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 Economy www.iasscore.in

PLANNING IN INDIA
Planning is programming for action for a particular period for achieving certain specific progressive developmental
goals. In other words, it is a method of achieving economic prosperity by the optimum utilization of the
resources of an organization. It is a tool to bridge the gap between reality and objectives of an organization.
Also, it is an effort towards attaining self-sufficiency and narrowing the intra and inter-regional disparities and
preparing ideal conditions for the development.
The first almost rudimentary idea of economic planning as part of republican justice in India started in 1938
when he was Congress President, Netaji Subhas Bose, with the collaboration of the physicist and mathematician,
Meghnad Saha, gave us a glimpse of all that planning for the long term, by an independent and transparent

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apex, could do for an India of the future. In his presidential address at the Haripura session of the Congress
in February 1938, Netaji envisaged "the first task of the Government of Free India" as being the setting up
of a "National Planning Commission" in order to address the task of fighting poverty. He created what was,

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in effect, the nucleus for the future Union Planning Commission in the National Planning Committee under
the aegis of the Indian National Congress, with Jawaharlal Nehru as the first Chairman of the Committee.
NEED OF PLANNING
Socio-economic planning has been one of the most noteworthy inventions of the 20th century. Starting with
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the Soviet experiment in 1928, planning gradually swept over almost two-thirds of the entire world.
1. For developing countries, whether belonging to a democratic or an authoritarian political culture, planning
has been considered a prerequisite for balanced socio-economic development and a strategy for making
the best possible use of a available natural manpower, and financial as well as infrastructural resources.
There are continuing pressures on developing countries to accelerate the speed of development so that
the gap between the standard of living of their people and that of the developed countries is reduced at
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the fastest possible pace and consequently, they also emerge as dignified members of the international
community.
2. Even in the developed countries of the west, planning in one form or another, has remained an integral
part of their economic system. Only, it is termed "indicative" planning for it is expected to indicate the
direction of growth and not to dictate it. Developing countries like China (in late 1970s) and India (in
1990s) started using indicative planning also.
OBJECTIVES OF PLANNING
Indian planning, ever since its inception, has attempted to meet the following objectives of multi-faceted
development:
Securing an increase in national income.
Accelerating the planned rate of investment to enhance the proportion of actual investment to national
income.
Mitigating the inequalities of income and wealth and regulating the concentration of economic power.
Increasing the quantum of employment for the maximum possible utilization of manpower.
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Promoting development in agricultural, industrial and other sectors and striving to achieve inter-sectoral
development
Speeding up the development of relatively backward regions and promoting balanced regional development.
Reducing, in a progressive manner, incidence of poverty by providing food, work and productivity to the
people below the poverty-line.
Modernization of the economy through effecting shifts, in the sectoral composition of production
diversification of activities, advancement in technology and institutional innovation.
TYPES OF PLANNING
There have been several experiments in planning in India. The different types of planning that one come across
while talking about planning in India are discussed below.
Indicative Planning
Indicative planning was adopted since 8th five year plan which is driven by liberalization of the Indian
economy and the private sector being given a role on par with or more than that of the government in

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quantitative terms. State would turn its role into a facilitator from that of a controller and regulator.
It was decided that trade and industry would be increasingly freed from government control and that planning
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in India should become more and more indicative and supportive in nature. In other words, the remodeling of
economic growth necessitated recasting the planning model from imperative and directive ('hard') to indicative
(soft) planning. Since the Government did not contribute the majority of the financial allocation, it had to
indicate the policy direction to the corporate sector and encourage them to contribute to plan targets. Government
should create the right policy climate - predictable, irreversible and transparent - to help the corporate sector
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contribute resources for the plan.

Indicative planning is to assist the private sector with information that is essential for its operations regarding
priorities and plan targets. Here, the Government and the corporate sector are more or less equal partners and
together are responsible for the accomplishment of planning goals. Government, unlike earlier, contributes less
than 50% of the financial resources. Government provides the right type of policies and crates the right type
of milieu for the private sector-including the foreign sector to contribute to the results.
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Indicative planning gives the Government an opportunity to give the private sector encouragement to achieve
growth in areas where the country has inherent strengths. It is known to have brought Japan results in shifting
towards microelectronics. In France, too indicative planning was in vogue.
Planning Commission would work on building a long-term strategic vision of the future. The concentration
would be on anticipating future trends and evolving strategies for competitive international standards. Planning
will largely be indicative and the public sector would be gradually withdrawn 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". The state has to play more of a facilitating role. This point is
particularly stressed in the development strategy of the Tenth Five Year Plant (2002-2007)
Rolling Plan
It was adopted in India in 1962, in the aftermath of Chinese attack on India, in the Defence Ministry in India.
Professor Gunnar Mrydal (author of the more famous book 'Asian Drama') recommended it for developing
countries in his book Indian Economic Planning in Its Broader Setting.
In this type, every year three new plans are made and implemented - annual plan that includes annual budget;
three-four-five plan that is changed every year in response to the economic demands; and perspective plan for
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10 or 15 years into which the other two plans are dovetailed annually. Rolling plan becomes necessary in
circumstances that are fluid.
Financial Planning
Here, physical targets are set in line with the available financial resources. Mobilization and setting expenditure
pattern of financial resources is the focus in this type of planning.
Physical planning
Here, the output targets are prioritized with inter-sect oral balance. Having set output targets, the finances are
raised.

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 Economy

FIVE YEAR PLANS

Plan Objectives and Achievements
First Plan (1951-56) It was based on Harrod-Domar Model.
Target Growth: 2.1% Influx of refugees, severe food shortage & mounting inflation confronted
Actual Growth 3.6% the country at the onset of the first five year Plan.
The Plan Focussed on agriculture, price stability, power and transport
It was a successful plan primarily because of good harvests in the last
two years of the plan. Objectives of rehabilitation of refugees, food self
sufficiency & control of prices were more or less achieved.
Second Plan (1956-61) Simple aggregative Harrod Domar Growth Model was again used for

