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Economic
Economy Notes for
Planning In
UPSC
India
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Economic planning in India is one of the most important topics under the subject Indian Economy for
various competitive exams. Efforts related to economic planning in India began as early as 1938 when
the Indian National Congress set up the National Planning Committee under the leadership of Pandit
Jawaharlal Nehru.
 For over two centuries, India was drained economically by the Britishers and they also exploited
the resources for their own benefit. When the Britishers left India in 1947, there were several
problems such as poverty, inflation, food shortages, lack of health care etc in the country.
Leaders believed that economic planning would bring solutions to most of the issues which were
then prevalent in the country.
 Prior to the independence of India, several plans such as the Bombay plan, Gandhian plan etc.,
were devised for the economic development of the country. However they remained only in the
papers and were never implemented.
 After the formation of the National Planning Commission, India began the planned economic
development by introducing the five year plan. The first five year plan was launched in 1951.
However, in 2017 the five year plan was replaced by the 3 year action agenda of NITI Ayog.
In this article on economic planning in India, we shall discuss the history, objectives, achievements and
failures of economic planning in India and also about the 12 five year plans.
This article will be very helpful for the aspirants in their upcoming UPSC Prelims and mains examination.

Economic Planning
 Economic planning is referred to as the way of planning and utilising the economic resources
available in the country to a maximum extent with an aim to achieve well-defined socio-
economic goals.
 Hermann Levy, a German economist defines economic planning as “a means to secure a better
balance between demand and supply by conscious and thoughtful control over, either of
production or distribution”.
 The process of economic planning in India involves the following steps,
o Listing down the problems that are prevalent in the economy and rearranging them on
the basis of priority. The ones which need to be resolved or addressed immediately, are
placed at the top.
o The problems which are to be addressed in the short run and over a long period are
identified and segregated accordingly.

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o Target, either in terms of time or quantity is fixed in order to achieve the desired goal.
Based on this, the amount of resources required for achieving the target are estimated
and are mobilized.
o Finally when all the resources such as human resources, financial resources, physical
and material resources etc are arranged, the proposed plan is implemented. Periodic
reviews are done in order to ensure that everything is right on track. If not, then
appropriate changes are made in the plan and in the execution process.
 There are several types of economic planning. Some of the important ones are given below:
o Democratic planning: In this type of planning, the economy of a country is controlled by
the representatives of people. They implement economic planning in the country. In
India, we follow the democratic form of government and thus democratic planning is
employed.
o Decentralized planning: Here the overall targets of production and investment are fixed
by the Central government and the State governments and the local government are
given the freedom to achieve their targets. This type is more prevalent in countries such
as France and Great Britain. This type of planning is more efficient and productive in
attaining the result.
o Planning by inducement: In this type, the government uses persuasion to implement
certain schemes of projects and tries to influence investment decisions by offering
incentives to the entrepreneurs through fiscal and monetary policies. However this is not
a time efficient method.
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History Of Economic Planning In India

 The concept of economic planning was not completely new in India. In 1934, Sir
Vishvesvarayya published a book entitled “Planned Economy For India”. He was the first person
in the country to advocate economic planning for India.
 Towards the end of 1938, the National Planning Committee under the chairmanship of Pandit
Jawaharlal Nehru was established by then President of INC, Netaji Subhash Chandra Bose.
The main objective of the Congress to set up the committee was to provide ways and means for
the establishment of new industries and also for the development of the existing ones.
 Following this, few historically significant economic plans were made, most of which remained
only in the papers. Some of the plans are discussed below,
 Bombay Plan:

