6th Five Year Plan
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28 || Appendix

Chapter - 2:
DEVELOPMENT PERSPECTIVE 1979-80 TO 1994-95

The basic task of economic planning in India is to bring about a structural transformation of the economy so as to achieve a high and sustained rate of growth, a progressive improvement in the standard of living of the masses leading to the eradication of poverty and unemployment and provide the material base for a self-reliant socialst economy. During the thirty years of planned development, which we have now completed, impressive progress has been made in agriculture, industry, science and technology, health and education, and in the development of the infrastructure for a wide range of services. However, as has been pointed out in Chapter 1, the progress achieved has fallen short of objective needs and expectations. In formulating the objectives and priorities of the Sixth Plan, we have to take note both of past achievements and shortcomings as well as aew developments in the domestic economy and in the international economi environment. While the basic objectives of planning remain unchanged, priorities, programmes and targets must be set out after a careful evaluation of needs, constraints and potentialities.

CHOICE OF DEVELOPMENT STRATEGY

2.2 Development by its very nature is a long term process of structural adaptation, which in turn derives its significance from the basic objectives a nation sets for itself. The scope for structural changes is admittedly limited in the short run but it increases as one extends the time horizon for planning. In the absence of a proper long term perspective there is a danger that short term and even medium term plans and economic policies may be excessively preoccupied with pressing contemporary events, thereby relegating the task of structural reforms to the background. In the process, the available growth potential may not be fully realised. Because of discontinuities and long time lags between investment and the resulting increase in output, the needs for perspective planning in specific terms is particularly strong in the development of infrastructure like power, transport and communications, scientific research, technical education as well as in sectors like major irrigation, coal and steel where there are large gestation lags often extending beyond the period of any single five year plan. In particular, in the present situation, there is an imperative need to have a carefully worked out perspective plan for the energy sector. In all such cases, a perspective plan which takes into account important intersectoral linkages greatly facilitates the task of taking consistent, timely and efficient decisions regarding the allocation of scarce resources in the framework of medium-term five year plans. At the same time, it has to be recognised that the future is inherently uncertain and the events of recent years, particularly the growing uncertainty of supply and prices of imported oil, have rendered the task of long term economic forecasting all the more difficult. Therefore, while the use of perspective planning as a valuable guide in framing policies and programmes in the medium term is obvious, the perspective itself needs to be updated and reviewed periodically in the light of changing conditions.

2.3 The Sixth Plan has been formulated against the background of a perspective covering a period of 15 years from 1980-81 to 1994-95. This development perspective visualises accelerated progress towards the removal of poverty, generation of gainful employment and technological and economic self-reliance. The strategy to attain these goals has been chosen after considering a variety of feasible alternative development profiles with their attendant costs and benefits. Experience shows that a substantial acceleration in the overall rate of growth of our economy, as measured by the growth of gross domestic product in real terms, is an essential condition for the realisation of these objectives. However, there is also convincing evidence which points to the limited effectiveness of "trickle down" effect. Therefore, consistent with our overall social and economic Objectives, public policies will have to acquire a sharper redistribution focus in raising 'the share of the poorer sections in national income and consumption and in the utilisation of public services. Thus specific action programmes like the national rural employment programme and other anti-poverty schemes meant for selected target groups of population are essential components of a strategy designed to assist in the removal of unemployment and poverty.

In selecting the growth path we h,ave to consider the trade off between a faster growth in the medium term with the consequence that the growth might slow down later on and conversely, somewhat slower growth now, to permit faster growth later. Although at any given time, meaningful investment choices are limited by the fact that ongoing projects absorb a substantial proportion of available investible funds, there is always some choice at the margin in the sense that the mix of new projects can be altered in favour of quick maturing and directly productive projects. However, in so far as such a choice leads to less investment in long gestation infrastructure projects, the long term growth rate may be adversely affected even though the short term prospects may improve.

2.4 While exploring the merits of alternative development strategies with the help of a dynamic intertemporal input-output model, it has been observed that the public sector investment plays an important role in influencing the overall growth of the economy. This is also corroborated empirically by our analysis of the past given in Chapter 1. As the public sector invests a major part of its available resources in irrigation, basic industries and infrastructure development which have extensive forward and backward linkages, the growth of the rest of the economy gets closely linked to the growth of the public sector. Thus the exploration of alternative development scenarios boils down largely to a choice among alternative investment allocations in the public sector.

ALTERNATIVE DEVELOPMENT SCENARIOS

2.5 Several alternative development scenarios have been considered in order to see how best the objectives specified in the development perspctive can be realised. However, because of the constraint of domestic and foreign exchange resources and the range of possible technological choices, the number of alternatives has been narrowed. Among these were (a) the alternative of a growth rate of 6 per cent in the post-Sixth Plan period which could be achieved provided the Sixth Plan growth rate was kept down to 5 per cent per annum or even less and (b) a somewhat higher growth rate in the Sixth Plan and a slightly lower growth rate in the period beyond. It was found that given the initi.al capacity constraints, especially in sectors with relatively long gestation such as major irrigation, power, transport and steel, any growth r.ate during the Sixth Plan above 5.2 per cent or so would not 'be feasible; at the same time a growth rate of lower than 5.2 per cent or so would not even cover the basic mintmum time bound programmes for fulfilling the economic and social objectives in agricultural and rural sectors including generation of employment. Thus the choice converged to a growth rate of 5.2 per cent in the Sixth Plan period and 5.5 per cent on the subsequent ten year period. This choice is consistent with the results derived from projections of the long term demand pattern and implications of the goal of self-reliance. The possibility of raising the targetted growth rate to 6 per cent in the post Sixth Plan period will be explored depending on the progress of the economy and the international environment.

