< Growth and development Economic Growth & Development Economic Reforms in India Agriculture sector: Agriculture is the primary source of livelihood for about 58% of India’s population. India is expected to achieve the ambitious goal of doubling farmer's income by 2022. The Government of India targets to increase the average income of a farmer household at current prices to Rs 219,724 (US$ 3,420.21) by 2022-23 from Rs 96,703 (US$ 1,505.27) in 2015-16. How are prices set? The government fixes the minimum support price (MSP) for agricultural produce to the mandis where it is sold by declaring Minimum Support Prices (MSP) for 24 crops based on recommendation from Commission for Agricultural Costs and Prices (CACP), under the Indian Council of Agricultural Research (ICAR). How does the supply chain of agriculture work? Farmers— Small Traders (Kaccha)— Larger Trader (Pakka)—+ Commission agent— Wholesaler— Retailer Consumer Major Government reforms: Model APMC Act of 2003- Ministry of Agriculture formulated a model law on agricultural marketing - State Agricultural Produce Marketing (Development and Regulation) Act, 2003 and requested the state governments to suitably amend their respective APMC acts for deregulation of the marketing system in India. Model APMC Act, 2003 provided for the freedom of farmers to sell their produce. National Agriculture Market (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities. Small Farmers Agribusiness Consortium (SFAC) is the lead agency for implementing eNAM under the aegis of Ministry of Agriculture and Farmers’ Welfare, Government of India. The Public Distribution System (PDS) in the country facilitates the supply of food grains. With a network of more than 4 lakh Fair Price Shops claiming to distribute annually. Through the Public Distribution Scheme of 5,00,000 Fair Price Shops around the country, wheat, rice, and sugar are supplied to the poor at highly subsidised prices. National Food Security Act (NFSA 2013) gives legal entitlement to 67% of the population (75% in rural areas and 50% in urban areas) to receive highly subsidized food grains. Coverage under the Act is based on the population figures of Census, 2011. Revolutions in Primary Sectors: (RSE - This increased the agriculture yields due the use of high-yielding vari 's of seeds, modifying farm equipment, and substantially increase in use of chemical fertilisers. The revolution in India is traced to 1967/68 with major focus on Wheat, which was later extended to other crops. Dr M.S. Swaminathan received the first World Food Prize in 1987 for spearheading the introduction of high-yielding wheat and rice varieties to India’s farmers. During the period of mid- 1960s, Prof. Norman Borlaug of Mexico developed new high yielding varieties of wheat and accordingly various countries started to apply this new variety with much promise. Similarly, in the kharif season in 1966, India adopted High Yielding Varieties Programme (HYVP) for the first time. The term "Green Revolution" was coined by William Gaud.<= Growth and development - Operation Flood (1970) popularly known as white revolution was aimed at increasing milk production. National Dairy Development Board (NDDB) realised this by organising dairy development through cooperative societies. Operation Flood was based on the experimental pattern set up by Verghese Kurien (Father of White Revolution), chairman and founder of AMUL, who was named the Chairman of NDDB and was also recognised as the architect of Operation Flood. (EER - Blue Revolution aimed at increase in the production of fish and marine products. The Blue Revolution in India was started in 1970 during the 5 Five Year Plan when the Central Government sponsored the Fish Farmers Development Agency (FFDA). Subsequently, the Brackish Water Fish Farms Development Agency was set up to develop aquaculture. SINE - The silver revolution refers to the period in which the production of eggs was tremendously increased. WAM - The yellow revolution refers to increased output in oil seeds. The growth, development and adoption of new varieties of oilseeds and complementary technologies nearly doubled oilseeds production from 12.6 million tonnes in 1987-88 to 24.4 million tonnes in 1996-97, catalysed by technology brought about the Yellow Revolution. - Red Revolution is a term used to denote the technological revolutions in meat and tomato Production. (GER - The pink revolution refers to the increased productivity in the meat and poultry-processing sector of India.