5th Five Year Plan
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Foreword || A Review of the Economic Situation || The Perspective || Rate and Pattern of Growth || Financial Resources || Plan Outlays and Programmes of Development || Resolution of the National Development Council on Power and Irrigation Systems || Resolution of the National Development Council on the Fifth Five Year Plan || Annexures

Chapter-2:
THE PERSPECTIVE

The objectives in view are removal of poverty and achievement of self-reliance. This chapter seeks to delineate a desirable profile of development, indicating magnitudes which will help to determine options for long term investment and outlining strategies which will help to overcome the constraints in achieving the objectives. The strategies relate to growth in the three leading sectors, viz., agriculture, energy and critical intermediates and the creation of additional employment opportunities.

Agricultural Sector

2.2. This is the most vital sector. Gross domestic product at 1960-61 prices, from the agricultural and allied sectors, increased at an annual compound trend rate of 2.07% during the period from 1961 -62 to 1 973-74. TabL-1 shows that growth in output of foodgrains in the same period is estimated at 2.72% per annum.

Table 1. Annual Compound Growth Rates1 of Output for Selected Crops During 1961-62 to 1973-74.

Crop Growth Rate (%)
(0) (1)
1. rice 2.08
2. wheat 8.85
3. jowar (-) 0.87
4. bajra 4.39
5. maize 3.21
6. total cereals 3.16
7. total pulses (-) 0.51
8. total foodgrains 2.72
9. sugarcane (cane) 2.37
10. cotton (lint) 1.17
11. jute (-) 0.87
12. mesta (-) 3.81
13. oilseeds (5 major) 1.26
14. all crops2 2.45

1 Estimated from semi-fog regressions of output data in quantities on tima.
2 Based on Index Numbers of Agricultural Production.

2.3. Neither for the country as a whole nor for any of the States was the output of foodgrains consistently below the estimated trend levels after 1 970-71. Thus, there is no evidence to suggest that the foodgrains economy stagnated in the early seventies.

2.4. Studies in growth of output and patterns of growth of input show that in certain regions of the country growth in production of foodgrains is primarily explained by spread of irrigation and multiple cropping, while in others it is due to water, seed and fertiliser technology. The picture varies from district to district. Table-2 presents a comparative analysis of the levels of agricultural development in the triennium 1970-71 to 1972-73 based on District level data on gross value of output per hectare and indicators of input such as gross cropped area, consumption of fertilisers, use of tractors, installed pump sets and gross irrigated area. In the early Seventies the gross value of cropped output per hectare was above Rs. 1 500 per annum only in 1 5 per cent of the gross cropped area. This relatively developed part of the rural economy accounted for 27.84 per cent of the aggregate output and approximately 40 per cent of most of the major inputs such as fertilisers and pump sets. On the other hand, the gross value of cropped output per hectare was less than Rs. 1000 per annum in 60 per cent of the total cropped area, and it accounted for roughly one-third of the total inputs used in the rural sector. Table-3 shows that in growth of agricultural output, rates higher than 5 per cent compound per annum have been achieved in the trienniums, 1962-63—1964-65 to 1970-71—1972-73, in approximately 12 per cent of the districts of India, accounting for about 1 4 per cent of the gross cropped area and approximately 20 percent of most of the major inputs. In approximately 30 per cent of the districts, accounting for approximately equal share of the gross cropped area and a somewhat higher share of major inputs, the growth rate of agricultural output has been higher than 3 per cent compound per annum. In another third of the districts accounting for 30.98 per cent of the gross cropped area, the rate of growth has been estimated between 1 to 2.99 per cent compound per annum. This class of districts corresponds to the modal class and the average growth rate of the agricultural sector also falls in it. The remaining districts showed a growth performance of less than 1 per cent compound per annum. The future strategy will need to take note of these factors.

Table 2. Summary Profiles of Levels of Agricultural Development in India
at the District Level for the Triennium 1970-71 to 1972-73

Cumulative Percentages of Total
gross value of gr output per hectare (Rs. in all India prices) oss cropped area aggregate output cousumptior of N.P.K. 1 use of tractors pumpsets installed gross irrigated area no. of districts in India (%)
(0) (1) (2) (3) (4) (5) (6) (7)
1. 2500—2799
2. 2000—2499
3. 1500—1999
4. 1000—1499
5. 500— 999
6. 54- 499
0.70
3.04
14.48
40.30
83.96
100.00
1.83
7.18
27.84
59.46
94.20
100.00
2.37
10.60
38.93
67.24
93.79
100.00
5.39 12.89 46.81 69.90 9588 100.00 0.83
7.82
40.68 63.40 91.56 100.00
2.22 8.27 34.08 64.25 95.75 100.00 1.06 3.56 17.73 42.91 87.94 100.00
Source: Centre for Regional Development, Jawaharfal Nehru University—Perspective Planning Division. Planning Commission, Project on Regional Levels of Agricultural Development in India. Analysis conducted for 19 main crops.
Table 3. Summary Profile of Growth of Agricultural Development in India at District Level between the Trienniums 1962-63/64-65 to 1970-71/72-73
Cumulative Percentages of Total in 1970-71/1972-73
annual compound growth rate of gross value of output (%) * gross cropped area aggregate output consumption of N.P.K. use of tractors pumpsets installed gross irrigated area no. of Districts in India (%)
(0) (1) (2) (3) (4) (5) (6) (7)

