Origin Five year plans were first introduced in the erstwhile Soviet Union in 1928 for controlled and rapid economic development. Much of the Soviet industrial successes are a result of the implementation of its five year plans. In 1950, India’s prime minister Jawaharlal Nehru, impressed by the Soviet system, adopted five year plans as a model for economic development, and established the Planning Commission which was to act independent of any cabinet and was answerable only to the Prime Minister, who is also Chairperson of the commission.
Draft plans were to be approved by the National Development Council, comprising the Planning Commission and the Chief Ministers of all states. An approved plan is then passed by the cabinet and then in Parliament. The benefits of five year planning, especially in a country as big and unpredictable as India, have been questioned by many, and it has often been seen that targets are not met. This method has still not been able to successfully get rid of poverty and the cost overruns in failed or incomplete public sector projects are often too high.
Be that as it may, five year plans are still a good yardstick to determine investment and policy priorities. Brief history India’s five greatest problems, Jawaharlal Nehru once remarked, are land, water, cows, capital and babies. To deal with them, he launched India’s First Five-Year Plan, which has coped fairly well with the first three. But the shortage of capital to create jobs and necessities for an enormous and fast-growing population has not been solved, and Prime Minister Nehru is impatient for a solution. “We cannot wait,” said he. That is the difficulty. We have to think in terms of large schemes of social engineering, not petty reforms. ” India’s First Five-Year Plan still had six months to run, but Nehru and his government were plunging ahead with a far more ambitious Second Five-Year Plan, which planners said should add 25% to the national income ( about $22 billion in 1956 ) and create 12 million new jobs by 1961. Socialism by Expansion- Nehru was a socialist and his dreams for India revolve around what he calls “the ideal of a socialist society. The First Five-Year Plan, a relatively modest $5 billion program, was not really socialistic. Its proudest achievement: good planning, hard work and good weather had increased food production 18%—for the first time in history relieving India’s peasant masses of the threat of famine. The plan strove to fill the most urgent needs of India’s millions, pumped the bulk of its money into irrigation, electric power, transport and housing, only 8% into industry, e. g. , one steel plant, a locomotive factory, a shipyard.
Meanwhile, the “private sector” of India’s economy was left free to expand. The new plan, Nehru’s advisers agreed, must push more decisively toward socialism and “the public sector must be expanded relatively faster than the private sector. ” To draft the new plan, Nehru picked Prasanta Chandra Mahalanobis, 62, head of the sprawling Calcutta University Statistical Institute. Cambridge-trained Professor Mahalanobis, a physicist turned economist, had achieved a sensational rise in prestige, which stands as close to Nehru on economic matters as Krishna Menon does on foreign affairs.
Mahalanobis had stocked the institute’s library with the works of Stalin and Mao Tse-tung and the proceedings of the Soviet Academy of Sciences, bound in calf. To help draft the plan, Mahalanobis got the services of ten Soviet economists to assist his staff. Mahalanobis has been called a Communist but denied it in hurt tones. “I have been only twice to Moscow but seven times to the U. S. ,” he said. Business at Gunpoint- The central proposal of the new Five-Year Plan: to increase government spending on economic development to $17. 6 billion in five years, doubling public sector” or state-owned industry. The private sector would be encouraged to grow all the while, but on a more moderate basis. Thus the Indian program falls short of complete state socialism. Nehru has long argued, as Britain’s Laborites now do, that socialism is feasible without full nationalization. But Nehru favors controls over private enterprise. “An army,” he explained, “does not occupy a country by placing a soldier in every nook and cranny: a gun mounted on a hill enables an army to control surrounding areas effectively. Overview of the Plans The economy in India is based in part on planning through its five years plans developed, executed and monitored by the Planning Commission. With the Prime Minister as the ex officio Chairman, the commission has a nominated Deputy Chairman, who has rank of a Cabinet minister. Montek Singh Ahluwalia is currently the Deputy Chairman of the Commission. The tenth plan completed its term in March 2007 and the eleventh plan is currently underway. In 1951, India’s first Five Year Plan (1951-55) was unveiled.
While the first plan placed greater emphasis on agriculture, the second Five Year Plan (1956-60) sought to build up an industrial base for the country, particularly in the public sector. However, the chief landmark in this period was wide ranging and broad-based reforms in the village power structure by the abolition of the Zamindari system and the creation of cooperatives among the rural poor to stimulate agricultural growth. The Third Five Year Plan (1961-65) was interrupted by the 1962 war with China and the 1965 war with Pakistan, and it was evident that its targets would not be met.
