7th Five Year Plan (Vol-1)
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Planned Development: Retrospect and Prospect || Development Perspective: Towards the year 2000 || Objectives, Strategies and Pattern of Growth in Seventh Plan || Financing the Plan || Balance of Payments || Framework of Economic Policy


4.1 The financing of a plan involves the diversion, through the use of various financial instruments including taxation, of the required volume of real resources for purposes of investment, without inflation and subject to certain other basic considerations such as equity and efficiency. The inter-dependency of physical and financial planning arises from the fact that while the volume of resources that could be diverted for investment would depend on the rate of investment and the growth of income, the feasible volume of investment, in turn, would depend on how much resources could be mobilised without inflation. Thus, the physical plan targets of investment and the financial targets have to be worked out simultaneously, and in the present exercise, the two sets of targets have been made consistent with each other through a process of iteration.

4.2 The total of resources available for investment consists of domestic savings and inflow of capital from abroad. The volume of domestic savings that could be mobilised depends on the pattern of past behaviour and long-term tendencies in the economy such as the propensity to save of the population and the elasticity of the tax system as well as on conscious efforts to raise the rate of savings through taxation, incentives and institutional and policy changes.

4.3 Although it is true that there is scope for increasing the productivity of capital, in its present stage, the Indian economy requires and can sustain a higher rate of savings than realised in recent years. The rate of gross savings, which had reached a peak of 24.6 per cent in 1978-79, has stagnated around 23 per cent during the Sixth Plan. One of the important tasks of policy in the Seventh Plan would be to induce a rise in the rate of domestic savings.

4.4 Financial planning involves not only the mobilisation of resources to match the targetted magnitude of physical investment, but also the allocation of the total available savings among the major investing sectors according to their respective requirements. In what follows, total domestic resource availability is arrived at through projections of sectoral savings, i.e., savings by the household, private corporate, government and public enterprise sectors. Then, given the investment targets of the sectors and allowing for inter-sectoral transfers and the expected inflow of capital from abroad (which includes the desired amount of commercial borrowings), the balance between sources and uses of funds is worked out for each sector. This gives the amount of savings to be transferred from the 'surplus' to 'deficit' sectors.

4.5 In projecting the savings of the Government sector (current revenue-current expenditure), a view has been taken of the amounts of additional resource mobilisation that could be reasonably undertaken by the Central and State Governments on revenue account through improvement in administration, structural changes and adjustments in rates. Similarly, in regard to public enterprises, in estimating savings (retained profits plus depreciation) effects of action to improve productivity and efficiency as well as adjustments in prices, where considered necessary and reasonable, have been taken into account. Given the projected total tax revenues and transfers from Government to the household sector, the disposable income of the latter is derived. Household sector saving is then arrived at by applying trend values of the savings rate. The savings of the private corporate sector have been estimated separately on the basis of the analysis of the operations and finances for the non-financial companies and on the basis of past trends for the financial companies.

4.6 Table 4.1 gives the disposable income, consumption and savings by sectors. Household sector saving is estimated at 20.5 per cent of its disposable income in 1984-85 and is expected to remain at the same level in 1989-90 but public sector saving is expected to rise from 29.1 per cent to 32.4 per cent of its disposable income. The rise in the savings ratio of the public sector arises from its increasing share of disposable income (from 14.6 per cent to 15.7 per cent) and the high marginal savings rate (41 per cent) assumed for the sector. All of the additional resources mobilised by public enterprises would go to augment the resources for investment. The share of the public sector in aggregate domestic saving would rise from 18.5 per cent to 20.9 per cent and that of the household sector would decline from 74.2 per cent to 69.6 per cent. Thus the success of the plan is predicated on a large savings effort by the public sector. The measures to be taken towards this end are indicated later in the Chapter.

4.7 The relative shares of the different sectors in aggregate domestic saving for the plan period as a whole are indicated in Table 4.2. The shares of the public and

Disposable Income, Consumption and Saving by Sectors

Sl. No Item Rs. crores at 1984-85 prices Percentage of total
1984-85 1989-90 1984-85 1989-90
1. Public sector
    (i) Disposable income 32198 44606 74.6 15.7
    (ii) Consumption 22834 30163 10.4 10.6
    (iii) Saving 9364 14443 4.2 5.1
2. Private corporate and cooperative sector
(i) Disposable income 3737 6514 1.7 2.3
(ii) Consumption
(iii) Saving 3737 6514 1.7 2.3
3. Household Sector
(i) Disposable income 183945 233325 83.7 82.0
(ii) Consumption 146308 185285 66.5 65.1
(iii) Saving 37637 48040 17.2 16.9
4. Total
(i) Disposable income 219880 284445 100.0 100.0
(ii) Consumption 169142 215448 76.9 75.7
(iii) Saving 50738 68997 23.1 24.3

private sectors are expected to be 19 per cent and 81 per cent respectively. The share of the household sector would continue to be dominant (71 per cent) though less than in the past. Of the total household sector savings, 47 per cent are estimated to be held in the form of financial assets.

Gross Domestic Saving by Sector of Origin (1985-90)
(At 1984-85 prices)

Sl. Sector No. Amount (Rs. crores) Percen-page of total
1. Public saving 57422 19.0
(i) Government and public enterprises (non-financial) 49156 16.3
(ii) Public enterprises (financial) 8266 2.7
2. Private saving 244944 81.0
(i) Household sector 216165 71.5
(a) Financial saving 102253 33.8
(b) Physical assets 113912 37.7
(ii) Private corporate including cooperative sector 28779 9.5
3. Total domestic saving 302366 100.0

4.8 In estimating the total resources availability tor plan investment, while conscious effort to raise the volume of savings through additional resource mobilisation effort on the part of the public sector is postulated, private sector savings have been estimated on the basis of past data. It would not be realistic to assume a significant rise in the savings rate in the short run. However, given that the value of the estimated marginal savings rate is only of the order of 28.4 per cent, there is scope for raising it through appropriate policy and institutional changes.