2.6 A large number of social and economic indicators have 'been used in selecting the development strategy for the Sixth Plan and the decade thereafter. Some of these indicators belong to conventional Bational income aggregates like gross domestic product (GDP), consumption, saving and investment, employment, per capita income and consumption. Others fall in the category of specific social welfare indicators like the number of people below the poverty line, per capita consumption basket, life expectancy etc. The principal indicators for the preferred alternative are shown in Table 2.1.

Table 2.1 Selected Economic and Social Indicators 1979-80 to 1894-95
(Values are in 1979-80 prices)

Sl.
No.

Item

1979-80 1984-85 1994-95
(0) (1) (2) (3) (4)

1

Gross Domestic Product [Rs. crores at 1979-80) prices 97051 125050
(5.2)
213600
(5.5)
2 Saving as percent of GDP at market prices . 21-24 24-48 27-52
3 Investment as percent of GDP at market prices .... 21'76 25-11 26-92
4 Population (millicr.s) 654-1 717-2
(1-86)
843-0
(1-63)
5 Per Capita GDP (Rs.) . 1484 1744
(3-28)
2534
(3-81)
6 Per capita monthly consumption (Rs.) 95-62 109-67
(2-79)
151-98
(3-32)
7 Percentage of people below poverty line 48-44 30-00 8-74
8 Employment (million standrad person years) . 151 185 248
9 Monthly per capita consumption of foodgrains (kgs.) 12-95 14-32
(2-03)
15-50
(0- 80)
10 Monthly per capita consumption of sugar(kgs.) 0-68 0-79
(3-00)
1-15
(3-82)
11 Monthly per capita consumption of clothing (metres) 0-85 0-92
(1-60)
1-41
(4-36)
12 Monthly per capita Generation of Electricity (Kwh) 14-27 22-19
(9-23)
39-05
(5-81)
13 Value added in Education per capita (Rs.) 20-32 24-72
(4-00)
36-60
(4-00)
14 Life expectancy (years) M 52-6
F 51-6
55-1
54-3
60-1
59-8

Note : Figures in brackets represent annual compound growth rates.

Treatment of Uncertainties

2.7 Planning for medium and long term has to reckon with certain inherent uncertainties. There are two principal sources of such uncertainty the weather and the international environment. Weather induced fluctuations in agricultural production and hydel generation can throw plan calculations out of gear. Fortunately, with the spread of irrigation and thermal power the impact of adverse weather conditions can be reduced. With regard to uncertainties in the international economic environment, several alternative scenarios were experimented with, on varying as-umptions about the terms of trade mainly to take account of prospective oil price increases. These calculations show .that even a small rise in oil prices vis-a-vis what has been assumed in the Plan will significantly reduce the growth of the economy below target levels; it will also adversely effect the level of consumption of the poor people. A rapid increase in the domestic production of oil and alternate energy sources and a reduction in the rate of growth of consumption of petroleum products are essential for safeguarding tne integrity of our development plans in the face of these uncertainties.

THE PERSPECTIVE

2.8 The different growth scenarios emerging from alternative strategies of development should be assessed in the light of the long-term socio-economic needs and aspirations of the country. In this respect, the long-term demographic profile exercises an important influence on the growth of demand for goods and services and for employment.

DEMOGRAPHIC PERSPECTIVE

Size of the population

2.9 The demographic profile for the perspective period is based on the population projections made by the Expert Committee under the Chairmanship of the Registrar General of India. These projections, along with their underlying assumptions are given in Table 2.2.

Table 2.2 Assumptions underlying Population Projections 1971-96

Period Population at
the end
of the
period (Million)

General Fertility Rate

Average expectation
of life at
birth(Years)
 
Decline compared
to the previous
quinquenium (%)
Absolute
Level
Male Female Birth
Rate
Death
Rate
Growth
Rate
(0) (1) (2) (3) (4) (5) (6) (7) (8)
1971-76 609 9 175 50.1 48.8 36.6 1-5.2 21.4
1976-81 672 12 154 52.6 51.6 32.9 13.2 19.7
1981-86 735 14 133 55.1 54.3 29.5 11.6 17.9
1986-91 799 12 117 57.6 57.1 27.0 10.4 16.6
1991-96 864 9 106 60.1 59.8 . 25.0 9.4 15.6

Notes: 1. The projection' relate to the n.id-year of the period, except otherwise stated.

2. The projections, for the period 1971-86 were made in 1978 and for 1986-96 in 1980. Based on the Census. of 1981, these projections are 'ikely to undergo revision.
3. General fertH'ty rate, birth .ate, death rate and growth rate are per thousand of population.

2.10 According to these projections, population will grow from 659 million in 1980 to 722 million in 1985, 786 million in 1990 and 864 million in 1996. The growth rate of population is expected to decelerate in 'successive auinquennia consequent to the declining birth rate. The annual average rate of growth in population has been projected at 1.79 per cent during 1981-86, 1.66 per cent during 1986-91 and 1.56 per cent during 1991-96.

Age Structure

2.11 A feature of the population With hi]ph growth rates in the initial periods is the relatively high proportion of younger people (below 15 years of age) in these periods. However, due to the expected decline in fertility and mortality, the age structure of the population is expected to have an increasing proportion of people above 15 years of age, as shown in Table 2.3.

