The
economy of India is based in part on
planning through its
five-year 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.
Prior to the Fourth plan, the allocation of state resources was based on schematic patterns rather than a transparent and objective mechanism, which lead to the adoption of the
Gadgil formula in 1969. Revised versions of the formula have been used since then to determine the allocation of central assistance for state plans.
First Five-Year Plan, 1951–1956
The first Indian Prime Minister,
Jawaharlal Nehru presented the first five-year plan to the
Parliament of India on 8 December 1951. The plan addressed, mainly, the agrarian sector, including investments in dams and irrigation. The agricultural sector was hit hardest by the
partition of India and needed urgent attention.
The total planned budget of
206.8 billion (
US$23.6 billion 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 (16.64 percent),
land rehabilitation (4.1 percent), and for other sectors and services (2.5 percent).
The most important feature of this phase was active role of state in all economic sectors. Such a role was justified at that time because immediately after independence, India was facing basic problems like- deficiency of capital and low capacity to save.
The target growth rate was 2.1 percent annual
gross domestic product (GDP) growth; 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, which 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 country.
Contracts were signed to start five
steel plants; however these plants did not come into existence until the middle of the second five-year plan.
Second Five-Year Plan, 1956–1961
This plan functioned on the basis of a nude model. The Mahalanobis model was propounded by Prasanta Chandra Mahalanobis in the year 1953.
The second five-year plan focused on industry, especially
heavy industry. Unlike the First plan, which focused mainly on agriculture, domestic production of industrial products was encouraged in the Second plan, 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 productive 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 1958 with
Homi J. Bhabha as the first chairman. 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.
The total amount allocated under the second five year plan in India was Rs. 4,800 crore. This amount was allocated among various sectors:
- Mining and industry
- Community and agriculture development
- Power and irrigation
- Social services
- Communications and transport
- Miscellaneous
Third Five-Year Plan, 1961–1966
The third plan stressed on agriculture and improving production of rice, but the brief
Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the
Defence industry. In 1965-1966, India fought a
war with Pakistan. The war led to inflation and the priority was shifted to
price stabilisation. 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,
Panchayat elections were started and the
states were given more development responsibilities.
State electricity boards and state secondary education boards were formed. States were made responsible for
secondary and
higher education. State road transportation corporations were formed and local road building became a state responsibility. The target growth rate of GDP(gross domestic product)was 4.5 percent.The achieved growth rate was 4.3 percent.
Fourth Five-Year Plan, 1969–1974
At this time
Indira Gandhi was the
Prime Minister. The Indira Gandhi government
nationalised 14 major Indian banks and the
Green Revolution in India advanced agriculture. In addition, the situation in
East Pakistan (now
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 diverted 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. The fleet had been deployed to warn India against attacking
West Pakistan and extending the war.
Fifth Five-Year Plan, 1974–1979
Stress was laid on
employment,
poverty alleviation, and
justice. The plan also focused on
self-reliance in agricultural production and defence. 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.
The
Indian national highway system was introduced for the first time and many roads were widened to accommodate the increasing
traffic.
Tourism also expanded.
Sixth Five-Year Plan, 1980–1985
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 and an increase in the
cost of living. This was the end of
Nehruvian Plan and
Rajiv Gandhi was prime minister during this period.
Family planning was also expanded in order to prevent
overpopulation. In contrast to China's strict and binding
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.
Seventh Five-Year Plan, 1985–1990
The Seventh Plan marked the comeback of the
Congress Party to power. The plan laid stress on improving the productivity level of industries by upgrading of technology.
The main objectives of the 7th five year plans were to establish growth in 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 favourable 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
- Anti-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 15-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 labour force of 39 million people and employment was expected to grow at the rate of 4 percent per year.
