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Business System

Description: In this document topics covered which are Five Year Plans, Meaning of Plan, History of Indian Planning, Glances, What is the Planning Commission?, Whom does the Planning Commission report to?.
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First Plan

Five Year Plans

Meaning of Plan An economic plan may be described as a specific set of quantitative economic targets to be achieved in a given period of time.

Just as the goals of a political system are spelled out in a constitution, so the goals of an economy are spelled out in a Plan.

However, unlike the constitution the Plan is transitory.

History of Indian Planning National Planning Commission (1938)

British govt. set up an officer (1944)

Bombay Plan (15 years)

People’s Plan (10 years)

Gandhian Plan

Planning Commission

Glances The National Planning Committee with Jawaharlal Nehru as its chairman laid its emphasis on the need for fundamental changes in the social and economic structure.

Bombay Plan which emphasized industrialization was sponsored by India’s distinguished industrialists.

The People’s Plan promoted by M. N. Roy and the Indian Federation of Labour emphasized the expansion of the public sector in the economy.

Gandhian Plan prepared by S. Narayan emphasized on rural reconstruction involving massive development of agriculture and cottage industries.

What is the Planning Commission?

It was first set up by the Union government in March, 1950 to promote a rapid rise in the standard of living of the Indian people by efficient exploitation of national resources, increasing production and offering opportunities to all for employment in the service of the community.

The Planning Commission is charged with the responsibility of making assessment of all resources in the country, augmenting deficient resources, formulating plans for the most effective and balanced utilization of resources and determining priorities.

The prime minister is the chairman of the Planning Commission, but the Commission is actually run by the deputy chairman (who enjoys the rank of Cabinet minister or minister of state, depending on his years in public life), and members of the Commission.

Whom does the Planning Commission report to?

The Planning Commission works under the overall guidance of the National Development Council, India's prime policy-making body, which guides the nation on the development process.

The Commission advises and provides guidance for the formulation of India's Five-Year Plans, Annual Plans and state government plans. It also monitors plan programs, projects and schemes.

Objectives of Planning The resolution of the Planning Commission, singles out

three principles as special terms of reference in the preparation of a Plan: that the citizens, men and women, equally, have the right to an adequate means of livelihood; that the ownership and control of the material resources of the community are distributed in a manner that best serves the common good; and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

Five Year Plans First Plan 1951 - 56 Second Plan 1956 - 61 Third Plan 1961 - 66 Fourth Plan 1969 - 74 Fifth Plan 1974 - 79 Sixth Plan 1980 - 85 Seventh Plan 1985 - 90 Eight Plan 1992 - 97 Ninth Plan 1997 - 02 Tenth Plan 2002 - 07 Eleventh Plan 2007 - 12

Brief Overview of Five Year Plans The first Five-Year Plan was launched in 1951.

Two subsequent Five-Year Plans were drawn up till 1965, when there was a break because of the Indo-Pakistan war. Two successive years of drought, devaluation of the rupee in 1966, a rise in prices and erosion of resources disrupted the planning process.

After three Annual Plans between 1966 and 1969, the fourth Five- Year Plan was launched in 1969.

The Eighth Plan could not take off in 1990 due to the swiftly changing political situation at the Centre and the years 1990-1991 and 1991-1992 were treated as Annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of liberalization.

Continued…. For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but since the launch of the Ninth Plan in 1997, the emphasis on the public sector has become less pronounced and the current thinking on planning in the country, in general, is that it should increasingly be of an indicative nature.

First Plan (1951-56) Objectives

To restore the economy which had run down ,resist the prevalent inflationary pressures, build up the transport system and ease the food and raw material position. To build up appropriate viable administrative and other organizations for development purpose and future progress. To initiate measures of social justice on a wider scale.

Budget Public outlay 19.6

Agriculture 2.9 Irrigation 3.1 Power 2.6

Village ,small industries 0.4 Organized industries, mining 0.7 Transport & communications 5.2

Other social services 4.6 Budgetary resources of which 14.4

Additional taxation 2.6 Internal private savings 6.9

External assistance 1.9 Deficit financing 3.3

Rs bn

Achievements Failures Increase in national income by 18%. Increase in per capita income by 11% The rate of investment as a proportion of national income rose by 2.4%. Important success of plan at agricultural front. (increase in food output by 20%)

Problem of poverty remained. Investment during this period was not sufficient to absorb new entrants into labour market. This added to backlog of unemployment and underemployment.

Second Plan (1956-61)

Objectives Shifting emphasis from agriculture to industrial growth and that too heavy industries. Rapid industrialization with particular emphasis on development of basic and key industries (iron and steel) Reduction of inequalities in income and wealth and more even distribution of economic power. To increase country’s productive potential in a way that would make accelerated development in succeeding plan periods. It aimed at an annual increase of 5% in national income and a multifold increase in employment.

