1991-92 : A REVIEW

Annual Report 1991-1992

The year 1991-92 witnessed momentous changes in India and the world. In India, the year began with an economic crisis of unprecedented dimensions and also marked the beginning of a new era in planning. After the General Elections, with a new Government taking over the reins of power in the Centre, a new Planning Commission took office. In tune with the sweeping changes and developments that took place in many parts of the world, the new government announced a number of bold and radical policy changes with a view to revitalising the sagging economy. In the process, it was decided that trade and industry would be increasingly freed from government control and that planning in India should become more and more indicative and supportive in nature.

1.2 The performance of the Indian economy during the Seventh Five Year Plan was excellent. Nevertheless, the Eighth Five Year Plan (1990—95) could not take off due to the fast changing political developments at the Centre. The new government, however, did not lose time in deciding that the Eighth Plan will commence on April 1, 1992 and 1990-91 and 1991-92 were to be treated as separate Annual Plans. During the year under review. Gross Domestic Product (GDP) was expected to rise by only about 2.5 per cent. Compared to the previous year, the South-West Monsoon was not quite active during the first Iwo months of the season and, as such, the target of foodgrains production of 182.5 million tonnes may not be attained. Generation of electricity during April-December, 1991 was 9% higher than in the corresponding period of the previous year and coal production was 10.9% higher. Crude oil production, however, declined by 7.1% and refinery throughput by 2.1%. Revenue earning goods traffic of the Railways continued to maintain an upward trend. However, the performance of the industrial sector was not encouraging. The index of industrial production in April-June, 1991 was 2.3% lower than that in the corresponding quarter of the previous year. Although, there was a growth of 0.5% in the next quarter (July to September 1991), the decline in the next two months (October-November, 1991) was by 1%. 'On the whole, between April and November 1991, the index. of industrial production showed a decline of 0.9%.

1.3 Mounting fiscal deficits, the ever-increasing non-plan expenditure, loss-making public sector undertakings, and the worsening current account deficits continued to be areas of serious concern and have put a severe strain on the country's-economic fabric. The balance of payments position especially worsened to such an extent that, in addition to long term corrective policy measures, emergency action had to be taken to prevent a default in payments. Being the threshhold year for the launching of the Eighth Five Year Plan (1992—97), the spillover problems were likely to have adverse repercussions on the implementation of the Plan at least in the initial years.

1.4 The primary task of the Planning Commission during the year under review was to reformulate the Eighth Five Year Plan so that it accords with the policies, programmes and priorities of the new government taking also into account the shift in the plan period. It also got the 1991-92 Annual Plan document ready, and finalised the 1992-93 Annual Plan allocations for the Central Ministries and the States.

1.5 In connection with finalisation of proposals for the Eighth Five Year Plan (1992—97), the Deputy Chairman held a series of consultations with Members of Parliament including Leaders of the Opposition and others from October, 1991 onwards on policy measures having a direct bearing on the priorities and processes of planning. These consultations were also meant to be a means of knowing the people's representatives' perception of the priorities and developmental needs of various parts of the country. Considering the far-reaching changes that the Government had already initiated and the formidable tasks lying ahead,. these consultations assumed a very special significance.

1.6 The Eighth Plan's Directional Paper entitled "Objectives, Thrusts and Macro-Dimensions of the Eighth Plan" was approved by the National Development Council in its 43rd meeting in December, 1991. At the very outset, pointing out to the wave of economic reforms that has been sweeping the developing world and the hitherto . centrally, planned . economies,, the Paper noted that this has important implications for India too in the 90's. Therefore, it stated that the Planning Commission would now work on building a long-term strategic^ vision of the-future. The concentration would be on anticipating future trends and evolving integrated strategies for achieving the highest possible level of development of the country in keeping with the competitive international standards. Planning will largely be indicative now and it is contemplated to withdraw the public sector from areas where no public purpose is served by its presence. The new approach to development will be based on "a re-examination and re-orientation of the role of the government, harnessing the latent energies of the people through people's involvement in the process of nation-building, creating an environment which encourages and builds up people's initiatives rather than their dependence on the government and which sets free the forces of growth and modernisation. The state has to play more of a facilitating role and to concentrate on protecting the interests of the poor and the under-privileged". Keeping these things in view, the objectives which the Eighth Plan seeks to give priority are adequate employment generation, containment of population growth, universalisation of elementary education, eradication of illiteracy, provision of safe drinking water and primary health facilities, self-sufficiency in food, generation of agricultural surpluses for export and strengthening of infrastructure.


43rd meeting of the National Development Council (December 23-24, 1991)
Seated from left to right are Shri Pranab Mukherjee, Deputy Chairman, Planning Commission, Shri P.V. Narasimha Rao, Prime Minister and Chairman of the N.D.C.. Dr. Manmohan Singh, Finance Minister and Shri Sharad Pawar, Defence Minister.