Its main basis was the conviction that an increase in agricultural production, particularly food grains, is essential for political stability and to build up food security and a buffer stock so as to not depend on foreign imports. Area specific programmes like the Intensive Area Agricultural Programme and the Intensive Agricultural District Programme were promoted at this time. This was followed by three annual plans between 1966 and 1968, once again emphasizing on agriculture, and also on stimulating exports, in the process also devaluating the rupee in 1966.
The Fourth Five Year Plan (1969-73) called for greater expenditure in the public sector, but was not able to meet its national income growth target. This was the time when the so-called “Green Revolution” begun, which by the end of the Fifth Five Year Plan period ensured food security and adequate buffer stocks for India. The Fifth Five Year Plan was only passed in 1976 after a series of revisions due to the global crisis over crude oil prices, but it had to be prematurely terminated because of internal political differences following the election of a new government.
There were two more annual plans in 1978 and 1979. The Sixth Five Year Plan (1980-84) took a more adaptable “rolling” approach and concentrated on employment generation in rural areas and anti-poverty measures, while the Seventh Five Year Plan (1985-89) laid greater emphasis on energy and social development. Following two more annual plans in 1990 and 1991, the Eighth Five Year Plan was launched in 1992, setting of economic liberalization and market based reforms, the fruits of which are still being enjoyed today.
It was a landmark in the sense that it encouraged private investment in major public sector undertakings, greater rural and agricultural development and anti-poverty and anti-illiteracy measures. It also continued the emphasis on food security and food grains were also being exported during this period. The Ninth Five Year Plan (1997-2001) continued with the momentum of its predecessor, especially emphasizing on employment generation and poverty reduction. | | First plan (1951-1956) The first Indian Prime Minister, Jawaharlal Nehru presented the first five-year plan to the Parliament of India on December 8, 1951.
The first plan sought to get the country’s economy out of the cycle of poverty. The plan addressed, mainly, the agrarian sector, including investments in dams and irrigation. Agricultural sector was hit hardest by partition and needed urgent attention. The total plan budget of 206. 8 billion INR (23. 6 billion USD in the 1950 exchange rate) was allocated to seven broad areas: irrigation and energy (27. 2 percent), agriculture and community development (17. 4 percent), transport and communications (24 percent), industry (8. 4 percent), social services (16. 64 percent), land rehabilitation (4. percent), and other (2. 5 percent). The target growth rate was 2. 1 percent annual gross domestic product (GDP) growth; the achieved growth rate was 3. 6 percent. During the first five-year plan the net domestic product went up by 15 percent. The monsoon was good and there were relatively high crop yields, boosting exchange reserves and the per capita income, which increased by 8 percent. 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 Dam and Hirakud Dam.
The World Health Organization, 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. University Grant Commission 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; however these plants did not come into existence until the middle of the next five-year plan.
Second plan (1956-1961) The second five-year plan focused on industry, especially heavy industry. Domestic production of industrial products was encouraged, particularly in the development of the public sector. The plan 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 he prevalent state of art techniques of operations research and optimization as well as the novel applications of statistical models developed at the Indian Statiatical Institute. The plan assumed a closed economy in which the main trading activity would be centered on importing capital goods. Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were established. Coal production was increased. More railway lines were added in the north east. The Atomic Energy Commission was formed in 1957 with Homi J. Bhabha as the first chairman.
The Tata Institute of Fundamental Research was established as a research institute. In 1957 a talent search and scholarship program was begun to find talented young students to train for work in nuclear power. Third plan (1961-1966) The third plan stressed on agriculture and improving production of rice, but the brief Sino-Indian War in 1962 exposed weaknesses in the economy and shifted the focus towards defense. In 1965-1966, the war led to inflation and the priority was shifted to price stabilization. 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 grassroot level, 1. Panchayat elections were started and the states were given more development responsibilities. 2. State electricity boards and state secondary education boards were formed. 3. States were made responsible for secondary and higher education. 4. State road transportation corporations were formed and local road building became a state responsibility. Fourth plan (1969-1974) At this time Indira Gandhi was the Prime Minister.
