Five-Year Plans of India UPSC

Five-Year Plans of India UPSC

Context

  • From 1947 to 2017, the Indian economy was premised on the concept of planning.
  • This was carried through the Five-Year Plans, developed, executed, and monitored by the Planning Commission (1951-2014) and the NITI Aayog (2015-2017).
  • With the prime minister as the ex-officio chairman, the commission has a nominated deputy chairman, who holds the rank of a cabinet minister. 
  • Montek Singh Ahluwalia is the last deputy chairman of the commission (resigned on 26 May 2014).
  • The Twelfth Plan completed its term in March 2017.
  • Prior to the Fourth Plan, the allocation of state resources was based on schematic patterns rather than a transparent and objective mechanism, which led to the adoption for the Gadgil formula in 1969.
    • The Gadgil formula is named after Dhananjay Ramchandra Gadgil, a social scientist and the first critic of Indian planning. It was evolved in 1969 for determining the allocation of central assistance for state plans in India. Gadgil formula was adopted for distribution of plan assistance during Fourth and Fifth Five Year Plans.
  • Revised versions of the formula have been used since then to determine the allocation of central assistance for state plans.
  • The recent government elected in 2014, has announced the dissolution of the Planning Commission, and its replacement by a think tank called the NITI Aayog (an acronym for National Institution for Transforming India).

M. Visvesvaraya Plan

  • In 1934, Sir M. Visvesvaraya had published a book titled “Planned Economy in India”, in which he presented a constructive draft of the development of India in next ten years.
  • His core idea was to lay out a plan to shift labor from agriculture to industries and double up National income in ten years.
  • This was the first concrete scholarly work towards planning.
  • The economic perspective of India’s freedom movement was formulated during the thirties between the 1931 Karachi session of Indian National Congress, 1936 Faizpur session of India National Congress.

National Planning Committee

  • The first attempt to develop a national plan for India came up in 1938. In that year, Congress President Subhash Chandra Bose had set up a National Planning Committee with Jawaharlal Nehru as its president.
  • However the reports of the committee could not be prepared and only for the first time in 1948 -49 some papers came out.

Bombay Plan

  • It was presented in 1944 by Eight Industrialists of Bombay viz. Mr. JRD Tata, GD Birla, Purshottamdas Thakurdas, Lala Shriram, Kasturbhai Lalbhai, AD Shroff , Ardeshir Dalal, & John Mathai working together prepared “A Brief Memorandum Outlining a Plan of Economic Development for India”.
  • This is known as “Bombay Plan”. This plan envisaged doubling the per capita income in 15 years and tripling the national income during this period.
  • Nehru did not officially accept the plan, yet many of the ideas of the plan were inculcated in other plans which came later.

Gandhian Plan

  • In the light of the basic principles of Gandhian economics, S. N. Agarwal authored ‘The Gandhian Plan’ in 1944 in which he put emphasis on the expansion of small unit production and agriculture.
  • Its fundamental feature was decentralisation of economic structure with self-contained villages and cottage industries.

People’s Plan

  • In 1945, yet another plan was formulated by the radical humanist leader M.N. Roy, chairman of the Post-War Reconstruction Committee of Indian Trade Union.
  • The plan was based on Marxist socialism and advocated the need of providing the people with the ‘basic necessities of life’. Agricultural and industrial sectors, both were equally highlighted by the plan.

Sarvodaya Plan

  • Sarvodaya Plan (1950) was drafted by Jaiprakash Narayan.
  • This plan itself was inspired by Gandhian Plan and Sarvodaya Idea of Vinoba Bhave.
  • This plan emphasized on agriculture and small & cottage industries.
  • It also suggested the freedom from foreign technology and stressed upon land reforms and decentralized participatory planning.

