ECONOMIC PLANNING : Business Economics 1st Year

LESSON – 13

ECONOMIC PLANNING

OBJECTIVES

            After going through this chapter, you should be able to

• Know the achievements and failures of five year plans.
• Understand the approach to Tenth Plan.

STRUCTURE

13.1.   Introduction

            13.1.1             Approach to each plan

            13.1.2             Achievement of planning in India

            13.1.3             Failure of Planning

13.2.   Tenth five year plan

Unit Questions

13.1. INTRODUCTION

            Since 1951, India has completed nine five-year plans the guiding principles of India’s Five-Year Plans are provided by the basic objectives of growth, employment, self-reliance and social justice. Apart from these basic objectives, each five-year plan takes into account the new constraints and possibilities faced during the period and attempts to make the necessary directional changes and emphasis.

13.1.1             APPROACH TO EACH PLAN

            At the time of the First Five Year Plan (1951-56) India was faced with three problems--influx of refugees, severe food shortage and mounting inflation. India had also to correct the disequilibrium in the economy caused by the Second World War and the Partition of the country. Accordingly, the First Plan emphasised, as its immediate objectives the rehabilitation of refugees, rapid agricultural development so as to achieve food self-sufficiency in the shortest possible time and control of inflation. Simultaneously, the First Plan attempted a process of all-round balanced development which could ensure a rising national income and a steady improvement in the living standards of the people over a period of time.

            The Second Plan (1956-61) was conceived in an atmosphere of economic stability. Agricultural targets fixed in the First Plan had been achieved. Price level had registered a fall and, consequently, it was felt that the Indian economy had reached a stage where agriculture could be assigned a lower priority and a forward thrust made in the development of heavy and basic industries of the economy for a more rapid advance in future. The basic philosophy of the Second Plan was, therefore, to give a big push to the economy so that it enters the take-off stage.

            Besides, the Government announced its Industrial Policy in 1956 accepting the establishment of a socialistic pattern of society as the goal of economic policy. This necessitated the orientation of economic policy to conform to the national goal of “socialist economy”. Accordingly, the Second Plan aimed at rapid intustrialisation with particular emphasis on the development of basic and heavy industries, such as iron and steel, heavy chemicals, including nitrogenous fertilisers, heavy engineering and machine building industry.

            By the beginning of the Third Plan (196 1-66) the Indian planners felt that the Indian economy had entered the “Take off stage” and that the first two plans had generated an institutional structure needed for rapid economic development. Consequently, the Third Plan set as its goal the establishment of a self-reliant and self-generating economy. But the working of the Second Plan had also shown that the rate of growth of agricultural production was the main limiting factor in India’s economic development. The experience of the first two plans suggested that agriculture should be assigned top priority. The Third Plan accordingly gave top priority to agriculture but it also laid adequate emphasis on the development of basic industries, which were vitally necessary for rapid economic development of the country. However, because of India’s conflicts with China in 1962 and with Pakistan in 1965, the approach of the Third Plan was later shifted from development to defence and development.

            The original draft outline of the Fourth Plan prepared in 1966 under the stewardship of Ashok Mehta had to be abandoned on account of the pressure exerted on the economy by two years of drought. devaluation of the rupee and the inflationary recession. Instead, three Annual Plans (1966-69) euphemistically described as “Plan Holiday” were implemented. India learnt a bitter lesson during Indo-Pakistan war when its so-called allies refused to supply essential equipment and raw materials for its economic development. The Fourth Plan (1969-74) set before itself the two principal objectives of “growth with stability” and “progressive achievement of self reliance”. The Fourth Plan aimed at 5.5 per cent average rates of growth in the national income and the provision of national minimum for the weaker sections of the community--the latter came to be known as the objectives of ‘growth with justice’ and “Garibi Hatao” (Removal of poverty).