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Target Growth: 4.5% overall projections and the strategy of resource allocation to broad sectors
Actual Growth: 4.3% as agriculture & Industry was based on two & four sector Model prepared
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by Prof. P C Mahalanobis. (Plan is also called Mahalanobis Plan).
Second plan was conceived in an atmosphere of economic stability . It
was felt agriculture could be accorded lower priority.
The Plan Focussed on rapid industrialization- heavy & basic industries.
Advocated huge imports through foreign loans.
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The Industrial Policy 1956 was based on establishment of a socialistic

pattern of society as the goal of economic policy.
Acute shortage of forex led to pruning of development targets , price
rise was also seen ( about 30%) vis a vis decline in the earlier Plan & the
2nd FYP was only moderately successful.
Third Plan (1961-66) At its conception, it was felt that Indian economy has entered a take-
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Target Growth: 5.6%
Actual Growth: 2.8%
Three Annual Plans
(1966-69) euphemistically
described as Plan holiday.
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off stage. Therefore, its aim was to make India a 'self-reliant' and 'self-
generating' economy.
Based on the experience of first two plans (agricultural production was
seen as limiting factor in Indias economic development) , agriculture
was given top priority to support the exports and industry.
The Plan was thorough failure in reaching the targets due to unforeseen
events - Chinese aggression (1962), Indo-Pak war (1965), severe drought
1965-66. Due to conflicts the approach during the later phase was shifted
from development to defence & development.
Failure of Third Plan that of the devaluation of rupee( to boost exports)
along with inflationary recession led to postponement of Fourth FYP.
Three Annual Plans were introduced instead. Prevailing crisis in agriculture
and serious food shortage necessitated the emphasis on agriculture during
the Annual Plans.
During these plans a whole new agricultural strategy was implemented.
It involving wide-spread distribution of high-yielding varieties of seeds,
extensive use of fertilizers, exploitation of irrigation potential and soil
conservation.

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During the Annual Plans, the economy absorbed the shocks generated
during the Third Plan
It paved the path for the planned growth ahead.
Fourth Plan (1969-74) Refusal of supply of essential equipments and raw materials from the
Target Growth: 5.7% allies during Indo Pak war resulted in twin objectives of growth with
Actual Growth: 3.3% stability and progressive achievement of self reliance for the Fourth
Plan.
Main emphasis was on growth rate of agriculture to enable other sectors
to move forward . First two years of the plan saw record production. The
last three years did not measure up due to poor monsoon. Implementation
of Family Planning Programmes were amongst major targets of the
Plan.
Influx of Bangladeshi refugees before and after 1971 Indo-Pak war was

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an important issue along with price situation deteriorating to crisis
proportions and the plan is considered as big failure.
Fifth Plan (1974-79)
Target Growth: 4.4%
Actual Growth: 4.8%

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The final Draft of fifth plan was prepared and launched by D.P. Dharin
the backdrop of economic crisis arising out of run-away inflation fuelled
by hike in oil prices and failure of the Govt. takeover of the wholesale
trade in wheat.
It proposed to achieve two main objectives: 'removal of poverty' (Garibi
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Hatao) and 'attainment of self reliance'
Promotion of high rate of growth, better distribution of income and
significant growth in the domestic rate of savings were seen as key
instruments
Due to high inflation, cost calculations for the Plan proved to be
completely wrong and the original public sector outlay had to be revised
upwards. After promulgation of emergency in 1975, the emphasis shifted
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to the implementation of Prime Ministers 20 Point Programme. FYP

was relegated to the background and when Janta Party came to power
in 1978, the Plan was terminated.
Rolling Plan (1978-80) There were 2 Sixth Plans. Janta Govt. put forward a plan for 1978-1983
emphasising on employment, in contrast to Nehru Modelwhich the Govt
criticised for concentration of power, widening inequality & for mounting
poverty. However, the government lasted for only 2 years. Congress
Govt. returned to power in 1980 and launched a different plan aimed at
directly attacking on the problem of poverty by creating conditions of
an expanding economy.
Sixth Plan (1980-85) The Plan focussed on Increase in national income, modernization of
Target Growth: 5.2% technology, ensuring continuous decrease in poverty and unemployment
Actual Growth: 5.7% through schemes for transferring skills(TRYSEM) and seets(IRDP) and
providing slack season employment (NREP), controlling population
explosion etc. Broadly, the sixth Plan could be taken as a success as
most of the target were realised even though during the last year (1984-
85) many parts of the country faced severe famine conditions and
agricultural output was less than the record output of previous year.
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 Seventh Plan (1985-90) The Plan aimed at accelerating food grain production, increasing employ-
Target Growth: 5.0% ment opportunities & raising productivity with focus on food, work &
Actual Growth: 6.0% productivity.
The plan was very successful as the economy recorded 6% growth rate
against the targeted 5% with the decade of 80s struggling out of the
Hindu Rate of Growth.
Eighth Plan The eighth plan was postponed by two years because of political
(1992-97) uncertainty at the Centre
Target Growth 5.6% Worsening Balance of Payment position, rising debt burden, widening
Actual Growth 6.8% budget deficits, recession in industry and inflation were the key issues
during the launch of the plan.
The plan undertook drastic policy measures to combat the bad economic
situation and to undertake an annual average growth of 5.6% through
introduction of fiscal & economic reforms including liberalisation under

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the Prime Minister ship of Shri P V Narasimha Rao.
Some of the main economic outcomes during eighth plan period were
rapid economic growth (highest annual growth rate so far 6.8%), high
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growth of agriculture and allied sector, and manufacturing sector, growth
in exports and imports, improvement in trade and current account deficit.
High growth rate was achieved even though the share of public sector in
total investment had declinedconsiderably to about 34%.
Ninth Plan (1997-2002) The Plan prepared under United Front Government focussed on Growth
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Target Growth: 6.5% With Social Justice & Equality Ninth Plan aimed to depend
Actual Growth: 5.4% predominantly on the private sector Indian as well as foreign (FDI) &
State was envisaged to increasingly play the role of facilitator &
increasingly involve itself with social sector viz education, health etc and
infrastructure where private sector participation was likely to be limited.
It assigned priority to agriculture & rural development with a view to
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generate adequate productive employment and eradicate poverty

