Economic planning in India – India’s Five Year Plan – Indian Economy – Free PDF Download

VISVESVARAYA PLAN

• He introduced planning through his book “Planned economy in India”
• He suggested to shift the workers working under Agriculture towards the Industries
• He told that industrialisation will lead to doubling the income in 10 years
• Though rejected by the Britishers, it urged Indians to think of their own planning commission

Congress plan

• Under the chairmanship of Jawahar Lal Nehru, Subhash Chandra Bose who was the president of INC created a National Planning Committee in 1938
• 29 volume of recommendations were given by 15 member NPC who had 29 subcommittee with more than 350 members.
• Failure of finalizing the report due to WW-II and Quit India Movement. Report later finalized and published in 1949.
• Importance of report was not their recommendations but the aspect that it created interest amongst Indians for co-ordinated planning.

Bombay Plan

• Capitalists didn’t want any hurdle in their growth so they proposed Bombay plan which focussed more on Rapid Industrialisation
• 8 capitalist of that time gathered and prepared the plan – JRD Tata, GD Birla, AD shroff
• But this was opposed to many politicians of that time specially socialists.

Gandhian Plan

• This plan was formulated by Sriman Narayan Agarwal in 1944
• Plan focussed on agriculture and denied findings of Bombay plan and NPC that focussed on heavy and big industries in India.
• Focussed more on development of cottage and village level industries as Mahatma Gandhi didn’t support usage of machinery and centralized state power.

People’s Plan

• MN Roy formulated this plan in 1945 that was based on the ideology of Marxist Socialism.
• Focussed on need of providing the people with basic necessities of life.
• Plan supported agriculture as well as industrial sectors however, demanded socialist organization of the society.
• This plan was a middle route to integrate agriculture and Industries keeping common man in centre

First Five Year Plan (1951-55)

Situation in India that time –

1. Influx of Refugees
2. Severe food crisis
3. Mounting inflation

• Planning commission was formulated on 1950 and was supposed to report to Prime Minister of the country. It was entrusted with

1. Raising the standard of people
2. Proper allocation of resources
3. Increasing production
4. Enabling employment opportunities.

• Parties in opposition were Bhartiya Jan Sangh , Kisan Mazdoor Praja

Total allocation in the FYP was of Rs 3000 crores our of which majority was for Public sector undertakings.

• Agriculture
• Price stability
• Power and transport
• Centralised plan with focus on

Harrod Domar model

Achievements of this plan (Harrod Domar model)

• There was good monsoon
• Bumper food crop
• Inflation was in control
• Growth Rate over achieved – Target 2.1% Achieved 3.6%
• Per capita income got increased
• IIT’s were established
• Irrigation projects like Bhakra and Hirakud were made

Second Five Year Plan (1956-61) This plan was also called P.C. Mahal Nobis plan

Features of this plan

• More ambitious (4800 cr)
• More radical
• Focus on Industrialisation

1. Upper strata
2. Middle
3. Lower class
4. Trickle down Effect

Food production declined

• Led to rise in food prices, Hence Inflation
• Challenges during this time
• Deficit Financing to fund the irrigation projects
  • Lead to rise in general price level
• For development of projects we were importing raw material
  • Leading to Balance of Payment crisis

Achievements of this Plan

• Growth target – 4.5% but achieved 4.2%
• 25 % increase in national income was registered
• Steel plants like Rourkela steel plants got established
• Atomic energy commission was formed

Critical Assessment of the FYP

• This plan was a big leap forward towards industrialisation
• But that failed to create trickle down effect
• Cottage industry still remained at their nascent stage
• Due to heavy imports the country faced BOP crisis, due to which economy suffered heavily in the next five year Plan.

By the end of second FYP

We had –

• Situation worsening in Agri sector
• Industrialisation got little better – mostly dominated to public sector
• Import dependency for Raw material leading to increase in import bill and depleting Forex

Third Five Year Plan (1961-66)

Incidents that took place during this Plan –

• Sino India war – 1962
• Death of the prime minister –Jawahar Lal Nehru in 1964
• Severe drought in 1965.
• War with Pakistan in 1965-66

Objectives of this plan were –

• To become self reliant as the import bills were increasing
• Move towards Import substitution
• Again tried to brought focus on Agriculture

Agriculture and industry

Failure of this plan –

• Growth target was set as 5.6% but achieved just 2.4%
• Drought led to food crisis which in turn led to Food Inflation

Situation after the third Five Year plan

• Political Upheaval
• Severe food crisis due to drought
• High Inflation
• Rupee got devalued for the first time to improve export competitiveness

Plan Holidays (1966-69)

• Third plan was a miserable failure so the government decided that they will not plan for an individual years only
• Three annual plans were drawn during this period
• No sufficient money to plan for long term

