Mobilization of Resources for Plan Implementation part 10

 Okay, here are structured notes from the Telugu audio explaining the mobilization of resources for India's Five-Year Plans.

Subject: Indian Economy - Planning & Budget

Topic: Mobilization of Resources for Plan Implementation (ప్రణాళికల అమలుకై వనరుల సమీకరణ)

Context:

• Previous video discussed Paper Plans (కాగితపు ప్రణాళికలు).

• Planning Commission (ప్రణాళికా సంఘం) implemented 12 Five-Year Plans (పంచవర్ష ప్రణాళికలు).

• NITI Aayog replaced Five-Year Plans with long-term strategies (దీర్ఘకాలిక వ్యూహాలు).

• Huge amounts (lakhs of crores of rupees) were spent on the 12 plans.

• The question is: Where did this money come from?

Sources of Funding for Plans:
The funds were mobilized from three main sources:

1. Domestic Resources (దేశీయ వనరులు): Resources generated within the country.

   • Current Revenue Surplus (కరెంట్ రెవెన్యూలో మిగులు): When the government's revenue receipts exceed its revenue expenditure in a year.

     • Budget Terms:

       • Revenue (రాబడులు): Government income. Two types: Revenue Receipts (రెవెన్యూ రాబడి) and Capital Receipts (మూలధన రాబడి).

       • Expenditure (వ్యయాలు): Government spending. Two types: Revenue Expenditure (రెవెన్యూ వ్యయం) and Capital Expenditure (మూలధన వ్యయం).

       • Revenue Receipts (రెవెన్యూ రాబడి): Income from taxes (పన్నుల ద్వారా) and non-tax sources (పన్నేతర రాబడి). (Example given: Income from imposing various taxes).

       • Revenue Expenditure (రెవెన్యూ వ్యయం): Spending on normal administration (సాధారణ పరిపాలన).

       • Current Revenue Surplus (ప్రస్తుత రెవెన్యూలో మిగులు): When Revenue Receipts > Revenue Expenditure for a specific year. This surplus amount is used for plans. (Example: Revenue Receipts 10,000 Cr, Revenue Expenditure 8,000 Cr, Surplus = 2,000 Cr).

   • Domestic Loans (దేశీయ రుణాలు): Borrowing from within the country.

     • Open Market Borrowings (బహిరంగ మార్కెట్ రుణాలు): Borrowing from the public, institutions, etc., through the market. (Managed by RBI on behalf of Govt).

       • Instruments:

         • Bonds (బాండ్లు): Long-term loan instruments (min 8+ years) issued by Central/State Govt, Govt companies, local bodies (మున్సిపల్ కార్పొరేషన్లు). They write these 'promissory notes' (రుణపత్రాలు) when taking long-term loans.

         • Securities (సెక్యూరిటీలు): Also loan instruments. Primarily purchased by banks. Banks are mandated to hold a portion of their deposits in liquid assets, including government securities (SLR). Banks participate in interest auctions to buy these. When banks buy securities, it's a loan to the government.

         • Treasury Bills (ట్రెజరీ బిల్లులు): Short-term loan instruments issued by the government (3 months, 6 months, 1 year).

     • Liabilities (లయబిలిటీస్): Funds accumulated from small savings schemes and similar sources.

       • Sources: Small savings (చిన్న మొత్తాల పొదుపులు) (e.g., Post Office schemes), Provident Fund (భవిష్యత్ జమలు) (PF deductions from govt employee salaries), National Saving Certificates (జాతీయ పొదుపు పత్రాలు).

       • These funds are held in the Public Account (పబ్లిక్ అకౌంట్).

       • Why 'Liabilities'? The government can use this money but has to repay it to the depositors when they demand it. It's treated as a borrowing the government can use anytime it needs funds from this account.

   • Profits of Public Sector Undertakings (ప్రభుత్వ రంగ సంస్థల లాభాలు): Profits earned by government-owned companies.