4.9. Aggregate gross domestic savings during the Seventh Plan would amount to Rs. 302,366 crores. Inflow of foreign capital to the extent of Rs. 20,000 crores is postulated. The aggregate resources would, therefore, amount to Rs. 322,366 crores, which is equal to the amount of investment contemplated in the plan. The savings of the sectors, inter-sectoral capital transfers (lending/borrowing) and investment by the sectors are given in Table 4.3. The own savings of the public and the private corporate sectors fall short of their investment plans while the household sector has a surplus of saving over its investment. It is envisaged that there would be a transfer of savings from the household sector to the extent of Rs. 102,253 crores to the other two domestic sectors. And, additionally, the inflow of capital from the rest of the world to the public sector would amount to Rs. 18,000 crores and to the private corporate sector Rs. 2,000 crores. The details of financing of the investment by each of the domestic sectors are shown in. Table 4.4. These details provide a broad picture of the flow of funds on capital account in the economy during the Seventh Plan period. It is seen that the public sector investment of Rs. 154,218 crores is financed to the extent of 32 per cent by own saving, 56 per cent by draft on private savings and by around 12 per cent by foreign borrowings. The corporate sector's total investment of Rs. 54,236 crores is expected to be financed to the extent of around 53 per

Sl No



Own savings Transfers from domestic sectors Rest of the world Investment Current outlay Aggregate outlay
Public Private Corporate House Hold
(0) (1) (2) (3) (4) (5) (6) (7) (8) (9)
1. Public 49156 +8266*
(-)8266 87062 18000 154218 25782 180000
2. Private corporate 28779 8266 15191 2000 54236 54236
3. Household 216165 — (--) 102253 113912 113912
Total 302366 20000 322366 25782 348148

* of Rs. 10,000 crores savings of the financial institutions, Rs. 8266 crores would be available.


Financing of Investment  ( 985-90) (rs. crores at 1984-85 prices)
   Private Corporate Government Household Total
Investment Financed by 54236 154218 113912 322366
1. Own resources 28779 57422 * 216165 302366
2. Borrowing from: A.Household sector
B. Government sector
15191 87062 (-)102253
(Public financial institutions) 8266 (-)8266
C. Rest of the world 2000 18000 20000
Total borrowings (A+B+C) 25457 96796 (-)102253 20000

(i) * Includes Rs. 8,266 crores public sector financial institutions, savings available for investment.
(ii) (—) Sign indicates lending.

cent by its own saving, 28 per cent through recourse to the household sector saving via the capital market, 15.3 per cent by the public sector and the remaining 3.7 per cent by foreign borrowing.

4.10 Of the total household sector savings of Rs. 216,165 crores, financial savings are estimated to account for Rs. 102,253 crores, forming 47 per cent. Projections of physical assets in the household sector have been made on the basis of their relationship with personal disposable income in the past years. The details and the forms in which financial savings will be held are given in Table 4.5, while the investments through which the draft on household sector's savings is effected are indicated in Table 4.6. The total financial savings of the household sector amount to Rs. 134,681 crores in gross terms and to Rs. 102,253 crores in net terms (i.e., net of increase in liabilities) over the five-year period. The major forms of financial savings of the household sector are:

Household Sector Financial Savings (1985-90) (Rs. crores at 1984-85 prices)

1. Currency 8527
2. Deposits with scheduled commercial
    banks including cooperatives
3. Non-banking companies deposits 8592
4. Life funds 9845
5. Provident fund 34675
6. Net claims on Government 8750
7. Corporate/cooperative shares and debentures 2911
8. Security of term-lending institutions 23
9. Unit Trust of India 2500
10. Other assets 1570
Total 134681
Liability (—)32428
Net financial assets 102253

deposits with scheduled commercial banks and cooperative societies, currency, life funds, provident funds, claims on Government including Unit Trust of India and corporate shares. The methods of estimation of the amounts which would be held in different forms are given in Appendix-l.

Draft on Household Financial Saving by Instruments (1985-90)
(Rs. crores at 1984-85 prices)

Items Government Private Corporate sector Total
1. Currency 8527 8527
2. Deposits with banks 28107 3595 31702
3. Non-Banking deposits' 1857 5600 7457
4. Life Insurance Corporation 4950 874 5824
5. Provident fund 34675 34675
6. Claims on Government 7064 7064
7. Corporate shares 2911 2911
8. Securities including Unit Trust of India 1882 641 2523
9. Other assets 1570 1570
Total 87062 15191 102253

Private Corporate Sector Savings

4.11 'The private corporate sector is divided into two parts viz., (i) non-financial institutions and (ii) financial institutions. Non-financial institutions include (i) non-Government public and private limited companies and (ii) co-operative non-credit societies. The financial institutions comprise (a) co-operative banks and credit societies

(b) non-nationalised commercial banks and (c) private financial and investment companies.

4.12 The projections of the savings of non-Government non-financial public and private limited companies for 1985-90 have been worked out on the basis of detailed studies of sales, fixed capital formation, inventories, borrowings, depreciation, profits, etc. The savings of the private financial institutions and co-operatives have been estimated on the basis of past trends. The gross savings of the private corporate sector have been placed at Rs. 28,779 crores during the Seventh Plan.

Resources for the Public Sector Outlay—Sixth Plan.

4.13 An analysis of the various sources of financing the public sector outlay in the Sixth Five-Year Plan (Table 4.7) shows that the balance from current revenues at constant rates underwent a sharp deterioration both for the Centre and the States. Although the additional resource mobilisation through budgetary measures undertaken by the Centre and the States exceeded the targets originally envisaged, the surplus from current revenues, including the revenue from additional resources mobilisation efforts, fell short of the original estimate by Rs. 862 crores in the case of the Centre and by Rs. 4,101 crores in the case of States (all in current prices).

Pattern of Financing th Public Sector Plan Outlay—Sixth Plan: 1980-85.
(Rs. Crores)

     Original Estimates Latest Estimates
Centre States Total Centre States Total
(at 1979-80 prices) (Current prices)
PLAN OUTLAY   48900 48600 97500 60689 50132 110821
1. Balance from current revenues
(a) At 1979-80 rates 1178 13300 14478 (-)4427 6320 1893
(b) Additional resource mobilisation 8390 4134 12524 13133 7013 20146
Total (a+b) 9568 17434 27002 8706 13333 22039
2. Contribution of public enterprises
(a) At 1979-80 rates 9911 (-)516 9395 12418 (-)6608 5810
(b) Additional resource mobilisation 3900 4878 8778 5700 7124 12824
Total (a+b) 13811 4362 18173 18118 516 18634
3 . Market borrowings 15000 4500 19500 17401 4719 22120
4 . Small savings 2112 4351 6463 3855 6057 9912
5 . Provident funds 1660 2042 3702 1805 2151 3956
6 . Term loans from financial institutions 2722 2722 2582 2582
7 . Miscellaneous capital receipts (Net) 6170 (-)2161 4009 10090 (-)2725 7365
8 . Inflow of foreign resources 9929 9929 8529 8529
9 . Drawing down of foreign exchange reserves 1000 1000
10 . Deficit financing/uncovered gap 5000 5000 10927 4757 15684
11 . Aggregate resources 64250 33250 97500 79431 31390 110821
12 . Central assistance
(a) For State Plans (-)15350 (+)15350 (-)17567 (+)17567
(b) For relief against natural calamities (-)1175 (+)1175
13 . Resources available for the plan 48900 48600 97500 60689 50132 110821

