Economic Planning in India : Planning Commission, NDC & Five Year Plans

Economic Planning

Economic Planning is a term by which a country achieves a long term objective in the economy by the use of limited resources. The concept of economic Planning in India is derived from Russia.

History of Planning

At the time of independence the Indian Economy was underdeveloped and depended on British economy.
At that time, Indian economy faced so many problems and economic planning was the only solution for these problems.
Sir M. Visvesvaraya first initiated the proposal of economic planning by his book “Planned Economy for India” in 1934.
Thereafter in 1938 “National Planning Commission” was set up under the chairmanship of J.L. Nehru by Indian National Congress.
In 1944 the Bombay Plan was formulated under the guidance of 8 Industrialists. Out of these industrialists Purushottam Das Thakur was one among the 15 members of the National Planning Committee. Rest three J.R.D Tata, G.D. Birla and Lala Sri Ram were the members of the sub-committees (29 in total) of the National Planning Committee.
In 1944 Gandhian Plan was put forward by S.N. Aggarwal.
It was mainly presented in support of Agriculture. (Mainly aimed at agriculture)
It’s another aim was promotion of cottage and village level industries.
In 1945 ‘Peoples Plan’ was put forward by M.N. Roy, chairman of the Post-war Reconstruction Committee of Indian Trade Union
This plan was based on Marxist socialism.
Its main aim was providing the basic necessities of life to the people.
In 1950 “Sarvodaya Plan” was proposed by J.P. Narayan.
This plan was based on “Gandhian Plan”.
A few important ideas were adopted from this plan when the Government of India promoted five year plans.

Planning Commission

The planning commission was set up by a resolution of the Government of India in March 15, 1950 under the chairmanship of J.L. Nehru.
Its main objective was to promote a rapid rise in standard of living of people by efficient use of the recourses of the Country.
It is an extra-constitutional and non-statutory body.
It consists of Prime Minister and some other full time members.
Prime Minister is the ex-officio chairman of this commission. It has one Deputy Chairman appointed by the Prime Minister.
Total no. of members in this commission as well as the term of the members is not fixed.
The members are appointed by the Government as per its need and the members of this commission also changes according to the wish of the Government.

National Development Council

National Development Council (NDC) was established in August 1952.
The Prime Minister is the Chairman of this council and the secretary of Planning Commission is the secretary of NDC.
It is a constitutional body.
The Chief Ministers of all states and the members of the Planning Commission are the members of NDC.
It was constituted to make a correlation between the states and the Planning Commission for economic planning.
All the planning framed by the planning commission has to be approved by the NDC.

Five year plans

1st five year Plan (1951-56)

First five year plan started on April 1st, 1951. And it continued till 1956.
It was based on Harrold-Domar Model.
Its main objective was development of Agriculture sector.
Other objectives were:
Rehabilitation of migrants from Pakistan.
To reconstruct the economy which got damaged due to 2nd world war?
To solve the food problem. To check the mounting inflation.
The growth of national income during this planning was 3.6% which was more than the targeted growth rate of 2.1%.

2nd Five year Plan (1956-61)

Time period of 2nd five year plan was 1951 to 1956.
It was based on the unbalanced growth model of P.C. Mahalanobis.
Its main objective was rapid industrialization particularly the basic and heavy industries.
The steel plants in public sector at Bhilai, Durgapur and Rourkela were constructed during this plan.
During this period Public sector became catalyst for industrial development.
National income increased at a rate of 4.2% which was targeted at 4.5%.
For heavy industries Government took heavy loan from Foreign.

3rd Five year Plan (1961-66)

It was based on John Sandy and S. Chakravarty model.
This plan is called ‘Gadgil Yojana’.
Its main objectives were self-reliant and self-generating economy.
It was a total failure due to Indo-China war in 1962 and indo-pak war in 1965.
During this period the development of industry slowed down and inequality in income and wealth increased.
Growth rate of national income was only 2.7% against the targeted 5.6%.
It was also a totally failed plan.

3 Annual Plans (1966-69)

During the time period of 1966-69 three annual plans were executed which are also called ‘Plan holiday’.
Its main objectives were to overcome the ill effects of 2 wars, to solve the food problems, to control inflation and to prepare the base for the fourth plan.
During this period the green revolution started (1966-67).
During this period the buffer stock share for food grains was introduced.

