Equity (planning goal)

Also called: Growth with equity · Topic: Economic Planning in India: Goals, Models and Import Substitution · NCERT: Class 11, Ch 2 "Indian Economy 1950-1990"; Class 11, Ch 4 "Human Capital Formation in India"

Meaning

Equity is the planning goal of making sure the benefits of economic growth reach the poor, not only the rich. It has two tests: everyone can meet basic needs (food, a decent house, education and health care), and inequality in the distribution of wealth goes down.

It matters because a country can have high growth and modern technology, and still most of its people can stay poor. Equity is the goal that checks whether growth actually gives people a better life. NCERT puts it as "growth with equity": grow the cake, and make sure the poor get a fair slice.

Explanation

Equity as one of the four goals of planning

• India's Five Year Plans had four goals: growth, modernisation, self-reliance and equity.
• Growth is a rise in the country's capacity to produce goods and services. It is seen in a rising GDP (Gross Domestic Product, the market value of all final goods and services produced in a year).
• Modernisation means new technology and a change in social outlook.

• Self-reliance means not importing goods India can make itself.

• The main planning rule: each plan picks one main goal, but its policies must not work against any of the four goals.

• Why equity is a separate goal:
• Growth, modernisation and self-reliance alone do not guarantee a better life.

• NCERT's image: "GDP is a cake; growth is a bigger cake." Equity asks who gets the slices.

• In the NCERT frame, modernisation and self-reliance are means, not ends. They serve the two final aims: growth and equity.

The two tests of equity

• Test 1: basic needs are met
• food
• a decent house
• education

• health care

• Test 2: inequality in wealth falls

• Even if nobody is starving, the gap between rich and poor should narrow over time.

• Link to human capital: education and health care are also investment in people. So meeting basic needs builds the skills and health that later growth depends on.

• Link to modernisation: a society that keeps women out of banks, factories and schools wastes half its talent. This hurts both growth and equity.

How equity is pursued: two views

• View A: "trickle down"
• Let the economy grow first.
• More factories and firms create more jobs and higher wages.

• The gains slowly "trickle down" to the poor.

• View B: direct attack on poverty

• Do not wait for growth to reach the poor.
• Run targeted programmes, meaning schemes aimed only at poor households.

• Example: IRDP (Integrated Rural Development Programme) gave the rural poor assets and credit, so they could earn an income on their own.

• India's later policy combined both views in a three-pronged anti-poverty strategy [9]:

• faster economic growth, focused on employment-intensive sectors (sectors that need many workers for each unit of output)
• human and social development through basic services
• targeted anti-poverty programmes

What pushes equity up or down

• Equity rises when:
• growth happens in sectors that use many workers, such as agriculture, irrigation, agro-forestry, small and medium enterprises, and information and communication technology [3]
• growth spreads to villages, small towns and all states, not only big cities [2]

• the state provides basic services such as schooling and health care

• Equity falls when:

• labour-saving technology replaces workers
  • a machine does the work of many people
  • output per worker rises, which helps growth
  • but jobs are lost, so the poor lose income
• growth stays in a few cities or a few states
• policy relies only on trickle-down, and the gains take a long time to reach the poor

In India

• Institution: the Planning Commission, set up on 15 March 1950 by a Cabinet Resolution with the Prime Minister as Chairperson, set plan goals including equity [4][5]. It was replaced by NITI Aayog through a Cabinet Secretariat resolution dated 1 January 2015 [6][7].
• How the focus on equity changed across plans:

Plan	Link to equity
Fifth Plan	Main priority: poverty removal ("Garibi Hatao")
Tenth Plan (2002-07)	8% GDP growth a year, plus 5 crore (50 million) job opportunities, pushing employment-intensive sectors [3]
Eleventh Plan (2007-12)	"Towards faster and more inclusive growth" [2]
Twelfth Plan (2012-17)	"Faster, sustainable and more inclusive growth", the last Five Year Plan [8]

• "Inclusive growth" is the later official form of equity. The Eleventh Plan (2007-12) said growth must be inclusive "in the broadest sense" [2]. This meant:
• growth in villages and small towns, not only big cities
• growth across all states

• enough good-quality jobs [2]

• Anti-poverty programmes:

• The major rural poverty programmes were restructured in 1999-2000 to improve their impact [9].
• The Ministry of Rural Development released ₹7,164.83 crore for anti-poverty programmes in 2000-01 [9].

Don't confuse with

• Growth: growth means the size of the cake (GDP) gets bigger. Equity is about how the cake is shared. High growth can exist with low equity.
• Equality: equity in planning does not mean everyone gets the same income. It means basic needs are met and the inequality in wealth falls.
• Self-reliance: self-reliance is about not depending on imports, and it was the goal of the first seven plans. Equity is about the poor within India gaining from growth.
• Trickle-down: trickle-down is one way to try to reach equity (grow first, gains reach the poor later). It is not the goal itself. The direct approach, such as IRDP, is the other way.

Prelims Hooks

• The four goals of planning are growth, modernisation, self-reliance and equity. "Stability" was a Fourth Plan priority, not one of the four goals, so it is a common trap option.
• Equity has two tests: basic needs (food, a decent house, education, health care) are met, and inequality in the distribution of wealth falls.
• Fifth Plan main priority: "Garibi Hatao" (poverty removal).
• Eleventh Plan (2007-12) theme: "Towards faster and more inclusive growth" [2]. Twelfth Plan (2012-17) theme: "Faster, sustainable and more inclusive growth" [8].
• IRDP is an example of the direct approach to poverty. Trickle-down means growth first, with benefits reaching the poor later.
• India's three-pronged anti-poverty strategy: faster growth in employment-intensive sectors, human and social development, and targeted anti-poverty programmes [9].

Mains Points

• Growth vs equity (GS-III, inclusive growth):
• High GDP growth does not remove poverty on its own. The poor may stay poor even in a fast-growing, modern economy.

• India's answer mixed growth in employment-intensive sectors, human development and targeted programmes [9]. Use this to argue for "growth with equity" rather than pure trickle-down.

• Modernisation vs employment (GS-III, technology and jobs):

• In a country with many workers, labour-saving machines raise output but can destroy jobs, which hurts equity.

• The Tenth Plan's target of 5 crore job opportunities in labour-heavy sectors shows how plans tried to balance the two [3]. This links to today's debates on automation and AI.

• From "equity" to "inclusive growth" (GS-III and GS-II):

• The Eleventh Plan widened equity to cover villages, small towns, all states and good-quality jobs [2]. So equity came to mean fairness between regions as well as between rich and poor people.
• After the Twelfth Plan (2012-17) [8], NITI Aayog (2015) works with the states [6]. This makes equity across regions a shared job of the Centre and the states under cooperative federalism, where the Centre and the states make policy together.

Related concepts

• Goals of planning
• Modernisation

Read more

• The four goals of planning and their trade-offs