BCom 1st Year The Twelfth Five Year Plan Notes Study Material
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BCom 1st Year The Twelfth Five Year Plan Notes Study Material
INTRODUCTION
India’s 1.25 billion citizens have higher expectations about their future today than they have ever had before. They have seen the economy grow much faster in the past 10 years than it did earlier, and deliver visible benefits to a large number of people. This has understandably raised the expectations of all sections, especially those who have benefited less. Our people are now much more aware of what is possible, and they will settle for no less. The Twelfth Five-Year Plan must rise to the challenge of meeting these high expectations.
THE INITIAL CONDITIONS
Though expectations have mounted, the circumstances in which the Twelfth Plan commenced are less favorable than at the start of the Eleventh Plan in 2007-08. At that time, the economy was growing robustly, the macroeconomic balance was improving and global economic developments were supportive. The situation today is much more difficult. The global economy is going through what looks like a prolonged slowdown. The domestic economy has also run up against several internal constraints. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
Macroeconomic imbalances have surfaced following the fiscal expansion undertaken after 2008 to give a fiscal stimulus to the economy. Inflationary pressures have built up. Major investment projects in energy and transport have slowed down because of a variety of implementation problems. Some changes in tax treatment in 2012-13 have caused uncertainty among investors.
TWELFTH PLAN: AN OVERVIEW
The last year of the Eleventh Plan developments produced a reduction in the rate of investment and a slowing down of economic growth to 6.2 percent in 2011-12. The growth rate in the first half of 2012-13, which is the first year of the Twelfth Plan, is even lower. The downturn clearly requires urgent corrective action but it should not lead to unwarranted pessimism about the medium term.
India’s economic fundamentals have been improving in many dimensions, and this is reflected in the fact that despite the slowdown in 2011-12, the growth rate of the economy averaged 8 percent in the Eleventh Plan period. This was lower than the Plan target of 9 percent, but it was better than the achievement of 7.8 percent in the Tenth Plan. The fact that this growth occurred in a period that saw two global crises, one in 2008 and another in 2011, is indicative of the resilience that the economy has developed.
The preparation of a Five Year Plan for the country is an opportunity to step back, take stock of the ‘big picture’, identify the strengths that can be leveraged to enable the country to move forward, and the constraints that could hold it back, and on this basis develop a strategic agenda. In developing such an agenda, the Planning Commission has relied on four key elements:
(i) First, the strategy must be firmly grounded in an understanding of the complexities of the development challenges that India faces, recognizing the transformation that is taking place in the economy and in the world. This understanding of the ground reality must be used to identify the critical leverage points where government action could have the maximum impact. The focus must be on identifying the strategic leverage points where successful action could trigger many supportive reactions rather than fixing everything everywhere.
(ii) Second, progress will be achieved through a combination of government action in both policies and public programs, and the efforts of many private actors that are important in the economy. Much of the inclusive growth we hope to achieve depends on investment in the private sector which accounts for over 70 percent of total investment. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
This includes not only the organized corporate sector, but also Micro, Small, and Medium Enterprises (MSMEs), individual farmers, and myriads of small businessmen who add to the Gross Domestic Product (GDP) and create jobs. The dynamism of this segment, and its ability to seize economic opportunities, is critical for inclusive growth and the Plan must address the constraints faced by all these private actors in achieving better results. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(iii) Third, the outlay on government programs has to increase in many areas but this must be accompanied by improved implementation. For this, it is necessary to focus on capacity building and governance reforms, including system change that will increase accountability in the public sector. The Twelfth Plan must back this focus by making specific allocations to improve the ability of the government to work better. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(iv) Finally, the planning process must serve as a way of getting different stakeholders to work together to achieve a broad consensus on key issues. These stakeholders include (i) different levels of the government sector: Centre, States, and Panchayati Raj Institutions (PRIS)/Urban Local Bodies (ULBs); (ii) the private sector, both big companies and small businesses, whose investments will drive our growth and (iii) citizens’ groups and the voluntary sector, who bring the key element people’s participation and can greatly help improve the quality government action. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
SECTORAL ALLOCATION OF RESOURCES
Total capital outlay allocation during the 12th plan in the public sector was Rs.80,50,123 crore. Among these, it is distributed to Rs.43,33,739 crore as a Central Government share and the share of the State is Rs.37,16,385 crore.
The twelfth Five-Year Plan revealed that:
(i) Under the 12th plan main priority has been given to the social sector and it has 34.745% of the total capital outlay.
(ii) The Second position has been given to the Energy sector and 18.75% will be spent on the energy sector.
(iii) For agriculture and its allied activities, rural development and irrigation, and flood control 17.25% have been provided.