The Wage Good Model

  • Prominent Economist like, C N Vakil and P R Brahmananda advocated Wage Good model for the development of the Indian economy and Industrialisation.
  • Vakil and Brahamanda differed from the Mahalanobis strategy as they believe “At the low level of consumption (this was the situation in India) the productivity of the workers depends on how much they consumed.
  • According to them, if people were undernourished, they will lose their productivity and become less efficient, at this juncture it is necessary to feed them to increase their productivity. But this is not true for all consumer good; so they differentiated between Wage Good (whose consumption increase worker productivity) and Non-Wage Good (whose consumption did not).
  • To sum up, Wage Good model says; worker’s productivity depends on not on whether they use machines to produce goods but also on the consumption of wage goods like, food, cloth and other basics.
  • Therefore, the first step towards development is to mechanize agriculture and raise food production; once this objective is reached, one should go for Mahalanobis strategy of Heavy Industrialisation.

Twenty Point Programme (TPP)

  • The second Central Plan which was launched in July 1975.
  • The programme was conceived for coordinated and intensive monitoring of a number of schemes implemented by the Central and the State Governments.
  • The basic objective was of improving the quality of life of the people, especially of those living below the poverty line.
  • Under this, a thrust was given to schemes relating to poverty alleviation, employment generation in rural areas, housing, education, family welfare and health, protection of environment and many other schemes having a bearing on the quality of life in the rural areas.

Planning commission

  • A formal body to formulate and implement Five-Year Plans was established on 15th March 1950 with the Prime Minister as the head.
  • The commission nominated a Deputy Chairman which held the rank of a cabinet minister.
  • In 2014, Prime Minister Narendra Modi dissolved the planning commission to replace it with the NITI Aayog which acts as a think tank for development of the nation.

National Development Council

  • All the plans made by the Planning Commission need to be approved by the National Development Council first which is an extra-constitutional body. It was set up on 6th August 1952.
  • Planning at the state level is done through a state planning body where the chief minister is the chairman of the body and finance and planning members along with technical members assist her/him to formulate a plan. A district planning committee also functions similarly.

NITI Aayog

  • The NITI Aayog was a political think tank set up to act as an advisor the government. The NITI Aayog will not involve setting up of a plan which is designed from the perspective of the center.
    • Rather, it aims to involve all states to devise systematic policies differently for all states.
  • The NITI Aayog aims to implement the sustainable development goals (SDG’s) which are formulated on the global forums and make the federal structure of our nation more efficient and co-operative.
  • The chairperson of the NITI Aayog is the Prime Minister.
  • The CEO of the planning commission is Amitabh Kant at present. The chief Ministers of all states are a part of the governing council of the NITI Aayog.
  • Structure under NITI Aayog
    • NITI Aayog will be headed by the Prime Minister and will have a Governing Council, comprising Chief Ministers of states and Heads of all Union Territories.
    • The Governing Council replaces the earlier National Development Council.
    • In addition, there will also be a regional council comprising of Chief Ministers and Lieutenant Governors of Union Territories, which will be mandated to develop plans that are region specific.
    • The Aayog will have 7 or 8 full time members and two well- known and accomplished part- time members, drawn from leading research organisations and major universities.
    • Four Union Ministers, nominated by the Prime Minister, will also be included in ex-officio capacity

Five-Year Plans of India UPSC

First Plan (1951–1956)

  • Mainly focused in the development of the primary sector.
    • The primary sector of the economy includes any industry involved in the extraction and production of raw materials, such as farming, logging, hunting, fishing, and mining
  • This five years plan’s president was Jawaharlal Nehru and Gulzarilal Nanda was the vice-president.
  • The motto of first five years plan was ‘ Development of agriculture’ and the aim was to solve different problems that formed due to the partition of the nation, second world war.
  • Rebuilding the country after independence was the vision of this plan.
  • Another main target was to lay down the foundation for industry, agriculture development in the country and to provide affordable healthcare, education in low price to the folks.
  • It was based on the Harrod-Domar model.
  • The most important feature of this phase was active role of state in all economic sectors. 
  • The target growth rate was 2.1% annual gross domestic product (GDP) growth; the achieved growth rate was 3.6% the net domestic product went up by 15%.
  • The monsoon was good and there were relatively high crop yields, boosting exchange reserves and the per capita income, which increased by 8%. National income increased more than the per capita income due to rapid population growth.
  • Many irrigation projects were initiated during this period, including the Bhakra, Hirakud and Damodar Valley dams.
  • The World Health Organization (WHO), with the Indian government, addressed children’s health and reduced infant mortality, indirectly contributing to population growth.
  • At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as major technical institutions.
    • The University Grants Commission (UGC) was set up to take care of funding and take measures to strengthen the higher education in the country.
  • Contracts were signed to start five steel plants, which came into existence in the middle of the Second Five-Year Plan. The plan was quasi-successful for the government.

