Lecture by S. Maitra on IAS Indian Economy at Civil Services Study Centre

transcript

Lecture No.: 8

Subir MaitraAssociate Professor and ex-WBCS(Executive)

Preparing for Prelims with focus on Mains

Five Year Plans in India-IIII n c l u s i v e G r o w t h

E l e v e n t h a n d T w e l f t h P l a n

Civil Services Study CentreA d m i n i s t r a t i v e Tr a i n i n g I n s t i t u t e

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‘Faster, Sustainable, and More Inclusive Growth’.

The broad vision and aspirations which the Twelfth Plan seeks to fulfill are reflected in the above subtitle.

The Need for Faster GrowthRapid growth of GDP is an essential requirement for achieving this

objective. Two reasons why GDP growth is important for the inclusiveness objective:

First, rapid growth of GDP produces a larger expansion in total income and production which, if the growth process is sufficiently inclusive, will directly raise living standards of a large section of our people by providing them with employment and other income enhancing activities.

Second, rapid growth generates higher revenues, which help to finance critical programmes of inclusiveness. There are many such programmes such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Sarva Shiksha Abhiyan (SSA), Mid Day Meals (MDMs), Pradhan Mantri Gram Sadak Yojana (PMGSY), Integrated Child Development Services (ICDS), National Rural Health Mission (NRHM), and so on which either deliver benefits directly to the poor and the excluded groups, or increase their ability to access employment and income opportunities generated by the growth process.

Growth Prospects of Twelfth Plan

The Approach Paper to the Twelfth Plan had set a target of 9 per cent average growth of GDP over the Plan period. But after the Eurozone crisis triggering a sharp downturn in global economic prospects, the Twelfth Plan target growth rate was revised to 8.2 per cent in the Plan period. Two sub-targets of growth rates are: 4 per cent for the agricultural sector and 10 per cent for the manufacturing sector.

Meaning of Inclusiveness

Inclusiveness as Poverty Reduction: To ensure adequate flow of benefits to the poor and the most marginalised.

Inclusiveness as Group Equality: Inclusiveness is not just about bringing those below an official fixed poverty line to a level above it. It is also about a growth process which is seen to be ‘fair’ by different socio-economic groups that constitute our society. The poor are certainly one target group, but inclusiveness must also embrace the concern of other groups such as the Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), Minorities, the differently abled and other marginalised groups. Women can also be viewed as a disadvantaged group for this purpose.

Inclusiveness as Regional Balance: Another aspect of inclusiveness relates to whether all States, and indeed all regions, are seen to benefit from the growth process. Twelfth Plan pays special attention to the scope for accelerating growth in the States that are lagging behind. This will require strengthening of States’ own capacities to plan, to implement and to bring greater synergies within their own administration and with the Central Government. An important constraint on the growth of backward regions in the country is the poor state of infrastructure, especially road connectivity, schools and health facilities and the availability of electricity, all of which combine to hold back development. Improvement in infrastructure must therefore be an important component of any regionally inclusive development strategy.

Inclusiveness and Inequality: Inclusiveness also means greater attention to income inequality. Inequality must be kept within tolerable limits. Some increase in inequality in a developing country during a period of rapid growth and transformation may be unavoidable and it may even be tolerated if it is accompanied by sufficiently rapid improvement in the living standards of the poor. However, an increase in inequality with little or no improvement in the living standards of the poor is a recipe for social tensions. Any given level of inequality of outcomes is much more socially acceptable if it results from a system which provides greater equality of opportunity. As a society, we therefore need to move as rapidly as possible to the ideal of giving every child in India a fair opportunity in life, which means assuring every child access to good health and quality education. Twelfth Plan aims at making substantial progress in this dimension.

M e a n i n g o f I n c l u s i v e n e s s

Inclusiveness as Empowerment: Inclusiveness is also about empowerment and participation. It is a measure of the success we have achieved in building a participatory democracy that people are no longer prepared to be passive recipients of benefits doled out by the Government. This brings to the fore issues of governance, accountability and peoples participation to much greater extent than before. This also covers areas like access to information about government schemes, knowledge of the relevant laws and how to access justice. The growing concern with governance has also focused attention on corruption.

E l e v e n t h P l a n A c h i e v e m e n t s o n I n c l u s i v e G r o w t h

Question-Answer Session

1. Real national income denotes

(a) national income at constant prices

(b) per capita income(c) national income at current prices

(d) net factor income

Answer to Qs.1 (a) national income at constant prices

2. The overall aim of Indian planning is best described by which of the following

(a) agricultural development (b) regional development(c) growth with justice (d) industrial development

Answer to Qs. 2. (c) growth with

justice

3. Rapid increases in the price level during periods of recession or high unemployment are known as:

(a) inflation (b) stagnation(c) slump (d) stagflation

Answer to Qs. 3. (d) stagflation

4. In an economy, “absorption” means(a) difference between disposable personal

income and household consumption(b) total domestic spending by households,

firms and governments on goods and services, both domestic and foreign

(c) the resources that firms set aside to replace used equipment and generally to strengthen their financial position

(d) aggregate real savings

Answer to Qs. 4 (b) total domestic spending by households, firms and governments on goods and services, both domestic and foreign

5. Real GDP is a measure of a country’s

(a) wealth (b) money(c) economic transactions (d) physical output

Answer to Qs. 5 (d) physical output

6. The government increases government spending to try to reduce unemployment. This is an example of:

(a) laissez faire (b) monetary policy(c) fine tuning (d) automatic stabilisers

Answer to Qs. 6 (c) fine tuning

7. Self-sufficiency in food, in the true sense of freedom from hunger, has not been achieved in India in spite of a threefold rise in food grains production over 1950 to 1990. Which of the following are the reasons for it?

A. the green revolution has been restricted to small pockets of the country;

B. the cost of food is too high compared to the earnings of the poor;

C. too much emphasis is laid on wheat and rice compared to the coarse grains;

D. gains of the green revolution have largely accrued to the cash crop rather than food crops.

(a) A, B and C (b) A, B and D(c) A, C and D (d) B, C and D

Answer to Qs. 7 (a) A, B and C

8. Which of the following policies would not be expected to reduce the frictional unemployment rate?

(a) Reducing the duration of full employment insurance benefits

(b) Increasing statutory minimum wages(c) Providing relocation subsidies to

unemployed workers(d) None of the above policies would

work to reduce frictional unemployment

Answer to Qs. No. 8 (b) Increasing statutory

minimum wages

9. The economic significance of a depreciation of a country’s real exchange rate is

(a) that there has been a gain in the country’s competitiveness

(b) that absolute purchasing power parity has increased

(c) that it leads to arbitrage resulting in an appreciation of the real exchange rate in the future

(d) all of the above.

Answer to Qs. No. 9(a) that there has been a

gain in the country’s competitiveness

10. An increase in the nominal of GDP by 6% can correspond to

(a) a decrease of real GDP by 4% and an increase of prices by 10%

(b) an increase of real GDP by 9% and an increase of prices by 3%

(c) an increase of real GDP by 5% and a decrease of prices by 1%

(d) a decrease in real GDP by 3% and an increase of prices by 3%

Answer to Qs. No. 10(a) a decrease of real GDP by

4% and an increase of prices by 10%

Growth rate of nominal GDP = Growth rate of real GDP+the

inflation rate

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Lecture by S. Maitra on IAS Indian Economy at Civil Services Study Centre

Economy & Finance