Budget Public outlay 46.7

Agriculture 5.5 Irrigation 4.3 Power 4.5

Village ,small industries 1.9 Organized industries, mining 9.4 Transport & communications 12.6

Other social services 8.6 Budgetary resources of which 25.6

Additional taxation 10.5 Internal private savings 14.1

External assistance 10.9 Deficit financing 9.5 Private Investment 31.0

Rs bn




Achievements Failures A large no. of hydroelectric and thermal power plants were constructed. Industrial sector achieved remarkable progress and three huge cement and fertilizers industries were set up. Social services like health and education improved a lot. It showed welcome reorientation in favour of heavy industry.

Second plan was termed as crisis of ambitions. The plan was not ambitious in relation to needs of the people. It failed in creating job opportunities and unemployment was still prevailing. Lack of realism in assumptions upon which second plan proposals. (problem of inflation was grossly underestimated, prospects of agriculture exaggerated) Despite its double development expenditure than first plan it was a failure with deterioration in living standards , economic inequalities increased and agriculture remained more or less static. Increase in national income proved to be only 20% as against the target of 25%.

Third Plan (1961-66)

Objectives To increase agriculture production and achieve self-sufficiency in food grains. To utilize to the fullest possible extent, man power resources of the country and ensure a substantial expansion of employment opportunities. To give importance to external assistance in achieving self sustaining growth. To concentrate on expansion of capital goods and machine building industries.

Budget Public outlay 85.8

Agriculture 10.9 Irrigation 6.6 Power 12.5

Village ,small industries 2.4 Organized industries, mining 17.3 Transport & communications 21.1

Other social services 14.9 Budgetary resources of which 50.9

Additional taxation 28.9 Internal private savings 21.1

External assistance 23.9 Deficit financing 11.5 Private Investment 41

Rs bn





Failures Third plan was not able to improve economic and social conditions and it proved even more frustrating than second plan. Neither industry nor agriculture fared well in this plan. Rate of growth of national income was less than half of the rate it aimed at. Industrial production was lower than the target of 11% per annum. In many respects the third plan period was abnormal, two wars broke out (1962-China war and 1965 indo-pak war) in this period which disturbed the plan and the focus was shifted to defence activities.

At the end of third plan the situation was so gloomy and unsettled that the formulation of next five year plans was suspended. After third plan three annual plans were formulated from 1966-69 to overcome the failures of last plan. Efforts were made to solve immediate problems like restoring the economy to normal, to complete the work of projects already in progress.

Annual plans contd.

Green revolution’ was initiated during the annual plan(1967-68). Nationalization of 14 major banks in 1969. All these events were seen to impart strength to the economy, to achieve price stability and lend confidence to the government’s capacity to mobilize increased resources for planning.

Fourth Plan (1969-74)

Objectives To step up the tempo of the activity to an extent that would be compatible with maintaining stability and progress towards self reliance. To even out supplies of food grains and to stabilize prices through buffer stocks. To use monopoly legislation and appropriate fiscal policy for reducing concentration of economic power. To chart the course of industrial activity so as to provide for future technological advance and to bring about spatial distribution of industrial activity and enterprise.

Budget Public outlay 157.8

Agriculture 23.2 Irrigation 13.5 Power 29.3

Village ,small industries 2.4 Organized industries, mining 28.6 Transport & communications 30.8

Other social services 29.9 Budgetary resources of which 120.2

Additional taxation 42.8 Internal private savings 65.4

External assistance 20.9 Deficit financing 20.6 Private Investment 89.8

Rs bn











3rd PLAN 4rth PLAN






Achievements Failures There was substantial increase in production of alloys and special steel, aluminium, automobile tyres, petroleum refinery products, electronics goods , machine tools, tractors and heavy electrical equipment. Greater degree of sophistication and self- reliance was achieved in industrial sector.

Rate of growth of national income and per capita income were below their targets . Industrial production growth rate was mere 3.9 % per annum. The course of production in industry remained erratic throughout the plan period and with acceptance of wide demands for dearness allowance, compounded by international oil crisis created, ensured to upset all physical targets implied in the plan investment outlays. Income disparities continued to widen and a large number of people still remained poor.

Fifth Plan (1974-79) Objectives

To concentrate on reigning inflation and achieving stability in the economic situation. To improve quality of life especially the downtrodden section of economy. Non-economic variables such as nutritional requirements, health, family planning were incorporated in this plan. Aimed at growth rate of 5.5% per annum in national income.