1.7 The Directional Paper projected an average annual growth rate of 5.6 per cent of GDP. This would be realised by achieving an average saving rate of 21.6 per cent of GDP during the Plan, an inflow of capital from abroad to the extent of 1.4 per cent of GDP, and a 13.6 per cent growth in exports.

1.8 In consonance with democratic conventions, consequent upon the formation of a new Congress (I) Government at the Centre, the Planning Commission was reconstituted on 25th June, 1991 when a new Deputy Chairman took over; the composition of the reconstituted Commission was, however, notified on 17th August 1991. The new Members with their varied achievements, expertise and experience have taken over the task of giving a new shape to the process of planning. After its reconstitution, the Commission met on 19-9-1991 under the Chairmanship of the Prime Minister who is ex-officio Chairman of the Commission. The meeting considered the Eighth Plan's Directional Paper, the Future of Centrally Sponsored Schemes, and the formula for distribution of Central Assistance among States. The Commission set up a three-member Committee headed by the Deputy Chairman, Planning Commission to go into all aspects of distribution of Central assistance among States. The Committee came up with a new formula which was later on unanimously endorsed by the NDC in its 43rd meeting held in December 1991. The new formula will govern distribution of Central Assistance to States during the Eighth Plan period.

1.9 Official level discussions of the plan proposals of the Central Ministries/Departments for the Eighth Five Year Plan (1992—97), alongwith the proposals for the Annual Plan, 1992-93 were held during the months, November, 1991 to January, 1992. Similarly, official level discussions with the State Governments on their resources and programmes were also held.

1.10 Based on the official level discussion with Central Ministries, and the discussions with the States Chief Ministers, the Planning Commission finalised the allocations for the Annual Plan 1992-93—Centre and the Annual Plan for the States and Union Territories for 1992-93.


Each Five Year Plan has a set of goals, targets and objectives. They show where a country wants to reach and what it wants to achieve within a given timeframe. To realise these goals and targets, basic national policies are formulated and strategies devised taking into account past experiences in the execution of earlier Plans. However, change being the essence of human progress, these blueprints for development need to be adaptable to take care of changing situations and emerging exigencies and the resultant need to re-order priorities. The much needed flexibility in the implementation of Five Year Plans is, therefore, provided for through the mechanism of Annual Plans which are prepared each year within the broad framework of the Five Year Plans incorporating such directional changes as are warranted for each year. The Annual Plans while settling out the details of the programmes to be implemented during each year also provide the basis for budgetary allocation for the Plan for that year.

Annual Plans

3.2 Annual Plan formulation affords the Planning Commission an opportunity to assess the previous year's Plan performance and to suggest a reorientation of policies and modification of strategies in keeping with the changing requirements without losing sight of the long-term growth targets. In the third quarter of each financial year, the Planning Commission indicates to the State Governments and the Central Ministries the more important short term objectives that should be kept in view while formulating the Annual Plan for the following year. The States and the Central Ministries are requested to furnish their Plap proposals including physical targets and the corresponding financial outlays required, conforming to the guidelines referred to above and the overall framework of their respective Five Year Plans. The State Governments are advised to furnish, in addition, their estimates of financial resources including the proposals for mobilising additional resources for their Annual Plans, keeping in view the resource and outlay targets fixed for the Five Year Plan.

3.3 The Annual Plan proposals and resources estimates submitted by the State Governments are discussed in detail during November-December in the Planning Commission. Similarly, indepth discussions are held with tlie representatives of the Central Ministries/Departments regarding their Annual Plan pfo-posals. The Planning Commission also reviews the progress of the Plan each year in both financial a/id physical terms on the basis of. information obtained from the Central Ministries and State Governments.

3.4 The plan outlays arrived at in the meetings between the Deputy Chairman and the State Chief Ministers/Lt. Gover/iors in respect of State Plans and at meetings taken by Secretary, Planning Commission with the Secretaries of Central Ministries/ Departiiieius regarding the Central Plan as approved by the Commission, become tlie basis for budgetary provisi.p,n for the Plan for tlie ensuing year.

Review of Annual Plan 1990-91

3.5 The year 1990-91 was the third year in a row when the monsoons were favourable. As a result, foodgrains production was around 176 million tonnes registering an increase of about 6 million tonnes over that in the previous year. Similar increases in production of sugarcane, oil seeds, iute and mesta were registered.

3.6 There was a slight decline in the rate of industrial growth during 1990-91 as compared to 1989-90. The index number of industrial production showed a growth rate of 8.6 and 8.5 per cent during 1989-90 and 1990-91 respectively.

3.7 Coal production during 1990-91 increased by 11 million tonnes to 212 million tonnes. At 264.6 billion kwh., the generation of electricity also exceeded that in the previous year by about 7.8 per cent. Crude oil production, however, went down marginally from 34.09 million tonnes in 1989-90 to 33.02 million tonnes in 1990-91. In terms of revenue earning goods traffic. the Railways recorded a growth rate of 2.1 per cent in 1990-91 over that in 1989-90.