1.11,00—11.35
2. 9.00—10.99
3. 7.00— 8.99
4. 5.00— 6.99
5. 3.00— 4.99
6. 1.00— 2.99
7.10.00— 0.99
8. negative

0.62
1.38
7.93
13.89
29.60
60.58
73.09
100.00
0.15
0.98
9.97
17.03
36.13
67.75
80.98
100.00
0.02
1.22
14.13
20.81
38.99
66.24
81.92
100.00
0.84
2.89
32.47
46.46
67.72
83.74
90.74
100.00
0.08
1.26
12.47
20.13
34.68
66.63
80.69
100.00
0.09
1.19
16.28
24.37
45.53
71.90
83.81
100.00
0.36
1.42
6.38
12.41
29.08
62.41
75.18
100.00

* Growth rate has been computed by valuing output in 1962-63 to 1964-65 and 1970-71 to 1972-73, at average all India Prices for each Crop for the triennium 1970-71 to 1972-73.
Source : Centre for Regional Development, Jawaharlal Nehru University-Perspective Planning Division. Planning Commission, Project on Levels of Agricultural Development in India.

2.5. The strategy for long term planning of the agricultural sector centres round detailed assessment and exploitation of ground and surface water, intensification in application of new technologies in agriculture, extension mechanisms and programmes for supply of inputs, apart from attention to the special needs of problem areas and vulnerable sections of the society.

2.6. The growth rate in gross cropped area in the period 1961-62 to 1972-73 is estimated at 0.54 per cent compound per annum. Based on an elasticity of multiple cropping with respect to gross irrigated area, the National Commission on Agriculture has estimated a growth rate of 0.66 per cent compound per annum in the gross cropped area from 1970-71 to the year 2000. The estimated elasticity of gross cropped area with respect to gross irrigated area for the country as a whole is 0.20. An increase of 4 per cent per annum in gross irrigated area can be safely postulated for the Fifth Plan. This growth rate will need to be intensified in the later Plan periods. On a somewhat conservative basis, the gross cropped area can be postulated to expand by 0.7 per cent per annum in the Fifth Five Year Plan period and by about 0.6 per cent per annum in the subsequent period.

2.7. The growth rate in the gross cropped area under foodgrains between 1961-62 and 1972-73 is estimated at 0.49 per cent compound per annum. The growth rate "for the Fifth Plan period is postulated at 0.6 per cent per annum. The trend of diversification to non-foodgrains crops is expected to be maintained in the later Plan periods. As regards individual food crops, the growth rate of irrigated area under paddy is likely to be higher than that under wheat. Recent evaluation also suggests that while the expansion of area under high yielding varieties of paddy will be considerably intensified in the Fifth Plan period, area under irrigated wheat is likely to be entirely covered by high yielding varieties during this period. High yielding varieties in jowar and some other cereals offer sufficient promise, provided problems relating to pest resistance can be controlled. Exercises in the Planning Commission suggest that towards the end of the next decade the irrigated area under foodgrains must rise to around 45 per cent of the total area under foodgrain crops.

2.8. The second factor in higher production of foodgrains is increase in yield by 3 per cent per annum during the Fifth Five Year Plan period. The increases in yield are derived from the increases in input. Somewhat conservative assessments are at present stipulated for yield level possibilities for each crop separately for differing agronomic conditions. However, technological assessments as well as comparative analysis within homogeneous agroclimatic regions suggest that higher yield levels are possible.

2.9. Annexure I gives State-wise position regarding the areas that have been covered by systematic geological surveys. However, 63 per cent of the coverable area has n"t yet been investigated. The gap is wider for the States of North Eastern Region, Eastern Region (excepting West Bengal), Central Region and Southern Region, which include some of the drought prone areas in the country. In the absence of more reliable data from surveys and exploration, the ultimate potential of ground water can be tentatively placed at 35 million hectares.

2.10. Allocation of funds for systematic evaluation of the country's ground water resources has been considerably increased in the Fifth Plan. With the availability of more information, it should be possible to develop a detailed land utilisation plan and a coordinated plan for the utilisation of surface and ground water in the Sixth Five Year Plan period and "beyond. Such a plan for the national economy needs to be integrated with the local and regional development plans.