Budget Public outlay 394.3

Agriculture 48.7 Irrigation 38.8 Power 74

Village ,small industries 5.9 Organized industries, mining 89.9 Transport & communications 68.7

Other social services 68.3 Budgetary resources of which 321.2

Additional taxation 77.5 Internal private savings 110.7

External assistance 58.3 Deficit financing 13.5 Private Investment 270.5

Rs bn


0 10 20 30 40 50 60 70 80 90


4rth PLAN 5th PLAN





5th: Rs394.3Bn

Achievements Failures

Rate of agriculture production was 4.2, the highest rate achieved since inception of planning. Only targets relating to food grains and cotton were achieved in fifth plan.

Industrial sector performance was not satisfactory. Inflation was still prevalent when plans were terminated by Janta government.

Janata plan(1979-80)

This plan was formulated for one year when janata govt. took charge from congress govt in 1978. In this plan emphasis was laid on small and cottage industries and also on agriculture. Its objectives were removal of unemployment, appreciable rise in standard of living of poorest sections of society and real per capita income to grow at highest possible rate.

Sixth Plan (1980-85) Objectives

Strengthening the impulses of modernization for the achievement of economic and technological self-reliance. A speedy development in indigenous sources of energy, with proper emphasis on conservation and efficiency in energy use. Promoting policies for controlling growth of population through voluntary acceptance of small family norm. To design programs to create job opportunities in rural sectors.

Budget Public outlay 1,104.7

Agriculture 136.2 Irrigation 109.3 Power 184.6

Village ,small industries 19.5 Organized industries, mining 272.9 Transport & communications 176.8

Other social services 205.4 Budgetary resources of which 800.1

Additional taxation 354.8 Internal private savings 99.1

External assistance 85.3 Deficit financing 156.8 Private Investment 747.1

Rs bn





5th: Rs394.3Bn

6th: Rs1,104.7Bn

Achievements Failures Growth of national income was 5.3 % as against the targeted rate of growth of 5.2 %. Agricultural production also exceeded the target. Important improvements were made in petroleum refineries and petro -chemical plants to reduce energy consumption and improve yields. Objective of social justice was achieved by minimum needs programme which aims at improving the living conditions of the poor and their access to education and health. Decline in incidence of poverty

Performance fell short in case of basic industries like steel, fertilizers, cement, and textiles. Machine building and chemical industries suffered from obsolete technologies and high prices of input.

In broad sense, sixth plan helped the country to move towards the objectives of growth, self reliance and social justice.

Seventh Plan (1985-90) Objectives

To achieve growth, equity and social justice, self- reliance, improved efficiency and productivity; To accelerate the production of foodgrains; To increase employment opportunities; To initiate rapid expansion of scientific and technological capabilities; To undertake execution of programmes which will facilitate the improvement in the basic priorities, viz., food, work and productivity.

Budget Public outlay 2,214.4

Agriculture 280.4 Irrigation 165.9 Power 385.6

Village ,small industries 32.5 Organized industries, mining 491.0 Transport & communications 397.7

Other social services 479.2 Budgetary resources of which 1,700.8

Additional taxation 402.9 Internal private savings 204.0

External assistance 199.1 Deficit financing 346.7 Private Investment 1,681.5




6th: Rs1104.7Bn

7th: Rs2,214.4Bn

Achievements Failures Average annual increase in foodgrains production was 3.6 %. Several special programmes like Jawahar Rozgar Yojana were introduced. Industrial growth accelerated during this plan period to 8.7% pa. Rural electrification increased significantly and covered 81% of the villages by the end of the seventh plan. 10 lakh houses were constructed/upgarded each year during the seventh plan in the urban areas.

Mining sector showed a substancial decline. Failed to reduce population growth. Actual public sector expenditure in the seventh plan increased by 21.5% against the envisaged outlay.

Eighth Plan (1992-97) Objectives

Universalization of elementary education and complete eradication of illiteracy; Strengthening of infrastructure in order to support growth process; Provision of safe drinking water and primary health care, complete elimination of scavenging; Self-sufficiency in food and generate surplus for exports; Achieve near full employment by the turn of the century.

Budget Public outlay 4,341.0

Agriculture 628.7 Irrigation 265.5 Power 810.5

Village ,small industries 63.3 Organized industries, mining 751.0 Transport & communications 810.4

Other social services 1,011.6 Budgetary resources of which 3800.0

Additional taxation 350.1 Internal private savings 2,022.6

External assistance 287.0 Deficit financing 200.0 Private Investment 4,370.0




7th: Rs2,214.4Bn

8th: Rs4,341.0Bn

Achievements Failures Deficit financing to meet the resource shortfall was curtailed to 4.6% of total resources as against 15.8% in the previous plan period. Government’s own resources increased considerably to 42.2% of the total resources. The overall GDP growth rate was 6.5% per annum. The overall industrial growth rate increased to 8.42%.