Table 2.3 Age Structure of the Population 1980—96 (as on 1st March)
(Per cent of total population)

Age Group 1980 1985 1990 1996
(0) (1) (2) (3) (4)
04 ... 14-08 12-91 11-96 11-18
5-14 . 25-59 24-33 22-78 21-32
15-59 . 54-85 56-92 58-94 60-59
60 Plus 5-48 5-84 6-32 6-91
Total . 100-0 100-0 100-0 100-0

2.12 The progressive decline in the proportion of 0-14 age group from 39.67 per cent of the total population in 1980 to 32.50 per cent in 1996 is expected to bring down the dependency ratio* from 0.66 to 0.48 during the same period.

2.13 The rising trend in urbanisation witnessed in the last two decades is expected to continue over the perspective period. The urban population, which is estimated at 144 million in 1980, is expected to increase to 166 million in 1985 and 189 million in 1990 and 220.73 million in 1996 as shown in Table 2.4.

Table 2.4 Urban Population Projections 1980—96
(as on 1st March)

Sl. No. Year Population (Million) Urban population as percentage of total population
Urban Total
(0) (1) (2) (3) (4)
1 1980 . 143-81 659-39 21-81
2 1985 . 165-65 722-42 22-93
3 1990 ... 189-36 786-05 24-09
4 1996 . 220-73 869-00 25-40

The ratio of numbers in the age group 0-14 to the rest of the population.
••According to this concept, the activity status of a person (whether or not in labour force) is determined with reference
to the preceding 365 days : NSS 32nd Round (1977-78).

Labour Force

2.14 The projections of labour force (usual status)** by age, sex and place of residence upto 1995 are given in Table 2.6. These projections are based on the results of the 32nd round of the National Sample Survey on employment. It is estimated that about 251 million persons in the age-group above 15 years were in the labour force (usual status) out of the estimated total population of 659 million in 1980;the figure is expected to rise to 285 million in 1985 and 359 million in 1995. In other words, the labour force is expected to grow at the r,ate of 2.54 per cent per annum during 1980-85 and 2.33 per cent during 1985-95 as against the rate of growth of population of 1.79 per cent during 1981-86 and 1.63 per cent during 1986-96. The estimated addition of 108 million persons to the labour force over the period 1980-95 combined with the backlog of unemployment/underemployment would prove to be the most important challenge to our development strategy during the perspective period.

Population Policy

2.15 The Plan envisages the long term goal of reducing the Net Reproduction Rate to unity by 1995 for the country as a whole. This is possible only by reducing the birth rate to 21 per thousand of population, death rate to 9 and increasing the proportion of couples protected by family planning to about 60 per cent. In the light of the demographic profile presented earlier in this Chapter, it is expected that the proportion of women in the reproductive age group 15-44 to the total female population would show a continuous rise as shown in Table 2.5.

Table 2.5: Women in the Reproductive Age Group 1980-1996
(as on 1st March)
(Millions)

Year Total female population Women in the
ape group
15-44
Percen-age of reproductive
age group to total
(0) (1) (2) (3)
1980 . 318.22 142.38 44.74
1985 . 349.05 162.09 46.44
1990 . 380.20 182.34 47.96
1996 . 418.33 205.78 49.19

2.16 The implication of the above demographic profile is that the birth rate is likely to show rising trend even if the age-specific fertility rates remain static. This situation calls for an effective strategy for fertility control in order that the longterm goal of population stabilisation is realised. The family planning programme has to be reactivised by education and persuasion of people, avoiding any form of coercion. The small family norm has to be built into the social and cultural ethos of the people. A multi-pronged but integrated approach comprising education and employment, particularly of women, eradication of poverty, maternal and child care services including immunisation, prophylaxis and nutrition, building up of health care facilities in the rural areas with due attention to control of communicable diseases, promotive and preventive health, water supply and sanitation etc. is called for. Family Planning services and supplies have to be made available on an extended scale through the health infrastructure in the country and al; existing channels of communication including governmental extension machinery, voluntary organisations, youth organisations, women's organisations, village opinion leaders etc. will have to be fully mobilised for promoting the widespread acceptance of family planning methods.

2.17 A national consensus is essential on the importance of the family planning programme in the present context of the growing pressures on the basic life support systems and the country's economic well-being. Social pressures against early marriages and large sized families should be built up. Further research into simple, safe and cheap methods of contraception is also necessary. All the Plan projections of reduction of poverty and unemployment will go wrong if success is not achieved in containing the growth of population.

2.18 The details of the strategy and programmes are discussed in Chapter 22 on 'Health, Family Planning and Nutrition'.

GOALS REGARDING POVERTY AND UNEMPLOYMENT

2.19 Economic development during the last nearly three decades has led to a perceptible increase In the average per capita income which rose from Rs. 466 in 1950-51 to Rs. 730 in 1978-79 at 1970-71 prices. In spite of this, the incidence of poverty 'n the country is high. So far, it has not been possible to make a major dent on poverty on account of the inadequate rate of growth of the economy, uneven distribution of income and consumption as well .is high rate of growth of population. The reduction in poverty should, therefore, receive the highest priorit in our development strategy.

2.20 A detailed discussion of poverty, undei employment and the problem of employment genera tion is given in subsequent Chapters of this documen From a general study of the problem, it has bee observed that within the possible range of growt irates In gross domestic product for the Sixth Plan an the perspective period (1985—1995), a substantk reduction in poverty can be achieved only if there i a determined effort at a significant redistribution c income and consumption in favour of the poors sections of the population. It is, therefore, necessar that the growth strategy should aim at a significar redistribution of income and consumption, so th the percentage of population below the poverty lin reduces to 30 in 1984-85 and to less than 10 b 1994-95.