The Indira Gandhi government nationalized 14 major Indian banks and the Green Revolution in India advanced agriculture. In addition, the situation in East Pakistan (now independent Bangladesh) was becoming dire as the Indo-Pakistani War of 1971 and Bangladesh Liberation War took place. Funds earmarked for the industrial development had to be used for the war effort. India also performed the Smiling Buddha underground nuclear test in 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of Bengal to warn India against attacking West Pakistan and widening the war.
Fifth plan (1974-1979) Stress was laid on employment, poverty alleviation, and justice. The plan also focused on self-reliance in agricultural production and defense. In 1978 the newly elected Morarji Desai government rejected the plan. Electricity Supply Act was enacted in 1975, which enabled the Central Government to enter into power generation and transmission. At the onset of the Fifth Five Year Plan India in the 1970s, the international economy was in a turmoil, which had a great impact on the economy of both, developed and developing countries of the world.
The main changes were perceived in sectors such as food, oil, and fertilizers where prices sky-rocketed. As a result of this, attaining self-reliance in food and energy became a top priority. During this period, the Indian economy was affected by several inflationary pressures. Food grain production was above 118 million tons due to the improvement of infrastructural facilities like the functioning of the power plants and the rise in the supply of coal, steel, and fertilizers.
Regarding the oil, credibility of Bombay High had shot up the commercial production of oil in India. In 1974-75, Indian exports crossed 18%, and the large earnings from these exports have further increased the Indian foreign exchange reserves. Objectives of the Fifth Five Year Plan India: The Fifth Five Year Plan India was designed with emphasis on certain objectives, enlisted as under: • to reduce social, regional, and economic disparities for developmental planning • to enhance agricultural productivity • to initiate land reforms to check rural and urban unemployment • to emphasize on household industries like carpet-weaving, handlooms, sericulture, and handicrafts • to encourage self-employment through a well integrated local planning • to encourage import substitution in areas like industrial machinery, chemicals, paper, iron and steel and non-ferrous metals • to capture the markets with location advantages • to initiate appropriate use of fiscal, credit and production support policies in the cottage industry sector • to develop labour intensive technological improvements.
Sixth plan (1980-1985) When Rajiv Gandhi was elected as the prime minister, the young prime minister aimed for rapid industrial development, especially in the area of information technology. Progress was slow, however, partly because of caution on the part of labor and communist leaders. The Indian national highway system was introduced for the first time and many roads were widened to accommodate the increasing traffic. Tourism also expanded. The sixth plan also marked the beginning of economic liberalization.
Price controls were eliminated and ration shops were closed. This led to an increase in food prices and an increased cost of living. Family planning also was expanded in order to prevent overpopulation. In contrast to China’s harshly-enforced one-child policy, Indian policy did not rely on the threat of force. More prosperous areas of India adopted family planning more rapidly than less prosperous areas, which continued to have a high birth rate. Seventh plan (1985-1989) The Seventh Plan marked the comeback of the Congress Party to power.
The plan lay stress on improving the productivity level of industries by upgradation of technology. The main objectives of the 7th five year plans were to establish growth in the areas of increasing economic productivity, production of food grains, and generating employment opportunities. As an outcome of the sixth five year plan, there had been steady growth in agriculture, control on rate of Inflation, and favorable balance of payments which had provided a strong base for the seventh five Year plan to build on the need for further economic growth.
The 7th Plan had strived towards socialism and energy production at large. The thrust areas of the 7th Five year plan have been enlisted below: • Social Justice • Removal of oppression of the weak • Using modern technology • Agricultural development • Anti-poverty programs • Full supply of food, clothing, and shelter • Increasing productivity of small and large scale farmers • Making India an Independent Economy Based on a 15-year period of striving towards steady growth, the 7th Plan was focused on achieving the pre-requisites of self-sustaining growth by the year 2000.
The Plan expected a growth in labor force of 39 million people and employment was expected to grow at the rate of 4 percent per year. Some of the expected outcomes of the Seventh Five Year Plan India are given below: Balance of Payments (estimates): Export – Rs. 33 thousand crore, Imports – (-)Rs. 54 thousand crore, Trade Balance – (-)Rs. 21 thousand crore Merchandise exports (estimates): Rs. 60,653 crore Merchandise imports (estimates): Rs. 95,437 crore Projections for Balance of Payments: Export – Rs. 60. 7 thousand crore, Imports – (-) 95. 4 thousand crore, Trade Balance- (-) Rs. 4. 7 thousand crore. 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. Period between 1989-91 1989-91 was a period of political instability in India and hence no five year plan was implemented. Between 1990 and 1992, there were only Annual Plans. In 1991, India faced a crisis in Foreign Exchange (Forex) reserves, left with reserves of only about $1 billion (US). Thus, under pressure, the country took the risk of reforming the socialist economy. P. V.