Demand for Foodgrains

2.11. Estimation of demand for foodgrains is sensitive to the assumptions made on growth and distribution of income. Based on the realised levels of growth of income upto 1 975-76, the target of 5.2 per cent per annum of compound income growth in the remaining years of the Fifth Five Year Plan and the estimated relationships between purchase of foodgrains and growth in total consumption expenditure per capita, the demand for foodgrains in 1978-79 is estimated at 1 27.69 million tonnes. The targets of income growth presently postulated for the Sixth and the Seventh Plan periods lead to estimates of the demand for food-grains at 1 50.9 million tonnes and 1 78.2 million tonnes respectively, provided the elasticity of demand of foodgrians to consumption expenditure remains constant. These projections are consistent, both methodologically and in quantities, with the upper limit'of requirements of foodgrains in 1985 estimated by the National Commission on Agriculture to be within a range of 150 million tonnes to 163 million tonnes. However, there is a possibility that the demand for foodgrain will slacken in the perspective period on account of the growth in per capita consump tion expenditure placing a larger proportion of consumer households in the higher expenditure brackets. This is particularly so since the behaviour of households in purchase of foodgrains varies markedly between households in the different expenditure brackets. The demand for non-foodgrain agricultural products will intensify with the diversification of the basket of consumer expenditure in relat'on ship with higher levels of living. If the demand for foodgrains reaches 180 kgs. per capita per annum in1 983-84, the aggregate requirement of foodgrains will be 143.5 million tonnes. As for the following five year period the requirement will be 1 61 million tonnes by 1 988-89, if the per capita demand is taken at 1 90 kgs. On current indications, it will be prudent 10 plan for a requirement of foodgrains within a range of 161 million tonnes to 170 million tonnes (implied per capita availability being 200 kgs) by 1988-89 and to firm up these estimates in the Sixth Plan.

Non-foodgrain Crops

2.12. The same strategy, namely of increasing the area under irrigation and of intensifying the spread of the available high yielding varieties, applies to nonfoodgrain crops. The expansion of irrigation facilities in sugarcane and in cotton is expected to continue. It is expected that demand should balance supply in the early part of the Sixth Plan period. The situation with regard to oilseeds is more uncertain on account of the area under irrigation being small and so the need for imports cannot be ruled out. Even with the postulation of a tight land balance, the expected rate of growth in the non-foodgrains crop is presently estimated at 3.94 per cent per annum in the Fifth Plan period, rising to 4.96 per cent per annum in the Seventh Plan period. Given the growth rates in the animal husbandry, fishing and forestry sectors, the rate of growth of the agricultural sector as a whole is postulated at 3.94 per cent in the Fifth Plan period and at approximately 4.30 per cent through the Sixth and Seventh Plan periods.

Fertilisers

2.13. The estimation of fertiliser demand is sensitive to the increase in irrigation facilities and the spread of new technologies. The demand is estimated in terms of nutrients at 4.80 millions tonnes in 1978-79 and approximately 8 million tonnes in 1 983-84. Suitable investment decisions in relationship to these fertiliser demands are being made in the area of nitrogenous and phosphatic fertilisers. Still there will be some area of uncertainty in estimation of demand arising both from the lack of fully disaggregated data and relationship of fertiliser applications to behavioural responses. Any spurt in demand may, therefore, have to be met from imports. The requirments of potassic fertilisers will continue to be met substantially out of imports.

Forestry

2.14. The forestry sector has to play an important role in the economic development of the country. Forests occupy about 23 per cent of the area and their contribution in the net domestic product at 1960-61 prices is 1.4 per cent. The targets of demand for industrial wood for the perspective period are consistent with the projections of the National Commission on Agriculture. The problems relating to the forestry sector are mainly organisational. In view of the tight land balance being anticipated, coverage by forests has to be integrated with the land utilisation plan. Development of communications is also necessary in relation to the optimal exploitation of the available forest wealth in inaccessible areas.

The Energy Sector

2.15. Issues relating to energy planning have been fully examined. Given 10 the non-renewable resource base of the economy, the main emphasis is on coal, electricity and crude oil and substitution of imported source of energy wherever possible. These three leading sectors of energy accounted for 3.96 per cent of the gross value added in the non-agricultural sector in 1973-74. This share is expected to go up to 5.00 per cent by the end of the Fifth Plan period and 5.56 per cent by the end of the Sixth Plan.

2.16. The revised production estimate for the coal sector is placed at 124.0 millon tonnes in 1978-79 and is estimated to go up to 185 million tonnes in 1983-84. Long term rates of growth of between 7 to 8 per cent compound per annum for this sector are expected to be sustained through the Seventh Plan period also.