<= Growth and development Other important revolutions related to primary sector in India are; Black Revolution - Petroleum Production; Brown Revolution - Leather/ non-conventional/ Cocoa production; Golden Fibre Revolution - Jute Production Golden Revolution - Fruits/ Overall Horticulture development/ Honey Production; Grey Revolution - Fertiliser; Round Revolution — Potato; Silver Fibre Revolution — Cotton FIVE YEAR PLANS: Five-Year Plans (FYPs) are centralized and integrated national economic programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late 1920s. Most communist states and several capitalist countries subsequently have adopted them. China and India both continue to use FYPs, although China renamed its Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to signify the central government’s more hands-off approach to development. After independence, India launched its First FYP in 1951, under socialist influence of first Prime Minister Jawaharlal Nehru. The process began with setting up of Planning Commission in March 1950 in pursuance of declared objectives of the Government 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. Ast Plan (1951 - 56) | Target Growth: 2.1 %, Actual Growth 3.6 % « It was based on Harrod-Domar Model. Influx of refugees, severe food shortage & mounting inflation confronted the country at the onset of the first five-year Plan. « The Plan Focussed on agriculture, price stability, power and transport It was a successful plan primarily because of good harvests in the last two years of the plan. Objectives of rehabilitation of refugees, food self-sufficiency & control of prices were more or less achieved. 2nd Plan (1956 - 61) | Target Growth: 4.5%, Actual Growth: 4.3% « Simple aggregative Harrod Domar Growth Model was again used for overall projections and the strategy of resource allocation to broad sectors as agriculture & Industry was based on two & four sector Model prepared by Prof. P C Mahalanobis. (Plan is also called Mahalanobis Plan). * Second plan was conceived in an atmosphere of economic stability. It was felt agriculture could be accorded lower priority. The Plan Focussed on rapid industrialization- heavy & basic industries. Advocated huge imports through foreign loans. The Industrial Policy 1956 was based on establishment of a socialistic pattern of society as the goal of economic policy. 3rd Plan (1961 - 66) |Target Growth: 5.6%, Actual Growth: 2.8% « At its conception, it was felt that Indian economy has entered a “take-off stage”. Therefore, its aim was to make India a 'self-reliant' and 'self-generating' economy. Based on the experience of first two plans (agricultural production was seen as limiting factor in India’s economic development), agriculture was given top priority to support the exports and industry. « The Plan was thorough failure in reaching the targets due to unforeseen events - Chinese aggression (1962), Indo-Pak war (1965), severe drought 1965-66. Due to conflicts the approach during the later phase was shifted from development to defence & development.<= Growth and development 3 Annual Plans (1966- 69) | euphemistically described as Plan holiday * Failure of Third Plan that of the devaluation of rupee (to boost exports) along with inflationary recession led to postponement of Fourth FYP. Three Annual Plans were introduced instead. Prevailing crisis in agriculture and serious food shortage necessitated the emphasis on agriculture during the Annual Plans. * During these plans a whole new agricultural strategy was implemented. It involved wide-spread distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation. Ath Plan (1969 - 74) | Target Growth: 5.7%, Actual Growth: 3.3% * Refusal of supply of essential equipment and raw materials from the allies during Indo Pak war resulted in twin objectives of “growth with stability” and “progressive achievement of self-reliance” for the Fourth Plan. Main emphasis was on growth rate of agriculture to enable other sectors to move forward. « First two years of the plan saw record production. The last three years did not measure up due to poor monsoon. Implementation of Family Planning Programmes were amongst major targets of the Plan. Influx of Bangladeshi refugees before and after 1971 Indo-Pak war was an important issue along with price situation deteriorating to crisis proportions and the plan is considered as big failure. 5th Plan (1974-79) | Target Growth: 4.4%, Actual Growth: 4.8% * The final Draft of fifth plan was prepared and launched by D.P. Dhar in the backdrop of economic crisis arising out of run-away inflation fuelled by hike in oil prices and failure of the Govt. takeover of the wholesale trade in wheat. It proposed to achieve two main objectives: 'removal of poverty' (Garibi Hatao) and ‘attainment of self-reliance’. Promotion of high rate of growth, better distribution of income and significant growth in the domestic rate of savings were seen as key instruments. Due to high inflation, cost calculations for the Plan proved to be completely wrong and the original public sector outlay had to be revised upwards. « After promulgation of emergency in 1975, the emphasis shifted to the implementation of Prime Ministers 20 Point Programme. FYP was relegated to the background and when Janta Party came to power in 1978, the Plan was terminated. Rolling Plan (1978 - 80) « There were 2 Sixth Plans. Janta Govt. put forward a plan for 1978- 1983 emphasising on employment, in contrast to Nehru Model which the Govt criticised for concentration of power, widening inequality & for mounting poverty. However, the government lasted for only 2 years. * Congress Govt. returned to power in 1980 and launched a different plan aimed at directly attacking on the problem of poverty by creating conditions of an expanding economy. 