            The Fifth Plan (1974-79) was introduced at the time when the country was reeling under a veritable economic crisis arising out of a run-away inflation, fueled by the hike in oil prices since September 1973 and failure of the Government take-over of the whole sale trade in wheat. But the Indian planners were concerned with the slogans of ‘Garibi Hatao’ (Removal of poverty) and the ”growth with social justice”. The original approach paper of the Fifth Plan prepared under C. Subramaniam in 1972 emphasised that “the main causes of abject poverty were open unemployment, under-employment and low resource base of very large number of producers in agriculture with service sectors.” The elimination of poverty could not be attained simply by acceleration in the rate of growth of the economy alone but the strategy should be to launch a direct attack on the problems of unemployment, under-employment and massive low-end poverty. But this approach was eventually abandoned and the final draft of the Fifth Plan prepared and launched by D.P. Dhar proposed to achieve the two main objectives, viz., removal of poverty and attainment of self-reliance, through promotion of higher rate of growth, better distribution of income and a very significant step-up in the domestic rate of saving. The Fifth Plan, however, was terminated by the Janata Party at the end of the fourth year of the Plan in March 1978.

            There were two Sixth Plans. The Janata Party Sixth Plan (1978-83) openly praised the achievements of economy in terms of self-reliance and modernisation but held the Nehru model of growth responsible for growing unemployment, for the concentration of economic power in the hands of a few powerful business and industrial families, for the widening of inequalitie of income and wealth and for mounting poverty. The Janata Sixth Plan sought to reconcile the objectives of higher production with those of greater employment so that millions of people living below the poverty line could benefit there from. The focus of the Janata Sixth Plan was enlargement of the employment potential in agriculture and allied activities encouragement to household and small industries producing consumer goods for mass consumption and to raise the incomes of the lowest income classes through a minimum needs programme. After the defeat of the Janata Party, the congress came to power in 1980 and decided to have a new Sixth Plan. When the new Sixth Plan (1980-85) was introduced by the Congress, the Planners rejected the Janata approach and brought back Nehru Model of growth by aiming at a direct attack on the problem of poverty by creating conditions of an expanding economy.

            The Seventh Five Year Plan (1985-90) was introduced in April 1985, after the country had enjoyed a reasonable rate of economic growth of the order of 5.4 per cent during the Sixth Plan. The Seventh plan sought to emphasis policies and programmes which would accelerate the growth in foodgrains production, increase employment opportunities and raise productivity-all these three immediate objectives were regarded central to the achievement of long-term goals determined as far back as the First Plan itself.

The approach to the Eighth Five Year Plan (1990-95) was approved in September 1989 and the Eighth plan was to be introduced in April 1990. However, there were changes in Governments at the Centre, necessitating constant reconstitution of the Planning Commission and preparation of a series of versions of the “approach” to the Eighth Plan. Finally, the fourth version of the Eighth Plan (1992-97) was approved at a time the country was going through a severe economic crisis caused by a balance of payments crisis, a rising debt burden, ever-widening budget deficits, mounting inflation and recession in industry. The Narasimha Rao Government initiated the process of fiscal reforms as also of economic reforms with a view to provide a new dynamism to the economy. The Eighth Plan (1992-97) reflected these changes in its attempt to accelerate economic growth and improve the quality of life of the common man.

The Ninth Plan prepared under the United Front government was released in March 1998. The same was modified and approved by the National Development Council in February 1999, nearly two years after its implementation from April 1, 1997. The focus of the Ninth Plan was on “Growth with Social Justice and equality “. It assigned priority to agriculture and rural development with a view to generating adequate productive employment and eradication of poverty. It aimed at achieving GDP growth of 7 per cent per annum, since during Eighth plan, already a GDP growth rate of 6.5 per cent had been achieved. Besides, it ensured food and nutritional security for all, particularly for the weaker sections of the society. However, the Plan failed to achieve the GDP growth target of 7 per cent and realized only 5.35 per cent average GDP growth.

It is, thus, clear that the short-term objectives of each plan--also called as the Approach to each Plan--reflect the current state of the economy and the economic thinking of the Party in power and of the planners in the Planning Commission.