Tenth Plan (2002-2007) Recognising that economic growth cant be the only objective of national
Target Growth 8% plan, Tenth Plan had set monitorable targets for few key indicators (11)
Actual Growth 7.6 % of development besides 8 % growth target. The targets included reduction
in gender gaps in literacy and wage rate, reduction in Infant & maternal
mortality rates, improvement in literacy, access to potable drinking water
cleaning of major polluted rivers, etc. Governance was considered as
factor of development & agriculture was declared as prime moving force
of the economy. States role in planning was to be increased with greater
involvement of Panchayati Raj Institutions. State wise break up of targets
for growth and social development sought to achieve balanced
development of all states.
Eleventh Plan (2007-2012) Eleventh Plan was aimed Towards Faster & More Inclusive Growth
Target Growth 9% after UPA rode back to power on the plank of helping Aam Aadmi
Actual Growth 8% (common man).
India had emerged as one of the fastest growing economy by the end
of the Tenth Plan. The savings and investment rates had increased,
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industrial sector had responded well to face competition in the global

economy and foreign investors were keen to invest in India. But the
growth was not perceived as sufficiently inclusive for many groups,
specially SCs, STs & minorities as borne out by data on several dimensions
like poverty, malnutrition, mortality, current daily employment etc.
The broad vision for 11th Plan included several inter related components
like rapid growth reducing poverty & creating employment opportunities,
access to essential services in health & education, specially for the poor,
extension if employment opportunities using National Rural Employment
Guarantee Programme , environmental sustainability, reduction of gender
inequality etc. Accordingly various targets were laid down like reduction
in unemployment( to less than 5% among educated youth) & headcount
ratio of poverty ( by 10%), reduction in drop out rates, gender gap in

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literacy, infant mortality, total fertility, malnutrition in age group of 0-3
(to half its present level), improvement in sex ratio, forest & tree cover,

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air quality in major cities, ensuring electricityconnection to all villages &
BPL households (by 2009) & reliable power by end of 11th Plan, all
weather road connection to habitations with population 1000& above
(500 in hilly areas) by 2009, connecting every village by telephone &
providing broad band connectivity to all villages by 2012
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The Eleventh Plan started well with the first year achieving a growth rate
of 9.3 per cent, however the growth decelerated to 6.7 per cent rate in
2008-09 following the global financial crisis. The economy recovered
substantially to register growth rates of 8.6 per cent and 9.3 per cent in
2009-10 and 2010-11 respectively. However, the second bout of global
slowdown in 2011 due to the sovereign debt crisis in Europe coupled
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with domestic factors such as tight monetary policy and supply side
bottlenecks, resulted in deceleration of growthto 6.2 per cent in 2011-12.
Consequently, the average annual growth rate of Gross Domestic Product
(GDP) achieved during the EleventhPlan was 8 per cent, which was
lower than the target but better than the Tenth Plan achievement. Since
the period saw two global crises -one in 2008 and another in 2011 the
8 per cent growth may be termed as satisfactory. The realised GDP
growth rate for theagriculture, industry and services sector during the
11th Plan period is estimated at 3.7 per cent, 7.2 per cent and 9.7 per
cent against the growth target of 4 per cent, 10-11 per cent and 9-11 per
cent respectively.
The Eleventh Plan set a target of 34.8 per cent for domestic savings and
36.7 per cent for investment after experiencing a rising level of domestic
savings as well as investment and especially after emergence of structural
break during the Tenth Plan period. However, the domestic savings and
investment averaged 33.5 per cent and 36.1 per cent of GDP at market
prices respectively in the Eleventh Plan which is below the target but not
very far.
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 Based on the latest estimates of poverty released by the Planning
Commission, poverty in the country has declined by 1.5 percentage
points per year between 2004-05 and 2009-10.The rate of decline during
the period 2004-05 to 2009-10 is twice the rate of decline witnessed
during the period 1993-94 to 2004-05. Though the new poverty count
based on Tendulkar Formula has been subject of controversy, it is believed
by the Committee that whether we use the old method or the new, the
decline in percentage of population below poverty line is almost same.
On the fiscal front, the expansionary measures taken by the government
to counter the effect fo global slowdown led to increase in key indicators
through 2009-10 with some moderation thereafter.
The issue of Price Stability remained resonating for more than half of the
Plan period. Inability to pass on burden on costlier imported oil prices
might have constrained the supply of investible funds in the governments

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hand causing the 11th Plan to perform at the levels below its target.
Twelfth Monitorable Targets of the Plan:
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(2012-17) 25 core indicators- Twenty Five core indicators listed below reflect the
Targets: Faster, vision of rapid, sustainable & more inclusive growth of the twelfth Plan:
Sustainable, and Economic Growth
More Inclusive Growth. 1. Real GDP Growth Rate of 8.0 per cent.
2. Agriculture Growth Rate of 4.0 per cent.
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3. Manufacturing Growth Rate of 10.0 per cent.

4. Every State must have an average growth rate in the Twelfth Plan
preferably higher than that achieved in the Eleventh Plan.
Poverty and Employment
5. Head-count ratio of consumption poverty to be reduced by 10 percentage
pointsover the preceding estimates by the end of Twelfth FYP.
6. Generate 50 million new work opportunities in the non-farm sector and
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provide skill certification to equivalent numbers during the Twelfth FYP.

Education
7. Mean Years of Schooling to increase to seven years by the end of
Twelfth FYP.
8. Enhance access to higher education by creating two million additional
seats for each age cohort aligned to the skill needs of the economy.
9. Eliminate gender and social gap in school enrolment (that is, between
girls and boys, and between SCs, STs, Muslims and the rest of the
population) by the end of Twelfth FYP.
Health
10. Reduce IMR to 25 and MMR to 1 per 1,000 live births, and improve
Child Sex Ratio (06 years) to 950 by the end of the Twelfth FYP.
11. Reduce Total Fertility Rate to 2.1 by the end of Twelfth FYP.
12. Reduce under-nutrition among children aged 03 years to half of the
NFHS-3 levels by the end of Twelfth FYP
Infrastructure, Including Rural Infrastructure
13. Increase investment in infrastructure as a percentage of GDP to 9 per
cent by the end of Twelfth FYP.
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14. Increase the Gross Irrigated Area from 90 million hectare to 103 million
hectare by the end of Twelfth FYP.
15. Provide electricity to all villages and reduce AT&C losses to 20 per cent
by the end of Twelfth FYP.
16. Connect all villages with all-weather roads by the end of Twelfth FYP.
17. Upgrade national and state highways to the minimum two-lane standard
by the end of Twelfth FYP
18. Complete Eastern and Western Dedicated Freight Corridors by the end
of Twelfth FYP
19. Increase rural tele-density to 70 per cent by the end of Twelfth FYP.
20. Ensure 50 per cent of rural population has access to 40 lpcd piped
drinking water supply, and 50 per cent gram panchayats achieve Nirmal

