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Indian Economy

Five Year Plans

  • 20 Aug 2022
  • 12 min read

What is the History of Five Year Plans?

  • The Idea of Planning as a process of rebuilding the economy gained prominence in the 1940s-50s.
  • Various Industrialists came together in 1944 and drafted a joint proposal for setting up a planned economy in India. It is famously known as the Bombay Plan.
  • Planning for development was seen as a crucial choice for the country, following Independence.
  • Joseph Stalin was the first person to implement the Five-Year Plan in the Soviet Union, in the year 1928.
  • India launched a series of Five-Year Plans after independence to build its economy and attain development.

What is the Concept of FYPs?

  • The idea of five-year plans is simple- The Government of India prepares a document with all its income and expenditure for five years.
  • The budget of the central government and all the state governments is divided into two parts: non-plan budget and plan budget.
  • The non-plan budget is spent on routine items yearly. The planned budget is spent on a five-year basis as per the priorities fixed by the plan.
  • The model of the Indian Economy was premised on the concept of planning based on five-year plans from 1951-2017.
  • The Five Year Plans were formulated, implemented and regulated by a body known as the Planning Commission.
  • The Planning Commission was replaced by a think tank called NITI AAYOG in 2015.
    • The Niti Aayog has come out with three documents — 3-year action agenda, 7-year medium-term strategy paper and 15-year vision document.
Five Year Plan Highlights

First Five-Year Plan (1951-56)

  • The First Five Year Plan laid the thrust of economic development in India.
  • It was presented by the first Indian Prime Minister, Jawaharlal Nehru to the Parliament of India.
  • K.N Raj, a young economist, argued that India should "hasten slowly" for the first two decades.
  • It mainly addressed the agrarian sector, including investment in dams and irrigation. Ex- Huge allocations were made for Bhakhra Nangal Dam.
  • It was based on the Harrod Domar Model and emphasised increasing savings.
  • By the end of 1956, five Indian Institutes of Technology were established.
  • The target growth rate was 2.1% and the achieved growth rate was 3.6%.

Second Five Year Plan (1956-61)

  • The Second Five year Plan stressed rapid industrialisation and the public sector.
  • It was drafted and planned under the leadership of P.C Mahalanobis.
  • It emphasised quick structural transformation.
  • The government imposed tariffs on imports to protect domestic industries under this plan.
  • The target growth rate was 4.5% and the actual growth rate was slightly less than expected, 4.27%.

Third Five Year Plan (1961-66)

  • The focus was on agriculture and improvement in the production of wheat.
  • States were entrusted with additional development responsibilities. Ex- States were made responsible for secondary and higher education.
  • Panchayat elections were introduced to bring democracy to the grassroots level.
  • The target growth rate was 5.6% and the actual growth rate only achieved 2.4%
  • This indicated a miserable failure of the Third Plan, and the government had to declare "Plan Holidays" (1966-67, 1967-68, and 1968-69). The Sino-Indian War and the Indo-Pak War, which caused the Third Five Year Plan to fail, were the primary causes of the plan holidays.
Fourth Five-Year Plan: (1969-74)
  • It was introduced under the Prime Ministership of Indira Gandhi and attempted to correct the previous failures.
  • Based on Gadgil Formula, a great deal of emphasis was laid on growth with stability and progress towards self-reliance.
  • The government nationalised 14 major Indian Banks and the Green Revolution boosted agriculture.
  • The Drought Prone Area Programme was also launched.
  • The target growth rate was 5.6%, but the actual growth rate was 3.3%.
Fifth Five-Year Plan (1974-78)
  • It laid stress on increasing employment and poverty alleviation (garibi hatao).
  • In 1975, the Electricity Supply Act was amended, enabling the central government to enter into power generation and transmission.
  • The Indian National Highway System was introduced.
  • The Minimum Needs Programme introduced in the first year of this plan, aimed to provide basic minimum needs. MNP was prepared by D.P. Dhar.
  • The target growth rate was 4.4% and the actual growth rate turned out to be 4.8%
  • In 1978, the newly elected Morarji Desai government rejected this plan.

Rolling Plan (1978-80)

This was a period of instability. The Janata Party government rejected the fifth five-year Plan and introduced a new Sixth Five-Year Plan. This, in turn, was rejected by the Indian National Congress in 1980 upon Indira Gandhi's re-election.