Regional disparities increased further. Failure of country to meet its employment generation targets, rising interest payments and large inflow of foreign portfolio investments.

Ninth Plan (1997-02) Objectives

 Priority to agriculture and rural development in view to general employment.

 Accelerating the growth rate of economy with stable prices.

 Ensuring food and nutritional security for all.  Provide basic amenities, safe drinking water,

shelter, transport, etc..  Slow down in growth rate of population.

Continued…  Ensuring environmental sustainability of

the development process through social mobilization and participation of people at all levels.

 Empowerment of women and socially disadvantaged groups such as SCs and STs etc..

 Promoting and developing peoples participatory institutions like panchayati raj

Features of Plan

 More freedom to states.  Planning process decentralized.  Growth with social justice.  Promoting federalism.  Emphasis on family welfare and

employment generation.

Budget Public outlay 8,750.0

Agriculture 366.6 Irrigation 577.4 Power 2,219.7

Village ,small industries 749.4 Organized industries, mining 716.8 Transport & communications 1,729.8

Other social services 1,809.3 Budgetary resources of which 3,740.0

Additional taxation 377.1 Internal private savings 2,800.7

External assistance 100.6 Deficit financing 3,201.4 Private Investment








Achievements Failures Reliance on own resources increased to 54.3%. This plan achieved 5.35 % annual growth rate for economy as a whole. Foreign assistance continued to remain low at 6.8% of total resources.

Domestic capital receipts’ contribution was slated to fall to 38.8% of total resources.

Tenth Plan (2002-07) Objectives

Accelerated economic development through infrastructural development; Thrust on privatization ensuring high availability of funds to be allocated for priority areas; Accelerated agriculture development programmes and promote agricultural exports; Balanced regional growth; More effective social service package; Double per capita income within next ten years; Water to be treated as the important catalyst of development.


Revenue receipts 9.1 10.2

Revenue expenditure 12.5 10.7

Revenue deficit 3.4 0.5

Total expenditure 15.4 14.0

(i) Plan expenditure 3.9 4.5

(ii) Non-plan expenditure 11.5 9.5

Non-debt Capital Receipts

0.8 1.2

Fiscal deficit 5.0 2.6


• The allocation of funds for various schemes/programmes for tribal development has been increased 65% over the year 1999-2000.

• During Tenth Five Year Plan, about 510 projects of NGos were provided financial assistance to the tune of Rs.146.16 Crore under the scheme of "Grant-in-aid to Voluntary Organizations" which benefited about 4.63 lakh scheduled tribe people.

• A National Scheduled Tribes Financial and Development Corporation (NSTFDC) has been set up with an authorized share capital of Rs. 500 crore.


Indian ports were an embarrassment, no progress being made. Antiquated airports are actually on the verge of derailing the rapidly growing aviation sector. Power sector continues to be one of the biggest bottlenecks to growth

Eleventh five year (2007-12)

Objectives Average GDP growth rate of 9% per year in the Eleventh Plan period. Agricultural GDP growth rate at 4% per year on the average. Generation of 58 million new work opportunities. Reduction of unemployment among the educated to less than 5%. 20% rise in the real wage rate of unskilled workers. Reduction in the head-count ratio of consumption To ensure electricity connection to all villages and BPL households by 2009 and reliable power by the end of the Plan. To ensure all-weather road connection to all habitations with population 1000 and above (500 and above in hilly and tribal areas) by 2009, and all significant habitations by 2015.

To increase forest and tree cover by 5 percentage points. To attain WHO standards of air quality in all major cities by 2011–12. To treat all urban waste water by 2011–12 to clean river waters. To increase energy efficiency by 20% by 2016–17. Infant mortality rate (IMR) to be reduced to 28 and maternal mortality ratio (MMR) to 1 per 1000 live births by the end of the Eleventh Plan.

Economy through five year Plans GDP growth rate : The pre-Independence stagnant economy started growing after Five Year Plans were launched. The growth rate in terms of GDP has been increasing with almost every Five Year Plan.

Industrial growth rate : One of the major achievements of our planning process has been a commendable increase in our industrial production. Industrial production registered a major hike in Second and Third Plans.

Literacy rate : Over the past four decades the country has made considerable progress in the sphere of education. Education for all has been the thrust of every Plan.

Continued… Poverty scenario : Right from the First Five Year Plan, consistent efforts have been made for the upliftment of poverty stricken masses. Many developmental programmes and special poverty alleviation schemes have been started to tackle this slur.

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