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Gram Status by the end of Twelfth FYP.
Environment and Sustainability
21. Increase green cover (as measured by satellite imagery) by 1 million

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hectare every year during the Twelfth FYP.
22. Add 30,000 MW of renewable energy capacity in the Twelfth Plan
23. Reduce emission intensity of GDP in line with the target of 20 per cent
to 25 per cent reduction over 2005 levels by 2020.
Service Delivery
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24. Provide access to banking services to 90 per cent Indian households by
the end of Twelfth FYP.
25. Major subsidies and welfare related beneficiary payments to be shifted
to a direct cash transfer by the end of the Twelfth Plan, using the
Aadhar platform with linked bank accounts.
Inclusiveness is to be achieved through
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poverty reduction
promoting group equality
Regional balance
Reducing inequality,
Empowering people etc
Sustainability is to be achieved through
Ensuring environmental sustainability
Development of human capital through improved health, education, skill
development, nutrition, information technology etc.
Development of institutional capabilities, infrastructure like power
telecommunication, roads, transport etc.
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NITI AAYOG
India has undergone a paradigm shift over the past six decades - politically, economically, socially, technologically
as well as demographically. The role of Government in national development has seen a parallel evolution.
Keeping with these changing times, the Government of India has decided to set up NITI Aayog (National
Institution for Transforming India), in place of the erstwhile Planning Commission, as a means to better serve
the needs and aspirations of the people of India. The new institution will be a catalyst to the developmental
process; nurturing an overall enabling environment, through a holistic approach to development going beyond
the limited sphere of the Public Sector and Government of India.
The NITI Aayog will comprise the following:
a. Prime Minister of India as the Chairperson

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b. Governing Council comprising the Chief Ministers of all the States and Lt. Governors of Union Territories
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c. Regional Councils will be formed to address specific issues and contingencies impacting more than one
state or a region. These will be formed for a specified tenure. The Regional Councils will be convened
by the Prime Minister and will comprise of the Chief Ministers of States and Lt. Governors of Union
Territories in the region. These will be chaired by the Chairperson of the NITI Aayog or his nominee.
d. Experts, specialists and practitioners with relevant domain knowledge as special invitees nominated by the
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Prime Minister
e. The full-time organizational framework will comprise of, in addition to the Prime Minister as the Chairperson:
i. Vice-Chairperson: To be appointed by the Prime Minister
ii. Members: Full-time
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iii. Part-time members: Maximum of 2 from leading universities research organizations and other relevant
institutions in an ex-officio capacity. Part time members will be on a rotational basis.
iv. Ex Officio members: Maximum of 4 members of the Union Council of Ministers to be nominated
by the Prime Minister.
v. Chief Executive Officer: To be appointed by the Prime Minister for a fixed tenure, in the rank of
Secretary to the Government of India.
vi. Secretariat as deemed necessary.
The NITI Aayog will aim to accomplish the following objectives and opportunities:
An administration paradigm in which the Government is an "enabler" rather than a "provider of first and
last resort."
Progress from "food security" to focus on a mix of agricultural production, as well as actual returns that
farmers get from their produce.
Ensure that India is an active player in the debates and deliberations on the global commons.
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Ensure that the economically vibrant middle-class remains engaged, and its potential is fully realized.
Leverage India's pool of entrepreneurial, scientific and intellectual human capital.
Incorporate the significant geo-economic and geo-political strength of the Non-Resident Indian Community.
Use urbanization as an opportunity to create a wholesome and secure habitat through the use of modern
technology.
Use technology to reduce opacity and potential for misadventures in governance.
The NITI Aayog aims to enable India to better face complex challenges, through the following:
Leveraging of India's demographic dividend, and realization of the potential of youth, men and women,
through education, skill development, elimination of gender bias, and employment.
Elimination of poverty, and the chance for every Indian to live a life of dignity and self-respect.
Reddressal of inequalities based on gender bias, caste and economic disparities.

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Integrate villages institutionally into the development process.

creation.
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Policy support to more than 50 million small businesses, which are a major source of employment

Safeguarding of our environmental and ecological assets.

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UNIVERSAL BASIC INCOME: A

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CONVERSATION

Context
A Universal Basic Income (UBI) is a periodic cash payment unconditionally
delivered to all on an individual basis. It is not an entitlement but a right by
virtue of being a citizen of a country. UBI is a step towards more equal society
as it would promote Social equity, reduce poverty directly, and reduce risks
related to unemployment, health etc. by providing a safety net. But, In India's

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context the most important benefit would be in terms of addressing
misallocation, exclusion and leakages which grapples plethora of schemes run
by government to root out poverty and inequality.

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Misallocation is due to administrative incapacity and inefficient delivery.
Exclusion is a natural consequence of misallocation and Leakages are due to
big and complex delivery system. UBI being delivered universally in bank
account would address all the three problems. Added benefits would include
increase in financial access due to increased volume of transaction which
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increases profitability of BC model of delivery. There are concerns that UBI
would lead to increase in conspicuous consumption and dropout from labour
market but studies have found no evidence in this regard.
However, survey chalks out legitimate concerns. The success of UBI hings on
success of JAM and still 1/3rd of adults don't have bank account. The state and
Centre need to agree on proportion of funding by each. Finally, taking away all
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schemes and benefits in lieu of UBI may not be politically feasible. The survey
talks about floating the UBI scheme in gradual manner as a way forward.

Technical Terms
A. Characteristics of UBI scheme
A basic income has the five following characteristics:
Periodic: it is paid at regular intervals (for example every month), not as a one-off grant.
Cash payment: Allowing those who receive it to decide what they spend it on. It is not, therefore, paid
either in kind (such as food or services) or in vouchers dedicated to a specific use.
Individual: It is paid on an individual basisand not, for instance, to households.
Universal: It is paid to all, without means test.
Unconditional: It is paid without a requirement to work or to demonstrate willingness-to-work.
B. JAM trinity - An abbreviation for Jan Dhan Yojana, Aadhaar and Mobile number. The government
is pinning its hopes on these three modes of identification to deliver direct benefits to Indias poor.
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Subsidies cost the exchequer quite a bit. Yet, only a part reaches the poor because of intermediaries,
leakages, corruption and inefficiencies. This is where the government hopes that the JAM trinity can
help. With Aadhaar helping in direct biometric identification of disadvantaged citizens and Jan Dhan
bank accounts and mobile phones allowing direct transfers of funds into their accounts, it may be
possible to cut out all the intermediaries.
C. Randomize control Trials - In order to test the effect of a variable on a given subject, the subjects
are divided into two groups with similar characteristics then the variable is introduced into one group
and differences between two groups are studied to know impact of new variable. In UBI case it
means taking two similar households and giving UBI to one and observing difference between two
groups over a period of time.
D. How UBI does liberate citizens from paternalistic and clientelistic relationships with the state?
Clientelism is a political or social system based on the relation ofclientto patron with the client giving
political or financial support to a patron (as in the form of votes) in exchange for some special privilege
or benefit. Ex- voting for a party in exchange for future promised freebies. Because UBI would be
Universal this incentive would be killed

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Paternalism is the interference of a state or an individual with another person, against their will, and
defended or motivated by a claim that the person interfered with will be better off or protected from
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harm. UBI would be in cash so receiver could exercise his discretion to maximize his interests.

