Five Year Plans of India

Five Year Plans of India


1. Introduction to Planning in India

After gaining independence, India faced immense challenges of poverty, illiteracy, and economic backwardness. To address these issues and achieve rapid economic development, India adopted the path of planned economic development, inspired by the Soviet model. The concept of Five Year Plans was introduced to set broad goals and allocate resources strategically across different sectors of the economy for a specified period.

1.1. The Planning Commission and NITI Aayog

  • Planning Commission: Established in 1950 by a resolution of the Government of India, its primary function was to formulate Five Year Plans and assess resource requirements. It was an extra-constitutional and non-statutory body.
  • NITI Aayog (National Institution for Transforming India): Replaced the Planning Commission on January 1, 2015. It acts as a premier policy 'Think Tank' of the Government of India, providing directional and policy inputs. It has a 'bottom-up' approach, fostering cooperative federalism.

2. Overview of Five Year Plans

The goals of the five-year plans are growth, modernization, self-reliance, and equity.

  • Growth: It refers to an increase in the country's capacity to produce the output of goods and services within the country. A good indicator of economic growth, in the language of economics, is a steady increase in the Gross Domestic Product (GDP).
  • Modernization: To increase the production of goods and services, producers have to adopt new technology.
  • Self-reliance: A nation can promote economic growth and modernization by using its resources or by using resources imported from other nations. The first seven five-year plans gave importance to self-reliance, which means avoiding imports of those goods which could be produced in India itself.
  • Equity: It is important to ensure that the benefits of economic prosperity reach the poor sections as well instead of being enjoyed only by the rich.

3. First Five Year Plan (1951-1956)

  • The First Five-Year Plan was launched in 1951, which mainly focused on the development of the primary sector (agriculture, irrigation, power).
  • The plan was based on the Harrod-Domar model, emphasizing the role of capital accumulation in economic growth.
  • The target growth rate was 2.1% annual GDP growth; the achieved growth rate was 3.6%, indicating success. The net domestic product went up by 18%.
  • At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as major technical institutions to build a scientific and technological base.
  • The University Grants Commission (UGC) was set up to take care of funding and take measures to strengthen higher education in the country.
  • Major irrigation projects like the Bhakra Dam and Hirakud Dam were initiated.

4. Second Five Year Plan (1956-1961)

  • The Second Plan focused on the development of the public sector and "rapid industrialisation", particularly heavy industries.
  • The plan followed the Mahalanobis model (after P.C. Mahalanobis), which advocated for a rapid increase in the production of capital goods to achieve long-term growth.
  • It aimed to determine the optimal allocation of investment between productive sectors to maximize long-run economic growth, assuming a relatively closed economy focused on importing capital goods.
  • Hydroelectric power projects and three major steel plants at Bhilai (with Soviet assistance), Durgapur (with British assistance), and Rourkela (with West German assistance) were established.
  • Coal production was increased significantly, and more railway lines were added.
  • The Tata Institute of Fundamental Research and Atomic Energy Commission of India were established as research institutes. A talent search and scholarship program was begun to train young students for work in nuclear power.
  • The second plan experienced rising prices and a foreign exchange crisis due to heavy imports of capital goods.
  • The target growth rate was 4.5% and the actual growth rate was 4.27%, a near achievement despite challenges.

5. Other Five Year Plans (Detailed Explanation)

5.1. Third Five Year Plan (1961-1966)

  • Primary Objective: To make the Indian economy self-reliant and self-sufficient in food grains. It aimed for a "self-sustaining" growth.
  • Challenges & Events: This plan faced severe setbacks due to unforeseen external shocks:
    • Sino-Indian War (1962): Diverted resources to defense.
    • Indo-Pak War (1965): Further strained the economy.
    • Severe Drought (1965-66): Led to widespread food shortages and agricultural crisis.
  • Outcome: It was a big failure in terms of growth achievement.
    • Target Growth Rate: 5.6%
    • Achieved Growth Rate: 2.4%
  • Key Initiative: Focus on basic industries, but agricultural crisis overshadowed progress.

5.2. Plan Holiday (1966-1969)

  • Reasons: Due to the dismal performance of the Third Plan, the wars, drought, and severe resource crunch, the government declared a "Plan Holiday". Instead of the Fourth Five Year Plan, three Annual Plans were implemented.
  • Focus: Primarily on agriculture and its allied sectors, as well as the industrial sector.
  • Key Event: During this period, the Green Revolution was introduced in India, employing high-yielding varieties of seeds, fertilizers, and irrigation to boost agricultural production, particularly of wheat and rice.

5.3. Fourth Five Year Plan (1969-1974)

  • Primary Objective: "Growth with Stability and Progressive Achievement of Self-reliance."
  • Key Events:
    • Nationalization of 14 major Indian banks (1969): Aimed at making credit available to neglected sectors.
    • Indo-Pakistan War (1971) and creation of Bangladesh: Led to a large influx of refugees and increased defense expenditure.
    • Heavy monsoon, oil price shocks (1973): Impacted economic stability.
  • Growth:
    • Target Growth Rate: 5.7%
    • Achieved Growth Rate: 3.3% (Fell short due to external shocks and rising inflation).
  • Programs: Family Planning Program was introduced.