2.17. The power generation programme together with minimisation of transmission and distribution losses, aims at meeting the anticipated demand of about 90 billion Kwhs by 1978-79. The rationalisation of power rates is also expected to lead to a more optimal pattern of energy consumption and restrict relatively inessential use. Energy consumption at the end of the Sixth Plan period is presently estimated tentatively at 138 billion units. Taking into account the regional dimensions, peak demand and rationalisation of the transmission and distribution system, investment planning decisions are under way to meet this requirement. The electricity sector is expected to maintain a growth rate of between 8.5 to 9.5 per cent per annum through the Seventh Plan. The slight deceleration in the growth rate is consistent with international experience of the declining elasticity of electricity consumption in relation to income growth at higher levels of industrialisation.

2.1 8. Consumption of refinery products grew at a rate of 8.5 per cent compound per annum in the period from 1960 to 1973. With suitable fiscal measures and appropriate restrictions on the non-essential use of oil products, the consumption in 1974-75 was reduced to the 1972 levels and further demand controlled. The requirements of petroleum products are expected to be of the order of 28.5 million tonnes in 1 978-79, even after taking into account the needs of the critical sectors like fertilisers, transport, irrigation, industry and domestic fuel. Simultaneously intensified exploration and processing is likely to give a production of 14.18 million tonnes of crude oil by then, as against the target of 12 million tonnes in the Draft Plan. The crude oil sector is expected to grow at a rate of 14.68 per cent during the period of the Fifth Plan. By 1983-84, the production level is tentatively expected to be 22 million tonnes. The refining capacity in the country will be about 31.5 million tonnes by 1978-79; and this is expected to increase during the Sixth Plan. It is estimated that till 1980-81, there wili be no need to raise the absolute level of import of crude oil.

2.19. The Fuel Policy Committee has estimated that the share of noncommercial energy in the domestic sector will decrease from 80 per cent in 1978-79 to 60 per cent by the end of the Seventh Plan. Against the estimated availability of 94 million tonnes of forest fuels, the demand is placed at 132 million tonnes in 1978-79 and 1 22 million tonnes in 1990-91. The need for a coordinated policy towards development of forests and use of soft coke appears inescapable.

Long Term Perspective tor Non-Renewable Resources

2.20. Planning for critical intermediates must have relation tu the non-renewable resource base, since even with recycling, the recovery ratio is less than unity. Major objectives for the development of non-renewable resources from the land and the sea can be stated as follows :

  1. to prepare detailed inventory of natural resources;
  2. to supply the growing needs at minimum social cost;
  3. to utilise nation's non-renewable resources at optimal depletion rate;
  4. to achieve self-reliance in terms of technology, production and conservation;
  5. to utilise the possibilities of international trade that are consistent with other long-term Plan objectives;
  6. to utilise re-cycling possibilities; and
  7. to undertake research and development.

2.21. In the present stage of industrialisation, the elasticity of mineral consumption with respect to growth of either GDP or manufacturing activity exceeds unity. This experience is consistent with the historical experience of other countries in similar stages of industrialisation.

2.22. Annexure 2 shows the status of geological mapping in India. Despite considerable efforts, only 46.14 percent of the total geographical area of the country has been geologically mapped on the scale of 1 : 50000. Geological mapping should have priority in the overall programme of land use and planning utilisation of non-renewable resources.

2.23. Annexure 3 indicates the recoverable reserves as a percentage of total reserves. Reserves of the measured categories, which are the outcome of detailed investigations, are smaller than the requirements for future long-term resource planning. In case of strategically important minerals like kyanite, barytes,chromite, etc. the bulk of the reserves are yet only of the inferred category. Unless detailed exploration is done for these minerals, exploitation may lead to unnecessary extra costs to the economy. Given the fact that the exploration of the non-renewable resources should be planned within a long-term framework, it is possible that private lease-holds may indulge in socially undesirable decisions on the rates of depletion. Thus a policy perspective needs to be developed.

2.24. Table 4 indicates the long-term perspective of the availability of major minerals based on estimated depletion rates in 1988-89. For many of the strategically important minerals, such as, chromite, kyanite, barytes and manganese, the nation would be depleting the known reserves before the year 2000 even if exports are maintained only at the current levels and production is increased to meet the growing domestic demand. This is a serious matter particularly as substantial deposits of these minerals are under private lease-hold. As for the critical non-ferrous metals viz, copper and zinc, of which India is a net importer, minimum exploitation to ensure self-sufficiency in the short run, will deplete the known reserves within fifteen years or so. This has obvious implications both for import planning and for exploitation. Reserves of some of the important minerals like iron ore (both hematite and magnetite) and bauxite seem to be sufficient for meeting growing domestic needs and to provide for exports. Reserves of limestone are abundant but complete inventory in terms of grades and quality has not yet been made.