Gist of Economic Survey Chapter

Introduction
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Despite making remarkable progress in bringing down poverty from about 70 percent at independence to
about 22 percent in 2011-12 (Tendulkar Committee), it can safely be said that wiping every tear from
every eye is about a lot more than being able to imbibe a few calories. It is also about dignity, invulnerability,
self-control and freedom, and mental and psychological unburdening. From that perspective, Nehrus
exhortation that so long as there are tears and suffering, so long our work will not be over is very much
true nearly 70 years after independence.
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Idea of a radical option like UBI can be debated to achieve the above objective. UBI requires that every
person should have a right to a basic income to cover their needs, just by virtue of being citizens. But
there is a need to discuss and debate it pros and cons.
The Conceptual/Philosophical Case for UBI
It has three components: universality, unconditionality, and agency (by providing support in the form of
cash transfers to respect, not dictate, recipients choices) and shows a radical shift in thinking about social
justice and productive economy. It is based on idea that:
Just society needs to guarantee to each individual a minimum income, and
Which provides the necessary material foundation for a life with access to basic goods and a life of
dignity.
It provides various social, economic and administrative benefits to individuals, society and nation.
A. Social justice
It promotes many of the basic values of a society which respects all individuals as free and
equal. It promotes liberty because it is anti-paternalistic; it promotes equality by reducing poverty.
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B. Economic benefits
It promotes efficiency by reducing waste in government transfers.
System it may simply be the fastest way of reducing poverty.
UBI is also, paradoxically, more feasible in a country like India, where it can be pegged at
relatively low levels of income but still yield immense welfare gains.
They allow for more non-exploitative bargaining in labour market
C. Administrative benefits
A UBI is also practically useful. The circumstances that keep individuals trapped in poverty are
varied; the risks they face and the shocks they face also vary. The state is not in the best
position to determine which risks should be mitigated and how priorities are to be set and UBI
restores decision making with citizens.

E
By taking the individual and not the household as the unit of beneficiary, UBI can also enhance
agency, especially of women within households.

OR
In India the case for UBI has been enhanced because of the weakness of existing welfare
schemes which are riddled with misallocation, leakages and exclusion of the poor.
However, it is important to recognize that universal basic income will not diminish the need to build state
capacity: the state will still have to enhance its capacities to provide a whole range of public goods. UBI
is not a substitute for state capacity: it is a way of ensuring that state welfare transfers are more efficient
SC
so that the state can concentrate on other public goods.

The Conceptual Case Against UBI

From an economic point of view there are three principal and related objections to a universal basic
income.
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A. The first is whether UBI reduces the incentive to work, which is highly exaggerated because the
levels at which universal basic income are likely to be pegged are going to be minimal guarantees
at best;
B. The second concern is, should income be detached from employment? But that is already done India
in form of rich and privileged accepting non-work related income inherited from their parents. So,
receiving a small unearned income as it were, from the state should be economically and morally less
problematic than the panoply of unearned income our societies allow.
C. The third is a concern out of reciprocity. Should income be unconditional, with no regard to
peoples contribution to society? Answer to this is that individuals do contribute to society. UBI in
fact will recognize non-wage work by individuals like housewife.
D. Temptation Goods: Would A UBI Promote Vice?
Detractors of UBI argue that, as a cash transfer programme, this policy will promote conspicuous
spending or spending on social evils or temptation goods such as alcohol, tobacco etc.
But NSSO 2011-12 data shows that these goods form a smaller share of overall budget/
consumption as overall consumption increases. This provides an indication that an increase in
income from UBI alone will not necessarily lead to an increase in temptation goods consumption.
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E. Moral Hazard: Would A UBI reduce Labour Supply?

It is argued that free money makes people lazy and they drop out of the labour market because
their income levels have increased.
However controlled trials of government cash transfer programs in 6 developing countries
{Honduras, Morocco, Mexico, Philippines, Indonesia and Nicaragua where cash transfer formed
between 4 percent (Honduras) and 20 percent (Morocco) of household consumption.} find no
significant reduction in labour supply (inside and outside the household) for men or women
from the provision of cash transfers. Similar results were obtained from trials in Indian villages
from state of Madhya Pradesh.
F. Another important question why universal basic income and why not targeted direct transfers.

Arguments in Favour and Against UBI

E
OR
SC
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Counter arguments in favor of UBI

Despite all these arguments against UBI, there are various reasons which favor consideration of the idea
of universalisation of the schemes, like:
Universalization prevents misallocation and diversion of resources. This can be more understood by analyzing
the problems with present welfare schemes.
Large number of schemes:
India has large number of social welfare schemes. The Budget for 2016-17 indicates that there are
about 950 central sector and centrally sponsored sub-schemes in India accounting for about 5 percent
of the GDP by budget allocation. Considerable gains could be achieved in terms of bureaucratic
costs and time by replacing many of these schemes with a UBI.
Misallocation of resources across districts:
The poorest areas of the country often obtain a lower share of government resources when compared

E
to their richer counterparts. Under no scheme the poorest districts which have 40% of poor receive
40 percent of the total resources in fact, for the MDM and SBM, the share is under 25 percent.

