India’s Five Years Plan BY abhiJitoo 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 pproved 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 riorities. 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 ix 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 istory 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 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 n 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 the conviction that an increase in agricultural production, particularly food grains, is ssential 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 ncome 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 eneration 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 rains 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. 4 percent), land rehabilitation (4. 1 percent), and other (2. 5 percent). 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, hich 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 ountry. 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. econd 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 roductive sectors in order to maximise long-run economic growth .
It used the 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 hairman.
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) 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 n 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 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 nflationary 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 ottage 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 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. eventh 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 Ann-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 1 5-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. Balance of Payments (estimates): Export – Rs. 3 thousand crore, Imports thousand crore, Trade Balance – (-)Rs. 21 thousand crore Merchandise exports (estimates): Rs. 60,653 crore Merchandise imports (estimates): Rs. 95,437 crore – (-)Rs. 54 Projections for Balance of Payments: Export – Rs. 60. thousand crore, Imports – (-) 95. 4 thousand crore, Trade Balance- (-) Rs. 34. 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 mplemented. 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. 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.