Indian Economy Quiz: Five Year Plans & Economic reforms|25 Feb, 2021

The fifth Plan (1974–79) has its focus on poverty alleviation and self-reliance. The Janata Party came to power with a thumping victory in 1977.

As the government of the time had then complete say in the central planning in India, how could the new government continue with the Fifth Plan of the last government which had still more than one year to reach its completion.

Source: TMH Ramesh Singh

The District Rural Development Agency (DRDA) has traditionally been the principal organ at the District level to oversee the implementation of different poverty alleviation programmes. The Centre established DRDA in 1980.

Source: TMH Ramesh Singh

The Service Area Approach (SAA) introduced in April 1989 (7^th five-year plan) for planned and orderly development of rural and semi-urban areas was applicable to all scheduled commercial banks including Regional Rural Banks.

• Under SAA, each bank branch in rural and semi-urban area was designated to serve an area of 15 to 25 villages and the branch was responsible for meeting the needs of bank credit of its service area.
• The primary objective of SAA was to increase productive lending and forge effective linkages between bank credit, production, productivity and increase in income levels.
• The SAA scheme was reviewed from time to time and appropriate changes were made in the scheme to make it more effective.

Source: TMH Ramesh Singh

The effective tax rate is the average tax rate paid by an individual or a corporation.

• The effective tax rate for individuals is the average rate at which their earned income, such as wages, and unearned income, such as stock dividends, is taxed.
• The effective tax rate for a corporation is the average rate at which its pre-tax profits are taxed, while the statutory tax rate is the legal percentage established by law.
• The effective tax rate is a more accurate representation of a person’s or corporations overall tax liability than their marginal tax rate, and it is typically lower.
• When considering a marginal versus an effective tax rate, bear in mind that the marginal tax rate refers to the highest tax bracket into which their income falls.

Source: Sriram’s IAS

The second five-year plan period was 1956–61. The strategy of growth laid emphasis on rapid industrialization with a focus on heavy industries and capital goods.

• The plan was developed by Professor Mahalanobis.
• Due to the assumption of a closed economy, shortages of food and capital were felt during this Plan.

Source: TMH Ramesh Singh

The fourth five-year Plan period was 1969–74.

• The Plan was based on the Gadgil strategy with special focus to the ideas of growth with stability and progress towards self-reliance.
• Droughts and the Indo-Pak War of 1971–72 led the economy to capital diversions creating financial crunch for the Plan.

Source: TMH Ramesh Singh

The rolling plan was introduced by the Janata party which formed a government led by Moraarji Desai.

• The rolling plan rejected the Fifth five-year Plan of the preceding Congress government and then launched the rolling plan that could be revised as per the needs of the economy due to the inherent flexibility in the plan.
• Frequent revision of targets reduced accountability and also adversely affected the stability in the economy.

Source: TMH Ramesh Singh

Washington Consensus is a collective term used for 10 economic policy prescriptions (economic reforms) as a part of a “standard” reform package promoted for crisis-wracked developing countries.

Washington Consensus was advocated by Washington, D.C.-based institutions viz. International Monetary Fund (IMF), World Bank, and the US Treasury Department.

Source: TMH Ramesh Singh

The Extended Fund Facility is lending facility of the Fund of the IMF and it was established in 1974 to help countries address medium- and longer-term balance of payments problems.

• The EFF is prescribed for a country who is suffering from balance of payment problem caused by structural weaknesses and who need fundamental economic reforms.
• The use of the facility has increased substantially in the recent crisis period.

Source: TMH Ramesh Singh

Privatization is the process of transferring an enterprise or industry from the public sector to the private sector.

• The public sector is the part of the economic system that is run by government agencies.
• Privatization may involve either sale of government-held assets or removal of restrictions preventing private individuals and businesses from participating in a given industry.
• Privatization is an ongoing trend in many parts of the developed and developing world. Proponents of privatization maintain that the competition in the private sector fosters more efficient practices, which eventually yield better service and products, lower prices and less corruption.

Source: TMH Ramesh Singh