13.1.2             ACHIEVEMENT OF PLANNING IN INDIA

            (i) Increase in National and Per capita Income: One of the basic objectives of economic planning in our country is to increase national and per capita incomes. As the direct consequences of economic planning, India’s national income and per capita income rose, though not as rapidly as the planners planned and anticipated.  National income rose from Rs.132,367 crores at the beginning of the First Plan to Rs.852,085 crores at the end of the Eighth Plan. On the other hand, the per capita income increased at a much lower rate Per capita income had risen from Rs.3,678 to Rs.9,007 between 1951 and 1997.

            (ii) Progress in Agriculture : During the last 55 years, the government had spent, on an average, 23 – 24 % of the plan outlay in each of the Five Years Plan on the development of agriculture and allied activities and irrigation.  Foodgrains production had gone up from 51 million tonnes at the beginning of the First Plan to 213 million tonnes by the end of the Ninth Plan-increase by over four times. Likewise, in every crop, production had increased by three or four times, Of course, the most spectacular increase was in wheat and potatoes. All this has been made possible because of the use of the new agricultural strategy.

            (iii) Progress in Industry : During the last nine plans (1951 to 20021), the Government had invested heavily on the development of industries, on the expansion of transport and communications, generation and distribution of electricity etc. Between 53 to 55 per cent of all planned outlay of the Government in each Five Year Plan was on these sectors. As a result, there has been considerable progress in such industries as steel, aluminium, engineering goods, chemicals, fertilisers and petroleum products.

            (iv) Development of Economic Infrastructure : Another achievement of great significance is the creation of economic infrastructure which provides the base for the programme of industrialisation. The expansion of roads and road transport has led to the enlargement of the market. Irrigation and hvdro-electric projects have given a big boost to agriculture and also provided energy for installing factories and other modern establishments in small towns and cities. The infrastructure has opened the possibilities of modernising semi-urban and rural areas.

            (v) Diversification of Exports and Import Substitution : As a consequence of the policy of rapid industrialisation, India’s dependence on foreign countries for the import of capital goods has declined. Similarly, quite a good number of consumer goods imported earlier are being produced indigenously. This has led to import substitution. Consequently, the commodity composition of India’s exports has changed in favour of manufactures, mineral ores and engineering goods.

            (vi) Development of Science and Technology : Another achievement of significance is the growth of science and technology and the development of technical and managerial cadres to run the modem industrial structure. This has significantly reduced our dependence on foreign experts. Being relatively more advanced than some of the other underdeveloped and countries, India has started exporting technical experts to middle East and African countries. This is a matter of legitimate pride for the country.

            (vii) Development of a huge educational system : One of the great achievements of Indian planning is the development of a huge educational system - the third largest in the world. As against a total enrolment of 239 lakhs in 1950-51, enrolment at the end of the Eighth Plan (1996-97) was of the order of 1.827 lakhs. The enrolment of pupils at the primary level increased from 192 lakhs to 1,118 lakhs during this period. As a percentage of population in the age group 6 to 11, it improved from 31 per cent to 84 per cent between 1951 and 1997. At the middle level total enrolment improved from 31 lakhs to 4l0 lakhs between 1951 and 1997 and as a proportion of the population in the relevant age-group (11 to 14), it improved from 13 to 68 per cent. Similarly, at the secondary level, total enrolment improved from 12 lakhs to 249 lakhs between 1951 and 1997 and as a proportion of the population in the age group (14 to 17) it improved from 5.3 per cent to 32.4 per cent. Total number of students enrolled in colleges and Universities increased from 3.6 lakhs to 75 lakhs between 1951 and 2001-02. Such a huge expansion of the educational system is a major achievement of the planning era.

13.1.3 Failures of Planning

            In his Book “Development Planning-the Indian Experience” late Professor Sukhamoy Chakravarty points out to three major weaknesses and failures of Indian Planning.