Fourth Five Year Plan – 1969 to 1974

• Growth with Stability
• Twin Objective
• Self Reliance

Major events that took place during this Plan

• Nationalisation of Banks
• Bangladesh war in 1971- leading to influx of refugees once again
• OPEC crisis

This plan was based on Gadgil Formula

Analysis of Fourth Five Year Plan – 1969 to 1974

• This plan also failed as the growth rate that was projected was 5.6% but only 3.3% was achieved
• Severe food crisis again due to influx of refugees and monsoon failing
• The money that was kept for expanding the Export Oriented Industries got utilised in fighting wars

Rolling Plan 1978-1980

• Due to political turbulence (emergency) Janata Party came and Morarji Desai rejected Fifth year plan
• Introduced new plan in 1978 which was again then rejected by INC after coming into power . So Indira Gandhi decided to have rolling plan for Two years
• The good part of rolling plan is that they are flexible and can be moulded as per the requirement of economy

5th Five Year Plan (1974-1978)

Background

Past 5 yr plan effect

1. food production has increased upto 118 million tone
2. increase in operation of power plant & boost in coal, steel and fertilizer output

1962 Indo-China war, 1965-66 Indo-Pak war & 1965 drought

• increased price of food, fertilizer and oil

Upto 1974 increase in remittance

• increase in foreign exchange reserves

Objective of this plan

• Garibi Hatao
• Employment generation
• To establish Egalitarian Society

Achievements

Nationalisation of Banks,1969

• Increase in Domestic saving

Minimum Needs Programme (MNP) introduced

improve the living standards of the people

• Agricultural production increased by 4.5% against targeted 3.3%
• Indian National Highway system was introduced and many roads were widened
• 8% growth in village and small industries

6th Five Year Plan (1980-1985)

Background 1950-1979

Overall economics growth rate was 3.3% also called Hindu growth rate

1979-1980

• WPI risen by 17%
• Inflation
• Negative impact on power and manufacturing sector
• Deteriorating Balance of Payment
• Trade Deficit
• But Foreign Exchange reserve continued to rise – Remittances

Objective

• Poverty eradication and employment generation
• Significant use of resources to boost productivity
• Modernization through technological development
• Increase ecological productivity
• Family Planning promoting small family norms
• Reduce regional disparity
• Reduce inequality in income and wealth
• Public policy & services in favor of poor

Achievements

• Targeted growth was 5.2% but we achieved 5.7%.
• Beginning of economic liberalisation.
• Private sector got priority over public sector.
• NABARD got established in 1982
• Schemes like
• NERP- National Rural Employment Programme
• IRDP- Integrated Rural Development Programme
• RLEGP- Rural Landless Employment Programme
• TRYSEM- Training of Rural Youth for self employment

Evaluation

1. A shift from Nehruvian Socialism model
2. Elimination of Price Control by central government
3. Ration shops controlled by government halted
4. Increase in cost of living

7th Five Year Plan (1985-1990)

Background

Past Plans

• More emphasis on Export oriented industries
  • But due to trade deficit
  • Balance of Payment deteriorated further
• Montreal Protocol, 1989
  • A shift toward ecological form of development
  • Environment protection act , 1986

Objective of 7^th five year plan

• Accelerate production of food grains
• outward looking strategy with gradual liberalization
• increase employment opportunities through Social Justice
• Raise economic productivity

Outcome

1. IT revolution Computers were introduced with later turned India into a silicon giant
2. Per Capita Income – Income was increased to 3.7%
3. With IRDP about 60% development were made in rural areas
4. Growth Rate target was 5% and we achieved growth rate of 6%

Industrial Policy of 1985 & 1986 (Ending MRTP Act.)

1. Removal of compulsory license for 64 companies
2. Relaxation in FERA Act

8th Five Year Plan (1992-1997)

Background

• Establishment of License Raj as license were given to steel, power and communications giving birth to irresponsible governance system

1 st to 7th 5 yr plan

Imperative planning or Socialist Planning

• performed all economic activity in the interest of common
• Balance of Payment Crisis
• Gulf War
  • Loan from IMF and World Bank
  • Lead to sever recession + Forex reserve crisis

1. Increased spending in non development activities led to rise in Fiscal deficit
2. State owned Enterprises made huge losses
3. After Independence India struggled to develop its economy

Situation in the global world

• The Soviet Union was collapsing at the time, proving that more socialism could not be the solution for India’s ills.
• Deng Xiaoping had revolutionized China with market-friendly reforms.
• 1990-91 Iraq war led to the stoppage of flow of foreign currency from Gulf countries.

