The Cabinet Ministers with certain important portfolios act as part-time members of the Commission, while the full-time members are experts from various fields like Economics, Industry, Science and General Administration.
The commission works through the following divisions
| l | General Planning Divisions |
| l | Special Planning Divisions |
| l | Programme Administration Divisions |
The majority of experts in the commission are economists, making the commission the biggest employer of the Indian Economic Services.
Five Year Plans
The Indian Economy is based on the concept of planning. This is carried through the five-year plans, developed, executed and monitored by the Planning Commission. The First Five Year plan was implemented in 1951. The Tenth plan is currently underway.
| l | First Five Year Plan (1951-56) – The first plan aimed at correcting the distortions caused to the economy after the World War II. |
| l | Second Five Year Plan (1956-61) – The second plan aimed at a pattern of development leading to a ‘socialist society’ framework for the economy. |
| l | Third Five Year Plan (1961-66) – The third plan aimed at achieving the goals enlisted in the first two plans and also aimed at achieving self-sufficiency in foodgrains, increase employment oppurtunities and expand basic and heavy industries. |
| l | Three Annual Plans (1966-69) |
| l | Fourth Five Year Plan (1969-74) – The objectives of the fourth plan were to achieve self-reliance, and give priority to agriculture, promote industrial production and exports. |
| l | Fifth Five Year Plan (1974-79) – The fifth five year plan aimed at removal of poverty, attaining economic self reliance and increasing employment oppurtunities in the country. |
| l | Sixth Year Plan (1979-85) – The sixth plan aimed at achieving a annual growth rate of 5.2 per cent and raising the per capita income by 3.3 per cent. |
| l | Seventh Five Year Plan (1985-90) – The plan focussed on policies and programmes to increase domestic industrial productivity, employment oppurtunities, and agriculture productivity by increasing the basic framework and by adopting modern technologies. |
| l | Annual Plans 1990-92 |
| l | Eighth Five Year Plan (1992-97) – The plan aimed at achieving a higher outlay of public sector enterprises to meet the demands of various central and state sectors. |
| l | Ninth Five Year Plan (1997-02) – The plan aimed to achieve an anual growth rate of 6.5 per cent. The total public sector outlay was Rs. 859000 crore. |
| l | Tenth Five Year Plan (2002-07) – This plan has adopted an aggressive approach. This plan aims at achieving 8 per cent GDP growth, reduce the poverty ratio to 20 per cent, increase the literacy rate to 72 per cent, reduce the infant mortality rate to 45 per 1000 births and clean all major polluted rivers till the end of the plan in 2007. |
| l | Eleventh Five Year Plan (2007-12) – This plan aims to accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in order to double per capita income by 2016-17,increase literacy rate for persons of age 7 years or more to 85%, reduce infant mortality rate to 28 and maternal mortality ratio to 1 per 1000 live births and ensure electricity connection to all villages and BPL households by 2009 and round-the-clock power. |
THE MONETARY POLICY
The Monetary Policy, as the name suggests, is the policy used as a tool to regulate the supply of money in the economy. The basic task of a monetary policy in a developing economy is to meet the credit needs of the growth sectors on the one hand and to curb the supply of money meant to be used in non - productive activities like speculative dealings, headging etc. In India, the monetary policy is regulated by the Reserve Bank of India (RBI). The policy in India is designed on the principles mentioned above and exercises various quantitative controls to make the policy effective. The policy is therefore also referred to as the policy of ‘Controlled Monetary Expansion’ which implies
| i. | Expansion in the supply of money. |
| ii. | Restraint on secondary expansion of credit. |
The Monetary Policy thus helps the government to exercise control over the money supply in the economy.
THE FISCAL POLICY
The fiscal policy helps the government exercise a control over the fiscal deficit i.e. the difference between the total revenue earned and the total expenditure incurred by the government. A rise in the fiscal deficit implies a higher borrowing for the government from the RBI. The economic impact of such borrowing is that the money supply in the economy decreases.
The pressure on the money supply leads to an increase of prices i.e. an inflationary situation. So the government, through a proper fiscal policy tries to maximize revenue sources (taxes) and reduce expenditure, thereby reducing fiscal deficits.
THE MAJOR PUBLIC SECTOR FINANCIAL INSTITUTIONS
1. The Reserve Bank of India (RBI)
The Reserve Bank of India (RBI) was set up in April 1935, with its central office at Calcutta (Kolkata) under the Reserve Bank of India Act of 1934, but was permanently moved to Mumbai in 1937. Though originally privately owned, since nationalization in 1949, the RBI is fully owned by Government of India. Presently, RBI is the central bank of India. It issues notes, buys and sells government securities, regulates the volume of what direction and cost of credit, manages foreign exchange, supports other financial institutions and comes out with the Monetary Policy. The RBI is presently headquartered at Mumbai and the present RBI governor is Dr. Duruvi Subbarao.