Narasimha Rao) (28 June 1921 – 23 December 2004), also called Father of Indian Economic Reforms, was the twelfth Prime Minister of the Republic of India and head of Congress Party, and led one of the most important administrations in India’s modern history overseeing a major economic transformation and several incidents affecting national security. At that time Dr. Manmohan Singh (currently, Prime Minister of India) launched India’s free market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning of privatization and liberalization in India. Eighth plan (1992-1997)
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. This plan can be termed as Rao and Manmohan model of Economic development. The major objectives included, containing population growth, poverty reduction, employment generation, strengthening the infrastructure, Institutional building, Human Resource development, Involvement of Panchayat raj, Nagarapalikas, N.
G. OSand Decentralisation and peoples participation. Energy was given prority with 26. 6% of the outlay. An average annual growth rate of 6. 7% against the target 5. 6% was achieved. Ninth Plan (1997 – 2002) Ninth Five Year Plan India runs through the period from 1997 to 2002 with the main aim of attaining objectives like speedy industrialization, human development, full-scale employment, poverty reduction, and self-reliance on domestic resources. Background of Ninth Five Year Plan India: Ninth Five Year Plan was formulated amidst the backdrop of India’s Golden jubilee of Independence.
The main objectives of the Ninth Five Year Plan India are: • to prioritize agricultural sector and emphasize on the rural development • to generate adequate employment opportunities and promote poverty reduction • to stabilize the prices in order to accelerate the growth rate of the economy • to ensure food and nutritional security • to provide for the basic infrastructural facilities like education for all, safe drinking water, primary health care, transport, energy • to check the growing population increase to encourage social issues like women empowerment, conservation of certain benefits for the Special Groups of the society • to create a liberal market for increase in private investments During the Ninth Plan period, the growth rate was 5. 35 per cent, a percentage point lower than the target GDP growth of 6. 5 per cent. Tenth plan (2002-2007) The main objectives of the 10th Five-Year Plan were: • Reduction of poverty ratio by 5 percentage points by 2007; • Providing gainful and high-quality employment at least to the addition to the labour force; All children in India in school by 2003; all children to complete 5 years of schooling by 2007; • Reduction in gender gaps in literacy and wage rates by at least 50% by 2007; • Reduction in the decadal rate of population growth between 2001 and 2011 to 16. 2%; • Increase in Literacy Rates to 75 per cent within the Tenth Plan period (2002 to 2007); • Reduction of Infant mortality rate (IMR) to 45 per 1000 live births by 2007 and to 28 by 2012; • Reduction of Maternal Mortality Ratio (MMR) to 2 per 1000 live births by 2007 and to 1 by 2012; • Increase in forest and tree cover to 25 per cent by 2007 and 33 per cent by 2012; All villages to have sustained access to potable drinking water within the Plan period; • Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012; • Economic Growth further accelerated during this period and crosses over 8% by 2006. Eleventh plan (2007-2012) The eleventh plan has the following objectives: • Income & Poverty • Accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in order to double per capita income by 2016-17 • Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of benefits Create 70 million new work opportunities. • Reduce educated unemployment to below 5%. • Raise real wage rate of unskilled workers by 20 percent. • Reduce the headcount ratio of consumption poverty by 10 percentage points. • Education • Reduce dropout rates of children from elementary school from 52. 2% in 2003-04 to 20% by 2011-12 • Develop minimum standards of educational attainment in elementary school, and by regular testing monitor effectiveness of education to ensure quality • Increase literacy rate for persons of age 7 years or above to 85% Lower gender gap in literacy to 10 percentage points • Increase the percentage of each cohort going to higher education from the present 10% to 15% by the end of the plan • Health • Reduce infant mortality rate to 28 and maternal mortality ratio to 1 per 1000 live births • Reduce Total Fertility Rate to 2. 1 • Provide clean drinking water for all by 2009 and ensure that there are no slip-backs • Reduce malnutrition among children of age group 0-3 to half its present level • Reduce anaemia among women and girls by 50% by the end of the plan • Women and Children Raise the sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-17 • Ensure that at least 33 percent of the direct and indirect beneficiaries of all government schemes are women and girl children • Ensure that all children enjoy a safe childhood, without any compulsion to work • Infrastructure • Ensure electricity connection to all villages and BPL households by 2009 and round-the-clock power. • Ensure all-weather road connection to all habitation with population 1000 and above (500 in hilly and tribal areas) by 2009, and ensure coverage of all significant habitation by 2015 Connect every village by telephone by November 2007 and provide broadband connectivity to all villages by 2012 • Provide homestead sites to all by 2012 and step up the pace of house construction for rural poor to cover all the poor by 2016-17 • Environment • Increase forest and tree cover by 5 percentage points. • Attain WHO standards of air quality in all major cities by 2011-12. • Treat all urban waste water by 2011-12 to clean river waters. • Increase energy efficiency by 20 percentage points by 2016-17. Evolution of strategies and priorities