Some of the expected outcomes of the Seventh Five Year Plan India are given below:
- Balance of Payments (estimates): Export - 33,000 crore (US$7.2 billion), Imports - (-)54,000 crore (US$11.7 billion), Trade Balance - (-)21,000 crore (US$4.6 billion)
- Merchandise exports (estimates): 60,653 crore (US$13.2 billion)
- Merchandise imports (estimates): 95,437 crore (US$20.7 billion)
- Projections for Balance of Payments: Export - 60,700 crore (US$13.2 billion), Imports - (-) 95,400 crore (US$20.7 billion), Trade Balance- (-) 34,700 crore (US$7.5 billion)
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 1989–1991
1989-91 was a period of political instability in India and hence no five year plan was implemented. 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
US$1 billion. Thus, under pressure, the country took the risk of reforming the socialist economy.
P.V. Narasimha Rao)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
privatisation and
liberalisation in India.
Eighth Five-Year 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,tourism management, Human Resource development, Involvement of Panchayat raj, Nagarapalikas, N.G.O'S and Decentralisation and people's participation. Energy was given prority with 26.6% of the outlay. An average annual growth rate of 6.7% against the target 5.6% was achieved.
Ninth Five Year 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.
The main objectives of the Ninth Five Year Plan of India are:
- to prioritize agricultural sector and emphasize on the rural development
- to generate adequate employment opportunities and promote poverty reduction
- to stabilize the prices in order to accelerate the growth rate of the economy
- to ensure food and nutritional security
- to provide for the basic infrastructural facilities like education for all, safe drinking water, primary health care, transport, energy
- to check the growing population increase
- to encourage social issues like women empowerment, conservation of certain benefits for the Special Groups of the society
- to create a liberal market for increase in private investments
During the Ninth Plan period, the growth rate was 5.35 per cent, a percentage point lower than the target GDP growth of 6.5 per cent.
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Tenth Five-Year Plan, 2002–2007
- Attain 8% GDP growth per year.
- Reduction of poverty ratio by 5 percentage points by 2007.
- Providing gainful and high-quality employment at least to the addition to the labour force;*All children in India in school by 2003; all children to complete 5 years of schooling by 2007.
- Reduction in gender gaps in literacy and wage rates by at least 50% by 2007;*Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2%;*Increase in Literacy Rates to 75 per cent within the Tenth Plan period (2002 to 2007).
Eleventh Five-Year Plan, 2007–2012
The eleventh plan has the following objectives:
- Income & Poverty
- Accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in order to double per capita income by 2016-17
- Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of benefits
- Create 70 million new work opportunities.
- Reduce educated unemployment to below 5%.
- Raise real wage rate of unskilled workers by 20 percent.
- Reduce the headcount ratio of consumption poverty by 10 percentage points.
2.
Education
- Reduce dropout rates of children from elementary school from 52.2% in 2003-04 to 20% by 2011-12
- Develop minimum standards of educational attainment in elementary school, and by regular testing monitor effectiveness of education to ensure quality
- Increase literacy rate for persons of age 7 years or above to 85%
- Lower gender gap in literacy to 10 percentage point
- Increase the percentage of each cohort going to higher education from the present 10% to 15% by the end of the plan
3
.Health
4.
Women and Children
- Raise the sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-17
- Ensure that at least 33 percent of the direct and indirect beneficiaries of all government schemes are women and girl children
- Ensure that all children enjoy a safe childhood, without any compulsion to work
5
. Infrastructure
- Ensure electricity connection to all villages and BPL households by 2009 and round-the-clock power.
- Ensure all-weather road connection to all habitation with population 1000 and above (500 in hilly and tribal areas) by 2009, and ensure coverage of all significant habitation by 2015
- Connect every village by telephone by November 2007 and provide broadband connectivity to all villages by 2012
- Provide homestead sites to all by 2012 and step up the pace of house construction for rural poor to cover all the poor by 2016-17
6.
Environment
- Increase forest and tree cover by 5 percentage points.
- Attain WHO standards of air quality in all major cities by 2011-12.
- Treat all urban waste water by 2011-12 to clean river waters.
- Increase energy efficiency by 20 percentage points by 2016-17
