Our leaders were very much clear that there is a need for planned growth of the economy to overcome the underdeveloped status of newly independent India. Many of our leaders were inspired by the soviet model of development and decided to go for a similar planned development strategy. The planning commission was established under the chairmanship of Prime Minister and was designated with the job of creating five-year plans for developing India.
Five-year plans are documents describing the growth targets, estimates if resources, priorities and strategies etc.
The second five-year plan designed by P C Mahalanobis was instrumental in pursuing the unbalanced growth strategy by focussing on basic goods and capital goods industries so that the forward linkages will propel the higher levels of production. This strategy was followed till the 1980s. But failure in creating forward linkages and high level of imbalance forced us to change the focus from basic goods to consumer goods.
Planning in India includes Indicative planning and Imperative planning. Indicative planning is when the direction of policy is given by the plan document and stakeholders are motivated to follow the suit. There may be some incentives for following the plan direction. But it is not mandatory for stakeholders. But in the case of imperative planning, the plan is binding on all stakeholders. India has a mixture of both plans because some of the provisions are mandatory and non-confirmation can be penalised.
Indian planning is unique in the sense that it includes Economic Planning and Social Planning. It talks about economic goals as well as social goals.
First Five Year Plan:
The first plan had a huge emphasis on agriculture. The economy was stagnant at the time of independence and there was an acute shortage of food grains.Industries in India was not developed enough and primarily consisted of cottage industries.Our exports were limited to primary products. We targeted a growth rate of 2.1% and achieved 3.6% in the first five-year plan designed by K. N Raj.
Second Five Year Plan:
Second Plan was designed to ensure rapid industrialisation. We could improve the share of industries in GDP from 3% to 18%. We also attained a growth rate of 4.2% against the target of 4.5%. The food shortage was still an issue and we had to manage with imports from the US.
Third Five Year Plan:
The objective of the third five-year plan was a Self-reliant and Self-sustained economy. We wanted to increase the production to a level where we can overcome the need to import things and this was called ‘Import Substitution’. We started Public Sector Units (PSU) to ensure production levels.
An economy can be self-sustained only when there is a huge growth rate. Issues in minor sectors should not affect the overall growth and development, and high growth rate will cushion the impact of minor issues. Though we wanted to attain self-sufficiency in Technology, Consumer Goods and Capital Goods, we were far away from actual self-reliance due to the shattered state of the economy at independence. Industries were set up in many sectors, only after Independence.
We had an ambitious target of 5.6% growth rate in this plan and we could achieve only 2.7% and the plan was officially declared as a failed plan.
Reasons for the failure of this plan includes the Leadership crisis after the demise of Nehru, Wars with China and Pakistan and Failure of monsoons.
Annual Plans/Rolling Plans:
Between 1966 and 1969 we had three annual plans and achievements of this period was green revolution.
Fourth Five Year Plan:
Self-reliance was the objective of the fourth five-year plan with emphasis on growth and stability. Our targets were at the level of the third plan itself we could achieve only 3.3% growth. Inflation was highest with problems of shortage of money with the government. 1971 war and oil crisis of 1972-73 due to Suez Canal Issue also affected this plan. However, this plan was not officially declared as a failure.
This plan was marked by aggressive policies of Indira Gandhi, like Nationalisation of Banks, the passage of Monopolistic and Restrictive Trade Practices Act to control industries and Foreign Exchange Regulation Act to control foreign exchange.
Fifth Five Year Plan:
Though the theme was Poverty Eradication, there were no schemes for the same in first three years as the plan design was more due to political need from agitations in the country by Jayaprakash Narayan. It went through the National Emergency and ultimately resulted in first non-Congress government.
Between 1979 and 80 we again had annual plans due to political instability.
Sixth Five Year Plan:
This plan was designed by Planning Commission itself and had an emphasis on Structural Change of the Economy. We wanted to induce faster development in the secondary and tertiary sector.We introduced Industrial Policy of 1980 to enable faster Industrial Development. Huge profits incurred by PSUs and the need for resources to run Employment generation and Poverty eradication schemes left government at a handicap to invest more and the only remaining choice was to allow the private sector to play a significant role. Hence we started liberalisation of licensing and perspective planning with long term goals.
Seventh Five Year Plan:
This plan was also designed by Planning Commission and talks about modernisation. This plan is almost similar to the previous one and had its emphasis on liberalisation. The plan wanted to promote investment in technology to modernise existing plans as well as to expand the economy to promote modern sectors like food processing and electronics.
The political instability resulting from the internal politics and Bofors Scam lead to economic crisis during this period and we faced the biggest crisis during this period. Credit rating agencies reported that India may default and USSR was not in a position to help due to their internal problems. Hence, we were forced to go for non-concessional assistance(high-interest short-term loans) and was forced to pledge gold to Banks ofJapan England and Switzerland.
1991 and 1992 we had annual plans with congress governments with a thin majority. We got a conditional loan from IMF and we announced ‘ The New Industrial Policy-1991.
Eighth Five Year Plan:
The plan, developed by John W Miller focussed on Human Resource Development and reforms were directed towards Liberalisation, Privatisation and Globalisation. In spite of many changes in government, the plan was not postponed.
Ninth Five Year Plan:
Ninth Plan aimed at equitable distribution and growth with equality and we could achieve a growth rate of 5.4%. There was a sudden decline in growth rate due to South East Asian Crisis, Sanctions after the nuclear test, Kargil War and the terror attack in the US.
Tenth Five Year Plan:
This plan was affected by the global slowdown in 2003-04. 2004 showed a sudden boom and African Countries were growing at 6%.
Eleventh Five Year Plan:
The objective was Inclusive development.
Twelfth Five Year Plan
Faster, More inclusive and Sustainable Growth
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