4.14 The surplus from current revenues including the yield of additional resource mobilisation efforts which was envisaged to finance 28 per cent of the Sixth Plan public sector outlay, actually contributed only 20 per cent of the financing. The deterioration in the contribution from current revenues was due mainly to the sharp rise in non-plan expenditure partly resulting from the inflationary pressures developed during the Sixth Plan period. Besides the increase in the cost of maintenance of normal services, additional D.A. instalments had to be accommodated from time to time. In fact, inflation, far from enabling Government to increase the resources at its disposal, eroded them in real terms because revenues did not grow as fast as the cost of the goods and services bought by Government. Also, additional resource mobilisation efforts by the public enterprises were neutralised to a large extent by cost increases. Apart from the impact of inflation, certain large items of current outlay, such as defence, subsidies and interest liabilities, have also been growing at a fast pace at the Centre. While some of the States have been increasing their commitments unrelated to their plans, their commitments arising from plan expenditure seem to have also grown out of pace with the increase in their revenue receipts (reckoned at the base year rates) which have not shown a corresponding buoyancy to fully offset the liabilities arising on account of growing expenditure. The ratio of tax to gross domestic product, which was 15.56 per cent in 1980-81, increased to 16.65 per cent in 1982-83 but came down to 16.25 per cent in 1983-84. Similarly, the ratio of non-tax revenues to gross domestic product, accounting for 18 per cent of total Government revenues, increased from 3.32 per cent in 1980-81 to 3.80 per cent in 1982-83 but decreased to 3.50 per cent in 1983-84. The automatic growth in revenues (i.e. without ARM) was less than proportionate to the growth in national income, and thus the yield of additional measures undertaken during the Sixth Plan was partly neutralised by-the fall in the automatic growth in revenues. While no doubt, it is necessary to take measures both at the Centre and the States to prevent the deterioration in budgetary savings, the reversal of the existing trend cannot be immediately ensured. This serious limitation cannot be lost sight of in evolving any scheme of development financing for the immediate future.

4.15 The contribution of public enterprises of the Centre at 1979-80 rates was higher by Rs. 2,507 crores than the original estimate. However, in the case of State public enterprises, there was a considerable deterioration. Originally they were estimated to incur a loss of Rs. 516 crores at base year rates, but, in fact, the amount of loss turned out to be Rs. 6608 crores. As a result, despite higher additional resource mobilisation by State public enterprises, the overall contribution amounted hardly to Rs. 516 crores as against Rs. 4,362 crores originally envisaged. While the total Sixth Plan expenditure of the Central and State public enterprises taken together was Rs. 56,360 crores, their contribution to plan resources (including the yield of additional measures) was Rs. 18,634 crores.

4.16 One of the major functions of public sector enterprises is to generate surpluses for financing further economic development. An analysis of Sixth Plan financing, however, shows that Central public enterprises financed only 28 per cent of their development outlay from their own internal resources. They mainly relied on budgetary support, which accounted for 56 per cent of their plan outlay. In the case of State enterprises like State Electricity Boards and State Road Transport Corporations, hardly 3.5 per cent of their development outlay was financed through their own internal resources. The dependence of State enterprises on State budgetary support was far greater than in the case of the Central enterprises. This is evident from the magnitude of commercial losses of Rs. 4,472 crores and Rs. 961 crores that State Electricity Boards and the State Road Transport Corporations, respectively, are estimated to have incurred during the Sixth Plan. Thus, public enterprises becoming a vehicle of resource mobilisation for financing development expenditure in the country remains a distant goal. Whilethere can be notwoopinionsthatsurpluses generated by public enterprises would have to be the mainstay of development "financing in future, it would not be realistic to assume that all public enterprises, both Central and States, would turn the corner immediately in the Seventh Plan period and discharge their expected role in resource generation for meeting the growing development expenditure in the country.

4.17 Owing to the depletion of budgetary savings and the inability of the public enterprises to adequately contribute to the financing of their plan outlay through their own internal resources, the Government had to rely increasingly on domestic borrowings for financing public sector plan outlays. Total domestic borrowings accounted for 35 per cent of the Sixth Plan public sector outlay. In the earlier plans, excepting the Fourth Plan, domestic market borrowings ranged from 21 per cent to 28 per cent. Greater dependence on borrowings has implications in terms of increasing the burden on the Government budget for meeting interest payments as well as repayments of the principal amount. Further, in the case of a number of State's, borrowings which should have been appropriately utilised for financing capital expenditure, have been used partly for meeting revenue expenditure. This trend is quite indicative of the nature of resource erosion.

4.18 In short, the development financing structure which has emerged during the Sixth Plan shows serious limitations in the matter of generation of resources to copewith the increasing demand for development expenditure in the country.

4.19 In the face of the resource crunch, mobilisation of financial resources, therefore, presents a real challenge to be faced in the Seventh Plan, both by the Centre and the States. This would obviously require restructuring of the present pattern of development financing so as to rectify emerging imbalances and maintain sound financial planning to achieve the desired goals. Much would depend on how far the different instruments of resource mobilisation respond to the challenge under a dynamic situation and maintain their resilience to adjust themselves to structural and non-structural changes. It is obvious that the process of resource erosion would have to be immediately checked and also reversed, in due course, if development is to be protected. In essence, the Indian fiscal system would have to accomplish the delicate task of raising adequate resources in a non-inflationary manner, besides providing enough incentives for savings and growth in production.

4.20 Within the above broad framework of fiscal objectives, the resources for financing the public sector outlay during the Seventh Plan have been assessed. The assessment has taken into account the past trends, the postulated rate of growth of the economy and the outlook for the future in different sectors of the economy. The estimates based on detailed exercises undertaken by the expert groups have been re-assessed in the light of the recommendations of the Eighth Finance Commission and the Government decision thereon. Concerned Central Ministries, State Governments, Union Territory Administrations, Reserve Bank of India, Life Insurance Corporation, General Insurance Corporation, Industrial Development Bank of India, the Provident Fund Commissioner, the Bureau of Public Enterprises, important public sector enterprises of the Central and State Governments, and various other agencies have been consulted at different stages to firm up the estimates. The Estimates of resources have been worked out at 1984-85 prices, assuming a non-inflationary situation over the Seventh Plan period. The revised projections are in broad alignment with the growth rates of receipts adopted by the Eighth Finance Commission for 1984-89 period.