Second Plan (1956–1961)

  • Focused on the development of the public sector and “rapid Industrialisation”.
  • Followed the Mahalanobis model, an economic development model developed by the Indian statistician Prasanta Chandra Mahalanobis in 1953.
  • The plan attempted to determine the optimal allocation of investment between productive sectors in order to maximise long-run economic growth.
  • It used the prevalent state-of-the-art techniques of operations research and optimization as well as the novel applications of statistical models developed at the Indian Statistical Institute.
  • The plan assumed a closed economy in which the main trading activity would be centred on importing capital goods.
  • From the Second Five-Year Plan, there was a determined thrust towards substitution of basic and capital good industries.
  • Hydroelectric power projects and five steel plants at Bhilai, Durgapur, and Rourkela were established with the help of the Soviet Union, Britain (the U.K) and West Germany respectively. Coal production was increased.
  • More railway lines were added in the north east.
  • The Tata Institute of Fundamental Research and Atomic Energy Commission of India were established as research institutes. In 1957, a talent search and scholarship program was begun to find talented young students to train for work in nuclear power.
  • The second plan was a period of rising prices. The country also faced foreign exchange crisis. The rapid growth in population slowed down the growth in the per-capita income.
  • The target growth rate was 4.5% and the actual growth rate was 4.27%.
  • The plan was criticized by classical liberal economist B.R. Shenoy who noted that the plan’s “dependence on deficit financing to promote heavy industrialization was a recipe for trouble”. Shenoy argued that state control of the economy would undermine a young democracy.
  • India faced an external payments crisis in 1957, which is viewed as confirmation of Shenoy’s argument.

Third Plan (1961–1966)

  • stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the defence industry and the Indian Army.
  •  The construction of dams continued. Many cement and fertilizer plants were also built. Punjab began producing an abundance of wheat.
  • Many primary schools were started in rural areas.
  • In an effort to bring democracy to the grass-root level, Panchayat elections were started and the states were given more development responsibilities.
  • For the first time India resorted to borrowing from IMF.
  • Rupee value devalued for the first time in 1966.
  • State electricity boards and state secondary education boards were formed. States were made responsible for secondary and higher education.
  • State road transportation corporations were formed and local road building became a state responsibility.
  • The target growth rate was 5.6%, but the actual growth rate was 2.4%.
  • It was based on John Sandy and Sukhamoy Chakraborty’s model.

Plan Holidays (1966–1969)

  • Due to miserable failure of the Third Plan the government was forced to declare “plan holidays” (from 1966 to 1967, 1967–68, and 1968–69).
  • Three annual plans were drawn during this intervening period. During 1966–67 there was again the problem of drought. Equal priority was given to agriculture, its allied activities, and industrial sector.
  • The government of India declared “Devaluation of Rupee” to increase the exports of the country. The main reasons for plan holidays were the war, lack of resources and increase in inflation.

Fourth Plan (1969–1974)

  • adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power.
  • Nationalisation of 14 major Indian banks and the Green Revolution in India advanced agriculture.
  • The target growth rate was 5.6%, but the actual growth rate was 3.3%.

Fifth Plan (1974–1978)

  • stress on employment, poverty alleviation (Garibi Hatao), and justice. The plan also focused on self-reliance in agricultural production and defence. In 1978 the newly elected Morarji Desai government rejected the plan. The Electricity Supply Act was amended in 1975, which enabled the central government to enter into power generation and transmission
  • The Indian national highway system was introduced and many roads were widened to accommodate the increasing traffic. Tourism also expanded. The twenty-point programme was launched in 1975. It was followed from 1975 to 1979.
  • The Minimum Needs Programme (MNP) was introduced in the first year of the Fifth Five-Year Plan (1974–78).
    • The objective of the programme is to provide certain basic minimum needs and thereby improve the living standards of the people.
    • It is prepared and launched by D.P.Dhar.
  • The target growth rate was 4.4% and the actual growth rate was 4.8%.

