Indian Planning

PHILOSOPHY AND STRATEGY OF

INDIAN PLANNING UPTO

6TH PLAN

SUBMITTED TO:MR. JAGWANT SINGH

SUBMITTED BY:DAVINDER KAUR(8128)GARIMA BANSAL(8129)

MBE 2ND SEM

PHILOSOPHY

• The philosophy for the five year plans in India includes:

economic planning

democratic socialism

mixed economy

FIRST FIVE YEAR PLAN (1951-1956)

• At that time India was faced with 3 problems- influx of refugees, severe food shortage & inflation.

• India had also to correct disequilibrium in the economy caused by 2nd world war and partition of the country.

• First plan emphasised, as its immediate objectives the rehabilitation of refugees, rapid agricultural development to achieve food self- sufficiency

control of inflation.

• First plan attempted a process of all round balanced development which could ensure

rising national income steady improvement in the living standard of

people over a period of time.

• Economic planning- first five year plan expressed clearly the long-term objectives or goals of economic planning in India as follows-

maximum production and full employment attainment of economic equality or social justice

SECOND FIVE YEAR PLAN (1956-1961 )

• Second plan was conceived in an atmosphere of economic stability.

• Agricultural targets fixed in the first plan had been achieved.

• Price level had registered a fall and consequently Indian economy had reached a stage where agriculture could be assigned a lower priority.

• Basic philosophy of second plan was to give push to the economy so that it enters the take – off stage.

• Besides, the govt. announced its industrial policy in 1956.

• This necessitated the orientation of economic policy to conform to the national goal of socialist economy.

• Accordingly, Second plan aimed at rapid industrialization .

• Democratic socialism- philosophy of democratic socialism in second plan was to raise incomes at the lowest level and to reduce the incomes at the top levels.

• Second plan states that the basic criterion of economic decisions in a socialist economy is not private profit but social gain.

• Mixed economy- mixed economy has the salient features of capitalism and socialism.

• The role of mixed economy in second plan have been outlined in the following words :

in an economy which gets increasingly diversified, there is scope for both the public and private sectors to expand simultaneously.

THIRD FIVE YEAR PLAN( 1961-1966 )

• By the beginning of third plan, Indian planners felt that Indian economy had encountered the “ take-off stage”.

• Third plan set as its goal the establishment of a self-reliant and self-generating economy.

• Experience of first two plans suggested that agriculture should be assigned top priority.

• Third plan accordingly gave top priority to agriculture but it also laid adequate emphasis on the development of basic industries.

• However, because of India's conflicts with china in 1962 and with Pakistan in 1965, the approach of the third plan was later shifted from development to defense and development.

• Mixed economy- nationalization of major commercial banks in 1969 was big step to channelize investment in socially desirable lines of production.

FOURTH FIVE YEAR PLAN (1969 -1974)

• original draft outline of fourth plan under the stewardship of Ashok Mehta had to be abandoned on account of the pressure exerted on the economy by two years of drought, devaluation of the rupee and the inflationary recession.

• Three annual plans(1966-1969) described as “ plan holiday “ were implemented.

• India learnt a bitter lesson during indo-Pakistan war.

• Fourth plan (1969-1974) set before itself the two principal objectives of “ growth with stability “ and “ progressive achievement of self- reliance”.

• Fourth plan aimed at 5.5 % average rate of growth in national income.

• Economic planning- the philosophy of economic planning in fourth plan was that greater equality could be achieved in part by transfer of income through fiscal, pricing and other policies.

• Democratic socialism- the philosophy of democratic socialism in fourth plan was to establish progressive and rapidly growing economy based on high levels of productivity, the application of science & technology and the use of manpower resources.

FIFTH FIVE YEAR PLAN ( 1974-1979 )

• Fifth plan was introduced at the time when country was reeling under a veritable economic crisis arising out of a run-away inflation, fueled by the hike in oil prices since sep 1973.

• The original approach paper of the fifth plan prepared under C. Subramaniam in 1972 emphasized that “ the main cause of abject poverty were open unemployment , under-employment and low resource base of very large no. of producers in agriculture and service sectors.

• Elimination of poverty could not be attained simply by acceleration in the rate of growth of economy.

• This approach was eventually abandoned and final draft of fifth plan prepared and launched by D.P.Dhar proposed to achieve two objectives- removal of poverty and attainment of self-reliance through promotion of higher rate of growth, better distribution of income and a very significant step-up in the domestic rate of savings.

• Fifth plan was however terminated by the janata party at the end of the fourth year of the plan in march 1978.

SIXTH FIVE YEAR PLAN ( 1978-1983 )

• There were two sixth plans.

• The janata party sixth plan openly praised the achievements of economy in terms of self-reliance and modernization.

• But Nehru model of growth was responsible for growing unemployment, for the concentration of economic power in the hands of few powerful business families for the widening of inequalities of income.

• Janata plan sought to reconcile the objectives of higher production with those of greater employment.

• Focus of janata plan was enlargement of the employment potential in agriculture and allied activities.

• After the defeat of janata party, congress came to power in 1980 and decided to have a new sixth plan.

• When the new sixth plan ( 1980-85 ) was introduced by the congress, the planners rejected the janata approach and brought back Nehru model of growth by aiming at a direct attack on the problem of poverty by creating conditions of an expanding economy.

• Economic planning- the philosophy of economic planning in sixth plan was the traditional growth approach with usual assumption that employment would increase with rise in investment.