The First plan provided an incisive general analysis of the nature of the country’s development problem and various options for mobilizing resources and achieving development with more equal distribution. There was special emphasis on the role of mass mobilization of idle rural labour and land reform. But on balance the plan rejected radical solutions (especially in respect of redistribution of existing wealth and incomes). The plan projected, rather optimistically, that savings and investments as a proportion of national income would rise from an estimated 5-6 percent in the early 1950s to 20 percent by 1968-69 and stabilise at that level hereafter. Aggregate income was expected to double in approximately twenty years and per capita in twenty-seven years. The successful completion of the modest first plan was followed by a very ambitious Second Five-Year Plan. The plan’s author P. C. Mahalanobis, provided an analytical foundation for it with a closed economy growth model with two sectors, one of which produced consumer goods and other investment goods, with sector-specific capital as the only factor of production.
The fundamental insight of this model was that the greater the proportion of investment devoted to increasing the capacity of the investment-goods sector, the faster the long-run growth in consumption and investment. In the strategy based on this model, rapid long-run growth was to be achieved without much sacrifice of short-run consumption by concentrating scarce investment in expanding capital-goods-producing (and intermediate-goods-producing) heavy industry.
Current consumption demand was to be met by employing abundant labour resources to manufacture consumer goods using labour-intensive methods that require little capital. The second plan underlined the political constraints on any radical solutions to redressing inequalities and re-emphasized rapid growth and diversification of economic activity through industrialization as essential for achieving and maintaining full employment at a rising level of productivity.
It went on to define a coherent overall strategy whose central elements included stepping up the rate of investments (but at a more moderate pace than envisaged in the first plan) and a conscious policy of developing an indigenous heavy industry base (comprising metallurgical, chemical and machine building industries) to lay the foundation for accelerated self-reliant growth, with a leading role for the public sector.
Accordingly, the 1956 Industrial Policy Resolution emphasized that the state must play a progressive role in the development of Industries and as the Resolution puts it “the adoption of socialist pattern of society as the national objective, as well as the need for planned and rapid development, require that all industries of basic and strategic importance, or in the nature of public utility services, should be in the public. Other industries which are essential and require investment on a scale which only the state, in present circumstances, could provide, have also to be in the public sector.
The state has, therefore, to assume direct responsibility for the future development of industries over a wider area. ” The encouragement of labour intensive forms of producing mass consumer goods was seen to be a potentially important way of reconciling the conflict between emphasis on heavy industry (which would generate faster growth of income and employment in the long run) and the need to generate adequate jobs for the currently unemployed and underemployed in the transitional period.
Of industries and as the Resolution puts it “the adoption of socialist pattern of society as the national objective, as well as the need for planned and rapid development, required that all industries of basic and strategic importance, or in the nature of public utility services, should be in the public sector. Other industries which are essential and require investment on a scale which only the State, in present circumstances, could provide have also to be in the public sector. The state has, therefore, to assume direct responsibilities for the future development of industries over a wider area. The encouragement of labor-intensive forms of producing mass consumer goods seen to be a potentially important way of reconciling the conflict between emphasis on heavy industry (which would generate faster growth of income and employment in the long run) and the need to generate adequate jobs for the currently unemployed and underemployed in the transitional period. The dominant growth orientation articulated in the Mahalanobis strategy of the Second plan continued into the third plan. Thus, the economic growth was expected to take place through the modern industrialization.
