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1990-91: AN OVERVIEW

Annual Report 1990-1991

The year 1990-91 was the threshold year for the beginning of a new Five Year Plan. The Seventh Plan, which ended in the previous year, provided a promising backdrop for the formulation of a new plan. The overall performance of the economy during the Seventh Plan had been impressive with an average annual growth rate (of GDP at factor cost) of 5.6% as against the target of 5 per cent. Agriculture, despite a run of poor monsoons in the first three years of the Plan, picked up in the remaining two years. Overall industrial production maintained the pace of growth of earlier years. The performance of the infrastructural sector also contributed to the success of the Seventh Plan. In addition, qualitative aspects of life also improved. The number of poor as a percentage of total population was brought down to 30 per cent in 1987-88 from 37 per cent in 1983-84. The enrolment figures at primary and upper primary stages had reached 9.89 crores and 3.25 crores respectively.

1.2 A few areas of concern, demanding renewed attention, also surfaced. The public sector undertakings had not been able to mobilise additional resources upto the desired levels. Fiscal deficit persisted and increasing non-plan expenditure affected availability of resources for development. Increasing current account deficits further aggravated the situation.

1.3 During 1990-91, the year under review. Gross Domestic Product (GDP) is anticipated to increase by about 5 per cent. The year experienced the third successive good monsoon. It is expected that the foodgrains production may rise above the target of 176.5 million tonnes. Generation of power by public utilities during 1990-91 was 264.14 billion units as against 245.40 billion units in 1989-90. Coal production was 211.73 million tonnes as against 200.89 million tonnes in 1989-90. Crude throughput of petroleum was 51.77 million tonnes. Railways maintained the growth rate in terms of the revenue earning goods traffic despite loss of freight traffic due to civil disturbances, shortage of diesel and natural calamities. The performance of the industrial sector was encouraging, with the average index for the first ten months of the financial year 1990-91 at 205.00 being 8.4 per cent higher as compared to the index of 189.10 for the corresponding period of the previous year.

1.4 During the year under review the Planning Commission was actively engaged in the exercises relating to the formulation of the Eighth Five Year Plan, in putting together the detailed Annual Plan for 1990-91 and in finalising the plan allocation for the Central Ministries and the States for the year 1991-92. The National Development Council approved the Approach Paper to the Eighth Five year Plan in its 41st meeting in June, 1990. The Approach Paper to the Eighth Five Year Plan, entitled, "Towards Social Transformation", envisages a reorientation of the development policy in. such a way that it gives primacy to the immediate and urgent needs of the poor, namely, employment opportunities, access to adequate means of livelihood and skills, supplies of food, education, health and child care services and other basic necessities such as housing. It also envisages decentralisation of the planning process with increased peoples participation. Further, it emphasises that "the basic objective is to ensure that the needs of ordinary people and the quality of their life become the central focus of planning even as the plan seeks to promote rapid overall development and diversification of the economy and to strengthen the infrastruc-tural base. Specifically, the state must assume primary responsibility to generate adequate employment in the economy and to ensure a basic standard of living to every one, specifically to the poor. The plans must also be sensitive to the needs of ecologically sustainable development."

1.5 The Approach to the Eighth Plan projected an average annual growth rate of 5.5 per cent of GDP. This was proposed to be realised by achieving an average saving rate of 22 per cent of GDP during the Plan, an inflow of capital from abroad to the extent of 1.5 per cent of GDP, and a 12 per cent growth in exports.

1.6 The financial dimensions, the sectoral allocations as well as the relative size of the Central and the State Plans were worked out in a paper which was approved by the full Planning Commission in'Sepember, 1990. Letters were issued to the Central Ministries/ Departments and State/ U.T. Governments, inviting their proposals for the Eighth Five Year Plan (1990-95). Broad guidelines, outlining the objectives and thrusts, quantitative dimensions, inter- sectoral priorities, and the aspects relating to employment, foreign exchange and environmental dimensions, based on the Approach Paper, were also made available to them.

