The Constitution came into force on 26 January 1950. Subsequently, Planning Commission was set up on 15 March 1950 and the plan era started from 1 April 1951 with the launching of the First Five Year Plan (1951-56).
Economic Planning In India – Five Year Plans
The term economic planning is used to describe the long term plans of the government of India to develop and coordinate the economy with efficient utilization of resources. Economic planning in India started after independence in the year 1950 when it was deemed necessary for economic growth and development of the nation.
Long term objectives of Five Year Plans in India are:
- High Growth rate to improve the living standard of the residents of India.
- Economic stability for prosperity.
- Self-reliant economy.
- Social justice and reducing the inequalities.
- Modernisation of the economy.
The idea of economic planning for five years was taken from the Soviet Union under the socialist influence of first Prime Minister Pt. Jawahar Lal Nehru.
The first eight five year plans in India emphasised on growing the public sector with huge investments in heavy and basic industries, but since the launch of Ninth five year plan in 1997, attention has shifted towards making government a growth facilitator.
An overview of all Five Year Plans implemented in India is highlighted below:
| List of Five Year Plans in India [1951-2017] | |||
| Five Year Plans | Years | Assessment | Objective |
| First Five year Plan | 1951- 1956 | Targets and objectives more or less achieved. With an active role of the state in all economic sectors. Five Indian Institutes of Technology (IITs) were started as major technical institutions. | Rehabilitation of refugees, rapid agricultural development to achieve food self-sufficiency in the shortest possible time and control of inflation. |
| Second Five year Plan | 1956-1961 | It could not be implemented fully due to the shortage of foreign exchange. Targets had to be pruned. Yet, Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were established. | The Nehru-Mahalanobis model was adopted.‘Rapid industrialisation with particular emphasis on the development of basic and heavy industries Industrial Policy of 1956 accepted the establishment of a socialistic pattern of society as the goal of economic policy. |
| Third Five year Plan | 1961-1966 | Failure. Wars and droughts. Yet, Panchayat elections were started.• State electricity boards and state secondary education boards were formed. | ‘establishment of a self-reliant and self-generating economy’ |
| Plan Holidays – Annual Plans | 1966-1969 | A new agricultural strategy was implemented. It involved the distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation measures. | crisis in agriculture and serious food shortage required attention |
| Fourth Five year Plan | 1969-1974 | Was ambitious. Failure. Achieved growth of 3.5 percent but was marred by Inflation. The Indira Gandhi government nationalized 14 major Indian banks and the Green Revolution in India advanced agriculture. | ‘growth with stability’ and progressive achievement of self-reliance Garibi HataoTarget: 5.5 pc |
| Fifth Five year Plan | 1974-1979 | High inflation. Was terminated by the Janta govt. Yet, the Indian national highway system was introduced for the first time. | ‘removal of poverty and attainment of self-reliance’ |
| Sixth Five year Plan | 1980-1985 | Most targets achieved. Growth: 5.5 pc.Family planning was also expanded in order to prevent overpopulation. | ‘direct attack on the problem of poverty by creating conditions of an expanding economy’ |
| Seventh Five year Plan | 1985-1990 | With a growth rate of 6 pc, this plan was proved successful in spite of severe drought conditions for the first three years consecutively. This plan introduced programs like Jawahar Rozgar Yojana. | Emphasis on policies and programs that would accelerate the growth in foodgrains production, increase employment opportunities and raise productivity |
| Annual Plans | 1989-1991 | It was the beginning of privatization and liberalization in India. | No plan due to political uncertainties |
| Eighth Five year Plan | 1992-1997 | Partly success. An average annual growth rate of 6.78% against the target 5.6% was achieved. | Rapid economic growth, high growth of agriculture and allied sector, and the manufacturing sector, growth in exports and imports, improvement in trade and current account deficit. to undertake an annual average growth of 5.6% |
| Ninth Five year Plan | 1997-2002 | It achieved a GDP growth rate of 5.4%, lower than the target. Yet, industrial growth was 4.5% which was higher than targeted 3%. The service industry had a growth rate of 7.8%. An average annual growth rate of 6.7% was reached. | Quality of life, generation of productive employment, regional balance and self-reliance.Growth with social justice and equality. growth target 6.5% |
| Tenth Five year Plan | 2002 –2007 | It was successful in reducing the poverty ratio by 5%, increasing forest cover to 25%, increasing literacy rates to 75 % and the economic growth of the country over 8%. | To achieve 8% GDP growth rate,Reduce poverty by 5 points and increase the literacy rate in the country. |
