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Economics

Lecture – 07
5 Year Plans And Their Analysis
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5 Year Plans And Their Analysis

The five-year plans in India were a series of centralized and planned economic development initiatives aimed at
fostering growth, reducing poverty and achieving self-reliance. These plans were inspired by the Soviet Union’s
model and were implemented by the Planning Commission, established in 1950 under the chairmanship of the
Prime Minister. Each plan focused on specific sectors like agriculture, industry, infrastructure and social welfare
to address the nation’s economic challenges and developmental needs.
First Plan (1951-1956):
❖ 85% of India’s population depended on agriculture, which was destroyed by the Britishers; hence, this plan
stressed agriculture.
❖ The first plan stressed more on agriculture in view of the large-scale import of food grains and inflationary
pressures on the economy.
❖ Other areas of emphasis were power and transport.
❖ The plan also focused on improving irrigation, one such example was the construction of Bhakra Nangal
Dam which increased the agriculture growth and output of North India substantially.
❖ The annual average growth rate during the first plan was estimated at 3.61% as against a target of 2.1%.
❖ Renowned economist KN Raj who died in 2010 was one of the main Architects of India's first five year
plan.
❖ This plan was based on the Harrod-Domar Model. This model states that economic growth is directly
linked to the amount of capital available for investment and the rate at which that capital is accumulated
which in turn is proportional to the savings rate. The Harrod-Domar model is often expressed as G = S / K
where G represents the rate of economic growth , K is the capital output ratio and S is the savings rate.
❖ Other major achievements of this plan was the success of community development program launched in
1952 and the establishment of 5 Indian Institute of Technologies.
Second Plan (1956-1961)
❖ The major architect of the Second five year plan was Prasanta Chandra Mahalanobis,A renowned Indian
scientist and statistician.
❖ This plan was based on Nehru Mahalanobis model of self Reliance and basic Industry driven growth.
❖ With agriculture targets of previous plan achieved major stress was on the establishment of heavy industries.
❖ Rate of investment was targeted to increase from 7% to 11% .
❖ The plan achieved a growth rate of 4.32% as against the target of 4.5% .
❖ This plan envisages giving a big push to the economy so that it enters the take-off stage.
❖ Heavy Steel plants were established in Durgapur, Bhilai and Rourkela.
❖ To protect the native infant Industries, India imposed huge tariffs on imported products.
Third Plan (1961-1966)
❖ After the introduction of the third five-year plan, India fought two Wars with neighbours, in 1962 the Sino-
India war and in 1965 the Indo-Pak war.
❖ It tried to balance industry and Agriculture.
❖ The aim of third plan was to establish a self-sustaining economy.
❖ For the first time, India resorted to borrowing from the International Monetary Fund.
❖ High yielding variety seeds were introduced in India in Uttar Pradesh, Punjab and Haryana which were
imported from Mexico. The seeds were tested on a pilot basis which later contributed to the Green
Revolution.
❖ The combination of external aggression, natural disaster such as drought, political instability led to no
further 5 year plans in the following years and also to the failure of third five year plan.
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Annual Plans
As the third plan experienced difficulties on the external front (wars with China and Pakistan) and economic
troubles mounted on the domestic front such as inflation, floods, droughts and foreign exchange crisis - the fourth
plan could not be started from 1966. There were three annual plans till 1969. This period is called plan holiday -
that is when 5 year plans are not implemented. The annual plans were 1966 - 67, 1967 - 68 and 1968 - 69.
Fourth Plan (1969-1974)
❖ Indira Gandhi Became the Prime Minister of India in 1966
❖ As India had seen severe droughts, wars, etc in past years, the focus of the plan was on growth with
stability, Hence, the drought-prone area program was started in 1972, and the government also nationalized
14 Banks in 1969 to provide cheaper loans to common citizens for better economic growth.
❖ The plan laid special emphasis on improving the condition of the underprivileged and weaker sections
through the provision of education and employment
❖ Reducing the fluctuations in agricultural production was also a point of emphasis of this plan.
❖ The plan aimed a target growth of 5.7% and achievement against this was 3.21% due to 1971 Indo Park war.
❖ This plan was based on Gadgil formula, developed by Dhananjay Ramachandra Gadgil which is a
method used to determine how much Central assistance is allocated to different states for their development
plans.
Fifth Plan (1974-1979)
❖ After the introduction of this plan, emergency was introduced in India which lasted for 2 years from 1975 to
1977.
❖ The main objective of the plan was growth for Social Justice.
❖ The targeted growth rate was 4.4% and we achieved 4.8%.
❖ Economist Raj Krishna gave the concept of Hindu rate of growth during this plan which means having
slow growth while having all resources.
❖ This plan was cut short by the Janata Party led by Morarji Desai that came to power in 1977.
❖ The slogan Garibi Hatao was given during this plan.
Sixth Plan (1980-1985)
❖ Removal of poverty was the former objective of the 6th plan.
❖ Another area of emphasis was infrastructure, which was to be strengthened for the development of both
industry and Agriculture.
❖ The achieved growth rate of 5.7% was more than the targeted 5.2%.
❖ Achievements of this plan were the Integrated Rural Development programme, cheaper bank loans,
betterment in agriculture and animal husbandry, training youth for employment, women empowerment, etc
❖ Government went to IMF for foreign exchange during this plan.
Seventh Plan (1985-1990)
❖ Rajiv Gandhi came to power and the era of computer started.
❖ The plan laid stress on rapid growth in food grains production and increase in employment opportunities.
❖ The growth rate of 5.81% achieved in this plan was more than the targeted 5%.
❖ The plan saw the beginnings of liberalization of Indian economy.
❖ The 8th plan could not start in 1990 due to economic crisis and political instability and there were two annual
plan holidays.
Eighth Plan (1992-1997)
❖ This plan was the watershed plan of Indian economy
❖ the plan was formulated keeping in view the process of economic reforms and restructuring of the economy
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❖ The main emphasis of this plan were :