2.21 The labour force over the last decade ha risen significantly faster than the number of gainfull employed. Between 1979-80 and 1994-95, th additions to labour force would be nearly 108 millio of which 34 million would be during 1980—8 (Table 2.6 col. 7). This implies a labour force increas of about 2.4 per cent per annum which is much highe than the population growth rate. It also reflects th fact that the population stock is becoming younge with increased productive potential requiring th creation of new jobs at an increasing rate. Our analysis shows that within the feasible range of growt of between 5 and 5.5 per cent per annum in gro" domestic product, any s^ificant reduction ( unemployment and under-employment will require choice of appropriate composition of sectors an techniques which generate more employment withoi affecting adversely the growth in productivity; sine there are limits to securing additional employme' through this method, it will also 'be necessary to ado{ specific employment generation schemes. A careful] balanced growth scenario as projected in the Sixt Plan will result in a net increase in employmen measured in standard person years, which is signif cantly higher than the growth of labour force, i.e., I 3.4 per cent per annum as against a labour fore growth of about 2.4 per cent per annum.

Table 2.6: Labour Force Projections by age, sex and place of residence using NSS 33 Round
(usual status) participation rates for the years 1978, 1980, 1985, 1990 and 1995
(as on 1st March)
(Million)

Year

(0)

5+ 15+ 15—59
Males Females Total Males Females Total Males Females Total
(1) (2) (3) (4) (5) (6) 17) (8)) (9)
1978 Rural 142.78 63.80 206.58 133.97 58.01 191.98 124.33 55.88 180.2
Urban 39.44 9.38 48.82 38.45 8.76 47.21 36.86 8.45 45.3.1
Total 182.22 73.18 255.40 172.42 66.77 239.19 161.19 64.33 225.52
1980 . Rural 149.24 66.68 215.92 140.22 60.75 200.97 130.04 58.51 188.55
Urban 42.08 10.05 52.13 41.04 9.40 50.44 39.34 9.06 48.40
Total 191.32 76.73 268.05 181.26 70.15 251.41 169.38 67.57 236.95
1985 Rural 166.22 74.35 240.57 156.92 68.26 225.18 145.16 65.66 210.82
Urban 49.72 12.00 61.72 48.59 11.30 59.89 46.51 10.89 57.40
.215.94 86.35 302.29 205.51 79.56 285.07 191.67 76.55 268.22
199U . Rural 183.90 82.17 266.07 174.55 76.04 250.59 160.92 73.01 233.93
Urban 58.54 14.24 72.78 57.34 13,48 70.82 54.77 12.97 67.74
Total 242.44 96.41 338.85 231.89 89.52 321.41 215.69 85.98 301.67
1995 . Rural 201,60 89.94 291.54 192.25 83.84 276.09 176.49 80.27 256.76
Urban 68.30 16.66 84.96 67.03 15.86 82.89 63.87 15.21 79.08
Total 269.90 106.60 376.50 259.28 99.70 358.98 240.36 95.48 335.84

Table 2.7 Structure of Gross National Expenditure
(Percsntage of gross national expenditure)

Sl.No ftsm 1979-80 1984-85 1994-95
(0) (1) (2) (3) (4)
1 Consumption 79-0 75-6 72-6
(i) Public 10-7 11-5 12-9
(ii) Private 68-3 64-1 59-7
2 Capital fonmtion 21-5 25-0 26-8
3 Net exports of goods and services olus net factor incoi'ne recciots from abroad (—)0-5 (--)0-6 0-6
4 Gross National Expenditure 100-0 100-0 100-0

MACRO-ECONOMIC FRAMEWORK

Structure of Demand

2.22 The development strategy envisaged in the Sixth Pian calls for a change in the existing structure of demand in favour of investment and social consumption. This necessarily involves a corresponding decline in the share of aggregate private consumption. The envisaged changes in the stru^ure of demand are given in Table 2.7. Detailed estimates of sectoral disposable income, consumption and saving for 1979-80, 1984-85 and 1994-95 are presented in Annexure 2.1, 2.2 and 2.3 respectively.

Saving and Investment

2.23 The rate of capital formation has been projected to increase from 21.5 per cent of GNP estimated for 1979-80 to 25.0 per cent in 1984-85 and 26.8 per cent in 1994-95. With the rate of investment stabilising at around 27 per cent beyond 1984-85, the economy is expected to have a solid base for a sustained growth of the order of 5.5 per cent per annum in GDP over the subsequent 10 years. The economy is also expected to achieve a modest surplus in balance of payments by 1994-95.

2.24 Expansion of social services is one of the effective ways to achieve a significant improvement in the standard of livir.c of the poorer sections of the population. For this purpose, public consumption has been projected to increase from 10.7 per cent ol GNP in 1979-80 to 11.5 per cent i.n 1984-85 and 12.9 per cent 'by 1994-95. At the same time, efforts would be intensified to improve the efficiency and quality of social services and evolve more effective delivery systems so 'that maximum benefit accrues to the 'poorer people from public expenditure on these services.

2.25 The rise in the share of domestic capital formation as well as that of public consumption, together with the projected improvement in export earnings, implies a decline in the share of private consumption in gross national expenditure. In spite of this decline in the share, private consumption expenditure is expected to grow at an annual average rate of nearly 4.7 per cent during the period 1980—85 and 5.0 per cent during the perspective period 1985—95. The projected overall growth in private consumption is consistent with a faster rate of growth in the private consumption of the poorest section of the population as shown in Table 2.3.