Financial Resources for the Public Sector Plan-Seventh Plan

4.21 The aggregate resources for financing the public sector outlay in the Seventh Plan amount to Rs. 180,000 crores at 1984-85 prices. The details of the estimates are set out in Table 4.8. Separate estimates for the Centre and the States are given in Appendix-ll.

4.22 It will be seen that budgetary resources including borrowings and public enterprises would provide

Estimates of Financial Resources for the Public Sector Plan—1985-90
(Rs. crores at 1984-85 prices)

1. Balance from current revenues at 1984-85 rates of taxes (—)5,249
2. Contribution of public enterprises 35,485
3. Market borrowings (net) 30,562
4. Small savings 17,916
5. State provident funds 7,327
6. Term loans from financial institutions 4,639
7. Miscellaneous capital receipts (net) 12,618
8. Additional resource mobilisation 44,702
9. Net capital inflow from abroad 18,000
10. Deficit financing 14,000
11. Aggregate resources 180,000

Rs. 148,000 crores or 82.2 per cent of the total resources required for financing the Plan. External resources would account for Rs. 18,000 crores or 10 per cent of the assessed resources. The balance of the required plan resources amounting to Rs. 14,000 crores (7.8 per cent of the total) would be met through deficit financing. Brief comments on individual items of financing are given below:

Balance from Current Revenues:

4.23 The aggregate balance from the current revenues of the Central and State Governments, after meeting their current non-Plan expenditure, is estimated at (-)Rs. 5,249 crores at 1984-85 rates of taxation. The estimate takes into account the normal growth of tax and non-tax revenues in the light of past trends, their likely response to the anticipated growth of production and incomes in the coming years and improvement in the collections. The provision of the States' share in Central taxes and statutory grants for the period 1985-90 is made on the assumption that the recommendations of the Eighth Finance Commission applicable to 1988-89 would also apply to the terminal year of the plan. Adjustments in the resources of the Centre and the States to take care of the recommendations of the next Finance Commission would be made as and when the Governmen't's decision thereon is made applicable.

4.24 On the expenditure side, moderate annual increases have been allowed to meet the normal growth of various items of non-plan expenditure. Besides, adequate provisions have been made to ensure proper maintenance of various assets created through public sector investments over the last six plans, such as roads, irrigation systems, public buildings and other facilities. Unless strict financial discipline is enforced and the growth of non-plan expenditure effectively controlled, the balances estimated on revenue account are likely to deteriorate further and consequently create an imbalance in the financing of the approved outays.

Central Government

4.25 The total revenue receipts of the Centre at 1984-85 levels of tax rates have been estimated at Rs. 138,399 crores for the Seventh Plan period, after transferring to the States their share in the Central taxes. The non-plan revenue expenditure is estimated at Rs. 150,410 crores, thus leaving a negative balance of Rs. 12,011 crores for the plan. The broad details of the estimate are shown in Table 4.9.

Balance from Current Revenues—Centre (1985-90)
(Rs. crores at 1984-85 prices)

I. Revenue receipts
1. Tax revenues (gross) 138,941
2. Less: States' share of Central taxes (-)36,087
3. Tax revenues (net) 102,854
4. Non-tax revenues 35,545
Total revenue receipts 138,399
I. Non-Plan revenue expenditure
1. Interest payments 46,222
2. Subsidies 16,805
3. Defence 45,000
4. Other non-development expenditure 33,911
5. Maintenance expenditure on Sixth Plan Schemes 1,684
6. Grants to States, Union Territories and Local bodies 6,135
7. Grants to foreign Governments 653
Total non-plan revenue expenditure 150,410
II. Balance from current revenues (l-ll) (—) 12,011

4.26 The estimate of the balance from current revenues of the Centre is based on the following major assumptions:

  1. The revenues from the major taxes, viz., income tax, union excise duties and customs have been estimated on the basis of the same growth rates as adopted by the Eighth Finance Commission for the projections of such receipts for 1984-89.
  2. With the growing importance of borrowings in the financing of the public sector plan, almost one-third of the outgo from the non-plan revenue expenditure of the Centre is accounted for by interest payments. The estimate for the next five years is worked out on the basis of the prevailing rates of interest on different categories of loans and takes into account both the outstanding loans/credits as also the likely level of fresh borrowings on a net basis for the Seventh Plan period.
  3. A significant proportion of the non-plan revenue expenditure is currently being provided to subsidise certain activities outside the plan, which have a direct bearing on the growth of the economy aimed at in the plan or are considered essential for maintaining price stability. This mainly includes subsidies on fertilisers, food and export promotion. Sinceit isessentialtomaximise the resources for the plan, the provision for subsidies for the next five years has been kept at the minimum needed for ensuring that the overall output growth and price stability were not adversely affected.
  4. The estimate includes provisions in respect of additional D.A. instalments sanctioned by the Centre upto the end of 1984-85. However, fresh expenditure liability which is likely to devolve on the Centre as a result of the recommendations of the Fourth Pay Commission has not been taken into account as its magnitude is not known at this stage.
  5. Necessary provisions for security environment as well as for maintenance of assets created under the Sixth Plan schemes have been made to arrive at the balance from current revenues.

State Governments

4.27 The combined revenue receipts of all the State Governments for the Seventh Plan period have been estimated at Rs. 141,124 crores at 1984-85 levels of tax-rates and fees. As against this, the non-plan revenue expenditure for the same period is estimated at Rs. 134,362 crores. Thus, a net balance of Rs. 6,762 crores from current revenues would be available for financing the plan in the State sector. The broad details of the estimate are shown in Table 4.10. Detailed discussions were held with the officials of the State Governments to estimate the growth of revenue receipts and non-plan expenditure for the plan period. The tax receipts of the State Governments have been projected keeping in view the trends observed during the past years and the growth rates adopted by the Eighth Finance Commission for the individual States for differnt taxes. The non-tax revenues under 'Forests' have been estimated to increase at a rate in accordance with the programmes of the State Governments under forestry working plans.