6th Plan (1980 - 85) | Target Growth: 5.2%, Actual Growth: 5.7% * The Plan focussed on Increase in national income, modernization of technology, ensuring continuous decrease in poverty and unemployment through schemes for transferring skills (TRYSEM) and providing slack season employment (NREP), controlling population explosion etc.< Growth and development Broadly , the sixth Plan could be taken as a success as most of the target were realised even though during the last year (1984-85) many parts of the country faced severe famine conditions and agricultural output was less than the record output of previous year. 7th Plan (1985 - 90) | Target Growth: 5.0%, Actual Growth: 6.0% The Plan aimed at accelerating food grain production, increasing employment opportunities & raising productivity with focus on ‘food, work & productivity’. The plan was very successful as the economy recorded 6% growth rate against the targeted 5% with the decade of 80's struggling out of the’ Hindu Rate of Growth’. 8th Plan (1992 - 97) | Target Growth 5.6 %, Actual Growth 6.8% Worsening Balance of Payment position, rising debt burden, widening budget deficits, recession in industry and inflation were the key issues during the launch of the plan. The plan undertook drastic policy measures to combat the bad economic situation and to undertake an annual average growth of 5.6% through introduction of fiscal & economic reforms including liberalisation under the Prime Minister ship of Shri P V Narasimha Rao. Some of the main economic outcomes during eighth plan period were rapid economic growth (highest annual growth rate so far — 6.8 %), high growth of agriculture and allied sector, and manufacturing sector, growth in exports and imports, improvement in trade and current account deficit. High growth rate was achieved even though the share of public sector in total investment had declined considerably to about 34 %. 9th Plan (1997- 2002) | Target Growth: 6.5%, Actual Growth: 5.4% The Plan prepared under United Front Government focussed on “Growth With Social Justice & Equality “ Ninth Plan aimed to depend predominantly on the private sector — Indian as well as foreign (FDI) & State was envisaged to increasingly play the role of facilitator & increasingly involve itself with social sector viz education , health etc and infrastructure where private sector participation was likely to be limited. It assigned priority to agriculture & rural development with a view to generate adequate productive employment and eradicate poverty 10th Plan (2002 - 2007) | Target Growth 8 %, Actual Growth 7.6 % Recognising that economic growth can’t be the only objective of national plan, Tenth Plan had set ‘monitorable targets’ for few key indicators (11) of development besides 8% growth target. The targets included reduction in gender gaps in literacy and wage rate, reduction in Infant & maternal mortality rates, improvement in literacy, access to potable drinking water cleaning of major polluted rivers, etc. Governance was considered as factor of development & agriculture was declared as prime moving force of the economy. States role in planning was to be increased with greater involvement of Panchayati Raj Institutions. State wise break up of targets for growth and social development sought to achieve balanced development of all states.< Growth and development 11th Plan (2007 - 2012) | Target Growth 9%, Actual Growth 8% ¢ The broad vision for 11th Plan included several inter related components like rapid growth reducing poverty & creating employment opportunities , access to essential services in health & education, especially for the poor, extension if employment opportunities using National Rural Employment Guarantee Programme , environmental sustainability , reduction of gender inequality etc. The Eleventh Plan started well with the first year achieving a growth rate of 9.3%, however the growth decelerated to 6.7% rate in 2008-09 following the global financial crisis. « The economy recovered substantially to register growth rates of 8.6 % and 9.3% in 2009-10 and 2010-11 respectively. However, the second bout of global slowdown in 2011 due to the sovereign debt crisis in Europe coupled with domestic factors such as tight monetary policy and supply side bottlenecks, resulted in deceleration of growth to 6.2% in 2011-12. Consequently, the average annual growth rate of Gross Domestic Product (GDP) achieved during the Eleventh Plan was 8%. « The rate of decline during the period 2004-05 to 2009-10 is twice the rate of decline witnessed during the period 1993-94 to 2004-05. Though the new poverty count based on Tendulkar Formula has been subject of controversy , it is believed by the Committee that whether we use the old method or the new , the decline in percentage of population below poverty line is almost same. 12th Five-Year Plan (2012-17) | Target Growth 8.2% - End of