            (a) A major defect is the gross inefficiency of production in many of the public sector enterprises. Thee are many areas of production where inefficiency is fairly widespread, as in the generation of power, transport, steel, fertilisers, let alone high cost consumer durables. 

            1.  Failure to Eliminate Poverty :  The basic objective of planning is the provision of a national minimum level of living. The “garibi hatao (Remove poverty) slogan of Mrs. Indira Gandhi could be provided a meaningful content only if measures were taken to remove poverty.  It was felt that growth rate would not be sufficient to remove poverty and, instead, it would be more desirable to undertake specific measures to remove poverty.  Thus, poverty removal programmes were made an integral part of the Fifth Plan and subsequent plans.  About 55 per cent of population was living below the poverty line and in 1987-88, this proportion had come down to 39 per cent.     In 1993-94, the total number of poor remained around 320 million. The fact that even after 5 decades of planning, 36 per cent of population live under conditions of poverty is a sad commentary on our planning. According to the latest of estimate of poverty based on NSS data, 26% of the total population (260 million) was living below the poverty line.  In other words, all through, India had followed a blood transfusion approach which provided temporary relief.  It would have been much better if India had followed a blood generation approach by emphasising sustainable employment creation.   

            2. Failure to Provide Employment to All Above Bodied Persons : Another basic failure of planning in India was the emphasis on growth rather than on employment and the adoption of capital-intensive production rather than labour intensive production. Despite the implementation five year plans, unemployment has been on the increase.  According to the Planning Commission, the backlog of unemployed persons was 5.3 million at the end of the First Plan and 7.5 million at the end of the Eighth Plan.  Taking unemployed and under-employed together, at the beginning of the Tenth Plan i.e 2001-02, 9.21 per cent of the labour force or 35 million persons were unemployed.  Unless India adopts an employment-oriented strategy and aims at 3 to 4 per cent annual increase of employment at higher levels of productivity, the chances of reaching the total full employment and alleviating under-employed would defy solution.

            3. Failure to Reduce Inequalities of Incomes and Wealth :   It is rather doubtful that during the last five decades of planned economic development, redistribution of income in favour of the less privileged classes has taken place.   The condition of the bottom 20 per cent of the population had definitely deteriorated and for the next higher 20 per cent of the population had remained more or less stagnant.  There was thus evidence of increased concentration of income and wealth in the hands of the propertied class.  Another method of judging social justice relates to the rise in prices and changes in price structure.  Prices of foodstuffs and essential consumer goods rose at a much higher rate than the prices of luxuries and semi-luxuries.  In a socialists economy, failure to control the prices of food and essential consumer goods is the denial of economic justice to the masses. The situation has been worsening over the years.

            4.   Failure to Check the Growth of Black Money:   There is no doubt that speculative gains, illegitimate incomes of various forms through illicit gains of contractors, windfall profits from protected markets, semi-monopolistic conditions created by import restrictions and capital issues and corruption generated by licences and quota system in various fields of economic activity have all resulted in illicit income shifts in favour of upper income classes. Inflation, controls and the vast expansion of the public sector have bred corruption, tax evasion and illicit speculative gains. Thus, the fruits of economic progress instead of being shared by the masses flow into the pockets of the traders, businessmen and industrialists.

            5.  Failure to reduce concentration of economic power:  One of the main tenets of socialism as accepted by our planners is the reduction of concentration of economic power.  But actually, monopoly has increased in India during the last 55 years, even though Jawaharlal Nehru had stated categorically: “Monopoly is the enemy of socialism”.  To reduce concentration of economic power and wealth in the hands of a few, the Government adopted fiscal and other measures regarding taxation, ownership of wealth and property, curtailment of luxurious consumption and provision of subsidies on necessaries. Although fiscal measures had a positive role to play, tax rate structure remained only on paper and became the source of black money.  Similarly, a system of heavy taxation on articles of luxurious consumption and provision of subsidies on necessaries was tried for many years as a part of a programme of social justice but without any result.