| Eleventh Five year Plan | 2007-2012 | India has recorded an average annual economic growth rate of 8%, farm sector grew at an average rate of 3.7% as against 4% targeted. The industry grew with an annual average growth of 7.2% against 10% targeted. | Rapid and inclusive growth.Empowerment through education and skill development. Reduction of gender inequality.Environmental sustainability. To increase the growth rate in agriculture, industry, and services to 4%,10% and 9% resp. Provide clean drinking water for all by 2009. |
| Twelfth Five year Plan | 2012-2017 | Its growth rate target was 8%. | “faster, sustainable and more inclusive growth”. Raising agriculture output to 4 percent. Manufacturing sector growth to 10 % The target of adding over 88,000 MW of power generation capacity. |
Objectives of Economic Planning in India
The following were the original objectives of economic planning in India:
- Economic Development: This is the main objective of planning in India. Economic Development of India is measured by the increase in Gross Domestic Product (GDP) and Per Capita Income
- Increased Levels of Employment: An important aim of economic planning in India is to better utilise the available human resources of the country by increasing the employment levels.
- Self Sufficiency: India aims to be self-sufficient in major commodities and also increase exports through economic planning. The Indian economy had reached the take-off stage of development during the third five-year plan in 1961-66.
- Economic Stability: Economic planning in India also aims at stable market conditions in addition to the economic growth of India. This means keeping inflation low while also making sure that deflation in prices does not happen. If the wholesale price index rises very high or very low, structural defects in the economy are created and economic planning aims to avoid this.
- Social Welfare and Provision of Efficient Social Services: The objectives of all the five year plans as well as plans suggested by the NITI Aayog aim to increase labour welfare, social welfare for all sections of the society. Development of social services in India, such as education, healthcare and emergency services have been part of planning in India.
- Regional Development: Economic planning in India aims to reduce regional disparities in development. For example, some states like Punjab, Haryana, Gujarat, Maharashtra and Tamil Nadu are relatively well developed economically while states like Uttar Pradesh, Bihar, Orissa, Assam and Nagaland are economically backward. Others like Karnataka and Andhra Pradesh have uneven development with world class economic centres in cities and a relatively less developed hinterland. Planning in India aims to study these disparities and suggest strategies to reduce them.
- Comprehensive and Sustainable Development: Development of all economic sectors such as agriculture, industry, and services is one of the major objectives of economic planning.
- Reduction in Economic Inequality: Measures to reduce inequality through progressive taxation, employment generation and reservation of jobs has been a central objective of Indian economic planning since independence.
- Social Justice: This objective of planning is related to all the other objectives and has been a central focus of planning in India. It aims to reduce the population of people living below the poverty line and provide them access to employment and social services.
- Increased Standard of Living: Increasing the standard of living by increasing the per capita income and equal distribution of income is one of the main aims of India’s economic planning.
History of Economic Planning In India
Economic planning in India dates back to pre-Independence period when leaders of the freedom movement and prominent industrialists and academics got together to discuss the future of India after Independence which was soon to come. Noted civil engineer and administrator M. Visvesvaraya is regarded as a pioneer of economic planning in India. His book “Planned Economy for India” published in 1934 suggested a ten year plan, with an outlay of Rs. 1000 crore and a planned increase of 600% in industrial output per annum based on economic conditions of the time.
The Industrial Policy Statement published just after independence in 1948 recommended setting up of a Planning Commission and following a mixed economic model. Here are the major milestones related to economic planning in India:
- Setting up of the Planning Commission: 15 March 1950
- First Five Year Plan: 9 July 1951
- Dissolution of the Planning Commission: 17 August 2014
- Setting up of NITI (National Institution for Transforming India) Aayog: 1 January 2015
Setting up the NITI Aayog was a major step away from the command economy structure adopted by India till 1991. The Planning Commission’s top down model of development had become redundant due to present economic conditions and NITI Aayog approaches economic planning in a consultative manner with input from various state governments and think tanks.