Table 4. Balance Life of Known Reserves at 1988-89 Consumption Levels minerals balance life at 1988-89
consumption levels in years

(0) (1)
1. coking coal 44
2. non-coking coal
(a) indigenous 168
(b) plus exports 159
3. iion ore-hematite
(a) indigenous 165
(b) plus exports 62
4. iron ore-magnetite 84
5. manganese ore
(a) indigenous 26
(b) plus exports 12
6. chromite
(a) indigenous 47
(b) plus exports 13
7. bauxite
(a) indigenous 66
(b) plus exports 45
8. zinc
(a) indigenous
(b) plus imports 11
9. copper
(a) indigenous 17
(b) plus imports 36
10. lead
(a) indigenous 29
(b) plus imports 46
11. rock phosphate
(a) indigenous
(b) plus imports 12
12. limestone 475

Critical Industrial Intermediates

2.25. Studies on steel demand indicate that domestic requirements can be met and export of some surpluses maintained till 1983-84 on the basis of fresh capacities expected to be created by investments in stream or possible expansion in the existing plants. Fresh investment decisions may, however, need to be taken for ensuring adequate supplies of finished steel, particularly shaped products, in the earlier part of the Seventh Plan period. The target of 4 lakh tonnes of aluminium in the Draft Plan is now expected to be reached by the end of the Sixth Plan period. Fresh capacities will need to be created before then. Aluminium demand is expected to rise by more than 50 per cent in the Seventh Plan period and decisions on setting up of capacity for mining of bauxite and erection of smelter facilities will be necessary.

Demographic Profile

2.26. The National Population Policy lays down a target for birth rate of 25 per thousand and a population growth rate of 1.4 per cent by the end of the Sixth Plan period. The policy envisages a series of fundamental measures including raising of thfc minimum age for marriage, female education, spread of population values and the small family norm, strengthening of research in reproductive biology and contraception, incentives for individuals, groups and communities and permitting State Legislatures to enact legislation for compulsory sterilization. The targets laid down in the National Population Policy correspond to those laid down in the Draft Fifth Plan for achievement by the end of the Sixth Plan and are expected to be reached. For the period 1986-91, the population growth rate is estimated at 1.1 percent. The population is estimated at 725.4 million by 1988-89 and at 744.8 million by 1991. The rural population is estimated at 545.1 million by 1988-89 and the urban population at 180.3 million.

Structure of Output

2.27. Gross Domestic Product at 1960-61 prices increased at an annual compound growth rate of 3.40 per cent in the period 1961-62 to 1973-74 as shown in Annexure 4. The fastest growing sector was Electricity, gas and water supply (9.90 per cent). The rate of growth of the Registered Manufacturing sector was faster than that of Unregistered Manufacturing sector. Broadly speaking, with the growth in the-agricultural sector at around 2 per cent per annum, the manufacturing, mining and quarrying and tertiary sectors grew at a rate of around 4 per cent per annum and the national economy at over 3 per cent per annum.

2.28. The structure of output in the perspective period can now be summarised. The constraints of the international economy, the desired patterns of consumption expenditures and the natural resources (including the non-renewable resources) determine the leading sectors of the economy. In addition, the export opportunities (outlined subsequently) and the required levels of investment and public consumption determine the details of the desired structure of output. The growth of gross output in the agricultural sector is estimated at 3.94 per cent in the Fifth Plan period and higher than 4 per cent in the Sixth and Seventh Plan periods (Table 5 : All estimates at 1 974-75 prices). The mining sector's gross output is targetted to expand at 1 2.58 per cent per annum and electricity at 10.1 2 per cent in the Fifth Plan period. The manufacturing sector is expected to sustain a growth rate of 6.92 per cent compound per annum in the Fifth Plan period and 7.23 per cent in the Sixth and Seventh Plan period. This growth profile is consistent with a growth target of 4.37 per cent for the Fifth Plan period (5.2 per cent for the period 1976-77 to 1978-79), 5.65 per cent for the Sixth Plan period and 6 per cent for the Seventh Plan period.

Table 5. Projected Sectoral Annual Rates of Growth in Terms of Gross Value
of Output and Gross Value Added at Factor Cost 1974-75 to 1988-89
(per cent per annum compound)