TABLE 4.10
Balance from Current Revenues—States (1985-90)
(Fts. crores at 1984-85 prices)

I. Revenue receipts
1. Tax revenues 79,396
a Non-tax revenues 20,425
3. Share in central taxes 36,087
4. Grants from the centre 5,216
Total revenue receipts 141,124
II. Revenue expenditure
1. Debt services 20,351
2. Other non-developmental and non-
plan developmental expenditure 106,019
3. Maintenance expenditure on Sixth Plan
    schemes 7,992
    Total revenue expenditure 134,362
III. Balance from current revenues (l-ll) 6,762

4.28 As regards provision for non-plan expenditure, except in the case of certain important areas, such as roads and bridges, hospital and medical services, public buildings, police, etc., where higher growth in expenditure has been allowed with a view to ensuring optimum utilisation of capital assets and services already created, in all other areas, the expenditure growth of around 5 per cent per annum has been assumed. Besides, full provision has been made for the cost of all increases in the emoluments sanctioned by the State Governments for their employees, school teachers and employees of local bodies upto the end of 1984-85. In some States, Pay Committees have been appointed and State Governments have taken decisions to implement their recommendations. The liability arising as a result of such decisions on the part of the concerned State Governments has been provided to the extent firm estimates were available.

Contribution from Public Enterprises

4.29 The gross surplus of public enterprises (retained profit plus depreciation), on the basis of 1984-85 rates of

TABLE 4.11
Contribution from Public Enterprises (1985-90)
(Rs. crores at 1984-85 prices)

Enterprises Amount
1. Railways 4,225
2. Posts and Telegraphs 1,729
3. Other central enterprises 31,500
4. State Electricity Boards (—) 1,569
5. State Road Transport Corporations (-)415
6. Other state enterprises 15
Total 35,485

tariffs, fares and product prices, is estimated at Rs. 35,485 crores as shown in the Table 4.11.


4.30 The gross surplus of Railways during the Plan period is estimated at Rs. 4,225 crores which comprises mainly the depreciation provision. This estimate is based on the anticipated growth in freight and passenger traffic.

Posts and Telegraphs

4.31 In the case of Posts and Telegraphs, the gross surplus is estimated at Rs. 1,729 crores comprising Rs. 2,482 crores from the tele-communication wing and (—)Rs. 753 crores from the postal wing, based on the anticipated growth of tele-communication and posts and telegraphs services during the plan period.

Other Central Enterprises

4.32 The contribution of 'Other Central Enterprises' including Ports and DVC, taken together, is estimated at Rs. 31,500 crores as shown in the Table 4.12. The generation of the surpluses of this order assumes better capacity utilisation, improvement in operational efficiency and increase in productivity which is the basic thrust of the Seventh Plan.

TABLE 4.12
Contribution of Other Central Enterprises
(Rs. crores at 1984-85 prices)

i. Gross internal resources
   (i) Retained profits 5,184
    (ii) Depreciation 24,893
    (iii) Deposits etc. 1,698
          Total I 31,775
ii. Utilisation
    (i) Loan repayments 4,917
    (ii) Working capital 2,600
    (iii) Other charges 317
    Total II 7,834
iii. Total internal resources available for the Plan (l-ll) 23,941
IV. Accrual to Oil Industry Development Board 5,259
V. Accrual on account of Steel Development Fund 2,300
    Total (III+IV+V) 31,500

State Enterprises

4.33 Among the State enterprises, the major ones, viz., State Electricity Boards and State Road Transport Corporations taken together are expected to incur cash losses at the existing levels of tariffs and fares which are reckoned at Rs. 1,984 crores during the Seventh Plan period.

Market Borrowings

4.34 Taking into account the recent increase in the statutory liquidity ratio of bank investments in the securities of the Government and the relevant provisions governing the deployment of funds in such securities by other institutional subscribers, the net market borrowings for the plan period have been estimated at Rs. 36,108 crores. This estimate is derived on the assumption of a reasonably buoyant growth in the deposits of commercial banks through branch expansion and other measures and a significant increase in the investible resources of other subscribers like Life Insurance Corporation and Employees' Provident Fund.

4.35 Out of Rs. 36,108 crores of aggregate market borrowings, Rs. 30,562 crores are proposed to be drafted for financing the public sector outlay, leaving the balance amount of Rs. 5,546 crores to be shared amongst the financial institutions. Of the available market borrowings for financing public sector outlay, Rs. 20,620 crores are allocated for financing the Central plan and the remaining Rs. 9,942 crores for financing the State plans. On this basis, the States' share of market borrowings works out to about 33 per cent and Centre's to 67 per cent.

4.36 Out of Rs. 9,942 crores of market borrowings provided for the State plans, an amount of Rs. 7,012 crores is distributed amongst the States by allowing a uniform step up over the base year level. Besides, market borrowings of Rs. 2,930 crores have been allocated to relatively less developed States for accelerating the tempo of development in those States.

Small Savings

4.37 The contribution to small savings collections has registered a significant rise over the past few years from Rs. 1,121 crores in 1980-81 to Rs. 3,300 crores in 1984-85. Taking into account the growth of households' contribution to small savings as well as from other agencies like the Employees' Provident Funds and other provident funds in the private sector in the light of the observed trend, the total collection of small savings over the plan period is estimated at Rs. 17,916 crores.

State Provident Funds

4.38 For the Seventh Plan, net accruals to State Provident Funds have been estimated at Rs. 2,300 crores for the Centre and Rs. 5,027 crores for the States in the light of past trends, existing rates of contribution and anticipated increase in employment under the Central and State Governments.

Miscellaneous Capital Receipts

4.39 This item represents the net balance of receipts and disbursements under a number of budget heads. The capital receipts include recovery of loans and advances from agriculturists, Government employees, local bodies, etc., deposits of non-governmental provident funds and net accretion to deposits and funds. Allowing for the likely non-plan loans and advances to the public sector undertakings, Government employees, agriculturists and foreign governments, subsidy on imported fertilizers and adjustment of States' overdraft as on 31st March, 1985, the net balance under this head for the Centre and States is estimated at Rs. 12,618 crores.

Term Loans from Financial Institutions

4.40 The financial institutions, viz., Life Insurance Corporation, General Insurance Corporation, Rural Electrification Corporation and National Bank for Agriculture and Rural Development are estimated to extend loans totalling Rs. 3,539 crores to the States for various programmes in the fields of housing, water supply, power, transport and agricultural co-operatives. Further, Industrial Development Bank of India under its Bills Rediscounting Scheme is expected to provide Rs. 1,100 crores for the State Plans. The broad details of the loan funds estimated to flow from the financial institutions are shown in Table 4.13.