            6. Failure to Implement Land Reforms : One of the basic policy decisions to transfer ownership of land to the peasantry, for which efforts were made for four decades, was not properly implemented.  Progress of land reforms had been rather slow and that the State governments were not eager to implement them with a speed sufficient for a quick transition to progressive agriculture and socialism.  To sum up, the planning process has been able to create social and economic infrastructure, provide an industrial base by fostering the development of heavy and basic industries and enlarge educational opportunities, it failed to provide employment to every able-bodies person, eliminate poverty and bring about institutional reforms leading to reduction in concentration of income and wealth. More-over, the benefits from economic development have accrued largely to the relatively affluent and those in urban areas.  These fundamental failures of planning emphasize the need for a re-appraisal of the development strategy.

13.2 Tenth Plan

            The Approach Paper on Tenth Plan proposes that the Tenth Plan should aim at an indicative target of 8 per cent GDP growth for 2002—2007. This is lower than the growth rate of 8.7 per cent needed to double the per capita income over the next ten years. But, it can be viewed as an intermediate target for the first half of the period. It is certainly an ambitious target, especially in view of the fact that GDP growth has decelerated to around 6 per cent at present. Even if the declaration is viewed as a short term phenomenon, the medium term performance of the economy over the past several years suggests that the demonstrated growth potential over several years is only about 6.5 per cent. The proposed 8 per cent growth target therefore involves an increase of at least 1.5 percentage points over the recent medium term performance, which is very substantial.

            Economic growth cannot be the only objective for national planning. Over years, development objectives are being defined in broader terms of enhancement of human well—being. This includes not only an adequate level of consumption (food and other types of consumer goods) but also access to basic social services especially education health, availability of drinking water and basic sanitation. It also includes the expansion of economic and social opportunities for all individuals and groups and greater participation in decision making. The Tenth Plan must set suitable targets in these areas to ensure significant progress towards improvement in the quality of life of all people.

Monitorable Key Targets

            To reflect the importance of the above said dimensions in development planning the Tenth Plan must establish specific and monitorable targets for a few key indicators of human development. It is proposed that in addition to the 8 per cent growth target, the targets given below should also be considered as being central to the attainment of the objectives of the Plan.

1.         Reduction of’ Poverty Ratio to 20 per cent by 2007 and to 10 per cent by 2012.

2.         Gainflul employment to the addition to the labour force over the Tenth Plan period.

3.         Universal access to primary education by 2007.

4.         Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2 per cent.

5.         Increase in literacy to 72 per cent by 2007 and to 80 per cent b 2012.

6.         Reduction of Infant Mortality Rate (IMR) to 45 per 1000 live births by 2007 and to 28 per cent by 2012.

7.         Reduction of Maternal Mortality Ratio (MMR) to 20 per 1000 live births by 2007 and to 10 by 2012.

8.         Increase in forest and tree cover to 25 per cent by 2007 and 33 per cent  by 2012.

9.         All villages to have access to potable drinking water by 2012.

10.       Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012.

            The social targets mentioned above will require a substantial allocation of resources to the Social Sector and major improvements in governance to make effective use of these resources. It must also be recognised that achievements of these targets is not independent of the achievement of high growth. Indeed high growth rates will generate the flow of public resources needed to sustain improvements in social indicators.

Balanced Development

            In order to emphasis the importance of ensuring balanced development for all States, the Tenth Plan should include a State-wise breakdown of the broad developmental targets, including target for growth rates and social development These state-specific targets should take into account the potentialities and constraints present in each state and the scope for improvement in performance given these constraints. This will require careful consideration of the sectoral pattern of growth and its regional dispersion. It will also focus attention on the nature of reforms that will have to be implemented at the state level to achieve the growth targets set for the states.

