Historical Background Of Development Planning In India Economics Essay


23 Mar 2015

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Planning in India starts from the 1930's. The colonial government had established a planning board even before Independence. Soon after independence India's leaders adopted the principal of formal economic planning as an effective way to intervene in the economy to foster growth and social justice. The First Five-Year Plan (FY 1951-55) was attempted to stimulate balanced economic development while improving imbalances caused by World War II and partition. Agriculture, including projects that combined irrigation and power generation, obtained priority. By contrast, the Second Five-Year Plan (FY 1956-60) stressed on industrialization, particularly basic, heavy industries in the public sector, and improvement of the economic infrastructure. The plan also emphasized on social goals, such as more equal distribution of income and extension of the remuneration of economic development to the large number of disadvantaged people. The Third Five-Year Plan (FY 1961-65) intended at a considerable rise in national and per capita income while enlarging the industrial base and resolves the neglect of agriculture in the previous plan. The third stressed for national income to grow at a rate of more than 5 percent a year; self-sufficiency in food grains was anticipated in the mid-1960s.

Economic difficulties interrupted the planning process in the mid-1960s. Defense expenditures increased sharply, and the increased foreign aid needed to maintain development expenditures eventually provided 28 percent of public development spending. It was clear that its goals could not be achieved midway through the third plan. Successive severe droughts in 1965 and 1966 disrupted the economy and planning. Three annual plans guided development between FY 1966 and FY 1968 while plan policies and strategies were reassessed. Instant attention centered on increasing agricultural growth, stimulating exports, and searching for efficient uses of industrial assets. The rupee was substantially devalued in 1966, and export incentives were adjusted to promote exports. Controls affecting industry were simplified, and greater dependence was placed on the price mechanism to attain industrial efficiency.

The Fourth Five-Year Plan (FY 1969-73) required a 24 percent increase over the third plan in real terms of public development expenditures. The public sector accounted for 60 percent of plan expenditures, and foreign aid contributed 13 percent of plan financing. Even though the plan projected national income growth at 5.7 percent a year, the realized rate was only 3.3 percent.

The Fifth Five-Year Plan (FY 1974-78) was planned in late 1973 when crude oil prices were rising quickly; the rising prices rapidly forced a series of revisions. The plan was subsequently approved in late 1976 but was concluded at the end of FY 1977 because a new government wanted different importance and programs. The fifth plan was in effect only for one year, though it provided some guidance to investments throughout the five-year period. The economy operated under annual plans in FY 1978 and FY 1979.

The Sixth Five-Year Plan (FY 1980-84) was intentional to be flexible and was based on the principle of annual "rolling" plans. It called for development expenditures of nearly Rs1.9 trillion, of which 90 percent would be financed from domestic sources, 57 percent of which would come from the public sector. Public-sector development spending would be concentrated in energy (29 percent); agriculture and irrigation (24 percent); industry including mining (16 percent); transportation (16 percent); and social services (14 percent). In practice, more was used up on social services at the expense of transportation and energy. The plan made the GDP growth to increase by 5.1 percent a year, a target that was surpassed by 0.3 percent. A most important objective of the plan was to increase employment, especially in rural areas, in order to reduce the level of poverty. Poor people were given cows, bullock carts, and handlooms; however, subsequent studies indicated that the income of only about 10 percent of the poor increased above the poverty level.

The Seventh Five-Year Plan (FY 1985-89) foresees a greater prominence on the allocation of resources to energy and social spending at the expense of industry and agriculture. The main increase was in transportation and communications, which took up 17 percent of public-sector expenditure during this period. Total spending was targeted at almost Rs3.9 trillion, of which 94 percent would be financed from domestic resources, as well as 48 percent from the public sector. The planners assumed that public savings would increase and help finance government spending. That increase did not occur; instead, the government relied on foreign borrowing for a greater share of resources than expected.

The schedule for the Eighth Five-Year Plan (FY 1992-96) was affected by changes of government and by increasing uncertainty over what role planning could usefully perform in a more liberal economy. Two annual plans were in effect in FY 1990 and FY 1991. The eighth plan was launched in April 1992 and emphasized market-based policy reform rather than quantitative targets. Total spending was designed at Rs8.7 trillion, of which 94 percent would be financed from domestic resources, 45 percent of which would come from the public sector. The eighth plan included three general goals. First, it required to cut back the public sector by selling off deteriorating and inessential industries while encouraging private investment in such sectors as power, steel, and transport. Second, it proposed that agriculture and rural development have priority. Third, it wanted to renew the assault on illiteracy and improve other aspects of social infrastructure. Government documents in 1992 indicated that GDP growth was expected to boost from around 5 percent a year during the seventh plan to 5.6 percent a year during the eighth plan. However, in 1994 economists predicted annual growth to be around 4 percent throughout the period of the eighth plan.