   • Additional Taxes (అదనపు పన్నులు): Increasing existing taxes or introducing new ones.

   • Increase in Prices of PSU Goods/Services (ప్రభుత్వ రంగ సంస్థల వస్తువుల ధరల పెంపు): Raising prices of goods/services provided by government entities to generate more revenue.

   • Fees and Penalties (ఫీజులు, పెనాల్టీలు): Income from imposing fees and penalties.

2. Foreign Resources (విదేశీ వనరులు): Resources received from outside the country.

   • Grants and Contributions (గ్రాంట్లు మరియు విరాళాలు):

     • Grants (గ్రాంట్లు): Financial aid received from more developed countries or countries with strong relations/support. Key feature: Not repayable. (Example: UK, Japan, USA giving grants to India). Can be used to influence foreign policy (developed nations give grants to place recipients in their 'grip').

     • Contributions / Donations (విరాళాలు): Financial aid received, often during times of natural disaster or hardship (భూకంపాలు, సునామీలు, ప్రకృతి వైపరీత్యాలు). Usually from smaller/less developed countries or from individuals/organizations abroad. Key feature: Not repayable. (Example: India giving donations to countries facing calamities).

     • Distinction: Grant implies aid from a more developed entity to a less developed one without repayment. Donation implies aid given during distress, regardless of development level, without repayment. Receiving grants or donations can sometimes compromise a nation's sovereignty in international forums.

   • External Debt (విదేశీ రుణాలు): Borrowing from foreign governments, international financial institutions (like IMF, World Bank), or foreign markets.

     • Key feature: Must be repaid with interest.

     • Why taken? Often lower interest rates than domestic loans, or needing foreign currency (forex) for imports (దిగుమతులు) when foreign exchange reserves (విదేశీ కరెన్సీ నిల్వలు / ఫారెక్స్) are low.

     • Risk: Can lead to an international debt trap (అంతర్జాతీయ రుణాల ఊబి). Need to make timely installment payments.

3. Deficit Financing (లోటు ద్రవ్య విధానము): Covering a budget deficit by borrowing directly from the central bank (RBI) via printing new money. (Also called Deficit Financing, Deficit Budgeting).

   • Occurs when Revenue < Expenditure, resulting in a Budget Deficit (బడ్జెట్ లోటు).

   • Method: Government borrows from RBI. RBI prints new currency to lend to the government.

   • Initial Instrument: Ad-hoc Treasury Bills (అడహాక్ ట్రెజరీ బిల్లులు). Government would issue these to RBI, and RBI would give money (print new money).

   • Sukhamoy Chakravarty Committee Recommendation (1997): Recommended stopping the direct borrowing from RBI via Ad-hoc T-Bills to control inflation.

   • Impact: From 1997 onwards (starting 9th Plan), the government largely stopped this direct borrowing. Instead, it focused on borrowing from the market (Domestic Loans, Foreign Loans) to cover deficits. The concept of 'Budget Deficit' as Revenue - Expenditure often became zero or minimal in budget presentations because market borrowings were included on the revenue (capital receipts) side.

   • Why is it (Generally) Bad? Printing new money without a corresponding increase in goods/services production increases the money supply, leading to inflation (ద్రవ్యోల్బణం). Prices rise because too much money is chasing too few goods.

   • When is it (Potentially) Used/Considered? During Economic Recession/Slowdown (ఆర్థిక మాంద్య కాలంలో). When there is low demand, unsold goods, company losses, and unemployment. Government spending (even via printed money) injects money into the economy, increases demand, and stimulates production.

   • Comparison with Inflation Period (ద్రవ్యోల్బణ కాలం): During inflation, the government tries to reduce money supply, often running a surplus budget (మిగులు బడ్జెట్) by spending less than revenue. During recession, it runs a deficit budget (లోటు బడ్జెట్) by spending more than revenue (funded by borrowing, including potentially printing money if allowed/necessary).