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o In 1944, the then eight leading Indian industrialists published a plan for the
economic development of the country, which came to be known as the Bombay
plan.
o The plan aimed to double the per capita income and the national income of that
period.
o It proposed to increase the output of the agricultural sector by two times and the
industrial sector by five times within the period of 15 years.
o The total cost of the plan was Rs.10,000 crores which were to be invested over
the 15 years.
o The Bombay plan stressed on the fact that in order for the economy of any
country to grow, government intervention and regulation is a key factor.
 People’s Plan:
o The Indian Federation of Labour came up with an alternative plan to the Bombay
plan which was known as the People’s plan. This plan was drafted by M.N.Roy in
1944.
o The plan aimed to provide basic needs to all the people in the country within a
period of 10 years. It was a Rs.15000 crores plan.
o To achieve the aim, the plan laid a special emphasis on development of
agriculture through nationalisation of land. The rationale behind this is that
agriculture is the major occupation as well as the backbone of the country.
 Gandhian Plan:
o In 1944, S.N.Agarwal, then principal of Wardha Commercial college, authored
the Gandhian plan. It was framed in the light of the Gandhian principles.
o The fundamental feature of this plan was that it aimed to develop a decentralised
self-sufficient agricultural society with emphasis on the development of the
cottage industries.
o The cost estimated to execute this plan was Rs. 3500 crores.
 Colombo Plan for India:
o The Colombo plan was a 6 year plan which proposed to spend Rs.1,839 crores
on development projects during the period 1951 to 1956.
o The plan aimed to increase the production of food grains, industrial raw materials
and finished goods in order to improve the living conditions of the people of
South and South-East Asia.
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Objectives Of Economic Planning In India

Some of the major objectives of economic planning in India are as follows,
 Economic growth - It is the first and foremost objective of economic planning in India.
Economic growth of a country can be achieved by increasing the real national income and per
capita income in the country. Economists argue that when both per capita income and national
income grows in real terms, a higher standard of living of every individual as well as society as a
whole can be achieved.
 Reduction in poverty - At the time of independence more than fifty percent of India’s
population was poor. Lack of employment is a major cause of poverty. There are a lot of people
in the country who are not even getting a square meal a day. Thus the planning commission
decided to prepare an appropriate plan to remove poverty completely from the country.
 Modernization of the economy - Since the inception of economic planning, modernization of
Indian economy has been the key objective of the planners. The structural and institutional
changes in economic activities in three major sectors of economy i.e agriculture, industry and
services will lead to a progressive and modern economy. It is also very essential to develop a
diversified economy that produces a wide variety of goods.
 Increase in employment - Employment is one of the key factors involved in the production
process of goods and services. Unemployment is the cause of various social problems such as
poverty, crime etc. So the planners of Indian economy put the creation of employment as one of
the major objectives of economic planning.
 Reduction in income inequality - In India, there is a diverse economic standard of its
population and income disparity is one of the major concerns in the Indian society. A large
section of the society falls under the lower income category while few are under the high income
category. Main reason for this disparity is the unequal distribution of asset holding such as per
capita land holding, possession movable and immovable property from inheritance etc. Thus the
planners, while planning the economy of the country, aim to reduce this inequality.
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Planning Commission And The Five Year Plans

 In 1950, the Government of India established the Planning Commission under the Chairmanship
of the first Prime Minister of independent India, Pandit Jawaharlal Nehru.
 The Planning Commission was a non constitutional body. It functioned under the guidance of
the National Development Council (NDC) which was the prime policy making body in the
country.
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 The commission was set up with an objective to formulate economic plans keeping in view the
resources of the country and suggesting the best methods to utilize them effectively and in a
balanced manner.
 In order to address the various socio-economic problems that existed in the country, the
Government of India adopted the five year planning system.
 In July 1951, the Planning Commission presented the draft outline of the first five year plan
which lasted the period 1951 to 1956.
 From 1951 to 2017, Government of India implemented 12 five year plans in total.
We shall discuss the objectives and achievement of all the 12 five year plans one by one,

Five Period Growth Rate Objectives And Remarks

Year
Targeted Actual
Plan Growth Growth

1st five 1951 to 2.1 % 3.6%  The first plan was made based on the Harrod-
year 1956 Domar model which was developed
plan independently by Roy.F.Harrod and Evsey
Domar.
 The main objective of this plan was to increase
agricultural production and thereby increase
growth of the sector. It also focused on full
employment, removal of economic inequalities
and power and transport.
 Objectives such as food self sufficiency,
rehabilitation of refugees and price stability were
achieved to some extent.