            Whether at the State level or at the aggregate level is the Centre, any acceleration in growth requires some combination of an increase in gross domestic fixed capital formation and an increase in efficiency of resource use. The latter requires policies that will increase the productivity of existing resources and also increase the efficiency of new investment.

            The targeted growth-rate of 8 per cent though ambitious, is not unattainable if adequate measures are taken for improving the efficiency, both in public and private sectors. In our country there is large scope for realising improvements in efficiency. However, this can only be realised if policies ensure such improvement. The Tenth Plan must therefore give high priority to identify efficiency enhancing policies at macro and also at sector levels.

            These will involve a radical break from past practices and even institutional arrangements. In many cases, they will involve policy decisions which can easily become controversial given the compulsions of competitive policies. The Tenth plan can only succeed in achieving 8 per cent growth, if sufficient political will is mobilised and a minimum consensus achieved that will enable significant progress to be made in critical areas.

Growth, Equity and Sustainability

            It is important to emphasis that the equity related objectives of the Plan which are extremely important are intimately linked to the growth objective and attainment of one may not be possible without the attainment of the other. For example. high rates of growth are essential if we want to provide a sufficient expansion of sustainable high quality employment opportunities to the expanding labour force and ensure a sufficient increase in incomes of the poor and the disadvantaged. However, the relationship is not just one way relationship.

            It is also true that sustained high growth rates may not be sustainable, if they are not accompanied by a dispersion of purchasing power that can provide the demand needed to support the increase in output without having to rely excessively on external markets. External markets are an extremely important source of demand and they need to be tapped much more aggressively for many sectors. However, given the size of the economy and the present relative size of experts much of the demand needed to support high growth will have to come from the domestic economy itself.

            Although growth has strong direct poverty reducing effects, the frictions and rigidities in the Indian economy can make these processes less effective, and the Tenth Plan must therefore be formulated in a manner which explicitly addresses he need to ensure equity and social justice. There are several ways in which this an be achieved:

(i)         First of all, agricultural development must he viewed as a core element of the Plan, as growth in this sector is likely to lead to the widest spread of benefits especially to the rural poor. We know very well that in the earlier plans, agriculture was grossly neglected or treated in a half-hearted manner leading to failure of successive plans and their targets. This attitude must change in the Tenth plan.

(ii)        Secondly. the growth strategy of Tenth Plan ensures rapid growth of those sectors that are most likely to create high quality employment opportunities and deal with policy constraints which discourage growth of employment. The policy should encourage wide range of service sectors which have a large employment potential. These include sectors such as construction, tourism. transport, Small Scale industries and modern retailing, besides IT services.

(iii)       Thirdly, there should be continuous efforts to supplement the impact of growth process with special programmes for special target groups that may not benefit sufficiently from the normal growth process. Such programmes have long been part of our development strategy and they will have to continue in the Tenth Plan.

Poverty Alleviation Programmes

            Over the years. poverty alleviation programmes of various types have expanded in size and today there is a wide variety of such programmes which absorb a large volume of resources. The Plan provision for rural development is Rs. 7.000 crores, for food subsidy Rs. 13.000 crores, and for kerosene and LPG subsidy about Rs. 12,000 crores, making a total of Rs. 32,000 crores. Against this, the provision for irrigation is only Rs. 1,700 crores and for afforestation only Rs. 400 crores.

            In this context, there is need to examine whether the resources used for poverty alleviation schemes and for various subsidies in the name of the poor are really effective in alleviating poverty in the rural areas. Several evaluation of the Integrated Rural Development Programme (IRDP) show that the projects undertaken under the programme suffer from numerous defects including sub-critical investment levels, unviable projects, lack of technological and institutional capabilities in designing and executing projects utilising local resources and expertise. In several cases, the beneficiaries happened to be illiterate and also unskilled with no experience in managing the enterprise, besides indifferent delivery of credit by banks (high transaction cost, complex procedure. corruption, one-time credit, poor recovery); over-crowding of lending in certain projects such as dairy, poor targeting and selection of non-poor; absence of linkage between different components of the IRDP; rising indebtedness etc.