Rolling Plan (1978–1980)

  • The Janata Party government rejected the Fifth Five-Year Plan and introduced a new Sixth Five-Year Plan (1978–1980). This plan was again rejected by the Indian National Congress government in 1980 and a new Sixth Plan was made.
  • The Rolling Plan consisted of three kinds of plans that were proposed.
    • The First Plan was for the present year which comprised the annual budget and the Second was a plan for a fixed number of years, which may be 3, 4 or 5 years.
    • The Second Plan kept changing as per the requirements of the Indian economy.
    • The Third Plan was a perspective plan for long terms i.e. for 10, 15 or 20 years. Hence there was no fixation of dates for the commencement and termination of the plan in the rolling plans.
  • The main advantage of the rolling plans was that they were flexible and were able to overcome the rigidity of fixed Five-Year Plans by mending targets, the object of the exercise, projections and allocations as per the changing conditions in the country’s economy.
  • The main disadvantage of this plan was that if the targets were revised each year, it became difficult to achieve the targets laid down in the five-year period and it turned out to be a complex plan. Also, the frequent revisions resulted in the lack of stability in the economy.

Sixth Plan (1980–1985)

  • beginning of economic liberalisation. Price controls were eliminated and ration shops were closed. This led to an increase in food prices and an increase in the cost of living. This was the end of Nehruvian socialism.
  • The National Bank for Agriculture and Rural Development was established for development of rural areas on 12 July 1982 by recommendation of the Shivaraman Committee. 
  • Family planning was also expanded in order to prevent overpopulation. In contrast to China’s strict and binding one-child policy, Indian policy did not rely on the threat of force.
  • Visakhapatnam Steel Plant (Andhra Pradesh), Salem (TamilNadu) and Bhadravathi Steel Plants were built.
  • Military Five-Year Plans became coterminous with Planning Commission’s plans from this plan onwards.
  • The target growth rate was 5.2% and the actual growth rate was 5.7%.

Seventh Plan (1985–1990)

  • The plan laid stress on improving the productivity level of industries by upgrading of technology.
  • The main objectives of the Seventh Five-Year Plan were to establish growth in areas of increasing economic productivity, production of food grains, and generating employment through “Social Justice”.
  • The Seventh Plan had strived towards socialism and energy production at large.
  • The thrust areas of the Seventh Five-Year Plan were: social justice, removal of oppression of the weak, using modern technology, agricultural development, anti-poverty programmes, full supply of food, clothing, and shelter, increasing productivity of small- and large-scale farmers, and making India an independent economy.
  • Under the Seventh Five-Year Plan, India strove to bring about a self-sustained economy in the country with valuable contributions from voluntary agencies and the general populace.
  • The target growth rate was 5.0% and the actual growth rate was 6.01%. and the growth rate of per capita income was 3.7%.

Annual Plans (1990–1992)

  • The Eighth Plan could not take off in 1990 due to the fast changing economic situation at the centre and the years 1990–91 and 1991–92 were treated as Annual Plans. The Eighth Plan was finally formulated for the period 1992–1997.

Eighth Plan (1992–1997)

  • Launched immediately after the initiation of structural adjustment policies and macro stabilisation policies which were necessitated by the worsening balance of payments position’ and inflation during 1990-91.
  • It was the beginning of liberalization, privatisation and globalization (LPG) in India.
  • Modernization of industries was a major highlight of the Eighth Plan.
  • Under this plan, the gradual opening of the Indian economy was undertaken to correct the burgeoning deficit and foreign debt.
  • Meanwhile, India became a member of the World Trade Organization on 1 January 1995.
  • The major objectives included, controlling population growth, poverty reduction, employment generation, strengthening the infrastructure, institutional building, tourism management, human resource development, involvement of Panchayati rajs, Nagar Palikas, NGOs, decentralisation and people’s participation.
  • Universalization of elementary education and complete eradication of illiteracy among the people in the age group of 15 to 35 years.
  • Energy was given priority with 26.6% of the outlay.
  • The target growth rate was 5.6% and the actual growth rate was 6.8%.