2. The Small Industrial Development Bank of India (SIDBI)
SIDBI was established on April 2, 1990. The Small Industries Development Bank of India Act, 1989 envisaged SIDBI to be “the principal financial institution for the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developing industry in the small scale sector and for matters connected therewith or incidental thereto. In the SIDBI charter,four basic objectives were set out. They are Financing, Promotion, Development, Coordination, for orderly growth of industry in the small scale sector.
The business domain of SIDBI consists of small scale industrial units, which contribute significantly to the national economy in terms of production, employment and exports. Small scale industries are the industrial units in which the investment in plant and machinery does not exceed Rs.10 million. About 3.1 million such units, employing 17.2 million persons account for a share of 36 per cent of India’s exports and 40 per cent of industrial manufacture. In addition, SIDBI’s assistance flows to the transport, health care and tourism sectors and also to the professional and self-employed persons setting up small-sized professional ventures. Mr. Rajendra Mohan Malla is the present chairman and managing director of the SIDBI.
3. The Industrial Development Bank of India (IDBI)
IDBI was established on July 1, 1964, by an act of the Parliament as a wholly owned subsidiary of the Reserve Bank of India, to catalyze the development of a diversified and efficient industrial structure in the country, in tune with national priorities. In 1976, the ownership was transferred from the RBI to the Government of India. The current Government holding in IDBI is about 53%. IDBI is currently the tenth largest development bank in the world. It financed some well-known institutes in India like, the National Stock Exchange of India (NSE), the National Securities Depository Services Ltd. (NSDL), and the Stock Holding Corporation of India (SHCIL).
To meet the emerging challenges and to keep up with reforms in the financial sector, IDBI converted into a banking company in 2004, to undertake an entire gamut of banking activities. Mr. Yogesh Agarwal is the present Chairman and Managing Director of the IDBI bank.
4. The National Bank for Agriculture and Rural Development (NABARD)
NABARD was established on 12th July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and the Rural Planning and Credit Cell (RPCC) of the Reserve Bank of India, and the Agricultural Refinance and Development Corporation (ARDC).
The following functions are performed by NABARD
| i. | Serves as an apex financing agency for the institutions providing investment and production credit for promoting the various developmental activities in rural areas. |
| ii. | Takes measures towards institution building for improving absorptive capacity of the credit delivery system, including monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, training of personnel, etc. |
| iii. | Co-ordinates the rural financing activities of all institutions engaged in developmental work at the field level and maintains liaison with the Government of India, State Governments, the Reserve Bank of India (RBI) and other national level institutions concerned with policy formulation. |
| iv. | Undertakes monitoring and evaluation of projects refinanced by it. |
Shri Umesh Chandra Sarangi is the present chairman of NABARD.
ECONOMIC LIBERALISATION (1991)
The economic liberalisation of 1991 was initiated by the then Indian Prime Minister, Mr. P. V. Narasimha Rao and his Finance Minister, Mr. Manmohan Singh in response to a balance-of-payments crisis being faced by the country. The new economic framework adopted by the government did away with the Licence Raj (investment, industrial and import licensing) system and ended many public monopolies. The policy aimed at allowing foreign direct investment (FDI) in many sectors of the economy. Even though the foreign direct investment ceiling was removed by the government in 1991, it was only in 1996 that foreign investors started showing confidence in the Indian economy and large sectors saw the inflow of foreign capital.
Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has yet tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies.
IMPORTANT SECTORS OF INDIAN ECONOMY
| 1. | AGRICULTURE | |
| i) | Contribution to GDP | |
Agriculture forms the backbone of Indian economy. it contributes approx. 26 percent of Gross Domestic Product. It was 55.4 percent in 1950-51. | ||
Though the agriculture in national income has come down, even now agriculture contributes a major share of the national income in India. Further, the share of agriculture in manufacturing and services sector is increasing. | ||
| ii) | Source of Employment | |
Agriculture provides employment to around 65 percent of the total work-force of the country. | ||
| iii) | Source of Industrial Development | |
Agriculture has been the source of supply of raw material to our leading industries. | ||
Many of our small and cottage industries like handloom, weaving, oil crushing, rice husking, etc. depends on agriculture. | ||
Green Revolution
Indian Green Revolution is associated with the use of HYVS (High Yielding Variety Seeds). Chemical fertilizers and new technology led to a sharp rise in agricultural production during the middle of 1960.