value of output

value added

sector 1978-79
over
1973-74
1983-84
over
1978-79
1988-89
over
1983-84
1978-79 over 1973-74 1983-84 over 1978-79 1988-89 over 1983-84
(0) (1) (2) (3) (4) (5) (6)
1. agriculture 3.94 4.35 4.30 3.34 4.00 4.02
2. mining and manufacturing 7.10 7.29 7.20 6.54 7.43 7.35
(a) mining 12.58 8.77 6.51 11.44 8.70 6.38
(b) manufacturing 6.92 7.23 7.32 6.17 7.32 7.43
(i) food products 4.63 5.21 6.06 3.73 5.27 6.21
(ii) textile 3.45 6.01 6.85 3.21 6.04 6.79
(iii) wood and paper products 6.75 7.89 8.56 4.90 7.73 8.92
(iv) leather and rubber products 5.50 7.76 7.97 2.47 7.55 7.85
(v) chemical products 10.84 9.16 7.18 10.46 9.13 8.02
(vi) coal and petroleum products 7.63 6.24 7.20 7.90 5.96 7.91
(vii) non-metallic minersni products 7.40 8.26 7.51 7,33 8.10 7.40
(viii) basic metals 14.12 6.42 7.71 13.40 6.03 7.87
(ix) mstal products 5.60 8.35 5.68 4.64 7.97 5.63
(x) non-electrical
engineering products 8.40 9.37 7.88 7.99 8.30 8.56
(xi) electrical engineering products 7.64 9.46 9.45 6.42 9.36 9.32
(xii) transport equipment 3.73 8.95 7.94 3.12 9.06 7.98
(xiii) instruments 5.39 9.87 8.82 4.45 9.73 8.75
(xiv) miscellaneous industries 6.75 7.09 7.72 4.42 684 7.48
3. electricty 10.12 9.38 8.62 8.15 9.71 7.86
4. construction 5.90 8.28 7.27 5.18 8,28 7.11
5. transport 4.79 6.38 6.68 4,70 5.33 6.39
6. services 4.88 6.82 7.72 4.80 6.77 770
7. total 4.37 5.65 6.00

2.29. The composition of Gross Domestic Product at factor cost undergoes a change in the perspective period. The agricultural sector shows a higher growth rate : but its share goes down from 50.78 per cent in 1973-74 to 48.1 5 per cent in 1978-79, 44.40 per cent in 1 983-84 and 40.25 per cent in 1 988-89. (Table 6). The share of the mining and manufacturing sectors goes up from 15-78 per cent in 1973-74 to 17.49 per cent in 1978-79, 19.01 per cent in 1 983-84 and 20.25 per cent in 1 988-89.

Table 6. Sectoral Composition of Gross Domestic Product: 1973-74. 1978-79, 1983-84 and 1988-89

(per cent)
sectors 1973-74 1978-79 1983-84 1988-89
(0) (1) (2) (3) (4)
1. agriculture 50.78 48.15 44.40 40.25
2. mining and manufacturing 15.78 1749 19.01 2025
(a) mining 0.99 1.37 1.58 1.61
(b) manufacturing 14,79 16.11 17.43 18.64
(i) food products 2.13 2.07 2.03 2.05
(ii) textiles 3.50 3.31 3.38 3.50
(iii) wood and paper products 0.58 0.59 0.66 0.75
(iv) leather and rubber products 0.16 0.15 0.16 '0.18
(v) chemical products 1.84 2.44 2.87 3.15
(vi) coal and petroleum products 0.23 0.27 0.28 0.30
(vii) non-metallic mineral produc ts 1.58 1.82 2.04 2.18
(viii) basic metals 1.09 1.65 1.68 1.84
(ix) metal products 1.08 1.09 1.22 1.20
(x) non-electrical engineering products 0.61 0.73 0.82 0.93
(xi) electrical engineering products 0.60 0.67 0.79 0.92
(xii) transport equipment 0.96 0.90 1.06 1.16
(xiii) instruments 0.03 0.03 0.04 0.04
(xiv) miscellaneous industries 0.38 0.38 0.40 0.43
3. electricity
4. construction
0.79
4.06

0.94
4.21

1.13
4.77
1.24
5.02
5. transport 3.43 3.48 3.43 3.49
6. services 25.16 25.73 27.26 29.75
7.Total 100.00 100.00 100.00 100.00

2.30. The average propensities to save and invest show constancy if the period from 1 961-62 to 1973-74 as a whole is considered. The expansion of public investment in the Annual Plans of 1975-76 and 1976-77 led to a step-up in gross capital formation. At 1974-75 prices, the percentage of Gross Investment to GNP is estimated at 18.9 per cent in 1938-89. Growth projections for the Sixth Plan period and beyond are based on careful assessment of past trends and future possibilities. However, they should not be interpreted as the upper limit of what the economy can achieve. It is eminently desirable that the economy should achieve higher rates of growth than postulated here. Improvement on the growth profile is feasible only if the investment level in the year 1988-89 is higher than what is indicated here. To be consistent with the objectives of removal of poverty, additional investment has to be sustained by greater efforts at resource mobilisation from the more affluent sections of the society.

Exports and Imports

2.31. The growth of exports has been 7 per cent per annum in the period 1960-61 to 1973-74. Manufactured exports increased by 12.8 per cent per annum in the same period and the share of manufactured items increased from 47.5 per cent to 59.2 per cent. This increase was mainly on account of rise in exports of new manufactures and non-traditional goods. This period also witnessed market-wise shift to EEC, OPEC and Socialist countries. However, India's share in total world exports declined as value of world trade grw at the rate of 12.2 per cent per annum as against value of India's trade at 8 per cent.