Five-year Plans « The average annual growth target for the 12th Plan has been scaled down to 8.2% and 12th Plan intended to achieve 4% agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10%. The total plan size has been estimated at Rs 47.7 lakh crore « As regards to poverty alleviation, the Commission aims to bring down the poverty ratio by 10%. NITI Aayog, has replaced the Planning Commission, as the new body in order to give policy direction. Its founding principal is ‘cooperative federalism’. Most important difference is that Niti Ayog has no power to grant funds or make decisions on behalf of states. It is only an advisory body. NITI Aayog has come up with its comprehensive national Strategy for New India @75, which defines clear objectives for 2022-23. It is a detailed exposition across 41 crucial areas, that recognizes the progress already made, identifies binding constraints, and suggests the way forward for achieving the clearly stated objectives. New Industrial Policy, 1991: This was announced when India’s Economic reforms took place. The major highlights are as follows: 1. De-reservation of the Industries: Now the industries under government control are only two- Atomic Energy and Railways. Atomic energy includes nuclear research and other related activities, i-e., mining, use management, fuel fabrication, export-import, waste management, etc., of radioactive minerals.< Growth and development 2. De-licensing of the Industries: Currently, there are only five industries which has to follow compulsory licensing: (i) Aero space and defence related electronics (ii) Gun powder, industrial explosives and detonating fuse (iii) Dangerous chemicals (iv) Tobacco, cigarette and related products (vy) Alcoholic drinks 3. MRTP Act was abolished and replaced by a competition Act passed in 2002. It led to the formation of Competition Commission of India. 4. Foreign investments were promoted in full swing for the first time which was not the case earlier. Foreign Direct Investment (FDI) and Portfolio Investment Scheme (PIS) was launched. 5. Foreign Exchange Management Act was passed in 2000-01 which replaced FERA to liberalise foreign exchange transactions and to boost investment. 6. Anew term DISINVESTMENT was introduced. It is a process by which government dilutes its stake in the public-sector enterprises. The C. Rangarajan Commission suggested ways to implement it. In 1997 the government started a Disinvestment Commission. The financial year 1999-2000 was a breakthrough for disinvestment wherein the government was in full swing to speed up disinvestment in the country. It first established a Disinvestment Department and later a full-fledged Ministry of Disinvestment was set up. Later on, the government dismantled the Ministry of Disinvestment and named it the Department of Disinvestment and currently it is named as Department of Investment and Public Asset Management (DIPAM). Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and deemed to be foreign territory for the purposes of trade operations and duties and tariffs. In order words, SEZ is a geographical region that has economic laws different from a country's typical economic laws. Usually the goal is to increase foreign investments. The Special Economic Zone (SEZ) policy in India first came into inception on April 1, 2000. Some of the functional SEZs are located at Santa Cruz (Maharashtra), Cochin (Kerala), Kandla and Surat (Gujarat), Chennai (Tamil Nadu), Visakhapatnam (Andhra Pradesh), Falta (West Bengal) and Noida (Uttar Pradesh) in India. Economic Growth Vs Economic Development Economic growth means an increase in real national income / national output. Economic development means an improvement in the quality of life and living standards, e.g. measures of literacy, life-expectancy and health care. Economic growth measures an increase in Real GDP (real output). GDP is a measure of the national income / national output and national expenditure. It basically measures the total volume of goods and services produced in an economy. Economic development Development looks at a wider range of statistics than just GDP per capita. Development is concerned with how people are actually affected. It looks at their actual living standards and the freedom they have to enjoy a good standard of living.< Growth and development Measures of economic development will look at: Real income per head - GDP per capita Levels of literacy and education standards Levels of healthcare e.g. number of doctors per 1000 population Quality and availability of housing Levels of environmental standards Life expectancy. Absolute Poverty. Do people have sufficient resources to maintain a healthy diet and basics of life such as shelter? Economic growth may be essential to enable higher incomes for people to be able to buy more food. However, economic growth doesn’t necessarily improve everyone’s living standards. Economic growth could bypass the poorest sections of society because they don’t have the ability to take part. A key issue is whether the benefits of economic growth