Answer the following questions in about 150 words each:
(a) Do you think that Indian development planning is a transition from centralised planning to indicative planning and subsequently to market based development? Explain. (10 marks)
(b) Discuss t

Question

Answer the following questions in about 150 words each:
(a) Do you think that Indian development planning is a transition from centralised planning to indicative planning and subsequently to market based development? Explain. (10 marks)
(b) Discuss the prospects and challenges faced by Indian Agriculture due to World Trade Organisation (WTO) provisions. (10 marks)
(c) Analyse the challenges for economic recovery in India posed by sluggish growth in rural wage rates during the pandemic period. (10 marks)
(d) Do you think that flow of Foreign Direct Investment (FDI) would always be good for the growth of Indian economy? Critically analyse. (10 marks)
(e) Discuss the desirability of increased public expenditure in India in recent years. (10 marks)

UPSC Answer Check · Accepted Answer

(a) Indian planning moved from centralised planning in the 1950s-80s to indicative planning in 1991-2014 and then market-based development, but gradually. The Second Five Year Plan and Planning Commission embodied centralised planning, with public investment, licensing and target-driven allocation. The 1991 liberalisation markers—trade reform, disinvestment, fiscal consolidation and market opening—converted plans into indicative frameworks, where government set priorities but left allocation to markets. The 2014 dismantling of the Planning Commission and creation of NITI Aayog in 2015 marked a structural break: cooperative federalism, competitive states and policy coordination replaced plan targets. The 2017 plan holiday shows India now relies more on market signals, institutional reforms and outcome-based policies. The shift was not linear; state and market roles changed with crises and reforms. Yet the state remains important in infrastructure, social spending and crisis management, so the transition is a move from command planning to market-led development with strategic state intervention.

(b) The WTO Agreement on Agriculture gives Indian agriculture prospects through market access, predictable export rules and discipline on other countries’ subsidies. India can benefit from global demand for rice, spices, dairy and processed foods, and from Green Box support for research, extension and infrastructure, which is non- or minimally trade-distorting. The challenge is that Amber Box Aggregate Measurement of Support is trade-distorting and subject to reduction commitments, limiting price support. India’s de minimis allowance of 10 per cent of the value of production is useful but narrow. Blue Box payments are exempt from reduction commitments, but constrained by fixed reference prices and historical base years, so they do not provide unlimited policy space. Thus WTO rules expand export opportunities and discipline trade barriers, yet compress room for direct price support, forcing India to shift towards input subsidies, crop insurance, irrigation, market infrastructure and Green Box measures while managing farmer income and food security.

(c) Sluggish rural wage growth during the pandemic weakened India's consumption base. The Periodic Labour Force Survey showed fragile rural wage trends: daily wages in agriculture and construction were depressed, and agricultural real wages fell in 2020-21 as prices rose and work opportunities shrank. MGNREGA provided a floor, but its wage support was effectively stagnant in real terms for many households, while job intensity remained uneven. Rural households are net food consumers and major buyers of low-value manufactured goods; when their wages stagnate, demand for food, clothing, durables and services falls. This matters because rural demand drives MSME output, local markets and the multiplier from public works. If rural wages do not recover, consumption-led recovery remains constrained, and higher urban growth may not translate into broad-based employment. Recovery therefore requires faster rural wage growth through public works, irrigation, rural non-farm activity and social protection, not merely aggregate GDP growth.

(d) FDI is not automatically good for Indian growth; its value depends on sector and scale. On the positive side, FDI brings technology transfer, export linkages and employment, especially in manufacturing, IT and infrastructure. Sector-specific patterns matter: 100 per cent automatic-route FDI in many sectors has eased investment, while restrictions in multi-brand retail have protected local traders. Yet FDI can crowd out domestic MSMEs when foreign firms use scale, branding and credit access to dominate markets. Profit repatriation can reduce domestic savings, and sectoral imbalances may concentrate investment in high-return services while leaving low-margin manufacturing or agriculture underinvested. If FDI is tied to local sourcing, skill development and technology spillovers, it can complement domestic capital. If treated as a substitute for domestic investment, it may create dependency and uneven growth. Thus FDI is beneficial when it raises productive capacity, but limited or harmful when it merely repatriates profits or displaces local firms.

(e) Increased public expenditure in recent years is desirable when it is productive and counter-cyclical. Post-COVID fiscal expansion—higher spending on health, food security, rural works and infrastructure—supported demand, consistent with Keynesian multiplier logic: government spending raises income and employment. In a liquidity-constrained economy, such spending can be more effective than private investment when private demand is weak. However, Ricardian equivalence concerns are not irrelevant: if households expect future tax rises or debt service, they may save more, weakening the multiplier. The quality of expenditure matters; recurrent subsidies and low-return assets can raise debt without raising growth. India’s FRBM targets show the tension between stimulus and debt sustainability. A prudent path is to expand capital expenditure, improve implementation and target social protection, while containing unproductive recurrent outlays. Thus higher public spending is desirable if it raises productive capacity and protects vulnerable groups, but not if it simply enlarges the deficit without growth.

Answer the following questions in about 150 words each: (a) Do you think that Indian development planning is a transition from…

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