2.32. Since 1960-61 import substitution has been significant in the area of industrial machinery, paper, chemicals, iron and steel and non-ferrous metals. The share of imported machinery and equipment in the country's gross (fixed) capital formation declined sharply from 43.4 per cent in 1960-61 to 25.3 per cent in 1 965-66 and 9-6 per cent in 1 973-74, reflecting increased self-reliance. During the Fourth Plan, the increase in the value of total imports was due to substantial increase in unit values of commodities like wheat, fertilisers, non-ferrous metals and POL products.

2.33. The perspective for India's balance of payment is to pursue policies for the achievement of the objective of self-reliance. In the areas of food, fertilisers and POL, imports are sought to be reduced by pursuing a policy of rapid import substitution through planned investments. The momentum in the growth of exports will have to be sustained by exploiting both supply and demand elasticities for export of products of manufacturing sector such as steel, industrial machinery, metal based products, ready-made garments, leather manufactures, marine products, electronics and transport equipment. In exports of natural resources such as iron ore, mica and bauxite, the emphasis would have to be on product-mix with higher value added component, implying expansion of capacity for pelletisation, production of alumina, fabrication of mica, etc.

2.34. It is hoped that markets where India enjoys distinct locational advantage would be tapped. These markets should also open up the possibilities of export of services in the areas of construction, consultancy and joint ventures.

2.35. As regards imports, it should be possible to reduce the dependence on the rest of the world for import of critical wage goods in the Sixth Plan period. As regards machinery, equipment and other industrial imports, the strategy envisaged in perspective calls for careful implementation of a policy of selective import substitution. The constraints of non-renewable resources will have to be kept in mind.

The Employment Perspective and Standards of Living

2.36. The problem of employment is a matter of vital concern to the planners and policy makers. Given the structural characteristics of the economy, quantification of the relevant magnitudes presents some serious conceptual and statistical problems. The Expert Committee on Unemployment Estimates had suggested that a multidimensional approach be adopted in this regard. The 27th Round of National Sample Survey was devoted to collecting data based on the recommendations of the Committee, So far, results are available for the first two sub-rounds. Using the concept of Current Activity Status and defining unemployment rates through the disposition of labour time, it is possible to arrive at certain qualitative considerations regarding the problem in the rural areas. The data clearly indicates an urgent need for substantial efforts at generation of employment in the rural areas. However, the real problem is seen in a better perspective if it is realised that a part of the urban unemployment problem also arises from a spill over from the rural areas. In addition, regional unevenness in the character of the problem comes out in sharp focus.

2.37. Growth in employment in the organised sector is estimated at around 3 per cent per annum in the Fourth Plan period. In spite of the conceptual difficulties involved, inter-censal comparisons as well as the results of the different rounds of the National Sample Survey suggest that magnitude of employment in the household manufacturing sector including cottage industries has not increased to the required size. In a period of low agricultural growth (1 961 -62 to 1 973-74), the rates of growth of gross value added at 1960-61 prices, of important household manufacturing industries were low, e.g. food, drink and tobacco (1.83 per cent compound per annum), textile tailoring, leather footwear (2.09 per cent), leather and leather products(—1.62 per cent). However, these are compensated to an extent by higher rates of growth (between 3 to 6 per cent) in the chemical and engineering sectors.

2.38. For the purpose of evolving an appropriate policy, it is necessary to identify factors influencing the levels of rural employment on a regional basis. Studies have been carried out by the Planning Commission using the concept of an NSS region. The relationship of employment per rupee of output with factors such as output per hectare, use of fertilizer per hectare, tractorisation, irrigation, levels of investment and level of inequality of operational land holdings, has been investigated. Employment per rupee of output and per hectare of land depends on variables relating to irrigation such as the number of pump sets installed per hectare of land. Such employment rates are seen to be associated with a higher percentage of land operated in farms equal to or less than 5 acres (2 hectares). It was decided to further investigate this relationship separately for the developed commercialised agricultural regions and the rest. The results were broadly similar to those obtained for the country as a whole. However, fertilizer applications per hectare, a surrogate for the extension of the new technology in agriculture, were also shown to be positively related with employment variables in the commercial regions.

2.39. From the point of view of devising an appropriate strategy and employment policy, there are three inter-related aspects, which need to be borne in mind. The first emphasises the need for implementing a programme using the strategic foci employed in the Plan such as irrigation, agricultural extension involving the use of high yielding varieties etc; the second relates to the fact that aspects of rural employment generation should be inter-woven with a local development strategy; and the third, the most important aspect relates to the creation of a secure rural tenantry and a productive small farmer base by means of tenancy reform.