Related Budget Concepts (Introduced alongside Deficit Financing):

• Budget Deficit (బడ్జెట్ లోటు): Total Revenue - Total Expenditure. As mentioned, after 1997, this often showed zero/minimal due to accounting changes (including borrowings in revenue).

• Fiscal Deficit (కోశ లోటు / విత్త లోటు / ఆర్థిక లోటు / ద్రవ్య లోటు): Introduced as a key indicator from 1997 onwards. It represents the government's total borrowing requirement in a year. Calculated as Budget Deficit + Market Borrowings (as presented in the audio). It signifies the extent to which the government's expenditure exceeds its non-borrowing receipts. (I.e., Revenue Receipts + Capital Receipts excluding borrowings).

• Primary Deficit (ప్రాథమిక లోటు): Fiscal Deficit - Interest Payments (వడ్డీ చెల్లింపులు) on past loans. Shows how much the government is borrowing this year for this year's activities, excluding the burden of old debt servicing. (Example: Fiscal Deficit 40,000 Cr, Interest Payments 25,000 Cr, Primary Deficit = 15,000 Cr).

• Monetized Deficit (ద్రవ్యీకరించిన లోటు): The portion of the deficit covered by borrowing from the RBI (by printing money). This practice against Ad-hoc T-Bills was stopped in 1997. (The audio doesn't delve deep into the current forms of monetization, but clarifies the historical link to Ad-hoc T-Bills).

Usage of Sources Across Plans:

• A chart (partially described) indicates how much of each source was used in different plans.

• From the 10th Plan (starting 2002), 11th, and 12th Plans, 100% Domestic Resources (దేశీయ వనరులు) were used. Foreign Resources and Deficit Financing were not used as primary sources for these plans.

• Before the 10th Plan, all three sources were utilized to varying degrees.

• Specific data point from an old exam (2008 Group 2): The plan that used the highest percentage of Domestic Resources among the options given was the 5th Plan (82%). (Note: 10th-12th were 100%, but perhaps not in the options or relevant to the question's scope).

• The plan that used the lowest percentage of Domestic Resources was the 2nd Plan (56%).

• The plan that used the highest percentage of Foreign Resources (విదేశీ వనరులు) was the 3rd Plan (28%).

• The plan that used the highest percentage of Deficit Financing (లోటు ద్రవ్య విధానం) was the 2nd Plan (36%).

• Deficit Financing (borrowing from RBI by printing) was largely discontinued from 1997 (start of 9th Plan) based on the Sukhamoy Chakravarty Committee recommendation.

Evaluation of Sources:

• Domestic Resources (దేశీయ వనరులు): Considered the best and most preferable source (ఉత్తమమైన మార్గము). Relying on internal strength is good for sovereignty and economic stability.

• Foreign Resources (విదేశీ వనరులు):

  • Grants/Donations (గ్రాంట్లు/విరాళాలు): Risky for sovereignty (సార్వభౌమాధికారం దెబ్బతింటది) as they can lead to external influence and dependence (డిపెండ్ కాకూడదు). Avoid them if possible to remain independent (స్వతంత్రంగా ఉండాలి).

  • Foreign Loans (విదేశీ రుణాలు): Can lead to debt traps (రుణాల ఊబిలో చిక్కుకోపోయే ప్రమాదం). Risky.

• Deficit Financing (లోటు ద్రవ్య విధానము): Generally not good (మంచిది కాదు) as it causes inflation (ద్రవ్యోల్బణం). However, can be considered (but with extreme caution) during severe economic recession to boost demand. The practice of direct monetization by RBI against ad-hoc T-bills was stopped in 1997 because it was seen as detrimental in normal times.

Conclusion:
For the successful implementation of plans and overall economic health, relying primarily on domestic resources is considered the most advisable approach. Foreign resources and deficit financing carry significant risks and should be minimized or avoided. The Sukhamoy Chakravarty Committee recommendation and the shift towards fiscal deficit measurement from 1997 reflect the move away from direct monetization of deficits.