1. stabilize the adverse balance of payment scenario sustainably.
2. Improvement in trade and current account deficit.
3. Human development as main focus of planning.
4. Decentralization which eventually happened through Panchayati Raj act.
❖ It was indicative plan for the first time. The plan was formulated in a way so as to manage the transition from
a centrally plant economy to market lead economy.
❖ The targeted annual average rate of growth of the economy during 8th plan was 5.6%, against this we
achieved in average annual growth of 6.8%.
❖ The plan was based on Rao-Manmohan Singh model of liberalisation, privatisation, globalisation,
divestment and disinvestment.
Ninth Plan (1997-2002)
❖ This plan came during the South East Asian financial crisis of 1997 to 2001.
❖ The salient features of this plan are a target annual average growth rate of 6.5% for the economy as a whole
and a growth rate of 3.9% for agricultural sector among others.
❖ The key strategies used to realize this target rest on attaining high investment rate of 28.2% of GDP at
market prices.
❖ The domestic saving rate with determines the sustainable level of investment was targeted at 26.1% of the
GDP.
❖ Care was taken to ensure achievement of ass sustainable growth path in terms of external indebtedness as
well as fiscal stability.
❖ Rate of growth achieved was 5.4%, hence it gave birth to a new term “neo Hindu rate of growth”.
Tenth plan (2002-2007)
❖ The main objectives of 10th five year plan were
1. Target Growth 8 % and attain actual Growth 7.6 %
2. Reduction of poverty rate by 5 percentage points by 2007.
3. Providing gain full and high quality employment at least to the addition to the labour force.
4. Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.
❖ While the Right to Education Act and the National Rural Employment Guarantee Act (NREGA) are
significant initiatives, they were enacted after the Tenth Plan period. The Right to Education Act was passed
in 2009, and NREGA was enacted in 2005
❖ 80 million people were provided employment.
Eleventh Plan (2007-2012)
❖ The main architect of this plan was C. Rangarajan.
❖ Target Growth 9 % and attain Actual Growth 8%
❖ “Towards Faster and More Inclusive Growth” is the central of the plan that seeks to lower poverty by 10%,
generate 70 million new jobs and reduce unemployment to less than 5%.
❖ The plan promises to accelerate economic growth and make it more inclusive.
❖ The chief thrust the plan will be agriculture, education and infrastructure.
❖ As many as 27 detailed national targets have been set in the plan, ranging from enhancing incomes and
reducing poverty, to education, literacy, infant mortality, maternal mortality and child development.
12th Plan (2012-2017)
❖ The main theme of the 12th Five Year Plan was to achieve more inclusive faster and sustainable growth
❖ It aims to achieve an annual average economic growth rate of 8%
❖ It also seeks to achieve 4% agriculture sector growth from 2012 to 2017.
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PLANNING COMMISSION
1. The planning commission was established in March 1950 by an executive resolution of the Government of
India on the recommendation of the advisory planning board constituted in 1946 under the chairmanship of
KC Neogi.
2. Thus the planning commission was neither a constitutional body nor a statutory body, in other words it was a
non constitutional or extra constitutional body and non statutory body.
3. It was headed by the Prime Minister of India.
4. The critics have described it as a super cabinet, an economic cabinet, a parallel cabinet, the fifth wheel of the
coach and so on.
5. According to Dr. Gadgil, the root of the failure lies in the process by which the planning commission,
essentially only an advisory body, has come to mix itself with the actual process of the formation of public
policies, even in matters other than development. The misdirection has been helped largely by the
membership of the Prime Minister and the Finance Minister in the Planning Commission, which appears to
have vested the Planning Commission and its decisions with an unnatural kind of prestige and importance.
6. The eminent constitutional expert K Santhanam stated that “planning has superseded the federation and our
country is functioning like a unitary system in many respects.
7. NITI Aayog replaced the Planning Commission in 2015.
National Development Council (NDC)
NDC or Rashtriya Vikas Parishad is India's highest policy making body for development matters established in
1952 to co-ordinate between the central and state governments and is chaired by the Prime Minister.
❖ The NDC serves as a platform for the Central and state governments to coordinate their efforts and
policies related to National Development.
❖ It aims to mobilize resources and efforts from across the nation to support the implementation of
development plans.
❖ It promotes standard economic policies across various sectors.
❖ The NDC’s objectives include creating a nation free of exploitation and poverty, achieving equality, decent
governance, rights and a welcoming environment, reducing violence against women and strengthening civil
society.
❖ The first five-year plan was adopted without the consent of the National Development Council.
❖ NITI Aayog, which replaced the Planning Commission, provides policy inputs and technical advice to the
central states and union territories.
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UPPSC Batch
Economics DMP–06
5 Year Plans And Their Analysis – Practice Questions
1. India has come a long way in terms of economic growth since independence , yet there is a long way to
go. In light of the statement, discuss the achievements of five year plans in India? Also mentions the
failures of the planning strategy and five year plans. (12 Marks, 200 Words)
How to approach the question:
❖ Introduction: Start your answer by writing about the five-year plans in India in 20-30 words.
❖ Main Body: Discuss the achievement, strategies and the failure of the five-year planning in 130-
140 words.
❖ Conclusion: Write a conclusion by highlighting the importance of five-year plans in 20-30 words.
Model Answer:
Introduction:
Since Independence, India has adopted a planned economic development approach through a series of Five-
Year Plans, starting in 1951. These plans aimed to accelerate growth, reduce poverty, achieve self-reliance,
and promote social justice. Over the decades, India has seen significant progress, but persistent issues indicate
gaps in planning and execution.
Main body
Achievements of Five-Year Plans
❖ Improvement in Economic Indicators:
➢ National income and per capita income grew significantly, lifting India out of post-colonial
stagnation.
➢ Capital formation rose to ~35% by 2010–11, showing strong saving and investment trends.
❖ Agricultural Transformation:
➢ Productivity and output increased, making India a net exporter of foodgrains.
➢ Ensured food security and boosted rural livelihoods.
❖ Industrial Development:
➢ Growth in capital goods industries (iron, steel, machinery, fertilizers) strengthened the
manufacturing base.
➢ Helped diversify the economy beyond agriculture.
❖ Infrastructure Development:
➢ Expansion of transport, power, and communication supported sectoral growth.
➢ The development of education and health improved human capital and living standards.
❖ Other Key Achievements:
➢ Employment opportunities increased, and society modernized.
➢ India moved towards self-sufficiency and became a rising global economic power.
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Failures of Planning Strategy and Five-Year Plans