4th Five year Plan (1969-74)

It was based on Allen S. Manne and Ashok Rudra.
Its objectives were ‘growth with Stability’ and ‘progress towards self-reliance’.
During this period growth rate in agriculture and Industrial sector was quite good in the first 2 years but failed in the last three years.
During this period inflation and unemployment was high.
After 1971 war India also faced the problems of refugees.
14 banks were nationalized in 1969.
GDP Growth rate was 3.2 % against the targeted 5.7 %.

5th five year plan (1974-79)

It was based on the model of D.D. Dhar.
Its main objectives were poverty eradication (Garibi Hatao) and self reliance.
No improvement was observed in unemployment.
GDP Growth rate was 4.8% against the target of 4.4%.
This plan was terminated in 1978 (instead of 1979) when Janta Government came to power.

Rolling Plan (1978-80)

The time period of rolling plan was from 1st April 1779 to 31st March 1980.
In Indian history there were 2 sixth five year plans. One was operated by Janta Party and the other one was operated by congress when they returned to power in 1980. The sixth five year plan by the Janta Party was planned for 1978 to 1983 but it executed for only 2 years (1978-1980).
This two years plan by the Janta Government is known as Annual plan which is also called the Rolling Plan.

6th Five-Year Plan (1980-85)

It was based on the model proposed by planning commission with emphasis on structural change.
Its main objectives were poverty reduction and employment generation.
In this plan special efforts were put in for ensuring basic infrastructure in agriculture and industrial sector.
During this plan industrial growth rate was less than the targeted rate but the growth rate of national income was 5.5% which exceeded the target of 5.2%.

7th five year plan (1985-90)

It was based on the model of planning commission with special emphasis on liberalization.
Its main objectives were modernization, growth, self reliance and social justice.
During this plan many sun-rise industries especially food processing and electronics were promoted.
Creation of more opportunities and productive employment was emphasized during this plan.
Industrial growth rate was 8.5% which was more than the target of 7%.

2 Annual Plans (1990-92)

Due to fast changing political situation at the centre and economic crisis eighth plan could not be started in 1990.
Therefore in these 2 years 2 annual plans were formulated and implemented.
During this period New Industrial Policy was announced which was the beginning of large scale liberalization in the Indian economy.

8th five year plan (1992-97)

It was based on the model of John W. Miller suitable for liberalized economy.
Its main objectives were human resource development, creation of sufficient employment opportunities, and control of population explosion, modernization and diversification of industries. Special emphasis on areas like primary education, drinking water, health was the other objectives of this plan.
During this plan the growth rate of Agricultural sector was 3.6 % which was higher than targeted 3.5%.
Growth rate of Industrial sector was 8.5 % which was higher than targeted 8.1 %.

9th five year plan (1997-2002)

It was based on the model of planning commission.
It was launched in the fiftieth (50th) year of India’s independence.
Its main objectives were growth with social justice and equality.

10th Five year Plan

It was based on the model of Planning Commission.
Its main objective was to growth with emphasis on human development.
Other important targets of 10th five year plan were:

Reduction of poverty ratio by 5% by 2007 and by 15% by 2012.
Providing high quality employment.
All children complete 5 years of schooling by 2007.
Reduction of gender gap.
Reduction of decadal population growth.
Increase in literacy rates.
Increase in forest and tree cover to 25% by 2007 and 33% by 2012.

11th Five Year Plan (2007-2012)

It was based on the model of Planning Commission.
Its main objective was fast and inclusive growth.
It’s other important aims were:

To achieve an average 9% growth in GDP at the end of 2011-2012.
Electrification of all villages.
Creation of 58 million job opportunities.
To decrease unemployment below 5% among the educated.
To double the per capita income by 2016-17.
To increase literacy rate to 85%.

12th Five Year Plan

Its main objective is faster, sustainable and more inclusive growth.
Other important objectives are :
A targeted growth rate of 9%.
Better performance in agriculture (at least 4% growth).
Growth of both agriculture and manufacturing sector.
Development of health, education and skill.
Special challenges focusing vulnerable groups and backward regions.