Ninth Plan (1997–2002)

  • Focus: Growth with Social Justice and Equality
  • Tried primarily to use the latent and unexplored economic potential of the country to promote economic and social growth.
  • It offered strong support to the social spheres of the country in an effort to achieve the complete elimination of poverty. 
  • Saw joint efforts from the public and the private sectors in ensuring economic development of the country.
  • In addition, the Ninth Five-Year Plan saw contributions towards development from the general public as well as governmental agencies in both the rural and urban areas of the country.
  • New implementation measures in the form of Special Action Plans (SAPs) were evolved during the Ninth Plan to fulfill targets within the stipulated time with adequate resources.
    • The SAPs covered the areas of social infrastructure, agriculture, information technology and Water policy.
  • Objectives
    • Population control.
    • Generating employment by giving priority to agriculture and rural development.
    • Reduction of poverty.
    • Ensuring proper availability of food and water for the poor.
    • Availability of primary health care facilities and other basic necessities.
    • Primary education to all children in the country.
    • Empowering the socially disadvantaged classes like Scheduled castes, Scheduled tribes and other backward classes.
    • Developing self-reliance in terms of agriculture.
    • Acceleration in the growth rate of the economy with the help of stable prices.
  • Performance
    • The Ninth Five-Year Plan achieved a GDP growth rate of 5.4% against a target of 6.5%
    • The agriculture industry grew at a rate of 2.1% against the target of 4.2%
    • The industrial growth in the country was 4.5% which was higher than that of the target of 3%
    • The service industry had a growth rate of 7.8%.
    • An average annual growth rate of 6.7% was reached.
  • The target growth was 7.1% and the actual growth was 6.8%.

Tenth Plan (2002–2007)

  • Attain 8% GDP growth per year.
  • Reduction of poverty rate by 5% by 2007.
  • Providing gainful and high-quality employment at least to the addition to the labour force.
  • Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.
  • 20-point program was introduced.
  • Target growth: 8.1% – growth achieved: 7.7%.
  • The Tenth Plan was expected to follow a regional approach rather than sectoral approach to bring down regional inequalities.

Eleventh Plan (2007–2012)

  • Theme: Towards faster and more inclusive growth
  • It aimed to increase the enrolment in higher education of 18–23 years of age group by 2011–12.
  • It focused on distant education, convergence of formal, non-formal, distant and IT education institutions.
  • Rapid and inclusive growth (poverty reduction).
  • Emphasis on social sector and delivery of service therein.
  • 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% respectively.
  • Reduce total fertility rate to 2.1.
  • Provide clean drinking water for all by 2009.
  • Increase agriculture growth to 4%.

Twelfth Plan (2012–2017)

  • Decided to achieve a growth rate of 9% but the National Development Council (NDC) on 27 December 2012 approved a growth rate of 8% for the Twelfth Plan.
  • Theme: Faster, More Inclusive and Sustainable Growth
  • The government intends to reduce poverty by 10% during the 12th Five-Year Plan.
  • Objectives of the Twelfth Five-Year Plan were:
    • To create 50 million new work opportunities in the non-farm sector.
    • To remove gender and social gap in school enrolment.
    • To enhance access to higher education.
    • To reduce malnutrition among children aged 0–3 years.
    • To provide electricity to all villages.
    • To ensure that 50% of the rural population have accesses to proper drinking water.
    • To increase green cover by 1 million hectare every year.
    • To provide access to banking services to 90% of households.
  • The UID (Unique Identification Number) will act as a platform for cash transfer of the subsidies in the plan.

Note: With the Planning Commission dissolved, no more formal plans are made for the economy, but Five-Year Defence Plans continue to be made. The latest would have been 2017–2022. However, there is no Thirteenth Five-Year Plan.

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