A rolling plan is one in which the effectiveness of the plan is evaluated annually and a new plan is created the following year based on this evaluation. As a result, throughout this plan, both the allocation and the targets are updated.

Sixth Five Year Plan (1980-85)
  • It underlined the beginning of economic liberation by eliminating price controls.
  • It was seen as the end of Nehruvian Socialism.
  • To prevent overpopulation, family planning was introduced.
  • On the recommendation of the Shivaraman Committee, the National Bank for Agriculture and Rural Development was established.
  • The target growth rate was 5.2% and the actual growth rate was 5.7%, implying that it was a success.
Seventh Five Year Plan (1985-90)
  • This plan was led by the Prime Ministership of Rajiv Gandhi.
  • It laid stress on improving Industrial productivity levels through the use of technology.
  • Other objectives included increasing economic productivity, increasing the production of food grains and generating employment by providing Social Justice.
  • The outcome of the Sixth Five-Year Plan provided a robust base for the success of the seventh five-year plan.
  • It emphasised anti-poverty programmes, the use of modern technology, and the need to make India an independent economy.
  • It focused on attaining prerequisites for self-sustained growth by 2000.
  • The target growth rate was 5.0%. However, the actual growth rate grew to reach 6.01%

Annual Plans (1990-92)

The Eight Five Year Plan was not introduced in 1990 and the following years 1990-91 and 1991-92 were treated as Annual Plans. This was largely because of the economic instability. India faced a crisis of foreign exchange reserves during this time. Liberalisation, Privatisation, Globalisation (LPG) was introduced in India to grapple with the problem of the economy under prime minister P.V Narasimha Rao.

Eighth Five Year Plan (1992-97)
  • The Eighth Plan promoted the modernisation of Industries.
  • India became a member of the World Trade Organisation on 1 January 1995.
  • The goals were to control population growth, reduce poverty, generate employment, strengthen the development of infrastructure, manage tourism, focus on human resource development etc.
  • It also laid emphasis on involving the Panchayats and Nagar Palikas through decentralisation.
  • The target growth rate was 5.6% but the actual growth rate was an incredible 6.8%.
Ninth Five Year Plan (1997-2002)
  • It marked India's fifty years since Independence and Atal Bihari Vajpayee led the prime ministership.
  • It offered support for social spheres to achieve complete elimination of poverty and witnessed the joint efforts of public and private sectors in guaranteeing economic development.
  • The focus was also to balance the relationship between rapid growth and the quality of life for the people.
  • The objectives, further included, empowering socially disadvantaged classes, developing self-reliance and primary education for all children in the country.
  • Strategies included enhancing the high rate of export to gain self-reliance, efficient use of scarce resources for rapid growth etc.
  • The target growth rate was estimated at 7.1% but its actual growth rate fell shorter to 6.8%
Tenth Five Year Plan (2002-07)
  • The features of this plan were to promote inclusive growth and equitable development.
  • It intended for an 8% GDP growth per year.
  • It aimed at reducing the poverty by half and creating employment for 80million people. Further, it aimed to reduce regional inequalities.
  • It also emphasised reducing the gender gaps in the field of education and wage rates by 2007.
  • The target growth rate was 8.1% while the actual growth was 7.6%.
Eleventh Five Year Plan (2007-2012)
  • The Eleventh Plan was significant in its aim to increase enrolment in higher education and focused on distant education as well as IT institutes. Ex: The Right to Education Act was introduced in 2009, and came into effect in 2010, making education free and compulsory for children aged between 6-14 years.
  • Its main theme was rapid and more inclusive growth.
  • It is aimed at environmental sustainability and reduction in gender inequality.
  • C.Rangarajan prepared the Eleventh Five Year Plan.
  • The focus was also laid on providing clean drinking water for all by 2009.
  • The target rate was 9% and the actual growth rate was 8%.
Twelfth Five Year Plan (2012-17)
  • The last Five Year Plan had "Faster, More Inclusive and Sustainable Growth" as its theme.
  • The plan aimed at strengthening infrastructure projects, and providing electricity supply in all villages.
  • It also aimed at removing the gender and social gap in admissions at school and improved access to higher education.
  • Further, it aspired to enhance the green cover by 1 million hectares each year and to create new opportunities in the non-farming sector.
  • The target growth rate was 9% but in 2012, National Development Council approved a growth rate of 8% for this twelfth plan.
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