Table 2.8 Improvement in the share of the bottom 30 per cent of the population in Total
Private Coiisiniiptioa Expenditure

Sl. Item Unit 1979-80 1984-85 1994-95
(0) (1) (2) (3) (4) (5)
1 Total private consumption expenditure Rs. crores at 1979-80 prices 75053 94386 153745
2 Share of bottom 30 per cent of the population percent 13-7 16-7 17-3
3 Mid-year population Million 654-1 717-2 843-0
4 Per capita annuai consumption expenditure Rupees at 1979-80 plices
(i) Aggregate 1147 1316 1824
(ii) Bottom 30 percent 523 734 1051
5 Annual average growth in per capita consumption expenditure percent
i) Aggregate 2-79 3-32
(ii) Bottom 30 percent 7-01 3-66

2.26 The increase in the rate of capital formation signifies a restraint on consumption expenditure in order to augment domestic saving. The rate of saving has been projected to increase from 21 per cent of GNP in 1979-80 to around 24.4 per cent in 1984-85 and 27.4 per cent in 1994-95. The projected growth in domestic saving is to be achieved through a rise in the ratio of saving to disposable income of both public and private sectors.

2.27 The saving strategy for the perspective period envisages a rising rate in public saving corresponding to a rising share in the disposable Income of the public sector. The policy of stepping '.ip the rate of public saving would help in channelling resources into higher priority investment. This would also enable the public sector to improve its share in total domestic saving. Taking the economy ,as a whole, the projected rise in the rate of saving indicates a marginal rate of saving of the order of 33.7 per cent during the period 1980—85 and around 31.6 per cent over the perspective period (1985'-—95).

Structure of Output

2.28 The change in the structure of output envisag ed for the perspective period derives its rational! from the contemplated changes in the structure o demand discussed earlier. In fact, the pattern o output has to move in step with the structure o demand Gn order to avoid imbalances in the perspec live period.

2.29 Detailed exercises have been carried out to delineating the output structure for the perspectiv period under assumptions of alternative growl scenarios and also taking into account the emergin and contemplated technological changes. The result of these exercises have helped develop an internall consistent sectoral pattern of output reflecting th priorities for the perspective period and corresponc ing to a rate of arowth of 5.2 per cent in the Sixt Plan period and 5.5 per cent over the perspectiv period (1985—95). The projected sectoral rates c growth of gross value of output and gross value addei for the periods 1980—85 and 1985—95 by broa groups of sectors are presented in Table 2.9.

Table 2.9 Projected Sectoral Annual Rates of Growth in Terms of Gross Value of
Output and Gross Value Added at Factor Cost: 1979-80 to 1994-95
(Per cent per annum compound)

Sl.

No

Sector Value of Output Value Added
1984-85 1994-95 1984-85 1994-95
1979-80 1984-85 1979-80 1984-85
;0) (1) (2) (3) (4) (5)
1 Agriculture 5-20* 3-75 3-83 3-32
2 Mining and Manufacturing 7-76 6-62 6-90 6-56
(i) Mining 11-50 6-49 11-25 6-45
(ii) Manufacturing 7-62 6-62 6-50 6-57
3 Electricity, Gas and Water Supply 11-25 7-06 7-15 7-00
4 Construction 7-10 7-05 5-10 7-00
5 Transport 6-70 6-41 5-46 6-38
6 Services 6-00 6-28 5-44 6-25
Total : 5-20 5-50

* However, the effective growth rate is about 4% per annum, if the performance during the unusual drought year of 1979-80 is adjusted io its trend value.

2.30. The varying rates of growth in different sectors reflect the changes in the rates of growth of total final and intermediate demand for the output of different sectors which are themselves influenced by factors like degree of import dependence, relative changes in the composition of final demand, interindustry relationships, etc. The rates of growth projected for the different sectors are also expected to bring about a structural change in the economy as reflected in the composition of gross domestic product at factor cost over the perspective period. The projected structural changes are presented in Table 2.10. As is evident, the share of infrastructure and social services is projected to rise from 45.28 per cent in 1979-80 to 45.88 per cent in 1984-85 and 49.84 per cent in 1994-95. These structural changes are not only in tune with what one would expect in the course of the development process, but also in line with the experience of many industrialised nations.

Table 2.10 Sectoral Composition of Gross Value Added at Factor Cost: 1979-80,
1984-85 and 1994.95
(Per cent)

Sl. N0.
(0)
Sector 1979-80 1984-85 1994-95
(1) (2) (3) (4)
1 Agriculture 35-13 32-90 26-71
2 Mining and Manufacturing 19-59 21-22 23-45
(a) Mining . 1-52 2-01 2-20
(b) Manufacturing . 18-07 19-21 21-25
3 Electricity, Gas and water supply 1-71 1-88 2-16
4 Construction . 5-07 5-05 5-81
5 Transport . . 4-89 4-95 5-38
6 Services 33-61 34-00 36-49
Total : 100-00 100-00 100-00

LONG TERM SECTORAL PROFILES AND POLICIES

2.31 The inter-temporal growth profile of the sectors presented in Table 2.11 is also influenced by the expected/desired behaviour of certain macro-variables.

(i) The rate of growth of investment of 9.3 per cent per annum which is considered feasible on the basis of savings/foreign borrowings capabilities of the economy in the Sixth Plan is expected to stabilise at around 6.5 psr cent during the perspective period (1985—95). Therefore, the commodities whose demand is largely influenced by investment related activities in the
economy exhibit a flattening of the growth rate in the inter-temporal growth profile.

(ii) Similarly, the long term strategy should aim at a sustained growth of exports over a longer time horizon to build in the desired safety margin in the long term balance of payments position of the economy. Therefore, exports are projected to grow at 9 per cent during the Sixth Plan and 7 per cent during the next ten years (1985—95).

