An Insight into Economic Planning in India | RBI Grade-B Main

Economic planning refers to the planning of economic activities through the development of specific policies & schemes in order to fulfill a pre-determined objective. Economic planning was first explored and adopted by the former Soviet Union, with their first five-year plan commencing from 1928. However, it was with the migration of east European economists to Britain and the USA in the 1920s and 1930s that the world beyond Soviet Union became aware of the nuances of economic planning.

A whole lot of democracies and colonies of the time were fascinated by the idea of planning as an instrument of economic development. In the 1930s, Indian socialists, nationalists, and academicians began advocating for the need of economic planning in India.

It was in this decade that many fresh proposals suggesting immediacy of planning were put forth, but the British government remained almost immune to them. However, these proposals served their purpose when India got its independence; and decided to adopt a planned economic pattern.

Listed below are some of the important economic plans that shaped economic planning in India:

  1. The Visvesvaraya Plan
  2. The FICCI Proposal
  3. The Congress Plan
  4. The Gandhian Plan
  5. The People’s Plan
  6. The Sarvodaya Plan

History of Economic Planning in India

Since independence till 2017, the Indian economy was premised on the concept of planning that was carried out by the five-year plans. These plans were developed, executed, and monitored by the Planning Commission from 1951 to 2015; and then by NITI Aayog from 2015 to 2017. In 2017, the five-year planning system was replaced by the NITI Aayog’s 15-year vision document. However, to have an insight into the economic planning in India, it is pertinent to know the history of economic planning and the objectives of each of the five-year plans. Let us take a brief look at each of them:

Five-Year Plans

Year

Objective

Achievements

First Five-Year Plan

1951-56

Agricultural development & balanced economic development. It was based on the Harrod-Domar Model.

During this time, 18% of national income & 11% of per capita income were increased.
Targeted Growth Rate: 2.1%
Actual Growth Rate: 3.6%

Second Five-Year Plan

1956-61

Industrial development,
transport & communication development
It was based on the P C Mahalanobis model.

Establishment of Durgapur, Bhilai, and Rourkela steel plants.
The price level was up by 30%.
Targeted Growth Rate: 4.5%
Actual Growth Rate: 4.1%

Third Five- Year Plan

1961-66

Both agricultural & industrial development and establishment of a self-reliance & self-reliant economy.
The third five-year plan was also called Gadgil Yojana.

The first elections (Panchayati Raj) under the Rajasthan Panchayat Samitis and Zilla Parishads Act, 1959 were held in September 1959.
Targeted Growth Rate: 5.6%
Actual Growth Rate: 2.8%
1962: Indo-China War
1965: Indo-Pak War
1966: Severe drought
These three were the major reasons behind the failure of this plan.

Plan Holiday

1966-69

Three annual plans: 1966-67; 1967-68 and 1968-69 were developed. Equal priority was given to agricultural & related activities

The Green Revolution commenced in 1966 with an objective to increase food grain production by using HYV (High Yielding Variety) seeds.
The Father of Green Revolution in India: M S Swaminathan

Fourth Five-Year Plan

1969-74

Growth with stability, and progress towards achieving a self-reliant economy

The plan failed due to the 1971 Indo-Pak War, the arrival of refugees from Bangladesh, and poor monsoon.
Targeted Growth Rate: 5.7%
Achieved Growth Rate:3.3%

Fifth Five-Year Plan

1974-78

Launched by D D Dhar, the objectives were:
Reduction of poverty (Garibi Hatao), attainment of self-reliance, and better distribution of income

Minimum Needs Programme (MNP) was started to provide certain basic needs to improve the living conditions of the poor.
Targeted Growth Rate:4.4%
Achieved Growth Rate:4.8%
The plan was terminated in 1978 when the Janata Party came into power (the only 5-Year Plan that was of 4-year duration)

Rolling Plan

1978-80

Every year the plan would be assessed according to the performance of the previous plan; and a new plan laid out accordingly.

 

Sixth Five- Year Plan

1980-85

Increase of national income, removal of poverty, decrease in unemployment, population control through family planning, modernization of technology

NABARD was established in 1982 during this five-year plan.
Targeted Growth Rate: 5.2%
Achieved Growth Rate: 5.4%

Seventh Five- Year Plan

1985-90

Rapid growth in food grain production, increase in employment opportunities, increase in production of all sectors

There was an increase in per capita income by 3.6% per annum.
The Jawahar Rozgar Yojana commenced.
Targeted Growth Rate: 5%
Achieved Growth Rate: 6.01%

Annual Plans

1990-92

Due to political instability, the two annual plans were rolled out

The New Economic Reforms, including the LPG (Liberalisation, Privatisation, Globalisation) reforms were undertaken in 1991

Eighth Five-Year Plan

1992-97

Development of human resources, rapid economic growth, high growth of agriculture & allied sectors, growth in export and import, improvement in current account deficit

The Prime Minister’s Rozgar Yojana was launched in 1993.
Targeted Growth Rate: 5.6%
Annual Growth Rate: 6.78%

Ninth Five-Year Plan

1997-2002

Theme: Growth with Social Justice & Equity
Objective: Agriculture & rural development with productive employment generation, improvement in quality of life, self-reliance, and generation of employment

The recession of the global economy was the reason for the failure of this plan.
Targeted Growth Rate: 6.5%
Annual Growth Rate: 5.4%

Tenth Five- Year Plan

2002-07

Eradicate poverty & unemployment (inclusive growth)
Double the per capita income in the next 10 years

The Kasturba Gandhi Balika Vidyalaya was established to promote education for girls.
The Jawahar Lal Nehru National Urban Renewal Mission was initiated to foster urban development.
Targeted Growth Rate: 8.1%
Annual Growth Rate: 7.76%

Eleventh Five- Year Plan

2007-12

Poverty eradication, Development of health, education, infrastructure & environment of the country.
To increase the literacy rate to 85%

The services sector attained an annual average growth rate of 9.7% vis-à-vis the targeted growth rate of 9.9%.
Targeted Growth Rate: 8.6%
Annual Growth Rate: 7.9%

Twelfth Five-Year Plan

2012-17

Theme: Faster, sustainable & more inclusive growth
Objective: Sustainable development & inclusive growth
The main focus areas were health, education, skill development, universal healthcare, and optimum utilization of available resources

Schemes like Atal Pension Yojana, UJALA, DDU Grameen Kaushalya Yojana, Digital India Programme were launched.
Targeted Growth Rate: 8%
Annual Growth Rate:     -

 

NITI Aayog | An Institution for Current Economic Planning in India

NITI (National Institution for Transforming India) Aayog is a policy think-tank of the Government of India that replaced the Planning Commission on January 1, 2015. It aims at involving the states in the policy-making process to foster economic growth & development. It strives to indulge in a ‘bottom-up’ approach to envisage ‘maximum governance, minimum government’, echoing the spirit of cooperative federalism. The Prime Minister of India is the ex officio Chairman of NITI Aayog.

This was a brief introduction to Economic Planning in India. You can check out more about the broader view of Economic Planning and types of Economic Planning here.

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