OR
This misallocation results into errors or inclusion of wrong persons and exclusion of genuine
poor. An estimate of the exclusion error from 2011-12 suggests that 40 percent of the bottom 40
percent of the population are excluded from the PDS
UBI cannot only help in overcoming these above mentioned issues, but will provide other benefits.
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Brief history of targeting in India
Indias experience with targeted delivery of welfare programs has not been much encouraging. Targeted
delivery started in 1992 based on self-reporting income criteria to identify the poor. Later in 1997 and
2002 multidimensional criteria was used to identify poor. However, all these were not able to remove
the issues of manipulation and corruption, with the crowding out of the poor and the truly deserving
from BPL card ownership and leakages to the rich.
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Targeting was both inefficient and inequitable, a license to fraud that spawned an entire ecosystem of
middlemen and petty abuse. All this forced governments to look for alternatives like SECC (Socio
Economic Caste Census), which used automatic exclusion criteria to identify poor. Under Food
Security Act the coverage was enhanced to nearly 70% choosing to exclude easily identifiable well off.
All these indicate gradual move by governments towards universalization.
A. Improvement in Governance
Misallocation to districts with less poor will be tackled because resources will be directly transferred
to beneficiaries without involving bureaucratic hassles which result into misallocation.
It will also reduce exclusion errors. Because it is by design universal.
It will also reduce out of system leakages because JAM platform will be used to directly transfer
benefits to beneficiary accounts.
B. Insurance against risk
It is found that slightly more than 50 percent of rural households across India face idiosyncratic (individual
specific) shocks like bad health, job loss and aggregate shock like natural disaster and natural shock and
make them vulnerable to poverty. UBI can prevent such poverty trap.
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C. Psychological benefit
The World Development Report argues that individuals living in poverty have
a) A preoccupation with daily hassles and this results in a depletion of cognitive resources required for
important decisions;
b) Low self-image that tends to blunt aspirations;

An assured income could relieve mental space that was used to meet basic daily consumption needs to
be used for other activities such as skill acquisition, search for better jobs, etc,and will improve psychological
wellbeing.
D. Improved financial inclusion

Financial inclusion in India has progressed well under PMJDY, with ownership of bank accounts increasing
to 2/3rd of adults and active usage to 40%, with only states like Bihar, UP, Jharkhand being laggard.
However effective financial inclusion, in terms of active usage is constrained by two factors:

E
Physical distance separating people from these bank branches: which is around 4.5 Km from any
form of access point (ATM, BC, Bank etc)
OR
Number of persons per bank, which are very high in high population density like UP, Bihar etc. and
greater burden on banks.
UBI can help in improving both these situations.
SC

UBI will help increasing financial inclusion by increasing bank transactions, increasing business per
BC, reducing per unit fixed cost for BCs and thus increasing their numbers.
At 90% financial inclusion rate with UBI of INR 12,000/person/year and 1% commission for BCs
can reduce average distance from banking access point from 4.5Km to 2.5 Km and dramatically
improving financial inclusion.
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E. Access to formal credit

Absence of assured income is a constraint for accessing formal credit. UBI can help in overcoming it.
Debt and Investment Survey (2013) shows that
As one moves along the consumption spectrum, the proportion of farmers taking informal loans falls
and formal loans take over.
That there is sudden increase in median loan amounts from zero to sudden increase at 78th percentile
(INR 90,000/household/year).
It shows that if everybodys consumptions could be increased to this level, there might be significant jump
in access to formal credit. It also shows that as UBI amount increases more number of households will
have access to formal credit, as more number of households will cross 78th percentile limit.
However, it may also occur that income threshold of 78th percentile group an increase and dampening the
effect of UBI on releasing credit constraints.
A way forward depending upon the potential costs, fiscal space with governments can be analyzed and
possibilities found out.
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What would be the potential cost of UBI?

The cost of UBI on government finances will depend upon the targets chosen and number of assumption. Based
on 2011-12 poverty distribution and their consumption expenditure if a target poverty level of 0.45% is chosen,
with UBI of INR 7620 per year (it corresponds to the annual consumption of marginal poor, who is at 0.45%
threshold) and 75% coverage the financial cost of UBI will be 4.9% of GDP.

Fiscal space to Finance a UBI

If we look at the present government welfare programs which are shown in fig., we find that:
Subsidies for the non-poor/middle class households, equivalent to about 1 percent of GDP.

Fiscal Cost of Existing Central Government Programmes (2015-16)

E
OR
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The middle class subsidies equal to the cost of a UBI of INR 3240 per capita per year provided to all
females. This will cost a little over 1 percent of the GDP or, a little more than the cost of all the
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middle-class subsidies.
However, taking away subsidies to the middle-class is politically difficult for any government. It is clear
that while the fiscal space exists to start a de facto UBI, political and administrative considerations make
it difficult to do this without a clearer understanding of its larger economy-wide implications.

Guiding Principle for Setting up a UBI

A. De jure universality, de facto quasi-universality
Using automatic exclusion criterion like:
Ownership of key assets such as AC, automobiles
Adopt a give up scheme
Public display of UBI list, this would name and shame the rich who choose to avail themselves
of UBI.
Self-targeting: under this Develop a system where beneficiaries regularly verify them in order to avail
themselves of their UBI the assumption here is that the rich, whose opportunity cost of time is
higher, would not find it worth their while to go through this process and the poor would self-target
into the scheme. However, this run counters to the objective of JAM trinity.
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B. Gradualism

A guiding principle is gradualism: the UBI must be embraced in a deliberate, phased manner. A key
advantage of phasing would be that it allows reform to occur incrementally weighing the costs and
benefits at every step. This can be done in following ways:

C. Choice to persuade and to establish the principle of replacement, not additionally

Under this UBI is offered as a choice to beneficiaries of existing programs. Apart from having the
normal advantages of cost reduction, giving choice to beneficiaries it will give them greater negotiating
power with administrators, which will force latter to improve their performance.

However it will have its own disadvantages of enforcing current problems with targeting, continues
with the problem of misallocation with richer districts getting more, does not solve the problem of
wrong exclusion and inclusion and will be cumbersome to administer.

D. UBI for women

E
It is worth considering because women suffer worse prospects in almost every aspect of their daily
lives employment opportunities, education, health or financial inclusion. Simultaneously, the higher
OR
social benefits and the multi-generational impact of improved development outcomes for women.

A UBI for women can, therefore, not only reduce the fiscal cost of providing a UBI (to about half)
but have large multiplier effects on the household. It will increase their bargaining power; reduce
concerns of money being splurged on conspicuous goods and by factoring in children in household
higher UBI can be provided to women.
SC

However this has three problems of counting number of children, parents may go for more children and
identification & phasing out of boys after they reach 18 years of age.