2nd five 1956 to 4.5% 4.3%  Similar to the first five year plan, this plan was
year 1961 developed on the basis of the Harrod-Domar
plan model.
 This plan was authored by P C Mahalanobis
and hence it is also known as the Mahalanobis
plan.
 The plan focused mainly on rapid
industrialisation with particular emphasis on
development of basic and heavy industries. It

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also aimed to increase employment

opportunities and national income.
 However, due to the shortage of foreign
exchange, the plan was not implemented
completely and the targets were pruned.
 The Industrial policy 1956 considered the
establishment of a socialistic pattern of society
as the goal of economic policy.

3rd five 1961 to 5.6% 2.8%  This plan aimed to make India a self-reliant and
year 1966 self-generating economy. However, towards the
plan end of the plan, the aim was shifted to the
development of defence.
 This plan created a base for the growth of
medium and small scale industries and cottage
industries.
 It was during this plan period, India resorted to
borrowing from the International Monetary Fund
(IMF) for the first time.
 Due to events such as Chinese aggression of
1962, Indo-Pak war of 1965 and severe drought
during 1965 to 1966, this plan failed to achieve
its targets.

4th five 1969 to 5.7% 3.3%  The fourth five year plan aimed for growth with
year 1974 stability and being self-reliant particularly in the
plan defence sector.
 The family planning programmes were
introduced during this five year plan.
 Special emphasis was laid on improving the
conditions of poor and underprivileged sections
of the society by providing education and
employment.
 Post the Indo-Pak war of 1971, there was a
huge influx of Bangladeshi refugees into the

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country which created scarcity of resources.

This led to the failure of the plan.

5th five 1974 to 4.4% 4.8%  Removal of poverty (Garibi Hatao) and
year 1979 attainment of self-reliance were the two chief
plan objectives of the 5th five year plan.
 Since the inception of five year plans, for the
first time removal of poverty was made the
prime objective of the plan.

Rolling 1979 to - -  The sixth five year plan for the period 1978 to
plan 1980 1983 was put forward by the Janata
government.
 This lasted only for two years. The Congress
government which came to power in 1980,
removed this plan from official records and
introduced the official 6th five year plan in 1980.

6th five 1980 to 5.2% 5.7%  The foremost aim of the 6th five year plan was
year 1985 the removal of poverty. It also aimed for higher
plan growth rate, removal of unemployment,
improved productivity, modernization of
technology and significant reduction in the
disparities of income and wealth.
 Though there was a famine in the last year of
the plan period, most of the targets fixed in this
plan were achieved and thus it was a successful
five year plan.

7th five 1985 to 5.0% 6.0%  This plan focused on increasing the production
year 1990 of food grains at a larger scale and the
plan employment opportunities.
 It was a very successful plan and it recorded the
highest ever agricultural as well as overall
growth rate in the fiscal year 1988 to 1989.

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 Following this plan, there was a plan holiday

from 1990 to 1992 due to political instability and
economic crisis that existed then in India.

8th five 1992 to 5.6% 6.8%  In 1992, issues such as recession in industry,
year 1997 inflation, budget deficits and increases in debt
plan burden existed. The planners of the 8th five
year plan introduced various measures and
policies to combat all these economical issues.
 Under the Prime Ministership of Shri
P.V.Narasimha Rao, fiscal and economic
reforms were introduced.
 Another key objective of the 8th five year plan
was to have universal education and eradication
of illiteracy in the age group of 15 to 35 years.
 Increase in private sector investment,
improvement in current account deficit and high
growth of agriculture and allied sectors and the
manufacturing sector were achieved through
this plan.

9th five 1997 to 6.5% 5.4%  This plan was mostly an extension of the eighth
year 2002 five year plan. It focussed on growth with social
plan justice and equality.
 Priority was given to agriculture and rural
development for generating adequate
productive employment and eradication of
poverty.
 Provisions to provide safe drinking water, PHC
facilities, UPE, shelter and connectivity to all in
a time bound manner were made under this
plan.
 It also aimed to ensure food and nutritional
security to all, particularly to the weaker
sections of the society.