2.40. The methodology outlined above has several operational implications : Firstly, it means ensuring the availability of critical inputs and their effective utilisation; the Plan has taken care of this aspect in its production and investment planning side. Secondly, employment planning through agriculture has to be area specific in character and, therefore, requires a multi-level approach. Given the soil and agronomic conditions in each area, th,e availability of irrigation facilities, both through surface water as well as ground water possibilities, have to be estimated in detail. In the light of past experience, the features of crop specialisation in the area and the demand profile indicated in the Plan, cropping patterns for each sub-region will have to be worked out. Realistic assessments have to be made of the possibilities of the extension work with respect to the new varieties, both for areas under irrigated conditions and under assured rainfall conditions and to the extent possible, for dry areas. The production potential for each region has, therefore, to be carefully estimated and the requisite organisational and input support ensured. Care hc.s to be taken to ensure that inconsistencies do not develop. Admittedly, these are difficult tasks. No serious and worthwhile employment planning can be done without a reasonable assurance that these tasks will be performed.

2.41. The importance of area planning is also highlighted by studies which have shown that certain resource inelasticities, which are binding at the national level, do not operate with the same level of severity at the local level. Consequently, the available resources, physical as well as human, are subject to augmentation and more efficient utilisation if local knowledge can be used along with popular participation and planning initiative. All this requires the strengthening of the planning machinery, both at the State and local levels ; equally, important would be its harmonisation with national planning.

2.42. As a part of successful local planning, it is important that priorities for land reforms in the 20 Point Programme are observed and the measures implemented. Grant of proprietory rights or ensuring security of tenurial arrangements to the small farmers and share croppers together with production support through agricultural and, more particularly, through special programmes, such as the SFDA and the MFAL programme, is of great importance. Agricultural planning carried out on the basis of a comprehensive area approach is likely to prove effective in generating additional employment through ancillary activities involving animal husbandry, better utilisation of conventional waste materials,etc.

2.43. The labour supply projections contained in the Draft Fifth Five Year Plan imply an increase in the labour force for the agricultural sector of 1 6.2 million in the Fifth Plan period and 18.9 million in the Sixth Plan period. The rates of labour force participation thrown up by the 27th round of National Sample Survey would be higher because of inclusion of children in the age group 5-14 years and also because of difference in the concepts used in the survey. However, the increase in the labour force estimated according to NSS concepts would be about 18.26 to 18.96 million in the Fifth Plan period and 19.57 to 20.39 million in the Sixth Plan period. There is an area of uncertainty in the labour supply projections in an economy of the Indian type. With successful achievement of the targets and policies indicated above, increments to the labour force can be absorbed in the Fifth Plan period and a substantial effort can be made at handling the problem of the backlog of the unemployed in the Sixth Plan period.

2.44. The relationship between employment and output in the registered manufacturing sector has been investigated for 20 groups of industries. Capacity utilisation variables have also been included in this analysis. With the emphasis on public investment and on the aggregate investment, as contemplated in the perspective,being achieved, the rate of growth of manufacturing employment in the registered manufacturing sector in the Fifth Plan period is expected to be significantly higher than that recorded in the Fourth Plan period. In perspective the trend should accelerate. Substantial employment opportunities can also be generated if the targets in the sectors of mining, quarrying, construction industry, electricity, railways and other transport and other services are reached.

2.45. In the unregistered manufacturing sector, which consists substantially of the household sector, the employment trends of the past decade need to be reversed. The Fifth Five Year Plan provides for substantially higher outlays for projectised programmes in the cottage industry sector, particularly in areas such as handloom, coir, carpet weaving and training and for production planning programmes in other sectors. It is expected that the constraints on the use of agro-based supplies for the household sector will be less severe. Appropriate use of fiscal, credit and production support policies in this sector is essential for reinforcing capabilities for further generation of employment. Labour intensive technological improvements also need to be developed and diffused. According to the profile contained in the Draft Fifth Plan, the increase in the labour force in the non-agricultural sector is estimated at 8.5 million in the Fifth Plan period and 9.1 million in the Sixth Plan period. Achievement of production targets as postulated in perspective is extremely important in relation to creation of employment opportunities in the non-agricultural sector. Along with the achievement of production targets in perspective and successful implementation of the policies outlined above, specially in relation to the unregistered sector, increments to the labour force in the non-agricultural sector in the Fifth Plan period can be absorbed into productive employment in the Fifth Plan period. Thereafter, a serious effort will have to be made in the Sixth Plan to remove the backlog of unemployment.

2.46. The employment strategy suggested in long-term perspective emphasises stepping up rates of public investment in order to realise the output projections contained in the Plans, intensification and refinement of agricultural planning strategies, particularly in their local aspects, realisation of the objectives of land reforms in the 20 Point Programme, production support to small farmers and finally, regeneration of employment in the unregistered sector through an appropriate policy framework. Once the strategy for absorption of the available labour force in gainful activities is achieved, the qualitative aspects of the employment situation should change,

2.47. As regards the level of living, the methodology followed in the Draft Fifth Plan has been used for integrating consumption standards with the employment perspective outlined above. The commodity composition of output has been appropriately modified and inter-woven with the structure of output estimated in perspective.

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