Growth and Development Planning in India

382 Pages·2021·0.948 MB·English

by  K. L. Datta

Growth and Development
Planning in India

Growth and Development
Planning in India
K. L. DATTA
1
1
Oxford University Press is a department of the University of Oxford.
It furthers the University’s objective of excellence in research, scholarship,
and education by publishing worldwide. Oxford is a registered trademark of
Oxford University Press in the UK and in certain other countries.

Published in India by
Oxford University Press
22 Workspace, 2nd Floor, 1/22 Asaf Ali Road, New Delhi 110 002, India

© Oxford University Press 2021
The moral rights of the author have been asserted.
First Edition published in 2021

All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system, or transmitted, in any form or by any means, without the
prior permission in writing of Oxford University Press, or as expressly permitted
by law, by licence, or under terms agreed with the appropriate reprographics
rights organization. Enquiries concerning reproduction outside the scope of the
above should be sent to the Rights Department, Oxford University Press, at the
address above.

You must not circulate this work in any other form
and you must impose this same condition on any acquirer.

ISBN-13 (print edition): 978-0-19-012502-8
ISBN-10 (print edition): 0-19-012502-0

ISBN-13 (eBook): 978-0-19-099156-2
ISBN-10 (eBook): 0-19-099156-9

Typeset in ScalaPro 10/13
by Tranistics Data Technologies, Kolkata 700 091
Printed in India by Rakmo Press, New Delhi 110 020
Tables
3.1 Growth Rate in Five Year Plans 91
3.2 Structure of the Economy 96
3.3 Frequency Distribution of Annual Growth Rates:
1951–52 to 2011–12 101
3.4 Investment Rate in Five Year Plans 106
3.5 Savings Rate in Five Year Plans 113
3A Annual Growth Rate of GDP by Sectors:
1951–52 to 2011–12 118
4.1 Growth Rate of GDP: 1951–90 122
6.1 Macro Parameters in the Pre- and Post-reform Periods 219
7.1 Poverty Ratio and Number of Poor: 1973–74 to 1993–94 259
7.2 Poverty Ratio and Number of Poor: 1993–94 to 2011–12 269
7.3 Decline in Poverty Ratio: 1993–94 to 2011–12 270
7.4 State-wise Poverty Ratio in the Era of Economic Reform 275
7.5 Rate of Decline in State-wise Poverty Ratio in the
Era of Economic Reform 277
7.6 Rate of Growth of Per Capita Consumption: 2004–05
to 2011–12 280
7.7 Poverty Ratio by Social Group: 2004–05 and 2011–12 286
7.8 Decline in Poverty Ratio by Social Group: 2004–05 to
2011–12 286
8.1 Growth Rate of GVA: 2005–06 to 2019–20 298
8.2 Savings and Investment Rate: 2004–05 to 2017–18 299
8.3 Usual Status Unemployment Rate in India 332
Preface