TABLE 4.13
Term Loans from Financial Institutions to States:  (1985-90)
(Rs. crores at 1984-85 prices)

Institutions Amount
1. Life Insurance Corporation/General Insurance Corporation 2,335*
2. Reserve Bank of India (NABARD) 222
3. Rural Electrification Corporation 982
4. Industrial Development Bank of India 1,100
   Total 4,639

* Includes Rs. 100 crores of LIC loan to North Eastern Council. Note:—The negotiated loans indicated above are in gross terms sincerepayments to these institutions have been provided for separately.

Additional Resource Mobilisation

4.41 The additional resource mobilisation by the Centre and the States including their enterprises is envisaged at Rs. 44,702 crores for the Seventh Plan. The specific measures to be adopted by the Centre and the States will have to be decided in the light of the economic situation as it emerges from year to year. However, the choice between different forms of resource raising measures would have to be such as to secure the requisite resources in a non-inflationary manner as also to stimulate growth, productivity and savings.

442 In the field of direct taxes, appropriate measures would have to be initiated towards securing better compliance, countering tax avoidance and reducing tax evasion. The recent reduction in the rates of income and wealth taxes would facilitate the strict enforcement of direct taxation. It is recognised that rationalisation and simplification of the tax structure greatly helps in better compliance and better enforcement. As regards the corporation tax, several changes have recently been introduced to simplify the structure. Further simplification may be possible; in particular the possibility of block depreciation allowance being granted for machinery in place of the existing machinery-wise allowance might be explored as part of the rationalisation measures.

4.43 In the area of indirect taxes, the main thrust would have to be in the form of adjustment and rationalisation of tax rates. Besides, there seems to be scope for improving the elasticity of the Union excise duties by the gradual substitution of specific duties and specitic-cum-ad-valorem duties by ad-valorem duties. Alternatively, the specific rates should be periodically adjusted keeping in view the rate of inflation. The existing tax concessions other than those which encourage production in the priority sectors would need to be reviewed and, wherever not justified on this consideration, discontinued.

4.44 In view of the large investments by the public sector in activities and programmes directly or indirectly benefiting the rural sector in general and the agricultural sector in particular, there is need to explore ways of raising revenues by tapping rural incomes in greater measure than hitherto, through both existing and new instruments.

4.45 Substantial effort is called for in mobilising additional resources by the public undertakings, both Central and States. For example, for achieving a return of 10 percent on the capital-at-charge, as suggested by the Paranjape Committee, the Railways would have to mobilise additional revenue of Rs. 5,736 crores. However, in view of the present constraints in the finances of the Railways, additional resource mobilisation through revision of fares, freights, etc., is envisaged to the extent of Rs. 2,500 crores. Keeping in view the expansion in the tele-communications programmes and need to reduce losses on postal operations, an amount of Rs. 250 crores of additional resource mobilisation by these departmental undertakings has been assumed at this stage.

4.46 The financial performance of other Central public enterprises, in general, continues to be far from satisfactory. Currently, the plan outlays of these enterprises are financed mainly through extra-budgetary resources and Central budgetary support, while only one-third of their plan outlay is financed through their internal resources. In the interest of improving the viability of these enterprises and reducing their heavy draft on the public exchequer, it is envisaged that the Central enterprises, taken together, would mobilise additional resources of Rs. 11,490 crores over the plan period through rationalisation of their pricing policy and by other measures, viz., improvement in capacity utilisation, raising the productivity levels, and drawing down of the inventories, etc.

4.47 Subsidies provided through the Central Budget have over the past shown a progressive rise. Although it would not seem practicable to reverse the trend in the immediate future, possibilities should be explored for reducing all but the most essential subsidies, whether implicit or explicit, so as to augment savings for the plan.

4.48 For financing the Central plan, additional resource mobilisation by the Centre is expected to be of the order of Rs. 22,490 crores. Of this amount, Rs. 8,250 crores is likely to be raised by the Centre through tax and non-tax revenue measures while the Central public enterprises including Railways and Posts and Telegraphs are expected to net an additional revenue of Rs. 14,240 crores.

4.49 For financing the State Plans, the States have agreed to undertake additional resource mobilisation totalling Rs. 22,212 crores. Concerted efforts by the State Governments and their enterprises would be required for realising this target. In this, emphasis should be placed on fashioning an income-elastic tax system, tightening of tax administration and improving the productivity of public enterprises.

4.50 The States are expected to raise additional resources of about Rs. 13,000'crores through various tax and non-tax revenue measures which include, among others, changes in tax rates, reduction in tax evasion, rationalisation of tax laws and better collections. There is also scope for harmonisation of the tax rates of States within a region as also for tapping fresh avenues of revenues from tax and non-tax measures.

4.51 In the State enterprises sector, the commercial losses of the State Electricity Boards over the Seventh Plan period are expected to amount to Rs. 11,757 crores at the existing rates of tariff. Steps in the direction of improving the maintenance, reducing the over-staffing, bringing down the transmission and distribution losses and periodically adjusting the tariff rates could bring about substantial improvement in the financial performance of these enterprises. Considering various aspects including a certain degree of cost escalation adjustments, it would seem reasonable to expect the State Electricity Boards to adopt suitable measures to raise net additional revenue of Rs. 7,000 crores over the Seventh Plan.

4.52 There is also much leeway to be made up by the State Road Transport Corporations, whose combined losses at existing fares are estimated at Rs. 1,434 crores over the Seventh Plan period. Preliminary estimates indicate that with a revision in the bus fare by 1 paise per km in the first year of the plan and 2 paise per km in the third year and through a 5 per cent increase in efficiency through improvement in occupancy ratio, staff-bus ratio, fleet utilisation at optimum level and proper maintenance of bus fleet, these undertakings could altogether raise Rs. 2,700 crores during the Seventh Plan period. However, allowing for certain likely over-runs in the costs, etc., it would seem realistic to expect the State Road Transport Corporations to raise additional revenue of around Rs. 2,200 crores.

4.53 Among the departmental enterprises of the State Governments, receipts from multi-purpose, major and medium irrigation works are expected to fall short of working expenses by Rs. 966 crores over the Seventh Plan period. Water rates need to be fixed at reasonable levels so as to reduce the recurring burden of subsidies to irrigation works on the States' current revenues. During the Sixth Plan, the States have raised not more than Rs. 79 crores through revision in the irrigation rates against the target of Rs. 325 crores. During the Seventh Plan period, the States have necessarily to raise the irrigation rates with a view to covering at least the working expenses.