E. Universalize across groups:

Certain groups like widows, old age, divyang etc can be included under UBI net under phase-1 because
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these groups are easily identifiable. However this may suffer from less access to bank accounts and not
part of JAM trinity.

F. UBI in urban areas:

Urban areas have proper banking infrastructure and as poor are less dependent on state for sustenance,
a disruptive step like UBI will not be that tricky in these areas.

Prerequisites for UBI

A. JAM

Financial inclusion is very necessary for success of UBI. In India considerable ground has been covered
for JAM preparedness but still a lot needs to be done.

1/3 of population is still without bank account and most of them belong to vulnerable social groups
like SC, ST, disabled etc.

Though 26.5 cr. Jan Dhan accounts have been opened, but linkages with Aadhar lags in J&K and
north east states.
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Though 1 billion Aadhar cards have issued, but there are instances of authentication failure in states
like Jharkhand (49% failure rates) and Rajasthan (having 37% failure rates), which results into
exclusion.
It is not clear, whether UBI will certainly result into fewer leakages. Given the amount of cash that will
flow through the system under the UBI and the fungible nature of money, one could imagine a perverse
equilibrium where the UBI results in greater capture by corrupt actors.

This, once again, reiterates the role of a transparent and safe financial architecture that is accessible to
all the success of the UBI hinges on the success of JAM.
B. Center-state negotiations

UBI amount, sharing between center and state will be very crucial for success of UBI. All these will
require complex negotiations between federal stakeholders.

E
Initially, a minimum UBI can be funded wholly by the center. The center can then adopt a matching grant
system wherein for every rupee spent in providing a UBI by the state, the center matches it.

Conclusion

OR
UBI is a powerful idea whose time even if not ripe for implementation is ripe for serious discussion. UBI
can help in wiping tears form all eyes, which Mahatma Gandhi dreamed of, but it would also have serious
consequences in form of
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Uncompensated reward harming responsibility and effort;

Effect on macro-economic stability of country; and

Recognizing exit problem in India, UBI may become another add-on government programme,which
would have come to mind of Mahatma Gandhi.
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Supplementary Reading
Left-wing views - Socialist and left-wing economists and sociologists have advocated a form of Universal
Basic Income (UBI) as a means for distributing the economic profits of publicly owned enterprises to
benefit the entire population (also referred to as a social dividend), where the basic income payment
represents the return to each citizen on the capital owned by society. Basic income as a project for
reforming capitalism into a socialist system by empowering labor in relation to capital, granting labor
greater bargaining power with employers in labor markets, which can gradually de-commodify labor by
decoupling work from income. Some thinkers view an income guarantee would benefit all workers by
liberating them from the anxiety that results from the tyranny of wage slavery and provide opportunities
for people to pursue different occupations and develop untapped potentials for creativity.
Right Wing View - For thinkers on the right, the UBI. seems like a simpler, and more libertarian,
alternative to the thicket of anti-poverty and social-welfare programs. For their part, right-wing advocates
of the UBI view it as a streamlined replacement for complicated welfare payments. For this reason,
Milton Friedman, an economist known for his laissez-faire beliefs, wanted to replace all welfare with a
simpler system that combined a guaranteed minimum income.
Debate in Europe - European Parliaments committee on Legal affairs (JURI) adopted a report on Civil
law rules on robotics which considers the legal and economic consequences of the rise of robots and
artificial intelligence devices. The report argues that development of robotics and AI may result in a large
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part of the work now done by humans being taken over by robots, so raising concerns about the future
of employment and the viability of social security systems, creating the potential for increased inequality
in the distribution of wealth and influence. To cope with those consequences, the report makes a strong
call for basic income.
On the other hand, in June 2016, Swiss voters overwhelmingly rejected a proposal to guarantee an income
to Switzerlands residents, whether or not they are employed, an idea that has also been raised in other
countries amid an intensifying debate over wealth disparities and dwindling employment opportunities.
Switzerland was the first country to vote on such a universal basic income plan, but other countries and
cities either have been considering the idea or have started trial programs. Finland has introduce a pilot
program for a random sample of about 10,000 adults who will each receive a monthly handout of 550
euros, about $625. The intent is to turn the two-year trial into a national plan if it proves successful.
Views from Experts : The Indian Statistical Institute hosted its 12th Annual Conference on Economic
Growth and Development (ACEGD) on December 19-21, 2016. ACEGDs plenary sessions included a
90-minute panel on universal basic income and its relevance for India.

E
This conference included a panel on UBI, featuring five economists: Debraj Ray (New York University),
Kalle (Karl Ove) Moene (University of Oslo), Rajiv Sethi (Columbia University), Himanshu (Jawaharlal
Nehru University), and Amarjeet Sinha (Government of Bihar).
OR
Ray and Moene have jointly developed a proposal for what they call a universal basic share (UBS) in
India. Like a UBI, a UBS would provide each citizen with regular unconditional cash transfers of an equal
amount. However, in contrast to most UBI proposals, a UBS fixes the amount of these transfers to a
fraction of the GDP rather than a specific monetary amount. Ray and Moene recommend that India
dedicate 12% of its GDP to the provision of a UBS. They calculate that, at present, this would provide
SC

each adult citizen with a basic income approximately equal to the countrys poverty line.
The last two panelists, Himanshu and Sinha, argue that India should prioritize public spending on universal
basic services, rather than simply distributing cash to individuals. About UBI, Himanshu states that the
question is not whether it should be adopted, but why and when. While allowing that UBI is a good idea
in principle, he maintains that it is not yet time to introduce such a policy in India, given that many in
the country lack clean water, access to education, and other essential public goods. Sinha, expanding on
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Himanshus thesis, stresses that we should not lose sight of the need to craft credible public systems
and worries that a UBI would divert money and attention from necessary improvements of education,
health, housing, and public infrastructure.
Relevant Questions
1. What do you understand by UBI? Is implementation of UBI is feasible for a developing country like
India? What probable strategies can be adopted for implementing UBI?
2. Has targeted programs been able to deliver desired results in India? If not, then what changes should
be implemented to ensure efficient delivery through various welfareprograms?
3. Critically analyze, whether introduction of UBI, be considered as culmination of continuous subsidy
reforms that are being implemented for past 15 years?
4. Despite improvement in delivery of targeted schemes in past decade, there is a case for UBI.
Comment
5. What could be possible hindrances in implementing UBI? Can it be implemented universally in
India? If not, then what could be some practical solutions?
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START UP INDIA SCHEME

Government of India has launched the Start-Up India initiative which aimed at promoting entrepreneurial
culture in the country. Start-up India Action Plan was unveiled providing a slew of incentives for the
youth to become job creators rather than job seekers.
According to the government notification, an entity will be identified as a startup.
a) Till up to five years from the date of incorporation.
b) If its turnover does not exceed 25 crores in the last five financial years.