(iv) 16.75% will be spent on economic infrastructure, transport, and communication for faster economical growth.
(v) Only 4.9% of the total capital outlay will be spent on Industry and Minerals because Government will try to attract the private sector in those areas. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(vi) On science and technology general economic services, and other services, the 12th plan proposes to incur 2.18%, 3.98%, and 1.40% respectively. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
THE POLICY CHALLENGES
The policy challenge in the Twelfth Plan is, therefore, two-fold. The immediate challenge is to reverse the observed deceleration in growth by reviving investment as quickly as possible. This calls for urgent action to tackle implementation constraints in infrastructure which are holding up large projects combined with action to deal with tax-related issues which have created uncertainty in the investment climate.
From a longer-term perspective, the Plan must put in place policies that can leverage the many strengths of the economy to bring it back to its real growth potential. This will take time but the aim should be to get back to 9 percent growth by the end of the Twelfth Plan period.
The government on 4th October approved the 12th five-year plan (2012-17) document that seeks to achieve an annual average economic growth rate of 8.2 percent, down from the 9 percent envisaged earlier, in view of fragile global recovery. The theme of the Approach Paper is “faster, sustainable, and more inclusive growth”. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
According to officials, the projected average rate of gross capital formation in the 12th Plan is 37 percent of GDP. The projected gross domestic savings rate is 34.2 percent of GDP and the net external financing needed for macro-economic balance has been placed at 2.9 percent of GDP. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
During the 11th Plan (2007-12), India recorded an average economic growth rate of 7.9 percent. This, however, is lower than the 9 percent targeted in 1lth Plan. Besides other things, the 12th Plan seeks to achieve 4 percent agriculture sector growth during 2012-17. The growth target for the manufacturing sector has been pegged at 10 percent. The total plan size has been estimated at 47.7 lakh crore, 135 percent more that for the 11th Plan (2007-12). (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
The “strategy challenges” refer to some core areas that require new approaches to produce the desired results. These are:
- Enhancing the Capacity for Growth
- Enhancing Skills and Faster Generation of Employment
- Managing the Environment
- Markets for Efficiency and Inclusion
- Decentralization, Empowerment, and Information
- Technology and Innovation
- Securing the Energy Future for India
- Accelerated Development of Transport Infrastructure
- Rural Transformation and Sustained Growth of Agriculture
- Managing Urbanization
- Improved Access to Quality Education
- Better Preventive and Curative Health Care.
HIGHLIGHTS OF THE 12TH FIVE-YEAR PLAN (2012-17)
(i) Average growth target has been set at 8.2 percent.
(ii) Growth rate has been lowered to 8.2 percent from the 9.0 percent projected earlier in view of adverse domestic and global situations.
(iii) Areas of the main thrust are infrastructure, health, and education.
(iv) The commission had accepted Finance Minister P. Chidambaram’s suggestion that direct cash transfer of subsidies in food, fertilizers, and petroleum be made by the end of the 12th Plan period. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(v) After the cabinet clearance, the plan for its final approval would be placed before the National Development Council (NDC), which has all chief ministers and cabinet ministers as members and is headed by the Prime Minister.
(vi) Agriculture in the current plan period grew at 3.3 percent, compared to 2.4 percent during the 10th plan period. The growth target for the manufacturing sector has been pegged at 10 percent. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(vii) During the 11th Plan period, the average annual growth was 7.9 percent
(viii) A full Planning Commission chaired by Prime Minister Manmohan Singh on September 15 endorsed the document which has fixed the total plan size at 47.7 lakh crore. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(ix) The 12th Plan seeks to achieve 4 percent agriculture sector growth during the five-year period. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(x) On poverty alleviation, the commission plans to bring down the poverty ratio by 10 percent. At present, poverty is around 30 percent of the population. (BCom 1st Year The Twelfth Five Year Plan Notes Study Material)
(xi) The outlay on health would include increased spending in related areas of drinking water and sanitation.
EVALUATION AND CRITICISM OF THE TWELFTH FIVE-YEAR PLAN
The prime objective of the 12th plan is faster and more inclusive growth for developed nations. But some serious problems like regional imbalances, poverty, unemployment social injustice, etc. raise question marks on the progress of this plan. The critics criticize the twelfth plan on the following basis:
- Low Agricultural Growth
- Increasing Trend of Income Inequality
- High Poverty Ratio
- Unemployment
- Regional Imbalances
- Sectoral Imbalances
- High Population Growth Rate
- Low per Capita Income
- Poor Community Services
- Low Literacy Rate
- Poor Health Services etc.
BCom 1st Year The Twelfth Five Year Plan Notes Study Material
BCom 1st Year The Twelfth Five Year Plan Notes Study Material
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