Objective

Structural Reform

• re- examination and reorientation of the role of the Government
• Increase average industrial growth rate to 7.5%
• improve the quality of life of the common man
• Energy was given priority

Achievements

1. Private sector give priority- main feature of LPG reform
2. Decentralization of Govt. 3 tier Government system introduced.
3. As India opened its market for the world, in 1995 India became member of WTO
4. Introduction of National Stock Exchange
5. Inflation came down to 3.8% by 1997
6. Heavy Industries expanded which further lead to development of secondary sector market in India.
7. Increase in per capita income by 4.4%

Background

LPG reform- Boom in industrialisation and urbanization-But rural areas were still agrarian-Regional Disparity

Objective

• Priority to agriculture and rural development
• Ensuring food and nutritional security to all
• Growth with social justice and equality
• Emphasis on Basic Minimum Services (BMS’s)-
  • safe drinking water
  • universalisation of primary education
  • streamlining PDS

Outcome

Special Action Plan

• Infrastructure
• Health, Education and Drinking wate
• Agriculture growth was 2.1% Industrial growth was 4.5% Tertiary was 7.8%
• Around 40,000 new school inaugurated
• Employment Assurance Scheme- 4.7 lakh job allotted
• Water Resources
• Information Technology
• Food and agriculture

Why 9th Five year plan under Performed?

• Asian Crisis started by 1997
• Cyclone in Odissa
• Earthquake and riots in Gujarat
• Kargil War, 1999
• Agricultural growth was low due to weather shock. Low rainfall, heat waves, delay in monsoon

10th Five Year Plan (2002-2007)

Background

• Due to 1991 LPG reform A high growth rate was observed
• Fiscal deficit lead to enactment of FRBM Act
• UPA 1 regarded as Headless government
• Investment in India Picked up and some sector like IT and Finance dominated the market.

Objective

Reduction in

1. Poverty Ratio by 5% by end of 2007
2. Gender gap literacy and wage rate by at least 50%

Cleaning major polluted river

• Portable Drinking facility in every village

Increase in

1. Literacy rate by 75%
2. Forest tree coverage upto 33% by 2012

Achievements (I)

• Reduction in Unemployment- Heavy Infrastructure investment and generation of labour- Reduction in Poverty
• Incremental Capital Output Ratio (ICOR)- Came down to 3.6 against 4.4 of 9th 5 yr plan- Better utilization of exiting capacity and suitable sectoral allocation

Achievements (II)

• Inclusive Growth- Tendulkar Committee recommendation- Moving away from caloric norms- Use uniform Poverty Line Basket (PLB) for both rural and urban population- Incorporating price indices for private expenditure on health and education

Outcome

1. 7% growth rate
2. Primary education made Fundamental Right under article 21A
3. MNREGA launched
4. Sarva Shiksha Abhiyan introduced
5. Vector born disease control programme. Eg Malaria, Dengue

11th Five Year Plan (2007-2012)

The National Development council approved 11th plan document titled, “Towards faster and more inclusive growth”

Background

• 
• 

Achievements

• Rangrajan Committee gave CPI combined 2012 To check poverty
• Reduction in gender inequality 2001 census- 933 F/1000 M 2011 census- 943 F/1000 M
• Rate of unemployment declined from 8.2% in 2004-05 to 6.6 in 2009-10
• Immunization rate increased
• Institutional deliveries increased
• National Urban Livelihood Mission started
• Population percentage below poverty line reduced by 1.5%
• Rajiv Awas Yojana started- A slum free mission
• Achived Growth rate of 8% against targeted of 9%

What went wrong?

Recession hit

• Exchange rate fluctuation due to flight of money
• Oil Imports a major concern
• Loans were given on political nexus
• Increase in inequality in distribution income and wealth
• Double Dip recession in the global world had impact on Indian economy as well.

12th Five Year Plan (2012-2017)

Background

• “Faster, Sustainable and more Inclusive growth”
• Fed Taper- FII exiting India- Exchange rate fluctuation- Decline in growth rate

2012 will be the worst year in a decade for the indian economy

Challenges

• Revive Deaccelerating Indian Economy
• Reverse FII outflow
• Twin balance sheet syndrome
• In Long Term Structural reform, increase investment & Increased saving rates
• Policies should be developed to strengthen and bring back economy to real growth potential

Objective/Target

Economic Growth

1. Real GDP growth of 8%
2. Agricultural Growth of 4%
3. Manufacturing Growth of 10%
4. State wise growth rate should be higher than 11th 5 yr plan

Poverty & Employment

1. Provide skill certification
2. Creating 50 million new job opportunity in non-farm sector

Education

• Increase in mean year of schooling
• Eliminate social and gender gap in school enrolment

Health

• Reduce TRF, IMR, MMR. Reduce malnutrition among children age 0-3 years

Infrastructure

• Provide electricity to all village Increase rural tele density by 70% 40% rural population should have access to LPCD piped drinking water

Outcome

1. GST
2. UID – Aadhar
3. Direct Benefit Transfer
4. Liberalizing FDI policy
5. Revival of MSME
6. Schemes like PM Jan Dhan Yojana
7. Startup India
8. Skill India

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