ECONOMIC PLANNING IN INDIA – 05

Rationale behind the planning commission:

The Constitution of India has guaranteed certain Fundamental Rights to the citizens of India and enunciated certain Directive Principles of State Policy, in particular, that the State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life, and shall direct its policy towards securing, among other things —
  1. That The Citizens, Men And Women Equally, Have The Right To An Adequate Means Of Livelihood ;
  2. that the ownership and control of the material resources of the community are so distributed as best to sub serve the common good ; and
  3. That the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
Having regarded to these rights and in furtherance of these principles as well as of the declared objective of the Government to: Promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production, and offering opportunities to all for employment in the service of the community. Objectives of planning:

  • High rate of growth – with a view to increase the standard of living
  • Modernization – of the economy in terms of adoption of new technology and social outlook
  • Economic self – reliance – avoiding imports and producing in India
  • Equity – equitable distribution of wealth with social justice
  • Economic stability – controlling inflation and unemployment.
Role – The Planning Commission was charged with the responsibility of:
  • making assessment of all resources of the country
  • augmenting deficient resources
  • formulating plans for the most effective balanced utilisation of resources
  • Determining priorities and defining the stages in which the Plan should be carried out and propose the allocation of resources for the due completion of each stage
  • indicate the factors which are tending to retard economic development
  • determine the nature of the machinery which will be necessary for securing the successful implementation of each stage of the Plan in all its aspects ;
INDIAN FIVE YEAR PLANNING

The first Five-year Plan was launched in 1951 and two subsequent five-year plans were formulated till 1965, when there was a break because of the Indo-Pakistan Conflict. Two successive years of drought, devaluation of the currency, a general rise in prices and erosion of resources disrupted the planning process and after three Annual Plans between 1966 and 1969, the fourth Five-year plan was started in 1969. The central importance assigned to the public sector was assigned was first articulated in the Industrial Policy Resolution in 1956.and subsequently documented in the second five year plan in 1956. The Eighth Plan could not take off in 1990 due to the fast changing political situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural adjustment policies. For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but since the launch of the Ninth Plan in 1997, the emphasis on the public sector has become less pronounced and the current thinking on planning in the country, in general, is that it should increasingly be of an indicative nature.

 Five– year plans:  an overview

The Planning Commission from 1950 to 2014 formulated twelve five year plans. The 1st and 2nd plans aimed at raising public resources for investments in public sector, the 3rd plan focused on increased emphasis on exports and the 4th Plan formulated at a difficult period of balance of payments crisis focused on agricultural development. The 5th Plan provided enhanced allocations for social sector spending. The 6th and 7th Plans were infrastructure plans focusing on raising plan resources for infrastructure spending. The 8th Plan formulated in the midst of economic reforms achieved 6.7 %growth. The 9th Plan period witnessed a sharp decline in economic growth to 2.4%. The 10th and 11th Plans implemented in the 2004-2014 period witnessed economic growth trajectory of above 9%.
PLAN Focus areas and details
First Plan (1951 – 56) Target growth: 2.1% Achieved growth: 3.6% ·       It was based on Harrod-Domar Model. ·       Community Development Program launched in 1952 ·       Focus on agriculture, price stability, power and transport ·       It was a successful plan primarily because of good harvests in the last two years of the plan
Second Plan (1956 – 61) Target Growth: 4.5% Actual Growth: 4.27% ·       Also called Mahalanobis Plan named after the well known economist ·       Focus – rapid industrialization Advocated huge imports through foreign loans. ·       Shifted basic emphasis from agriculture to industry far too soon. ·       During this plan, prices increased by 30%, against a decline of 13% during the First Plan
Third Plan (1961 – 66) Target Growth: 5.6% Actual Growth: 2.84% ·       At its conception, it was felt that Indian economy has entered a take-off stage. ·       Therefore, its aim was to make India a ‘self-reliant’ and ‘self-generating’ economy. ·        Based on the experience of first two plans, agriculture was given top priority to support the exports and industry. ·       Complete failure in reaching the targets due to unforeseen events – Chinese aggression (1962), Indo-Pak war (1965), severe drought 1965-66
 
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