The industrialization in turn, was expected to be a replica of the advance countries. However, the relatively greater emphasis on the long-term growth in an import-substitution oriented strategy required a modification in the industrialization process. This consisted of a strong accent on the creation of domestic capacity in the direction of producing capital goods to produce more capital goods. In this strategy, the public sector was expected to play a dual role of (a) promoting the growth of infrastructural facilities and he creation of capacity in the basic and heavy industries and (b) reducing the concentration of economic power through the expansion of public ownership of means of production. An attempt was made with a reasonable success in implementing the long-term growth maximizing Mahalanobis strategy during the second and third five year plan. There was as a result a considerable acceleration in public sector investment in infrastructure (roads, railways, major and medium irrigation) and indirectly productive investments in universal intermediates like steel, coal, power and heavy electrical machinery.
Although the encouragement to the cottage, village and small scale industries as a means of providing employment as well as expanding the supplies of a consumer goods were conceived as part of this strategy, very little was achieved in this regard. Similar was the fate in regard to the policies towards the reduction of inequalities. As rightly pointed out by Kaushik Basu “the actual policy regime that India followed in its early days of independence was a mixture of the two competing (and almost contradictory) vision. A Soviet-style planning system was developing, but without the state having a monopoly of control over the resources.
Capitalism was allowed to flourish, but a large bureaucracy was nurtured. Huge investments were made in basic industries, but at the same time several sectors were protected as belonging to the small scale sector. Capitalism was criticized but it was also relied upon. Socialism was never practiced, but the rhetoric of socialism was the norm. A burgeoning bureaucracy became the surrogate for socialism”. (Basu, 2004) However, in terms of the aggregate performance, this phase recorded a fairly sustained 8 to 10 per cent compound growth rate of industrial output, 3 to 3. per cent compound growth rate in the food grains output and around 1. 75 per cent growth rate in per capita income. All these growth rates represented a sharp acceleration over the pre-Independence past. A diversified industrial structure came to be established. This was taken to be a success of the planning efforts. Planning was regarded during this period as a “going”. Thus, the first phase spanning roughly over the first three Five Year Plan periods was characterized by fairly sustained growth in per capita incomes, distinct acceleration in public sector investment and in the growth of industrial output.
This was dominated by the growth oriented development strategy. Changing Perceptions The fifties & sixties were marketed by relatively strong. & stable governments under the Congress both at the Centre & in the states as well as a clear commitment to, and support for planning from the political leadership. The Planning Commission could impart a sense of vision, direction & integrated overall perspective on the desired course of the economy. This provided a framework in which investment allocation could be decided and the justification for particular projects and programs could be evaluated.
The commission acquired prestige and began to play an important role in mediating the claims of different ministry, of the Centre vis-a-vis the states and of the different states over limited development resources. It also pioneered independent evaluation of the actual working of selected scheme and there impact. According to Tendulkar “whatever success that had been claimed for the growth oriented development strategy of the first phase could be attributed to the credibility of the planning process”. The atmosphere changed dramatically after the drought and foreign exchange crisis of the mid-sixties.
The sudden increase in defence expenditure consequent to the armed conflicts with China and Pakistan and the leveling-off of foreign aid, all in the short span of three years (1962-65), put the economy under severe strain. A crisis occurred when to consecutive droughts hit the country in 1966 and 1967 and GDP decline in absolute term. The sharp deterioration of the economic situation and the security environment highlighted to main weakness of the existing strategy, namely, the relative neglect of agriculture and a critical dependence on the foreign aid.
The two-year period 1965 and 1966 witnessed the worst drought in recent memory and consequent famines in large part of the north India. At the same time, all aid was cut off to India by donor countries on account of the Indo-Pakistan War of 1965, including food aid. The consequence was a virtual collapse of the economy, and the recourse had to be taken to extraordinary financing from the International Monetary Fund (IMF) and the World Bank, which were accompanied by stiff conditional ties.
This traumatic experience brought food securities into the forefront of our policy imperatives, which was further buttressed by the observation that sustained industrialization was not possible without adequate provision of wage-goods. The Fourth Plan, conceived after three years of Plan holiday, therefore, had to have food securities as its centre-piece. The Fifth Plan recognized that growth and industrialization would not necessarily improve the living conditions of the people, particularly the poor.