(iii) The growth rate of population is projected to decline to 1.56 per cent per annum during 1991—96 as against 1.79 per cent during 1981—86. Thus, in the case of private consumption goods, with a relatively stable output growth rate, per capita consumption wouici be increased.

Table 2.11 Projections of Output of Principal Commodities and Services: 1984-85 and 1994-95

Sl. No. Commodity Unit 1979-80 1984-85 1994-95
(0) (1) (2) (3) (4) (5)
1 Foodgrains Mill. tonnes 109 149 to 154 205
2 Sugarcane Mill. tonnes 128 200 to215 300
3 Jute and Mesta Lakh bales (180 Kgs. each) 80.3 91 125
4 Cotton Lakh bales (170 Kgs. each) 77 92 135
5 Oil seeds (5 major) Lakh tonnes 81 110 165 to 170
6 Coal Mill. tonnes 103.96 165 325
7 Lignite Mill. tonnes 3.12 8 20
8 Iron ore and Concentrates Mill. tonnes 39 60 82
9 Cloth Mill. metres 10435 13030 21200
10 Paper and Paper Board Thou. tonnes 1050 1500 3000
11 L.D. Polyethylene Thou. tonnes 71.3 100 425
12 H.D. Polyethylene Thou. tonnes 25.4 27 175
13 Polypropylene Thou. tonnes 13.4 27 90
14 PVC Thou. tonnes 49.9 128 450
15 Nitrogenous Fertilizers (N) Thou. tonnes 2226 4200 9700
16 Phosphatio Fertilizers (P0) Thou. tonnes 757 1400 3600
17 Cement MiU. tonnes 17.68 34 to 34.5 65
18 Saleable Steel (Plain Carbon) . Mill. tonnes 7.38 11.51 20.8
19 Aluminium Thou. tonnes 192 300 700
20 Copper-Refined Thou. tonnes 18.8 45 75
21 Zinc Thou. tonnes 52.65 85 160
22 Lead Thou. tonnes 11.4 25 50
23 Electricity Generation Bill. Kwh. 112 191 395
24 Railways—Originating Traffic Mill. tonnes 217.8 309 560

Agriculture

2.32 The gross cropped area in agriculture is csuma'-ed to have increased from 165.8 million hectares in 1970-71 to 168 million hectares in 1979-80. It is anticipated that tlie gross cropped area will in' crease lo 179.7 million hectares by IS'84-85 and 1^8 million hectares by ly 94-95.

2.33 The scope for bringing additional area under cultivation is very limited. However, it is possible to increase gross cropped area through multiple cropping, tor which the extension of irrigation facilities and adequate energy supply are major prerequisites. The gross irrigated area has increased from 38.19 million Hectares m 1970-71 to 50 million hectares in 1979-80 according to land utilisation statistics. It is estimated that an ultimate irrigation potential of the order of 113 million hectares could be created by the year 2000 A.D., of which 58 million hectares would be through major and medium irrigation sources and 55 million hectares through minor irrigation sources, including 40 million hectares from ground water sources. This implies that a long term average growth rate of about 4.2 per cent per annum in gross irrigated area is necessary to exploit the estimated irrigation potential by ihe turn of the century. In the light 01 this scenario, tile Sixtii Plan envisages that the gross irrigaied area would increase to 64 million hectares in 1984-85. It is further expected to increase to 97.3 million hectares by 1994-95. In other words nearly 51.76 per cent of the gross cropped area is likely to be irngaled by 1994-95 as against 29.76 per cent estimated for 1979-80. The attainment of the above irrigation potential through conjunctive use of ground and surface water is thus crucial to sustained long-term growth in agriculture. In this context, it is essential to find an early solution to inter-State river disputes which are hampering work on long gestation irrigation projects.

2.34 In making the long term agricultural output projections (Taole 2.11) it has been assumed that the existing ratio of area under foodgrains to gross cropped area of 75 per cent would get slightly reduced in order to permit the expansion of the area under commercial crops. Further, it has also been assumed that a significant portion of the incremental gross irrigated area would be devoted to pulses, oilseeds and other crops currently in short supply.

2.35 The output growth rate of foodgrains, sugar-cane and oilseeds in the perspective period (1985—95) would be higher than the 1980—85 growth rate based on the trend estimates of 1979-80. For example, in the case of foodgrains, while the 1980—85 growth rate oased on 1979-80 actuals is 6.5 per cent per annum, the trend estimate for 1979-80 indicates a growth rate of 3.1 per cent, which rises to 3.2 per cent during the perspective period (1985—95). The growth rate of raw cotton output will rise from 3.6 per cent during 1980—a5 to 4.0 per cent during 1985—95. In view of the substitution of jute goods by synthetic packaging in overseas markets and consistent with the prospects of exports of jute goods, the growth oi production of jute and mesta is estimated at 3 per sent per annum during 1980—95.

Other Sectors

2.36 The off-take of fertilizers in 1979-80 was low because of the drought and therefore, a high growtii rate in fertilizer consumption (12.8 per ceni per annum) is targetted during the Sixth Plan. Grcwtti m demand over trie perspective period (1985—95) is linked wilh the expansion of irrigated area, which it targeited to grow at 4.3 per cent during 1985—95 as agamsi 5.1 per cent during 1980—85. Nitrogenous fertilizers output will rise from 4.2 million lonnes in 1984-85 to 9.7 million tonnes in 1994-95, and that of phosphatic fertilizers from 1.4 million lonnes to 3.6 million tonnes. However, the demand for potassic leniiizers will be met through imports.

2.37 The growth rate in domestic demand foi cloth is expected to rise from 4.3 per cent during 1980—85 to 5.0 per cent during 1985—95. This reflects the projected improvement in income distribution in the society. The growth rate of consumption Oi paper and paper board will be maintained ai around 7 per cent during the Sixth Plan and the perspective period (1985—95).