            Another disturbing feature of the lRDP in several states has been rising indebtedness of the beneficiaries. Besides, the programme for upgrading skills TRYSEM, was not dovetailed with IRDP. It has also been discovered non-existent training Centres and non-payment of stipend in some cases. However, the programme for women. DWCRA did well in some states, particularly, Andhra Pradesh, Kerala and Gujarat.

            Evaluation of the programmes for wage employment also reveals serious weaknesses such as inadequate employment and thin spread of resources; violation of material-labour (60:40).norms; fudging of muster rolls; schemes implemented universally through contractors who sometimes hired outside labourers at lower wages. Central norms of earmarking 40 per cent of funds for watershed development and 20 per cent for minor irrigation, have not been followed. According to norms laid down, at present, Rs. 60/- out of Rs. 100/- is reserved for wages in wage schemes. But, in reality only Rs. 10 to 15 goes to the poor worker; the balance is appropriated as illegal income for the bureaucracy, contractors and politicians.

            The programme for rural housing, although quite popular, because of’ 100 per cent subsidy of Rs. 20.000 per beneficiary, has led in strengthening of dependence of the rural poor on the elite. Given the large number of potential beneficiaries awaiting the allotment of a free house and limited resources, a situation has been created wherein the poor are divided among themselves. There would also be pressure from the local MLAs and MPs to ensure that their followers are given a house on priority at the earliest possible. Thus, the scheme dis-empowers the poor collectively while providing then individually with a valuable asset. Instances of corruption to the tune of Rs. 5,000/- to 8,000/- out of the approved amount of Rs. 20,000/- also came to light.

Suggestions

            During the Tenth Plan, it is suggested as follows:

(1)       Several IRDP schemes should be transformed into a micro-finance programme to be run by banks with no subsidy on the lines of Rashtriya Mahila Kosh (RMK).

            Rashtriaya Mahila Kosh (RMK) is an innovative venture to facilitate credit support micro-financing to poor and assetless women struggling in the informal sector, works through the medium of NGOs as its channalising agencies for identification of borrowers, delivery of credit support and also recovery. While the lending rate of RMK both for short and medium-term loans is 8 per cent per annum to NGOs, the ultimate borrowers or their Self Help Groups pay 12 per cent per annum. Till the end of the Eighth Plan in 1997, KMK has extended credit worth Rs.35.14 crores through 170 NGOs benefiting about I .91 lakh women all over the country. In addition, RMK also supports its NGO partners, to form Women’s Thrift and Credit Societies, which are popularly known as Self Help Groups.

(2)       Funds to Gram Sabhas should be extended only when the people contribute a substantial amount, say 25 per cent in normal blocks and 15 per cent in tribal or poor blocks.

(3)       Employment programmes should be replaced by Food for Work Programmes to be run only in areas of distress. In all areas, the focus should he on undertaking productive works and their maintenance, such as rural roads, watershed development, rejuvenation of tanks, afforestation and irrigation.

(4)       Rural development funds should also be used for enhancing the budgetary allocation of successful rural development schemes that are being run by State Governments, or for meeting the State contribution for donor assisted programmes for poverty alleviation.

(5)       Special efforts should be made to strengthen the economy of the marginal and small farmers, forest product gatherers, artisans and unskilled workers. The poor should not merely benefit from growth generated elsewhere, they should contribute to growth.

(6)       Special efforts must be made to encourage development of small industry and other industries suited for rural areas to provide non-farm employment in rural areas.

            In conclusion, the realisation of Tenth Plan objectives of 8 per cent growth depends on hard and harsh decisions on the part of the States. Many of the policy decisions of the Planning Commission would be unpopular among States. Where politics predominates over economics, realisation of targets will be rather dim.

Unit Questions :

1.            Describe the approach to plans.

2.            Give an account of the achievements and failures of five decades of planning.

3.            Briefly explain Tenth Five Year Plan.

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