4.54 While setting the additional resource mobilisation target for the Seventh Plan, it is considered necessary to ensure that no real shortfall in financing the plan emerges as a consequence of utilising additional yields for meeting erosion in the resources estimated at the base level. The experience of the Sixth Plan indicates that although the Centre and the States together were estimated to have exceeded the plan target of additional resource mobilisation by Rs. 11,668 crores, this was more than offset by the deterioration in the balance from current revenues and the contribution of public enterprises, to the extent of Rs. 16,170 crores over the estimated level. It is, therefore, proposed that in the case of both the Centre and the States, any erosion in their contribution of resources estimated at the base level would have to be offset by raising additional resources over and above the revenue envisaged to be raised by fresh measures for financing the plan. In other words, additional resource mobilisation effort would be assessed net of deterioration.

Net Inflow of Capital from Abroad

4.55 The net inflow of external resources for the public sector plan for 1985-90 has been estimated at Rs. 18,000 crores at 1984-85 prices. This estimate is based on projections of balance of payments covering detailed estimates of imports, exports, current invisibles and capital transactions. The assumed net inflow from abroad constitutes 10 percent of the total public sector plan outlay.

Uncovered Gap/Deficit Financing

4.56 The resources estimated from the various sources add upto Rs. 166,000 crores as against the plan outlay of Rs. 180,000 crores for the public sector. The gap of Rs. 14,000 crores is proposed to be covered through deficit financing. Taking into consideration the current price situation and the trends in the economy, the level of deficit financing, as contemplated, is considered to be within safe limits.

Central Assistance to States

4.57 The financial resources of the Centre are estimated at Rs. 129,039 crores. Of this amount, Rs. 29,737 crores would be transferred to the States as assistance for the State plans, leaving thereby a balance of Rs. 99,302 crores for financing the Seventh Plan outlay of the Centre including the Union Territories. The Central assistance of Rs. 29,737 crores for State plans has been allocated as shown in Table 4.14.

TABLE 4.14
Central Assistance for State Plans (1985-90)
(Rs. crores at 1984-85 prices)

l. Area Programmes 2,459
(i) Hill areas 870
(ii) Tribal areas 756
   (iii) North Eastern Council 575
   (iv) Border Areas Dev. Programme 200
   (v) Other programmes 58
ll. Assistance for externally aided projects 3,800
Ill. Assistance under modified Gadgil formula 23,627
   (i) Special category States 7,102
   (ii) Other States 16,525
   Aggregate assistance (l+ll+lll) 29,886
IV. Less: Adjustment for advance Plan assistance given for relief works (-)149
V. Net central assistance for State plans 29,737

Public Sector—Sources and application of funds

4.58 The details of resources to be mobilised through various instruments and their uses for meeting non-plan and plan expenditure during the Seventh Plan period, by the Central and State Governments, are presented in Appendix III.

Fiscal Implications of the Pattern of Financing

4.59 In the earlier plan periods, the automatic growth of tax revenues has been proportionate to, or slightly more than proportionate to, the growth in national income or GDP. But this did not happen during the Sixth Plan period. Every major tax declined as a percentage of GDP, without additional resource mobilisation between 1980-81 and 1984-85. At the Central level, even though the yield of additional resource mobilisation measures cumulated to 1.58 per cent of GDP by 1984-85, the ratio of Central tax to GDP rose only by 0.14 per cent. This shows that either additional tax measures such as rate increases cut into the automatic growth in revenues or the structure and the functioning of the tax system is such as not to enable it to respond to the growth of income and activity. The same behaviour is seen in respect of State taxes. Even the sales tax showed an automatic growth less than proportionate to the growth in income. Total State tax revenues, without additional resource mobilisation, declined as percentage of GDP from 5.09 to 4.83 during the Sixth Plan period.

4.60 It is also a matter of concern that direct taxes (excluding land revenue and the agricultural income tax) have steadily declined as a percentage of non-agricultural GDP at current factor cost over the last decade or so: it fell from 5.8 per cent of non-agricultural GDP in 1975-76 to as low as 4.2 per cent in 1983-84. Contrary to the expectation that with economic development the ratio of direct to indirect taxes would increase, as a result of poor performance of direct taxes the Government has been forced to rely increasingly on indirect taxes, which rose from 11.7 per cent of GDP at market price in 1975-76 to 14.0 per cent in 1984-85, while direct taxes fell from 3.4 per cent to 2.3 per cent during the same period.

4.61 The fact that there was a continuous decline in the proportion of direct taxes to non-agricultural GDP as well as to total GDP, and the experience of the Sixth Plan period during which, inspite of a substantial effort at additional resource mobilisation, through tax rate adjustments etc., amounting to nearly 2.3 per cent of GDP, the tax ratio rose only by 0.5 percentage point, clearly indicate that the tax system must be re-structured and/or its administration and enforcement improved significantly. This is one of the major tasks of long-term fiscal policy which should be initiated during the Seventh Plan period. For the Seventh Plan, the resource exercise projections are postulated on the assumption that automatic growth as well as policy measures would raise the aggregate tax ratio from 16.3 per cent in 1984-85 to 18.3 per cent in 1989-90. The success of the plan is crucially dependent on the achievement of this target.

4.62 Table 4.15 shows direct taxes as percentage of non-agricultural GDP in the period 1975-76 to 1983-84. It is seen that the ratios of the Central as well as the State direct taxes to GDP (except that of corporation tax) have steadily declined. This trend needs to be reversed.

4.63 The trends in public finances during the Sixth Plan and the budgetary projections for the Seventh Plan excluding additional resource mobilisation indicate the emergence of a serious resource crunch in the public sector, which is likely to persist. In view of this, there is an urgent need to formulate a long-term strategy for fiscal management and policy and for improving productivity in the public sector. This question is addressed in detail in Chapter 6.

TABLE 4.15

Direct Taxes As Percentage of Total Non-agricultural
Gross Domestic Product At Current Factor Cost: 1975-76 to 1983-84

Nature of tax 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84
1. Corporation tax 2.24 2.17 2.54 2.34 2.31 1.84 2.35 2.30 2.32
2. Tax on income 3.15 2.78 2.09 2.20 2.22 2.11 1.76 1.65 1.51
3. Wealth tax 0.14 0.14 0.10 0.10 0.11 0.09 0.10 0.09 0.08
4. Land revenueagricultural and income tax 0.68 0.52 0.50 0.53 0.37 0.28 0.32 0.27 0.27
5. Other direct taxes 0.26 0.41 0.35 0.16 0.13 0.25 0.41 0.41 0.27
6. Total direct taxes 6.47 6.02 5.58 5.33 5.14 4.57 4.94 4.72 4.45
7. Total direct(excl. land taxesrevenue and agriculturalin
come tax)

5.50 5.08 4.80     4.77    4.29     4.62 4.45 4.18

APPENDIX—1: Estimates of Financial Assets and Liabilities of the Household Sector


Projections of household demand for currency have been made by regressing it on GDP at factor cost at constant prices, the GDP factor cost deflator and on two dummy variables, representing the investment in bearer bonds and growth pattern in currency.


