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unit-4-planning,-governance-and-institutions

Unit-4 Planning, Governance and Institutions

This unit outlines the growth performance in each plan, the shifts in plan priorities and strategies, and the shifts in major economic policies leading to the present regime of economic reforms with a central place to market induced investment and growth.

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What were the recommendations of Chakravarthy Committee for non-inflationary financing of plans? 

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Written on Jun 26, 2019 2:51:10 PM

According to the Chakravarty Committee Report (submitted in 1985), the operation of monetary system should be consistent with plan priorities, so that the process of mobilisation of savings and utilisation of these resources, became socially purposive.

Though savings in the country increased from 10 percent to 23 percent between 1950-51 and 1983- 84, it was not adequate to finance public sector investment. Hence the Government of India was forced to resort to deficit financing creating inflationary pressures in the economy. 

The Committee emphasised financing Five Year Plans in a non-inflationary manner by:

 i.  tapping the savings of the public in a greater measure than in the past, which could be done by raising the yield from government bonds;

 ii.  raising higher savings from the public sector enterprises, and

 iii.  improving efficiency in both revenue gathering and expenditure functions.

Other important recommendations of the Committee related to monetary targeting, change in the definition of budgetary deficit and interest rate policy.

Most of the recommendations of the Committee were accepted by the GOI by late 1980s.