2.38 Consistent with the rate of growth of capi-iai formation over the perspective period (1985—95), the growth in consumption of steel and cemeni durmg the perspective period (1985—95) will be about 6.3 per cent. Growth in output of non-ferrous metals will be 7.4 per cent per annum during 1985— 95 as against 10.8 per cent during 1980—85. The higher growth rate in the Sixth Plan is also due to the fact that the output of aluminium and copper had declined by 10.2 and 18.1 per cent, respectively, ir 1979-80.

2.39 A high growth in consumption (10 to 25 pel cent) is projected for the Sixth Plan in respect of the plastics group of commodities (PVC, Polyethylene, Polypropylene etc.); this is mainly due to the substitution by these materials of conventional materials like wood, leather and metals. Over the perspective period (1985—95), the growth in consumption of the plastics group of commodities is expected to stabilise at 10 to 12 per cent. This is also consistent with the strategy of restraining the demand for petroleum products.

2.40 Given the past erratic behaviour of iron ore exports, and also due to slow growth of world Steel output it will not be prudent to take credit for ever-increasing iron ore exports in determining the long-ierm balance of payments profile of the economy. Since exports account for about 60 per cent of domestic iron ore production, these considerations are reflected in the relatively lower output growth rate over the perspective period.

2.41 In the p;ist thiee decides of planned develop-inent in India, tile elasticity of commercial energy consumption to GDP has been around 1.8, which is very high in comparison to the developed countries. The sectoral growth profile for the perspective period (1985-95) outlined in earlier sections of this chap:er seeks to arrest further acceleration in the growth rate of consumption of commercial energy in the economy. Growth rate of all principal forms of commercial energy is projected to decline considerably in the perspective period as shown in Table 2.12.

Table 2.12 Growth in Consumption of Commercial Energy : 1980—85 and 1985—95
(Per cent per annum compound)

Form of Energy Growth in Consumption
1984-85 1994-95
1979-80 1984-85
(0) (1) (2)
Petroleum products 9-1 5-8
Coal 9-8 7-0
Electricity 11-3 7-5

2.42 Consistent with the growth in consuming sectors (steel, power, cement, etc.) and also to fulfil the need for increasing the share of indigenous energy in total energy consumption, the output of coal will have to be raised from 165 million tonnes in 1984-85 to 325 million tonnes in 1994-95. This would be supplemented further by raising lignite production from 8 million tonnes to 20 million tonnes during the perspective period (1985—95).

2.43 While the policy of substituting other fuels for petroleum as a source of energy in transport and other sectors will be pursued, a large scale shift away from the petroleum based energy and the use of petroleum products in non-energy applications (such as fertilizers, petro-chemicals, etc.) does not appear to be feasible in the perspective period. However, in the perspective period (1985—95), the growth in demand for petroleum products will have to be brought down substantially below 9 per cent per annum estimated for the Sixth Plan period. Indeed, in the light of newly emerging trends, it will be prudent to restrict the growth of petroleum products to a lower rate even in the Sixth Plan. Effective measures will need to be adopted in this direction.

2.44 Electricity generation will need to be raised from 191 billion units in 1984-85 to 395 billion units in 1994-95 to meet the energy requirements for the projected levels of industrial production and the requirements of the other sectors. The projection provides for an increase in the share ut electri-cily in rail transport to restrict the growth in consumption of petroleum products. As against the overall GDP growth rate of 5.5 per cent, electricity generation would grow at around 7.5 per cent per annum during the perspective period (1985—95). In view of the higher cap-ital intensity of electricity, it is necessary to adopt effective measures to curb the rate of growth on consumption and in particular to prevent its wasteful use.

2.45 Considering the energy efficiency in long distance rail transportation of bulk commodities, vis-a-vis, road transport, and also the technological possibilities of utilising domestic energy in this mode of transport, the share of Railways in overall transport will be increased during the perspective period. Railway goods carrying capacity will need to be augmented to 560 million tonnes by 1994-95.

NON-RENEWABLE RESOURCES

2.46 The estima^s of recoverable reserves for major minerals are tabulated in Table 2.13. The likely depletion by 1994-95 at contemplated rates of exploitation is also shown. The balance life of the reserves remaining at the end of the period, assuming 1994-95 consumption levels, would be less than 100 years in the case of seven minerals viz. ores of copper, zinc and lead; manganese ore, chromite, prime coking coal and crude oil. The position in regard to crude oi.1 is very critical. Therefore, two-pronged action, viz., intensification of exploration for oil for establishing additional reserves and measures to curb consumption of petroleum products through their substitution by alternate fuels is called for to meet the situation.

2.47 With the right approach and strategy of mineral exploration by judicious, application of human material and financial resources at our command, the-known mineral base can be made to expand. The known reserve of the various minerals is restricted mainly to exposed deposits at limited depths in mineral belts and areas that had a long tradition of mining and smelting in the ancient and medieval times and which have been mapped on 1 : 10,000 or larger scales. Further, deposits hidden from view and at depths, particularly in virgin areas, are likely to be discovered. Detailed mineral surveys and prospecting efforts would, therefore, have to be intensified by employing modern exploration and drilling techniques to expand the known mineral base in the perspective period. Improved mining techniques and development of technology to utilise low grade ores and fines in respect of several minerals will enable substantial additions to known reserves. A rise in mineral prices will enable the exploitation of certain deposes which were considered uneconomical at one time and this process also will improve the reserves position New mineral resources could be found with the application of modern technology in the Hima-lavan and off-shore regions, under the alluvial plains of the North and Coastal areas and the great mass of Deccan trap volcanic effusive rocks covering large chunks of the Peninsular shield.