The term Green Revolution was given by Americal Scientist, Dr. William Gande.
During the middle of sixties, Indian agriculture scientists developed a number of new high yielding varieties of wheat by processing wheat seeds imported from Mexico. A similar improvement in variety of rice was also observed.
The credit of this goes not only to Nobel Laureate Dr. Norman Borlaug. But also to Dr. M.S. Swaminathan. Dr. M.S. Swaminathan is also known as the father of the Green Revolution in India.
Second Green Revolution
Of all the plans, the sixth five-year plan was hailed as a great success on the agriculture front. As against the expected annual growth of 3.8 percent for agriculture, the actual growth rate was 4.3 percent. The production of food grains in 1983-84 was 152 million tones and was hailed by the Government as the Second Green Revolution.
While the first Green Revolution from 1967-68 arose from the introduction of HYVS of Mexican wheat and rice, the second Green Revolution from 1983-84 was said to be for the extension in supplies of inputs and services to farmers, agricultural extension and better management.
While the first Green Revolution was confirmed mainly to Punjab, Haryana, and Western Uttar Pradesh, the second Revolution has spread to the entire North India.
Other Revolutions
| Revolution | Area |
| Yellow Revolution | Oil Seeds |
| White Revolution | Milk |
| Blue Revolution | Fish |
| Pink Revolution | Shrimp |
| Grey Revolution | Egg |
| Golden Revolution | Horticulture |
IMPORTANT INDUSTRIES OF INDIA
| 1. | LARGE SCALE INDUSTRIES | |
| i) | Iron and Steel Industries: | |
| Ist Steel Industry at Kulti near Jhari, West Bengal | ||
| Ist large scale steel plant - TISCO at Jamshedpur in 1907 followed by IISCO at Bumpur in 1919. Both belonged to private sector. | ||
| The first public sector unit was ‘Vishveshvaraya Iron and Steel Works’ at Bhadrawati | ||
Public Sector Steel Plants
| Location | Assistance | |
| 1. | Rourkela (Orissa) | Germany |
| 2. | Bhilai (Madhya Pradesh) | Russian Govt. |
| 3. | Durgapur (West Bengal) | Britain Govt. |
| 4. | Bokaro (Jharkhand) | Russian Govt. |
| 5. | Burnpur (West Bengal) | Acquired by Private sector in 1976 |
| 6. | Vishakhapatnam (Andhra Pradesh) | Russian Govt. |
| 7. | Salem (Tamilnadu) | |
| 8. | Vijai Nagar (Karnataka) | |
| 9. | Bhadrawati (Karnataka) | |
| Nationalization of Vishveshvaraya Iron and Steel Ltd. | ||
| (Owned by Central and State Government) | ||
All these are managed by SAIL. (At present all important steels except TISCO, are under Public Sector).
Steel Authority of India Limited (SAIL) was established in 1974 and was made responsible for the development of the steel Industry.
Bhilai, Durgapur and Rourkela were established during the Second Five Year Plan. Bokaro was established during the Third while the steel plants at Salem, Vijay Nagar, and Vishakhapatnam were established in the Fourth Five Year Plant.
Presently India is the 8th largest steel producing country in the world.
ii) Jute Industry :
Jute industry is an important industry for a country like India, because not only does it earn foreign Exchange but also provides substantial employment opportunities in agriculture and industrial sectors.
Its first modernized industrial unit was established at Reshra in West Bengal in 1855. There are at present 73 jute mills in India, out of which West Bengal has 59 mills, Bihar 3 mills, Uttar Pradesh 3 mills, Andhra Pradesh 4 mills and Assam, Tripura, Orissa and Madhya Pradesh one each.
The Jute Industry in the Country is traditionally export oriented. India ranks number one in raw jute and jute goods production and number two in export of jute goods in the world.
iii) Cotton and Textile Industry :
Oldest industry of India, and employs largest number of workers.
It is the largest organized and broad-based industry which accounts for about 4 percent of GDP, 20 percent of manufacturing value added and one-third of total export earnings.
The first Indian modernized cotton cloth mill was established in 1818 at Fort Gloaster near Kolkata but this mill was not successful. The second mill named ‘Bombay Spinning and Weaving Co.’ was established in 1854 at Bombay by K.G.N. Daber.
iv) Sugar Industry :
Sugar Industry is the second largest industry after cotton textile industry among agriculture based Industries in the country.
There are more than 500 installed sugar factories in the country. This industry provides not only employment to a substantial number of persons but also holds the potential of developing other industries related to its by-products.