5.4. Fifth Five Year Plan (1974-1979)

  • Primary Objective: "Garibi Hatao" (Poverty Eradication) and achieving self-reliance through promotion of high growth rate, better distribution of income, and significant growth in the domestic rate of savings.
  • Drafted by D.P. Dhar.
  • Key Programs:
    • Twenty Point Programme (1975): Launched by Indira Gandhi to address poverty and economic upliftment.
    • Minimum Needs Programme: Focused on providing basic necessities like primary education, rural health, rural water supply, rural roads, rural electrification, and housing for the landless.
  • Termination: The plan was terminated in 1978 by the Janata Party government, one year before its scheduled term.
  • Growth:
    • Target Growth Rate: 4.4%
    • Achieved Growth Rate: 4.8% (It actually performed better than its target despite early termination).

5.5. Rolling Plan (1978-1980)

  • Introduced by the Janata Party government, this plan had no fixed duration, allowing for continuous revision of targets and allocations.
  • It aimed for greater flexibility in planning in response to changing economic conditions.
  • However, it lacked stability and consistency due to frequent changes in government and policies, and it was terminated with the return of the Congress government in 1980.

5.6. Sixth Five Year Plan (1980-1985)

  • Primary Objective: Focused on economic liberalization, poverty eradication through employment generation, and technological self-reliance.
  • Key Programs:
    • Integrated Rural Development Program (IRDP): Aimed at providing assistance to the rural poor.
    • National Rural Employment Programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP): Focused on creating employment opportunities.
  • Growth:
    • Target Growth Rate: 5.2%
    • Achieved Growth Rate: 5.7% (A relatively successful plan).

5.7. Seventh Five Year Plan (1985-1990)

  • Primary Objective: "Food, Work, and Productivity". It emphasized accelerating food grain production, increasing employment opportunities, and raising productivity.
  • It marked a significant step by introducing the private sector for the first time on a large scale, especially in manufacturing.
  • Key Programs: Jawahar Rozgar Yojana (JRY) was launched.
  • Growth:
    • Target Growth Rate: 5.0%
    • Achieved Growth Rate: 6.0% (A highly successful plan).

5.8. Annual Plans (1990-1992)

  • Due to severe political instability at the center and a major balance of payments crisis (BoP crisis) in 1991, the Eighth Five Year Plan could not be launched.
  • Instead, two Annual Plans were implemented during this period.
  • This period saw the introduction of momentous Liberalization, Privatization, and Globalization (LPG) reforms in 1991, which fundamentally transformed India's economic policy.

5.9. Eighth Five Year Plan (1992-1997)

  • Primary Objective: Focused on "Human Resource Development" (education, health, employment), aiming for universal primary education and eradication of illiteracy. It reflected the spirit of LPG reforms.
  • This plan was formulated in the context of the new economic policy (LPG reforms) and aimed at achieving growth with macro-economic stabilization.
  • Growth:
    • Target Growth Rate: 5.6%
    • Achieved Growth Rate: 6.8% (A very successful plan, benefiting from reforms).

5.10. Ninth Five Year Plan (1997-2002)

  • Primary Objective: "Growth with Justice and Equality." It aimed to bridge regional disparities and ensure equitable distribution of benefits.
  • Challenges: Faced economic slowdown due to the East Asian Financial Crisis (1997) and international sanctions following the Pokhran-II nuclear tests (1998).
  • Growth:
    • Target Growth Rate: 7.1%
    • Achieved Growth Rate: 5.6% (Fell short of target due to global and domestic factors).

5.11. Tenth Five Year Plan (2002-2007)

  • Primary Objective: Aims to reduce the poverty ratio by 5 percentage points by 2007 and increase literacy rates. Emphasis on broad-based growth and improving the quality of life.
  • It set monitorable targets for key indicators, including poverty reduction, employment creation, literacy, and access to drinking water.
  • Growth:
    • Target Growth Rate: 8.0%
    • Achieved Growth Rate: 7.8% (Almost met the ambitious target, reflecting a period of high growth).

5.12. Eleventh Five Year Plan (2007-2012)

  • Primary Objective: "Faster and More Inclusive Growth." It sought to achieve faster growth while ensuring that the benefits spread more widely and reach all sections of society.
  • Strong emphasis on social sector development (health, education, women empowerment) and environmental sustainability.
  • Growth:
    • Target Growth Rate: 9.0% (later revised to 8.1% due to the 2008 global financial crisis).
    • Achieved Growth Rate: 8.0% (Maintained strong growth despite the global crisis).

5.13. Twelfth Five Year Plan (2012-2017)

  • Primary Objective: "Faster, More Inclusive, and Sustainable Growth."
  • It was the last Five Year Plan.
  • Aims to achieve an 8% growth rate, significant reductions in poverty, and improvements in various social indicators like health, education, and infrastructure access.
  • Focused on improving governance, energy security, and environmental protection.

6. End of Five Year Plans

The Modi government decided to discontinue the Five Year Plans from April 1, 2017. The NITI Aayog now brings out a three-year Action Agenda, a seven-year Medium-term Strategy paper, and a fifteen-year Vision Document. This marks a significant shift from centralized planning to a more flexible, indicative, and cooperative federalism approach, where states have greater say in their development strategies.

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