports;

ii.

iii.

iv.

v.

vi.

Strengthening the infrastructure (energy, transport, communication, irrigation) in order to support the- growth process on a sustainable basis;

The Eighth Plan will concentrate on these objectives keeping in view the need for (a) continued reliance on domestic resources for financing investment,(b) increasing the technical capabilities for the development of science and technology, (c) modernisation and competitive efficiency so that the Indian economy can keep pace with and take advantage of the global developments. Financing the Plan has three major dimensions: first, estimating major sources of finance; secondly, allocating these resources to user sectors (both public and private) for investment; and thirdly, checking the consistency of the sources and application of resources with the overall growth of income, consumption and savings. The sources of financing projected in the Eighth Plan differ from the Seventh Plan in many respects. These projections reflect reduced dependence on borrowings, domestic as well as foreign and on deficit financing, and place greater reliance on resource mobilisation through buoyancy in revenues and economy in non-Plan (revenue) expenditure (NPRE). Thus, the Eighth Plan calls for much greater effort towards raising the resources domestically and deriving more out of the same expenditure, in support of the targeted GDP growth at 5.6 per cent. The projections of Plan financing, imply rationalisation of fiscal, monetary and financial policies. Since the Seventh Plan projections were made at 1984-85 prices, the review of performance is also made at these prices using estimated gross domestic product (factor cost) deflators. Data for the review are based on actual/RE figures of Central Government for Central sector and Central assistance to States; for others, they are based on information supplied by the State Governments. The Seventh Plan financing placed considerable reliance on additional resource mobilisation (ARM) and contribution of public enterprises. The pattern that has emerged after five years shows the shortfalls in contribution of public enterprises and ARM, on the one hand, and substantial increase in non-plan revenue expenditure on the other. It reveals a nearly three-fold deficit in Balance from Current Revenues (BCR), at base rates, one third actualised surplus at current rates i.e., including ARM and more than two-fold of level of deficit financing compared to the original projections. While the average growth of GDP during the Seventh Plan (5.8%) exceeded the projected rate (5%), the domestic savings rate (estimated at 20.4%) fell short of the projected rate (24.3%). The average savings rate during the Seventh Plan was just about the average rate during the Sixth Plan. The shortfall in domestic savings rate was largely on account of lower rates of public sector and private corporate savings. The household savings rate is estimated to have increased significantly to 18.1% by 1989-90, compared to 13.7 % in the base year. A review of savings and investment during the Seventh Plan, as compared to the projections, reveals three major features: First, household savings financed household investment to the extent of 8 % of GDP as was projected. But, the overall gross (domestic) savings rate (20.4%) turned out to be substantially below the projections (24.3 %). The lower proportion was largely due to a change in the basis of estimating GDP in the new series, which raised GDP from 1980-81 onwards by over 8 % as compared to the old series. The corresponding ratio (comparable to 24.3%) in terms of New Series of GDP would be around 22 per cent. Secondly, the overall rate of gross investment during the Seventh Plan is estimated to be 22.7 % compared to the projected 25.3 per cent. Much of this shortfall was in the public sector. Thirdly, despite some shortfall in investments, domestic borrowings and inflows

from the rest of the world in the public sector were consistently in excess of projections. The private corporate borrowings, domestic and foreign also exceeded the projections. During the Seventh Plan period, the role of the capital market as the medium for mobilising additional resources expanded greatly. The aggregate level of new capital issues by the nonGovernment public and private limited companies reached about Rs.7,910 crores in 1989-90, compared to little over Rs. 1,787 crores in 1984-85. These companies raised about Rs.23,200 crores during the Plan period. The composition of resources raised changed in favour of debentures. This period was marked by some large-sized or mega issues each exceeding Rs. 100 crores. Institutional investors have played a major role in this process. Centre's Borrowings and Deficit Financing: Reliance on domestic borrowings in the form of market borrowings, small savings and provident fund and net capital receipts for financing the Plan was higher than the original estimates. These items of domestic borrowings financed 67% of the Centre's Plan as against about 50% envisaged in the original Plan estimates. Deficit financing has totalled Rs.35,626 crores (at current prices). At base year prices, this is more than twice the level projected in the original Plan at Rs. 14,000 crores. Central Assistance : Total Central assistance including advance (adjusted) plan assistance, normal as well as for relief and special plan loans for Punjab added to total Rs.38,921 crores at current prices, which works out to Rs.30,941 crores at 1984-85 prices (Statement 5.1) compared to Rs.29,737 crores in the Plan that is higher by 8.3 per cent. The total of releases of Central assistance for the States' Plans and special assistance for area programmes during the Plan amounted to Rs. 36,554 orores as per details given below (Rs. crores):Plan Estimates (at 1984-85 prices) I.State Plans 1.Normal Central Assistance (net)* including Plan loan to Punjab, etc. i) Special Category States** ii) Non-Special Category States*** 2. Additional Assistance for Externallyaided Projects II Area Programmes l.Hill areas & Western Ghat Areas 2.Tribal Sub-Plan 3. North-Eastern Council (NEC) Plan 4. Border Area Programmes 5. Other Special Area Programmes III. Total (I & II) 27,278 23,478 7,098 16,380 3,800 2,459 870 756 575 200 58 29,737 Present Estimates (at current prices) 33,594 30,435 9,384 21,051 3,159 2,960 1,043 861 714 219 123 36,554

The overall public sector plan outlay during the plan amounted to Rs. 4,34,100 crores at 1991-92 prices. The share of the Central Plan in this amount was Rs. 2,47,865 crores, or 57.1%, whereas the share of State Plans accounted for Rs. 1,79,985 crore, or 41.5%. Impact of Financing: India became a member of the World Trade Organisation during this plan period. Industries got modernised sector through technology. With that the Indian economy opened to counter the foreign debt burden and also, Increased rate of employment and reduction in poverty. 7th Plan Sector Actual (198590) GDP growth per annum 5.8% 8th Plan (199297) Target 5.6% 4.3% 6.3% Achievement Achievement (1993-94) (1994-95)

Domestic Savings as a % of 20.3 GDP Investment as a % of GDP 22.7

21.6

20.2

24.4

23.2

Foreign Capital inflow as a 1.6 % of GDP Current account Deficit as % of GDP Total Plan investment outlay (Rs billion) Exports as % of GDP Imports as % of GDP Total Exports (Rupees million) Total Imports (Rupees million)

1.4

2.4

1.6

0.1

0.7

3,480

7,980

9.9 10.3

10.1 10.9

697,510

823,380

731,010

887,050

Achievements: There was a rise in the employment level and reduction in poverty levels. Now we can have self-reliance on domestic resources. Production of food has increased from 51 million to 176.22 million. And, GDP went up to a whopping 6.3% while the target was 1.6%. The 24.4% domestic savings, contributed 10.1% to the GDP in regards to Export Earnings and Deficit reduced by 0.7% compared to 0.1% in the 7th Five Year Plan. Also, the import volume as a percentage of GDP was also more during the 8th Five Year Plan (10.9%) compared to that during the 7th Five Year Plan (10.3%). In a nutshell, the 8th Five Year Plan was more successful in meeting its objectives as compared to the previous five year plans.