1.7 At the 42nd meeting held in October, 1990, the National Development Council considered the suggestions for revising the existing modified Gadgil formula for distribution of Central assistance to State Plans. After detailed discussions, amendments to the existing modified Gadgil formula was announced at the meeting.

1.8 Official level discussions of the plan proposals of the Central Ministries/ Departments for the Eighth Five Year Plan (1990-95), alongwith the proposals for the Annual Plan, 1991-92 were held during the months, September to December, 1990. Similarly, official level discussions with the State Governments on their resources and programmes were also held.

1.9 The Planning Commission was re-constituted on llth December, 1990 after the formation of the Janata Dal (S) Government. The first meeting of the re-constituted Commission was held on 24.12.1990 under the Chairmanship of the Prime Minister and Chairman of the Commission. The meeting considered various issues including the further steps required for the speedy formulation of the Eighth Plan.

1.10 The Second meeting of the Commission was held on 26th February, 1991 under the Chairmanship of the Prime Minister and the Chairman of the Commission. The meeting considered, inter-alia, the following issues which concern the formulation of the Eighth Five Year Plan :

  1. Distribution of Central Assistance among the States during the Eighth Five Year Plan (Gadgil Formula); and
  2. Some aspects of the Eighth Five year Plan (1990- 95) - Plan size and rate of growth.

It was decided in the meeting that the formula for distribution of Central Assistance to States announced at the 42nd meeting of the National Development Council be discussed with the States and subsequently be placed for reconsideration before the National Development Council. It was also decided that the possibilities for a higher growth target for the Eighth Plan and a higher outlay for the public sector be explored.

1.11 Based on the official level discussions with Central Ministries, and the discussions with the States Chief Ministers, the Planning Commission finalised the allocations for the Annual Plan 1991-92 - Centre and the Annual Plan for the States and Union Territories for 1991- 92.


Each Five Year Plan involves an appraisal of the past/ a reformulation of basic national policies in the light of experience gained and the drawing up of a guide map for action in the future. This blue print for development, however, needs to be adaptable to take care of changing situations and priorities which arise from time to time. In order to provide for this flexibility, the Five Year Plan is implemented through the mechanism of Annual Plans which are prepared each year within the broad framework provided in the Five Year Plan, but incorporating such directional changes as are warranted for each year. The Annual Plans while setting out the details of the programmes to be implemented during each year also provide the basis for budgetary provision for the Plan for that year.

Annual Plans

3.2 Formulation of the Annual Plan every year gives the Planning Commission an opportunity to assess the previous year's plan performance and suggest strategic modifications as required, keeping in view long term growth targets. In the third quarter of each financial year the Planning Commission indicates to the State Governments and Central Ministries, the more important short term objectives that should be kept in view for the formulation of the Annual Plan for the following year. The States and the Central Ministries are requested to furnish their Plan proposals including physical targets and the corresponding financial outalys 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 the representatives of the Central Ministries/Departments regarding their Annual Plan proposals. The Planning Commission also reviews the progress of the Plan each year in both financial and physical terms on the basis of the detailed 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. Governors in respect of State Plans and at meeings taken by Secretary, Planning Commission with the Secretaries of Central Ministries/Departments regarding the Central Plan as approved by the Commission, become the basis for budgetary provision for the Plan for the ensuing year.

Review of Annual Plan 1989-90 :

3.5 During the year 1989-90, due to favourable weather conditions, the production of foodgrains reached a level of 170.60 million tonnes, about 0.7 million tonnes higher than the production in 1988-89. Similarly production of sugarcane, cotton, jute and mesta was higher in 1989-90 as compared to 1988-89.

3.6 Industrial growth in 1989-90, at-8.6 per cent was almost equal to the performance during 1988-89.

3.7 During 1989-90, coal production was about 201 million tonnes as compared to 195 million tonnes in 1988-89. Generation of electricity, by public utilities, was 245 billion units, which was 10.9 per cent higher than the previous year. Crude oil production touched the mark of 34 million tonnes, as compared to 32 million tonnes in 1988-89. Railways recorded a growth rate of 2.6 per cent in terms of revenue earning goods traffic over the previous year.