❖ Economic Indicators and Living Standards:
➢ Growth benefits were unequally distributed, with persistent poverty and inequality.
➢ Inflation reduced real incomes: price rise of 63% in the 2nd Plan, 5.8% in the 3rd, 9% in the 4th,
and 6.3% in the 5th Plan.
❖ Employment and Production Challenges:
➢ Unemployment rose from 53 lakh (1st Plan) to 349 lakh (2004–05).
➢ Employment growth (2.3%) was slower than labor force growth (2.5%).
➢ Agricultural growth was limited to wheat and rice; other crops were neglected.
❖ Infrastructural and Administrative Inefficiencies:
➢ Inadequate development in power, transport, and airways hindered growth.
➢ Weak administrative capacity impacted effective implementation.
❖ Regional and Wealth Disparities:
➢ Uneven development: Western states progressed while Eastern states lagged.
➢ Wealth inequality worsened; 3% of households owned ~50% of cultivable land.
❖ Planning and Implementation Issues:
➢ Overemphasis on PSUs led to weak private sector regulation and an imbalance in goods production.
➢ The politicization of planning and the growth of black money weakened the formal economy.
Conclusion :
The five-year plans in India have yielded a mixed bag of results, with notable achievements in certain areas
and significant shortcomings in others. On the positive side, the plans have contributed to increased national
income, agricultural transformation, industrial development, and infrastructure creation. However, these
achievements have been overshadowed by persistent challenges such as rising unemployment, inflation,
regional disparities, and inequitable distribution of wealth.

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