India is now the largest producer and consumer of sugar in the world. Maharashtra contributes over one-third of the total sugar output, followed closely by Uttar Pradesh, Tamil Nadu and Karnataka are the other important producers of sugar.
v) Fertilizer Industry :
India is the third largest producer of nitrogeneous fertilizers in the world.
There are at present, 57 fertilizer units manufacturing a wide range of nitrogeneous and complex fertilizers, including 29 units producing urea and 9 units producing ammonium sulphate as a by-product.
vi) Paper Industry :
The first mechanized paper mill was set-up in 1812 at Serampur in West Bengal.
The Paper Industry in India is ranked among the 15 top global paper industries.
vii) Silk Industry :
India is the second largest (first being China) country in the world in producing natural silk. At present, India produces about 16 percent silk of the world.
India enjoys the distinction of being the only country producing all the five known commercial varieties of silk, viz. Mulberry, Troical rassal, Oak Tussar, Eri and Muga.
viii) Petroleum and Natural Gas :
First successful oil well was dug in India in 1889 at Digboi, Assam.
For exploration purpose, Oil and Natural Gas Commission (ONGC) was established in 1956 at Dehradun, Uttranchal.
The total oil reserves in India have been estimated to be about 13 crore tones. Domestic production of oil in India is much less to meet the domestic demand. India currently produces just over 32 million tones of crude oil against it annual demand of 105 million tones meeting only 30.5 percent of demand from domestic resources.
Marketing and Distribution of Petroleum Products
| a) | Bharat Petroleum Corporation Ltd. (BPCL): By acquisition of Burmah Shell in 1976. |
| b) | Hindustan Petroleum Corporation Ltd. (HPCL): Established in 1974 by acquiring the assets of US company ESSO Eastern. In 1976, Government acquired Caltex Oil Refining Ltd. and merged it with HPCL. |
| c) | Gas Authority of India Ltd. (GAIL): Established in 1984 for handling post-exploration activities relating to natural gas. The company was assigned the priority task of setting up the cross country HBJ (Hazira, Bijapur, and Jagdishpur) pipeline. Presently GAIL is the largest company in India for marketing of natural gas. |
NAVRATNAS
In 1997, the Government identified nine leading, well performing and high profit making public enterprises as Navratnas (Nine Precious Jewels). Later, on the same year, two more were added to the list.
They have been given special powers including freedom to form new joint ventures, make new investments and authorized to raise money.
| 1. | Indian Oil Corporation Ltd. (IOC) |
| 2. | Bharat Petroleum Corporation Ltd. (BPCL) |
| 3. | Hindustan Petroleum Corporation Ltd. (HPCL) |
| 4. | Oil and Natural Gas Corporation Ltd. (ONGC) |
| 5. | Indian Petrochemicals Corporation Ltd. (IPCL) |
| 6. | Steel Authority of India Ltd. (SAIL) |
| 7. | National Thermal Power Corporation Ltd. (NTPC) |
| 8. | Bharat Heavy Electronics Ltd. (BHEL) |
| 9. | Videsh Sanchar Nigam Ltd. (VSNL) |
| 10. | Mahangar Telephone Nigam Ltd. (MTNL) |
| 11. | Gas Authority of India Ltd. (GAIL) |
Two of these Navratnas, IPCL and VSNL, have been privatized.
INSURANCE
Insurance has been an important part of the Indian financial system. Until recently, insurance services were provided by the public sector, i.e. life insurance by the Life Insurance Corporation of India and general insurance by the General Insurance Corporation and its four Subsidaries. This insurance industry was opened to the Private sector in August 2000. After the opening, 12 new companies have entered life segment and 9 companies in the non life segment.
| 1. | Life Insurance Corporation (LIC) | ||
| Established | : | Sept, 1956 | |
| Head Office | : | Mumbai | |
| Zonal Offices | : | 7 (Mumbai, Kolkata, Delhi, Chennai, Kanpur, Hyderabad, Bhopal) | |
| 2. | General Insurance Corporation (GIC) | ||
| Established | : | Jan 1, 1973 | |
| It has four subsidiary companies: | |||
| 1.National Insurance Company Ltd., Kolkatta | |||
| 2.The New India Assurance Co. Ltd., Mumbai | |||
| 3.The Oriental Fire and General Insurance Co.Ltd., New Delhi | |||
| 4.United India Fire and General Insurance Co. Ltd., Chennai. | |||
STOCK EXCHANGES
Stock exchange or share market plays a dominant role in mobilizing resources for corporate sector. It is a market for dealing in shares, debentures and financial securities. In the stock exchange, shares and debentures are bought and sold for investment as well as for speculative purposes. There are 24 stock exchanges in the country.
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