The concepts of “minimum needs” and directed anti-poverty programs where innovations of this Plan, whatever may have been the success achieved in implementing them effectively. The Fifth Plan also marks the beginning of a period of steady increase in the growth rate of economy, which continued right through to the Eight Plan. The Sixth Plan for the first time recognized that the success of the Mahalanobis heavy industrialization strategy in raising the savings rate of the country had created a situation where excess capacities were becoming evident in certain industries.
A shift in the pattern of industrialization, with lower emphasis on heavy industries and more on infrastructure, begins here. The Seventh Plan represents the culmination of this shift. In perspective, it may justifiably be termed as the infrastructure plan. It was also during this period that a reappraisal of the imports-substitution strategy begins, and a gradual liberalization of the Indian economy is initiated. The Eighth plan was overtaken by the crisis of 1991, and the economic reforms that came in its wake.
The dramatic events and policy initiatives of the two-year plan holiday between 1900 and 1992 demanded a full reappraisal of the planning methodology, and the Eighth plan represents the first efforts at planning for a market-oriented economy. Jean Dreze and Amartya Sen (1995) pointed out “four decades of allegedly ‘interventionist’ planning did little to make the company literate, provide a wide-based health service, achieve comprehensive land reforms, or end the rampant social inequalities that blight the material prospects of the underprivileged”.
Thus, the Eighth Five Year Plan documents state that “in the background of our experience of planning for development over the last forty years and under the strong imperatives for change as they have emerged now, a question is generally asked: what will be the role of planning in future? The Role of Planning “ when the term planning was, for the first time, officially defined in the First Five year Plan document the term used was “ democratic planning” as distinct from a ‘ plan based on regimentation’. The centralized planning of the type practiced in socialist economies did not exist in India, ever.
In practice, the market has determined allocations in a major sector of the economy. Public sector, of course, has expanded with a wide ranging influence on the economic life of the nation. The lack of cost consciousness of the public sector, its increasing ineffectiveness in achieving the targets and depletion of its resources, crippling its ability to carry on its activities without high- cost borrowings have compelled us to define and limit its role and lay down the objective principles of its operations.
The process of planning and the pattern of Government activities followed hitherto have dampened people`s initiatives and their sense of responsibility towards building the nation. The process of planning needs to be corrected in this respect. “As a corollary to this, the role of Planning Commission needs to be redefined. It has to play an integrative role in developing a holistic approach to the policy formulation in critical and inter- sectoral areas of human and economic development.
The existing multiplicity of agencies is not only wasteful but also counter-productive because of the long repetitive procedures and the diffusion of authority involved. An integrated approach can lead to better results at much lower cost. So far, resource allocation has been the predominant role of the planning commission. This has to change. Instead of looking for mere increases in the plan outlays the emphasis should be on increases in the efficiency of utilization of the allocation being made and the prospects of a return on the investments.
The planning in our country still has a large role to play. Planning is needed for creating social infrastructure and for human development. Planning is necessary to take care of the poor and the downtrodden who have little asset endowments to benefit from the natural growth process. Future planning process has to manage the flow of resources across regions for accelerated removal of regional disparities. Certainly there are areas in which markets cannot play an environment, forest and ecology. Planning and market mechanism should be so dovetailed that one is complementary to the other.
Market mechanism must serve as an ‘ efficiency promoting device’, while planning will be the larger guiding force, keeping the long term social goals in the perspective” (Ninth Plan Document). CONCLUSION The Five year plans have seen significant changes from 1951-2009. While the First five year plan focussed on agriculture, the current five year plan focuses on women development. These changes have come up as the Indian economy has seen significant changes in the last 50 years. But the major change in the planning has come after 1990 when india’s economy was under distress and the P.
V. Narshimha Rao government took the charge of improving the economic situation of the country. Since then there has been continuous development in the country and significant emphasis has been laid on problems that are long term social problems and solutions are such that they keep the social prespective in mind. BIBLIOGRAPHY Books Refer:- 1. Essentials of Business Environment by K. Aswathappa 2. Indian Economy since Independence by Uma Kapila Websites Refers:- 1. www. wikipedia. org/ 2. www. planningcommission. gov. in/ 3. www. economywatch. com/