Those who were born immediately after India’s Independence have
been both fortunate and unfortunate: unfortunate as they could
not participate in the freedom movement, and fortunate as they could
see the development of independent India unfolding before them. I
was born in independent India in 1949 and hence my participation
in the freedom movement was a mathematical impossibility. I had to
learn about some of the early developmental eff orts as part of history.
So was the case with learning about the making of India as a republic,
the fi rst general elections to the Parliament and the state legislative
assemblies, and the initiation of planned economic development.
Some of these events entered into my memory from the animated
discussions that were a routine aff air in our household, where both
like-minded people and people with confl icting ideas would be pres-
ent. Among these, I vividly remember the discussions in the late
1950s that were centred on three issues: food crisis, price infl ation,
and corruption. There were mixed feelings about the application of
planning to turn India into an industrially developed nation. It was a
time when expectations were not very high and ideas about develop-
ment remained strictly within the confi nes of food, clothing, and
housing—the r oti–kapda–makaan trilogy. It does not matter if the
food consisted of coarse cereals, if cloth was coarse or hand-spun, or
if the house was k utcha (not made of stones, tiles, and so on). But the
ideas were rigid that these should be made available to all, and with
the exception of none.
That is how my association with India’s economic growth and
development issues began. Though I missed the entire debate on
whether planning should be used as a development strategy, and then
the Mahalanobis model as a stepping stone for India’s foray into the
x Preface
comity of developed nations, these were compensated many times in
the course of my student days, when we were taught these subjects
in great detail. In due course, I as a teacher passed on some of this
knowledge to my students. The developments in the Indian economy
began to unfold before my eyes from the late 1950s, as I witnessed
food riots in Calcutta in 1959, became familiar with the border confl ict
with China in 1962, the war with Pakistan in 1965, and the unprec-
edented drought in the mid-1960s leading to a near-famine situation
in large parts of the country. While this shock and horror was least
expected, there was light at the end of the tunnel. In the late 1960s,
India transformed from a food-defi cit to a food-surplus nation, and in
1971 it earned a decisive military victory against Pakistan, heralding
the birth of the new country Bangladesh in the Indian subcontinent.
Though I do not fi nd that military victory for anyone brings joy to me,
that time was diff erent, perhaps seeing the delight with which my
parents embraced the news. They had reasons, emotions too, because
Bangladesh was their place of birth, and they had spent their child-
hood days there.
In 1975, I entered the Indian Economic Service. It brought mixed
feelings for me as it would mean leaving Calcutta, the city where I
was born, educated, and began my professional career with suffi cient
contentment. It was a place where I learnt many things and made
innumerable friends; and yet, there were hostilities too, in the fi eld
of history, literature, economics, and most of all, politics. During my
student life, most of us were active politicians; there was no dearth of
political parties or groups and their self-acclaimed leaders in Calcutta
in those days. Then, there was the charm of teaching in a college in
Calcutta. All these I had to forego for the sake of joining the govern-
ment, whose offi ce buildings I had detested for long—among them
the Writers’ Building, then the seat of the West Bengal administration,
and also Lalbazar, the headquarters of the Calcutta Police. I wondered
how people spent eight hours every day inside these buildings.
My fi rst two years in the Indian Economic Service, in many ways,
were a novel experience. Until then, my longest journey had been to
the Visva-Bharati University, located in Santiniketan, West Bengal, for
an interview that did not take place. I was paid the train fare and given
free accommodation at their International Guest House. Frankly, that
had been the motivation for the journey. My fi rst two years working
Preface xi
in the government, which was a probation period, involved structured
training and travel across the length and breadth of the country. At
the end of the probation, it was time to take a call about the place of
my posting. I gave some thought to this issue, and requested for a
placement with the Perspective Planning Division (PPD) of the then
Planning Commission because I knew many of the mathematical
models that they used. This work interested me. But, it was not an
easy aff air to get into the Planning Commission, and that too in the
PPD. One of my seniors suggested that I should meet Division Head
Y. K. Alagh. Alagh, a person with considerable knowledge in the area
of mathematical modelling, told me straightaway that he would have
to interview me to assess if I could fulfi l the requirements of the post-
ing. I had no reason not to agree.
The interview took place in Alagh’s offi ce at Yojana Bhawan and
lasted for three hours. I cannot say that I was grilled, as the answers
to the questions he asked were known to me, thanks to my teachers
at Calcutta University. Nikhilesh Bhattacharya, my teacher in econo-
metrics, and Asim Dasgupta, who taught me mathematical statistics,
distribution functions, and growth models, helped me tide through
Alagh’s test; so much so that at the end of the session he threw his
hands in the air saying I had wasted three hours of his time, and
that I should have told him at the beginning that I was a student
of Nikhilesh Bhattacharya. With this, my tryst with the Planning
Commission began.
In the Planning Commission, I remained occupied with the work
on multi-sectoral consistency models, which were being used at that
time to formulate the Sixth Five Year Plan. For the most part of the
next three decades I was engaged in this subject.
Over fi ve spells I have spent seventeen years of my career in the
civil services at the Planning Commission. And I have served this
organization in diff erent positions, including as adviser and head of
the PPD, which I joined fi rst in 1977. I consider such a long stay
in the Commission a matter of luck and privilege. It gave me the
opportunity to work on the application of mathematical models of
growth and investment in the formulation of medium- and long-term
plans, and understand the nuances of planning in determining the
rate of economic growth and improving the levels of living and qual-
ity of life of people. This book, in some ways, is a culmination of
xii Preface
my administrative and academic experience in the civil services in
the past four decades on issues related to growth, equity, poverty, and
deprivation. Writing this book has indeed been a task of tall order.
My friends and colleagues have been a source of inspiration
in this endeavour. As always, I remain grateful to Y. K. Alagh, who
inducted me into this complex and challenging area of research.
In the Planning Commission, interactions with Arjun Sengupta
and S. R. Hashim have been full of excitement and challenge. They
reposed faith in me by entrusting me, among many other things,
with the responsibility of leading a team of offi cers in the Planning
Commission to prepare the ‘Technical Note to the Eighth Five Year
Plan’—a document which contains the mathematical models used to
arrive at the macro-parameters for growth, its sectoral pattern, and
allocation of resources for diff erent sectoral activities of the Plan. My
interactions with Montek Singh Ahluwalia and Saumitra Chaudhuri
in the Planning Commission have been a rewarding experience.
Others who have helped me in several ways include C. Rangarajan,
Pronab Sen, Abhijit Sen, Arvind Virmani, Bibek Debroy, Kirit Parikh,
B. N. Yugandhar, Mahesh Vyas, Sunil Khatri, Savita Sharma, K.
Sundaram, Sabina Alkire, James Foster, Jugal Kishore Mohapatra, P.
K. Padhy, Manjula Krishnan, Parthapratim Mitra, Himanshu, Rinku
Murgai, and S. V. Ramana Murthy.
On the personal front, Amrita Datta and Sumeet Popli assisted me
in a wide range of areas, which included hardware and software sup-
port. Embarking on such a project inevitably leads to a disruption of
daily routine. My wife, Indu, tolerated my busy and irregular schedule
that accompanied this research. For this, I am grateful to her. The
errors and omissions, however, rest with me.
K. L. Datta
Introduction

India, after seven decades of independence, found itself in the
position of the fi fth-largest economy in the world, with nominal
gross domestic product (GDP) of USD 2.94 trillion in 2019. It is also
the fastest-growing trillion-dollar economy in the world. India’s rank
would have been third if GDP across the countries was compared
in terms of purchasing power parity. But, in per capita terms, India
falls way behind most of the member countries of the World Bank.
However, this should not negate the expansion of the Indian economy
that has taken place since Independence.
India adopted planning as an instrument of policy with rigid state
control and regulation in economic activities after Independence.
The degree of control may have varied within the fi rst four decades of
planning, 1951–90, but remained fi rmly in place. In 1991, when the
policies of economic reforms and liberalization were initiated, state
controls were either relaxed or dismantled, and planning became
market-based. Finally, in 2014, planning was abolished, and along
with it the Planning Commission, which was created in 1950 to
formulate medium- and long-term plans for economic growth and
development.
The institutionalization of planning in India became the subject
matter of debate in India’s post-Independence growth and develop-
ment strategy ever since planners and policymakers began to realize
Growth and Development Planning in India. K. L. Datta, Oxford University Press (2021).
© Oxford University Press. DOI: 10.1093/oso/9780190125028.003.0001