E
c) It is working towards innovation, development, deployment, and commercialization of new products,
processes, or services driven by technology or intellectual property.

a)
Start-up India Action Plan highlights are:
OR
Compliance Regime based on Self-Certification: There are provisions of self certification to comply with
various labour and environment laws such as Contract Labour (Regulation and Abolition) Act, 1970 or
Air (Prevention & Control of Pollution) Act, 1981 etc. It has been done to reduce the regulatory burden
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on Startups thereby allowing them to focus on their core business and keep compliance cost low.
b) Mobile App & Portal: The government has proposed to create a single window web portal or Mobile App
for purpose of registration of start-ups, tracking status of registration, Filing compliances for various
clearances/approvals, applying for various schemes or collaborating with various Startup ecosystem partners
etc.
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c) Fast-tracking Patent Examination at Lower Costs: For effective implementation of the scheme, a panel
of "facilitators" shall be empanelled by the Controller General of Patents, Designs and Trademarks
(CGPDTM), who shall also regulate their conduct and functions. The government will bear entire facilitation
costs and startups have to pay only statutory fees for patent registration. Startups shall be provided an
80% rebate in filing of patents as compared to other companies.
d) Faster Exit for Startups: In terms of the Insolvency and Bankruptcy Bill 2015 (IBB) which has been
tabled in Lok Sabha, Startups with simple debt structures or those meeting such criteria as may be
specified may be wound up within a period of 90 days from making of an application for winding up
on a fast track basis.
e) Funding: Under Start-up India scheme, government will set up a fund with an initial corpus of Rs 2500
Cr and total corpus of Rs 10000 Cr for next 4 years. The Fund will be in the nature of Fund of Funds,
which means that it will not invest directly into Startups, but shall participate in the capital of SEBI
registered Venture Funds.
f) Tax Benefits: Start-ups shall be exempted from income tax for a period of first 3 years.
g) Atal Innovation Mission (AIM) and SETU: The AIM has launched with Start-up India scheme. It has two
main functions that are as follows:
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Entrepreneurship promotion through Self-Employment and Talent Utilization (SETU), wherein

innovators would be supported and mentored to become successful entrepreneurs. Establishment of
500 Tinkering Labs, Pre-incubation training, Strengthening of incubation and Seed funding are some
examples of entrepreneurship promotion.
Innovation promotion: to provide a platform where innovative ideas are generated such as Institution
of Innovation Awards (3 per state/UT) and 3 National level awards etc.
h) Govt will create innovation or Start-up centres at national institutes such as IITs, NITs or IIITs with various
facilities like incubation, etc.

E
OR
SC
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STAND UP INDIA SCHEME

The Govt of India has recently approved the "Stand up India Scheme" to promote entrepreneurship
among SC/ST and Women entrepreneurs.
The Scheme is intended to facilitate at least two such projects per bank branch, on an average one for
each category of entrepreneur.
The scheme aims to benefit at least 2.5 lakh women and SC/ST entrepreneurs. The scheme has target
of 2.5 lakh loan approvals within 36 months.
The Stand Up India Scheme provides for:

E
a) Refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount

OR
of Rs. 10,000 crore.
b) Creation of a credit guarantee mechanism through the National Credit Guarantee Trustee Company
(NCGTC).
c) Handholding support for borrowers both at the pre loan stage and during operations. This would include
SC
increasing their familiarity with factoring services, registration with online platforms and e-market places
as well as sessions on best practices and problem solving.
The overall intent of the approval is to leverage the institutional credit structure to reach out to these
under-served sectors of the population by facilitating bank loans repayable up to 7 years and between Rs.
10 lakh to Rs. 100 lakh for greenfield enterprises in the non farm sector set up by such SC, ST and
Women borrowers.
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The loan under the scheme would be appropriately secured and backed by a credit guarantee through a
credit guarantee scheme for which Department of Financial Services would be the settler and National
Credit Guarantee Trustee Company Ltd. (NCGTC) would be the operating agency.
Margin money of the composite loan would be up to 25%. Convergence with state schemes is expected
to reduce the actual requirement of margin money for a number of borrowers. o Over a period of time,
it is proposed that a credit history of the borrower be built up through Credit Bureaus.
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TERMINOLOGIES ASSOCIATED
WITH START UP FUNDS
Seed capital/Seeding:
It is a form of securities offering in which an investor invests capital in exchange for an equity stake in the
company. Seed capital is the initial capital used when starting a business, often coming from the founders'
personal assets, friends or family, for covering initial operating expenses and attracting venture capitalists. This
type of funding is often obtained in exchange for an equity stake in the enterprise, although with less formal
contractual overhead than standard equity financing. Because banks and venture capital investors view seed
capital as an "at risk" investment by the promoters of a new venture, capital providers may wait until a
business is more established before making larger investments of venture capital funding.
Seed Stock:

E
An investment security that is based on shares of a publicly traded, agriculture-based company is involved in
plant research and development. A seed stock is any stock that represents a company that researches and
OR
produces seeds for planting crops and develops new seed products to increase farmers' yields or otherwise
improve seed performance.
Angle investors:
They are an affluent individual who provides capital for a business start-up, usually in exchange for convertible
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debt or ownership equity. A small but increasing number of angel investors invest online through equity crowd
funding or organize themselves into angel groups or angel networks to share research and pool their investment
capital, as well as to provide advice to their portfolio companies.
Incubators:
They work with startups to develop entrepreneurial skills such as building a business around an idea, creating
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and testing a prototype and understanding the market. Incubator programmes can be relatively long-term - over
a year.
Accelerators:
They offer usually shorter and more intense programmes to hone in on the business model, the market
opportunity and the product.
Co-working:
These spaces are shared offices that typically have open space and offer desk space as well as other facilities
such as administrative help or services such as couriers. In addition, there may be formal or informal networks
of mentors or entrepreneurs based at the co-working space. India's largest cities have a number of co-working
spaces.
Notes