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10th 2002 to 8% 7.6%  In this plan, monitorable targets were fixed for a
five 2007 few key indicators of development.
year  Following were the main objectives of the tenth
plan five year plan,
o Attainment of GDP growth rate of 8%
per annum.
o Providing access to basic services such
as education, health, drinking water and
sanitation.
o Substantial allocation of resources to the
social sector and major improvement in
governance for effective use of
resources.
o Reduction in poverty to 15% by 2007
and 5% by 2012.
o To reduce the gender gap in literacy and
wage rate to 50% by 2007 and
population growth to 16.2% during 2001-
2011.
o To give sustained access to drinking
water for all the villages in the country by
2007.

11th 2007 to 9% 8%  The theme of the 11th five year plan was
five 2012 “towards faster and more inclusive growth”.
year  Though the Indian economy witnessed growth,
plan it was not perceived as sufficiently inclusive by
various vulnerable sections of the society. Thus
the concept of inclusive growth was introduced
in this plan.
 Agriculture, infrastructure and education were
the key areas of concern during this plan period.
 Around 27 detailed national targets, ranging
from enhancing production and incomes to
literacy, health, child development, poverty

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reduction etc., were set under the 11th five year

plan.

12th 2012 to 8% 5.1%  Inclusive growth was the central theme and
five 2017 (2012- objective of the 12th five year plan. In order to
year 13) achieve this target, planners set 25 core
plan 6.9% monitorable targets most of which are to be
(2013- achieved by the end of 12th five . They are as
14) follows:
7.2% o The overall growth rate of each state
(2014- should be greater than the previous one.
15) o Real GDP growth rate - 8.2%
7.6% o Manufacturing growth rate - 10%
(2015- o Agricultural growth rate - 4%
16) o Increase mean years of schooling to
7.1% seven years by 2017.
(2016- o Elimination of gender and social gap in
17) enrollment into schools.
o Increasing the access to higher
education by increasing the total number
of seats for each age category.
o Reducing the head count ratio of
consumption poverty by 10%
o Generation of 50 million job
opportunities in the non-farm sector.
o Reducing the Infant Mortality Rate to 25
per 1000 live births and Maternal
Mortality Rate to 1 per 1000 live
births by the end of this plan.
o Reducing the under-nutrition among the
children aged 0 to 3 years to half by the
end of the 12th five year plan.
o Also, reducing the total fertility rate to
2.1% by the end of the plan period.

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o Adding 30,000 MW of renewable energy

capacity.
o Increasing the green cover in the country
by 1 million hectare every year.
o Reducing the emission intensity of GDP
to 20-25% by 2020.
o Increasing the teledensity in rural areas
to 70%.
o Completing the Eastern and Western
Freight corridors by the end of the plan
period.
o Providing electricity to all the villages in
the country by the end of the 12th five
year plan.
o Increasing the infrastructure investment
as a percentage of GDP to 9% by the
end of the plan.
o Increasing the gross irrigated area from
90 million hectare to 103 million hectare.
o Connecting all the villages with all
weather roads.
o Upgrading all the national and state
highways to two-lane standard by the
end of 12th five year plan.
o Ensuring that at least 50% of the rural
population have access to 55 LPCD
piped drinking water supply and 50% of
gram panchayats to achieve Nirmal
Gram Status by the end of plan period.
o Proving 90% of households in the
country an access to banking services
by the end of the plan period.
o Providing the subsidies and welfare
related benefits to the beneficiaries by
direct bank account transfer.

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NITI Aayog And Its Action Agenda

 In January 2015, the Government of India replaced the Planning Commission with an institution
called NITI Aayog (National Institution for Transforming India) by passing a resolution.
 It is the premier think tank of the Government of India. It acts as the quintessential platform of
the Government, as it brings the Indian states to act together in national interest.
 The initiatives of NITI Aayog includes
o Three year Action Agenda
o Fifteen year vision and
o Seven year strategy.
 Some key functions of NITI Aayog are designing policy and programme framework, fostering
cooperative federalism, providing advice and encouraging partnerships between key
stakeholders and various national and international institutions, designing strategic and long
term policies and programme frameworks and monitoring their progress and efficacy.
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