Role of National Development Planning in India

Roles of national development planning can be attained if all actors work together and do their part. Poor countries have pledged to administrate better, and invest in their people through health care and education. Rich countries have also assured to support them, through aid, debt relief, and fairer trade. These roles were planned in 2000 at the UN Millennium Summit are aimed to be achieved by 2015. These are not mere development planning objectives but they comprise a universally accepted human values and rights, for example freedom from hunger, the right to basic education, the right to health and a accountability to future generations.

Role 1

In the global action against poverty, one of the leading factors is India's accomplishment in poverty reduction. With more than 2.3 billion people in India and China alone, their major advances in poverty reduction makes developing world averages. The target set for poverty reduction is 19% population below the poverty line by 2015. The Indian Planning Commission expects to meet the poverty goal and overlook the target for hunger eradication.

Role 2

It is simple to follow outcomes such as the construction of school facilities, the filling of vacancies and training of teachers, achievement in enrolment, and decrease in dropout rates. Nevertheless the real outcome is quality of education. Literacy in India varies among states, regions and social groups.

Role 3

India's advance to bridging the gender divide is improving women's literacy rate. Female literacy rate has gone up from 39% in 1991 to 54% in 2001 which is still below the 75% literacy rate for men in 2001. The male-female literacy rate gap has reduced from 25% in 1991 to 22% in 2001. The literacy gap between the sexes is also higher in rural than in urban areas. The National Literacy Mission that begun in 1988 has been functioning to progress women's literacy and decrease the gender gap.

Role 4

Malnutrition accounts for almost 50% of child deaths in India. According to the Planning Commission, India is doubtful to attain the targets for child mortality and infant mortality by 2015. IMR has always been gradually declining in India from 146 in 1951 to 58 in 2005. However, the rate of decline in IMR reduced after 1993. Infant Mortality Rate is elevated in rural areas than urban and higher for girls than boys.

Role 5

As for 2001-03, India's MMR is 301 with a little over 48% births being attended by skilled health personnel. The Planning Commission projects that India will fail to reach the MMR target for 2015, which is less than 109. Hospital based data shows that states that have comparatively better socio-economic conditions and higher educational levels (such as Kerala, Karnataka, Tamil Nadu, and Maharashtra) also have lesser rates of MMR. The Government of India has commenced the National Rural Health Mission (NRHM) in 2005 to advance for better essential health care delivery system in India.

Role 6

Over 60% of all HIV cases in Asia live in India. India had about 25 lakh HIV infected people in 2006 according to the National AIDS Control Organisation's estimation. HIV cases are elevated among commercial sex workers, injecting drug users, and men having sex with men. Though, infection from blood transfusions and transmission from mother to newborn is low. The National Health Policy (NHP) prepares out a number of goals to address HIV/AIDS, malaria and other major diseases. NHP's goal is to reduce mortality by 50% on account of TB, malaria, other vector and water-borne diseases, to attain zero level growth of HIV AIDS, and to boost health expenditure by govt to 2.0% of GDP by 2010.

Role 7

India has 16% of the world's population. However its allocation of fresh water sources is only 4%. Though, the Planning Commission is certain that India will meet the aim of halving, by 2015, the amount of people without sustainable access to safe drinking water. The National Water Policy (2002) put emphasis on protection and sustainable use of water, and prioritizes its use for drinking, hydro-power, agriculture, industries and ecology. Government programmes on water emphasizes to additional room for irrigation systems, watershed programmes and rainwater harvesting.

Role 8

India's target focus within this role is to make obtainable the benefits of technology to a wider accumulation in cooperation with the private sector. The country's growth story of Business Process Outsourcing (BPO) has put India as the leader in the global services trade. There has also been noticeable progress in the telecom sector. The share of private telecom operators has augmented to over 65% by the end of March 2007 owing to proactive and positive government policies. The number of internet users has also improved to 3.5 persons per 100 from 2001 to 2006.


Four decades of planning explains that India's economy, a mix of public and private enterprise, is too huge and diverse to be completely responsive or predictable to directions of the planning authorities. Real results generally differ in important respects from plan targets. Major inadequacy includes deficient improvement in income distribution and mitigation of poverty, delayed completions and cost overruns on many public-sector projects, and far too little a return on numerous public-sector investments. Despite the fact that the plans have turned out to be less effective than expected, they help guide investment priorities, policy recommendations, and financial mobilization.

Kumar, Dharma (Ed.) (1982). The Cambridge Economic History of India (Volume 2) c. 1757 - c. 1970. Penguin Books. 

Nehru, Jawaharlal (1946). Discovery of India. Penguin Books. 

Roy, Tirthankar (2000). The Economic History of India. Oxford University Press.

Sachs, D. Jeffrey; Bajpai, Nirupam and Ramiah, Ananthi (2002) (PDF). Understanding Regional Economic Growth in India. Working paper 88.


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