3.8 The [ndian Economy has performed rather well during 1990-91 despite the Gulf crisis; GDP (new series as 1990-91 prices) rose by about 5.6 per cent. However, inflation rate (as measured by the consumer price index of industrial workers) was higher tby 13.6% with food index rising by as much as 16.3%.

3.9 The Plan outlav and the revised estimates for the Annual Plan, 1990-91 are given below :



Annual Plan, 1990-91

Plan Outlay Revised Estimates
l. Centre 39329.26 38052.33
2. States and UTs 25387.54 23465.77
  Total 64716.80 61518.10

In addition, an amount of Rs. 5 crores was released to States and LTs as advance Plan assistance for natural calamities. The details of progress of expenditure during the Seventh Five Year Plan, and the Annual Plan 1990-91, yearwise along with the original outlays is given at Annexure 3.1 through 3.4 (a).

Annual Plan 1991-92

3.10 The Annual Plan, 1991-92 envisaged a total public sector plan outlay of Rs. 72316.75 crores. This was 11.4% more than in the preceding Annual Plan. Out of this total outlay, Rs. 42968.75 crores was in the Central Sector and Rs. 29548.00 crores in the States and Union Territories sector.

3.11 Formulated in the context of the now terminated Eighth Five Year Plan (1990-95), the basic thrusts of the Annual Plan, 1991-92 were on maximisation of employment and social transformation. Greater emphasis was also laid on decentralisation of decision-making and on involvement of local communities in the planning and the execution of development programmes. The Programmes benefitting the rural people and the rural areas were given priority over others.

3.12 In view of the constraint of resources facing both the Centre and the States (as outlined in the report of the Ninth Finance Commission), the need to subject each and every continuing scheme and programme to a critical zero-based analysis keeping in mind the priorities enunciated in the then Approach Paper to the Eighth Five Year Plan (1990-95) was emphasised. Due weightage was also given to the environmental dimension of each scheme/activity.

Details of plan outlays for 1991-92 are given at Annexure 3.5

Formulation of Eighth Five Year Plan (1992-97) and Annual Plan 1992-93

3.13 The Process of formulation of the Eighth Five Year Plan (3992-97) and Annual Plan 1992-93 was initiated in September, 1991 with the issue of detailed guidelines to the Central Ministries/Departments and to the State Governments and UTs indicating priorities and programme thrusts to be kept in view while formulating their Plan proposals. The basic objectives, priorities and the thrust areas of the Eighth Five Year Plan (3992-97) as detailed in the Directional Paper, approved by the National Development Council, provided the broad framework for the formulation of the Annual Plan, 1992-93. Discussions for the Annual Plan, 199,2-93 and the Eighth Five Year Plan (1992-97) with the States, UTs, and the Central Ministries/ Departments had already taken place between October, 1991 and January, 1992 on the basis of proposals submitted by them to  the Planning Commission.

3.14 The guidelines mentioned above comprise of the objectives aisd thrusts, quantitative dimensions and intersectoral priorities envisaged for the Eighth Plan in the Directional Paper. Special emphasis is laid on agriculture, human resource development, and better delivery system in the social services sector. Private initiative and voluntary efforts will also be given more encouragement. The recommendations of the NDC Committee on Centrally Sponsored Schemes will be implemented during this Plan period.

3.15 Working Groups had been constituted for the formulation of the State Plans. Wrap-up meetings with representatives of each State/UT. were arranged and outlays arrived at for 1992-93 keeping in view the recommepdations of the various Working Groups including those of the Working Group on financial resources.

3.16 Thereafter, meetings were held between the Deputy Chairman of the Planning Commission and the Chief Ministers/Lt. Governors of the State/Union Territory to finalise their respective Annual Plan outlays.

3.17 As regards the Annual Plan of the Central Ministries/ Departments, the concerned Subject Divisions of the Planning Commission held indepth discussions with the nodal Ministries on both physical and financial performance particulary in the case of proposals relating to industrial and infrastructure sectors.

3.18 Detailed exercises regarding the aggregate budgetary support as well as the internal and extra budgetary resources of the public sector enterprises likely to be available for the year 1992-93 were undertaken through close coordination between the Commission and the Ministry of Finance.

3.19 Background notes were prepared by the subject Divisions in the light of their discussions with the officers of the Central Ministries. These notes and the results of exercises on the financial resources mentioned above, formed the basis for the series of discussions that the Secretary and the Senior Officers of the Commission held with the representatives of the Central Ministries/Departments. The Ministry/Department-wise outlays were tentatively formulated at these meetings. These outlays, as subsequently finalised internally in the Commission, were later communicated to the various Ministries/Departments including the Ministry of Finance for incorporation in the Expenditure Budget—(Centre) 1992-93.