STRATEGY OF INDIAN PLANNING

Each plan is formulated to achieve set objectives. In order to achieve these objectives certain activities are undertaken. For instance, the First five year plan aimed at “ correcting the disequilibrium in the economy caused by the war and partition of the country”. Simultaneously, it had to overcome food shortage in the country. To achieve this objective , it laid emphasis on the development of agriculture. It is called the strategy of the first plan. Strategy refers to the detailed actions and policies which are to be adopted to achieve definite objectives.

STRATEGY OF FIRST FIVE YEAR PLAN (1951 - 1956)

1. The objective of the first plan was to rehabilitate the economy disrupted on account of world war II and partition of the country and to increase the production of food grains, cotton and jute. Hence the strategy adopted was to give priority to the development of agriculture.

2. Target of increased production of food grains, jute and cotton was mainly achieved by bringing more land under cultivation. Facilities of irrigation were also extended.

3. Of the total public sector outlay, 37% was spent on agriculture and irrigation. According to the strategy of the plan, 4.9% of the total public sector outlay was spent on heavy and basic industries.

STRATEGY OF SECOND PLAN (1956-1961)

1. Agriculture production exceeded the target in the first plan. The planning commission, therefore, formulated the second plan on the assumption that agricultural production will proceed on self-sustained basis. Hence, in the strategy of second plan, agricultural development was accorded low priority.

2. Strategy of the second plan was based on MAHALANOBIS MODEL. This model was developed by noted economist Prof. MAHALANOBIS . It emphasized the need for the establishment of large and basic industries so as to achieve rapid rate of economic development.

3. Consequently on the one hand consumer goods industries like textile, sugar, cement etc., would develop and on the other hand due to more production of tractors, agricultural machines etc. agriculture would made progress by leaps and bounds.

Main elements of the strategy of the second plan based on MAHALANOBIS model were:

1. Establishment of iron and steel plants and other basic industries.

2. Emphasis on the development of cottage industries with a view to increase employment opportunities and production of consumer goods.

3. In the second plan, the share of industries in the public sector outlay increased from 4.9% to 24.1% and that of agriculture and irrigation decreased from 37% to 20.9%.

STRATEGY OF THIRD FIVE YEAR PLAN(1961-1966)

• ‘Balanced Growth’ was adopted as the strategy of third plan. Agriculture and industry both received equal treatment with regard to their development. Main elements of the strategy of this plan were:

• Development of agriculture to achieve self sufficiency in the production of food grains.

• Completion of the construction of basic industries set up during the second plan and establishment of some new industries.

• Initiation of employment oriented programmes to augment employment opportunities.

• Removal of inequalities in the distribution of income and wealth.

Although the strategy of the third plan was to a large extent much better, yet owing to several factors like Indo –China war and Indo-Pak war, failure of monsoon, drought etc., it failed to achieve its goals. Because of the losses suffered in the Third plan, the succeeding Fourth plan had to be deferred for three years and in its place three one- year plans were introduced.

STRATEGY OF THREE ONE -YEAR PLANS

• The main element of the strategy of the three one-year plans was ‘STABILITY’ in the economy so as to pave the way for the smooth initiation of the Fourth plan. Greater stress was laid on the development of agriculture. It promoted GREEN REVOLUTION IN THE COUNTRY.

STRATEGY OF FOURTH FIVE YEAR PLAN (1969- 1974)

Aim of the fourth plan was ‘GROWTH WITH STABILITY’ . Main elements of the strategy pursued in Fourth plan were:

1. Intensive Development Programme was adopted for accelerated development of agriculture. Under this programme great emphasis was laid on the use of better seeds, chemical fertilizers, mechanization, etc. Buffer stocks of food grains were built and public distribution system was started.

2. External assistance to the country had stopped in the wake of Indo- Pak war in 1965. Hence more importance was given to import substitution to attain the objective of self reliance. Import of food grains was to be reduced by increasing its production within the country.

3. With a view to checking the concentration of economic power, MRTP act and industrial licensing policy were enforced more strictly. Financial help was given to weaker sections, small entrepreneurs and small and marginal farmers.

4. In order to reduce regional inequalities, public sector industries were established in backward regions. Private entrepreneurs were encouraged to set up their industries in these regions.

5. Social welfare programmes were extended.

STRATEGY OF FIFTH FIVE YEAR PLAN (1974-1979)

• ‘REMOVAL OF POVERTY’ was the sole objective of the fifth plan. Main elements of the strategy adopted during the fifth plan were:

1. Programmes were introduced to meet the minimum needs of the poor.

2. Family planning programme was enforced effectively. Financial assistance was given to self employed persons. They

were imparted technical training to increase their productivity. Land was redistributed with a view to raising the level of employment in rural areas.

3. More emphasis was placed on the adoption of employment-oriented projects.

4. Special programmes were introduced to improve small and marginal farmers.

5. Special programmes were initiated to accelerate the export growth rate.

STRATEGY OF SIXTH FIVE YEAR PLAN( 1980-1985)

The sixth plan began in 1980. Main elements of the strategy of this plan were:

1. To make significant increase in the growth rate of the economy, to increase the efficiency in the use of natural resources and to improve productivity.

2. To promote modernization to achieve economic and scientific self sufficiency.

3. To alleviate poverty and unemployment.4. To encourage policies controlling population growth by

making people accept small family norm.