2.48 The growth rate in consumption of less abundant minerals, in the meanwhile, would need to be regulated commensurate with the known reserves at any point of time. At the same time, the processes of extraction and beneficiation will have to be made progressively more efficient. And whenever foreign exchange availability, relative prices and the foreign supply position permit, relatively larger import and a lower rate of depletion would be preferred. Research and development efforts wi'll have to be made to reduce the norms of consumption of materials, recycling of scrap and waste by developing better and more efficient technologies and materials management. Development of substitute materials derived from renewable resources, wherever possible, would be encouraged.

Table 2.13 Balance life of known Mineral Reserves at 1994-95 Consumption levels implicit
in Long Term Production, Export and import Projections

Sl. N0. Mineral Estimated recoverable reserve in 1979 Depletion 1979-95 Balance life after 1994-95
(0) (1) (2) (3) (4)
(Million tonnes) (Years)
1 Non-coking coal 37,000 2,640 126
2 Prime Coking Coal 2,700 330 74
3 Iron ore-Haematite 9,300 936 111
4 Bauxite 1,900 62 245
5 Limestone 53,000 1,020 519
6 Manganese ore 75 34 14
7 Chromite 24 6-5 29
8 Copper 3-20 0-77 32
9 Zinc 6-00 1-22 38
10 Lead 2-25 0-42 37
11 Crude Oil 361 336 1

Notes: (i) Recoverable reserves have been broadly estimated on the basis of prevailing ratios to in situ reserves.
(ii) For coal, seams of thickness of 1-2 metres and above and at depth upto 600 metres have been considered.
(iii) In the case of copper, lead and zinc, the figures are in terms of recoverable metal from ores.
(iv) Recoverable reserves for crude oil are as on 1-1-1980.
(v) Balance life is at 1994-95 depiction rates.

Annexure 8.1 Macro-Economic Estimates of Disposable Income, Consumption and Saving: 1979
(Rs. crores at current prices)

Sl.No. Source/Destination Gross Domestic Product

Income from

abroad

Gross National Product Domestic Economy
Public Sector Private Sector including households
(0) (1) (2) (3) (4) (5) (6)
1 At factor cost accruing to the sector 97051 (-)201 96850 4089 92761
2 Indirect taxes less subsidies 11495 11495 11495
3 At market prices 108546 (-)201 108345 15584 92761
4 Inter-sectoral Transfers 1520 1520 188 1332
(i) Direct Taxes (+)3242 C—)3242
(ii) Misc. Govt. Receipts

(iii) Interest on Public Debt

(+)295 C—)1028 (-)295 (+)1028
(iv) Current transfers from Govt. to Private Sector . (-)2321 (+)2321
(v) Other Current transfers from rest of the world 1520 1520 (+)1520
5 Disposable Income 109865 15772 94093
6 Consumption* 86810 11757 75053
7 Saving 23055 4015 19040
8 Net exports of goods and services (-)1882
9 Net capital inflow (-)563 563
10 Investment 23618

* The figures differ slightly from the "Quick Estimates" of the Central Statistical Organisation due to diflerence in methodology relating to the treatment of "statistical discrepancy."

Annexure 2.2 Macro-Economic Estimates of Disposable Income, Consumption and Saving: 1984-85
(Rs. crores at 1979-80 prices)

Sl. No. Source/Destination Gross Domestic Product Income from aboard Gross National Product Domestic Economy
Public Sector Private Sector including households
(0) (1) (2) (3) (4) (5) (6)
1 At factor cost accruing to the sector 125050 (-)248 124802 7610 117192
2 Indirect taxes less subsidies 21490 21490 21490
3 At market prices 146540 (-)248 146292 29100 117192
4 Inter-sectoral transfers . 843 843 (-)3311 (+)4154
(i) Direct Taxes (+)4209 ()4209
(ii) Misc. Govt. Receipts (+)330 (-)330
(iii) Interest on Public Debt (—)2850 (+)2850
(iv) Current transfers from Govt. to private sector (—)5000 (+)5000
(v) Other current transfers from rest of the world 843 843 (+)843
5 Disposable Income 147135 25789 121346
6 Consumption 111265 16879 94386
7 Saving 35870 8910 26960
8 Net exports of goods and services (-)1522
9 Net capital inflow (-)927 927
10 Investment 36797

Annexure 2.3 Macro-Economic Estimates of Disposable Income, Consumption and Saving: 1994-95
(Rs. crores at 1979-80 prices)

Sl. No. Source/Destination Gross Domestic Product Income from abroad Gross National Product Domestic Economy
Public Sector Private Sector including households
(0) (1) (2) (3) (4) (5) (6)
1 At factor cost accruing to the sector 213600 (-)495 213105 13850 199255
2 Indirect taxes less subsidies 42720 42720 42720
3 At market prices 256320 (-)495 255825 56570 199255
4 Inter-sectoral transfers 1650 1650 (—)6430 (+)8080
(i) Direct taxes (+)7665 (—)7665
(ii) Misc. Govt. Receipts (+)505 (-)505
(iii) Interest on Public Debt (—)6600 (+)6600
(iv) Current transfers from Oovt. to private sector (—)8000 (+)800C
(v) Other current transfers from rest of the world 1650 1650 (+)165C
5 Disposable Income 257475 50140 20733;
6 Consumption 186945 33200 153745
7 Saving 70530 16940 53590
8 Net exports of goods and services 385
9 Net capital inflow 1540 (—)1540
10 Investment 68990
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