are equitably distributed amongst different groups of society. Education standards. e.g. literacy rates. Economic growth may enable more money to be spent on education. However, there is no guarantee that the proceeds of growth will be used to improve education standards. There is often a weak correlation between GDP and literacy rates. Environmental standards. Economic growth can actually harm the environment and people’s living standards. For example, higher output could cause more pollution. If higher growth involves cutting down forests - this could have adverse environmental consequences in long-term. Transport / Infrastructure Economic development would require improvements in infrastructure and transport. This may be important for regions which may be cut off from the main areas of economic growth. Factors affecting economic growth in developing countries « Levels of infrastructure - e.g. transport and communication « Levels of corruption, e.g. what percentage of tax rates are actually collected and spent on public services. * Educational standards and labour productivity. Basic levels of literacy and education can determine the productivity of the workforce. « Levels of inward investment. For example, China has invested in many African countries to help export raw materials, that its economy needs. « Labour mobility. Is labour able to move from relatively unproductive agriculture to more productive manufacturing? « The flow of foreign aid and investment. Targeted aid can help improve infrastructure and living standards. « Level of savings and investment. Higher savings can fund more investment, helping economic growth. The Harrod Domar Model suggests that the rate of economic growth depends on two things: « Level of Savings (higher savings enable higher investment) « Capital-Output Ratio. A lower capital-output ratio means investment is more efficient and the growth rate will be higher.<= Growth and development In 1991 India embarked on major reforms to liberalize its economy after three decades of socialism and a fourth of creeping liberalization. Twenty- five years later, the outcome has been an outstanding economic success. India has gone from being a poor, slow-growing country to the fastest- growing major economy in the world in 2016. The World Economic Outlook for 2016 says that the United States and India are the two pillars of strength today that are helping hold up a sagging world economy. Indian socialism reached its zenith in the 1970s, when the banks and several major industries were nationalized. The top income tax rate rose to 97.75 percent, and the wealth tax to 3.5 percent. The Asian financial crisis of 1997-99 laid India low, yet it proved far more resilient than other Asian nations. Soon after came two droughts (in 2000 and 2002), the dot-com collapse and global recession of 2001, and the huge global uncertainty created in the run-up to the invasion of Iraq in 2003. The Indian economy sputtered in those difficult years, and average GDP growth slowed to 5.7 percent in 1997-2003. But then followed the global boom of 2003-8, spearheaded by China, which lifted all boats across the world. India's GDP growth soared, and it reached a peak of over 9 percent per year in the three years 2005-8. India & Poverty: India's poverty ratio did not improve at all between independence in 1947 and 1983; it remained a bit under 60 percent. Meanwhile, the population virtually doubled, meaning the absolute number of poor people doubled. In the seven years between 2004-5 and 2011-12, no fewer than 138 million Indians rose above the poverty line. India's poverty decline was 0.7 percentage points per year between 1993- 94 and 2004-5, when GDP growth averaged about 6 percent per year. The annual rate of decline accelerated to 2.2 percent between 2004-5 and 2011-12, when GDP growth accelerated to over 8 percent per year. Between 2004-5 and 2011-12, the all-India poverty ratio fell by 15.7 percent. The decline was much higher at 21.5 percent for Dalits (the lowest Indian caste group) and 17.0 percent for scheduled tribes, traditionally the two poorest groups in India. The decline in the poverty ratio of the upper castes was much lower, at 10.5 percent. Muslims are another historically disadvantaged group. Their poverty ratio declined in that seven-year period by 18.2 percent, faster than the 15.6 percent for Hindus. In as many as seven states, Muslims are less poor than Hindus. Table 3. India's Poverty Decline (Tendulkar Committee Methodology) ee eed Number of Poor (millions) 1993-94 453 4037 2004-5 y2 4071 2011-12 29 269.3 Source: S. Mahendra Dev, Suresh Tendulkar Lecture, 2016,Practice: Q. Minimum Support Prices are announced based on recommendation from A. Ans - A, C, D poPPe 99 87>0 Commission for Agricultural Costs and Prices B. Ministry of Panchayati Raj Cc. D Food Corporation of India . Parliamentary committee on Food & Agriculture First Five Year Plan was launched in which year? 1948 1952 1951 1955 . White Revolution is associated with * Food grains Oilseeds . Marine products . Dairy products