3.8 In 1989-90, Gross Domestic Product (GDP) increased by 5.2 per cent in real terms. The index of agricultural production increased by a modest 1.7 per cent, while the index of industrial production increased by 8.6 per cent.

3.9 The revised estimates of the Annual Plan for 1989-90, as compared to the Plan outlay, are summarised below :

(Rs. crores)


Annual Plan 1989-90

Plan Outlay Revised Estimates
1.Centre 34445.97 35712.93
2. States and UTs. 23151.55 21303.96
Total 57597.52 57016.89

In addition, a amount of Rs. 100.00 crores was released to States and UTs. as advance Plan assistance for natural calamities. The details of progress of expenditure during the Seventh Five Year Plan, year-wise, along with the original outlays are given at Annexure 3.1 through 3.4 (a).

Annual Plan 1990-91

3.10 The Annual Plan, 1990-91 envisaged a public sector plan outlay of Rs. 64716.80 crores/ registering an increase of 12.36 per cent over the previous Annual Plan in current prices.

3.11 The Central sector plans outlay was fixed at Rs. 39329.26 crores, whereas the outlay for the States and UTs. was envisaged as Rs. 25387.54 crores.

3.12 The Annual Plan, 1990-91, formulated in the context of Eighth Plan, aimed at maintaining the tempo of economic development through enhanced investment and outlay in the public sector, with increased emphasis on the States Plan. The Plan laid special emphasis on rural oriented programmes/schemes.

3.13 The Ministries/Departments were requested to undertake a fresh examination of individual schemes/programmes that are continuing from the Seventh Plan or earlier. The need for a quick zero-based analysis and for consolidating various schemes into a compact group of thrust programmes were emphasised. Similarly, the States and Union Territories were requested to consolidate/integrate Area Development Programmes into sustainable programmes with the twin objectives of ecological improvement and employment creation.

Details of plan outlays for 1990-91 are given at Annexure 3.5.

Formulation of Annual Plan 1991-92 :

3.14 The process of formulation of the Annual Plan 1991-92 was initiated with the issue of detailed guidelines to the Central Ministries/Departments and to State Governments and UTs indicating priorities and programme thrust to be kept in view while formulating their Plan proposals in the month of June, 1990. The basic objectives, priorities and the thrust areas of the Eighth Five Year Plan (1990-95) as detailed in the Approach Paper to the Eighth Plan, approved by the National Development Council, were to provide the broad frame-work for the formulation of the Annual Plan 1991- 92. It was also proposed that the plan discussions concerning the Annual Plan 1991-92 and the Eighth Five Year Plan would be taken up in tandem. Accordingly, the States, UTs. and the Central Ministries/Departments were requested to submit their proposals for the Eighth Five Year Plan and for the Annual Plan 1991-92 simultaneously.

3.15 The above mentioned guidelines comprised of the objectives and thrusts, quantitative dimensions and inter-sectoral priorities as envisaged for the Eighth Five Year Plan in the Approach document. It was stressed therein that every programme/ scheme that had found place in the Seventh Plan will need to be subjected to a critical zero- based analysis in order to see whether it satisfies the priorities indicated in the Approach. It was also urged that the pattern of investment be restructured, to the extent possible, in favour of areas, sectors and production processes with ample productive employment potential.

3.16 Working Groups had been constituted for the formulation of the States Plan. Wrap-up meetings with representatives of each State/ UT. were arranged and outlays arrived at for 1991- 92 keeping in view the recommendations of thevarious Working Groups including those of the Working Group on financial resources.

3.17 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.

3.18 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 particularly in the case of proposals relating to industrial and infrastructure sectors.

3.19 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 1991-92 were undertaken through close coordination between the Commission and the Ministry of Finance.

3.20 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) 1991-92.