The increase in deposits comprises the deposits in scheduled commercial banks, cooperatives and non-banking companies. The deposits of the banks are estimated as a function of GDP at factor cost and GDP deflator. The share of the household sector is assumed at 79 per cent. The deposits of the non-banking companies have been taken at 15 per cent of the deposits with the banks.

Life Insurance Fund

This is household saving in the form of the Life Insurance Fund, which is of a contractual nature. The life fund is estimated to increase by Rs. 9,845 crores over the plan period.

Provident Fund

The net accretion to Provident Funds comprises contribution to provident fund by Central and State Government employees, Employees' Provident Fund (EPF), and other provident funds. The accretion to EPF includes the contributions of employees and employers and interest on investment. The projections have been made on the basis of regression of accretions to provident fund on GDP at constant market prices, GDP market price deflator and the ratio of non-agricultural income to national income at constant prices.

Shares and Debentures (Corporate and Cooperative and Units of UTI)

Projections of investment in Corporate and Cooperative shares and debentures have been oDiained by relating this variable to GDP at constant market prices, GDP market price deflator and ratio of non-agricultural income to national income. The saving in the form of Units of Unit Trust of India is based on trends observed in the recent past.

Claims on Government

The net claims on Government of the household sector consist of Central and State Government securities and contributions to small savings and bearer bonds. These have been projected by estimating the parameters from regressions by using GDP at current market prices and other variables like small savings and investment in bearer bonds in the recent past.

Securities of term lending and other financial institutions.

These have been estimated on the basis of a regression relating them to DGP at factor cost at constant prices, GDP factor cost deflator and the ratio of non-agricultural income to national income.

Other Assets

The estimates of other assets representing mainly net position in trade transactions with private companies and State Electricity Boards are placed around at Rs. 1,570 crores at 1984-85 prices.

Financial Liabilities

The Financial liabilities have been worked out on the basis of the ratio of gross household financial assets to personal disposable income and net household saving in physical assets. These have been calculated at Rs. 32,428 crores which works out to 24 per cent of the gross household financial assets.

Estimates of Financial Resources for Seventh Plan: 1985-90
(Rs. crores at 1984-85 prices)

  Centre (Including UTs) States Total (Col. 1 +2)
1 2 3
1. Balance from current revenues (at 1984-85 rates of taxation) (-) 12,011 6,762 (-)5,249
2. Contribution of public enterprises        
a) Centre: (i) Railways 4,225 4,225
(ii) Posts and Telegraphs 1,729 1,729
(iii) Other enterprises 31,500 31,500
(b) States: (i) State Electricity Boards (-) 1,569 (-)1,569
(iii) State Road Transport Corporations (-) 415 (-) 415
    (iii) Others 15 15
   Total (2) 37,454 (-) 1,969 35,485
3. Market borrowings (net) 20,620 9,942 30,562
4. Share in small savings 6,377 11,539 17,916
5. State provident funds 2,300 5,027 7,327
6. Miscellaneous capital receipts (net) 19,809 (-) 7,191 12,618
7. Negotiated loans 4,639* 4,639
8. Additional resource mobilisation 22,490 22,212 44,702
9. Net capital inflow from abroad 18,000 18,000
10. Deficit financing 14,000 14,000
11. Total resources 129,039 50,961 180.000
12. Central assistance for state plans (-) 29,737 29,737    
13. Aggregate resources 99,302 80,698 180,000

'Includes loan from Life Insurance Corporation of Rs.100 crores to North Eastern Council.

Public Sector—Sources and Application of Funds: Seventh Plan 1985-90
(Rupees in crores at 1984-85 Prices)

Receipts Centre and U.Ts. States Total
(A) Revenue Receipts                 
1. Tax Revenues (Gross) 138,941 79,396 218,337
2. States' share of Central Taxes (-)36,087 36,087   
3. Non-Tax Revenues 35,545 20,425 55,970
4. Grants from the Centre 5,216 5,216
Sub-Total (Revenue Recipts) 138,399 141,124 279,523
(B) Other Receipts        
1. Contribution of Public Enterprises 37,454 (-)1,969 35,485
2. Market Borrowings 20,620 9,942 30,562
3. Share in small savings 6,377 11,539 17,916
4. State Provident Funds 2,300 5,027 7,327
5. Misc. Capital Receipts(net) 19,809 (-)7,191 12,618
6. Negotiated Loans      4,639 4,639
7. Additional Resource Mobilisation 22,490 22,212 44,702
8. Net Capital inflow from abroad 18,000       18,000
Sub-Total (Other Receipts) 127,050 44,199 171,249
Total Receipts (Revenue Plus Other Receipts (A+B) 265,449 185,323 450,772
(C) Central Assistance to State Plans (-)29,737 29,737    
(D) Deficit Financing 14,000 14,000
Grand Total (A+B+C+D) 249,712 215,060 464,772
Expenditure (A) Non-Plan Centre and U.Ts States Total
1. Interest Payments 46,222 20,351 66,573
2. Maintenance Expenditure on the Sixth Plan Schemes 1,684 7,992 9,676
3. Subsidies 16,805      16,805
4. Defence 45,000      45,000
5. Other non-development expenditure 33,911 106,019 139,930
6. Grants to States, U.Ts. and local bodies 6,135      6,135
7. Grants to Foreign Governments 653       653
Sub-Total (Expenditure-Non-Plan) 150,410 134,362 284,772
(B) Plan Outlays                
1. Agriculture 4,325 6,249 10,574
2. Rural Development 4,931 4,143 9,074
3. Special Area Programmes         3,145 3,145
4. Irrigation and Flood Control 1,029 15,950 16,979
5. Energy 32,035 22,786 54,821
6. Industry and Minerals 18,675 3,786 22,461
7. Transport 17,199 5,772 22,971
8. Communication, Information and Broadcasting 6,373 99 6,472
9. Science and Technology 2,309 157 2,466
10. Social Services 12,167 17,183 29,350
11. Others 259 1,428 1,687
Sub-Total* 99,302 80,698 180,000
Grand Total (A+B) 249,712 215,060 464,772

*Plan Outlays are rounded off to nearest Rs. 1 crore.

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