PLANNING IN INDIA

Ekjyot Kaur Gujral

Assistant Professor of Economics
Army Institute of Law, Mohali
 INTRODUCTION
 The process of planned economic development began in India in 1951
 In 1934, Sir M Visvesvraya wrote a book named ‘Planned Economy for India’.
 In 1938, the INC under the leadership of Jawaharlal Nehru made a National
Planning Committee. But it couldn’t function due to 2nd world war and changing
political scenario.
 In 1944, 8 industrialists of Bombay presented a well organized ‘Bombay Plan’.
 In 1944, Shri Sriman Narayan constructed a plan called the ‘Gandhian Plan’.
 In August 1944, British Indian govt set up ‘Planning and Development
Department’ but this deptt was abolished in 1946.
 In April 1945, Mr MN Rao introduced a ‘People’s Plan’ but it remained
unimplemented.
 In Oct 1946, a planning advisory board was set up by the interim govt to review
plans and future projects.
 In Jan 1950, Shri Jaiprakash Narayan published a plan called ‘Sarvodaya Plan’,
only a few parts of the plan were accepted by the govt.
 The Planning commission was constituted on 15th March 1950- A non-political and
non-constitutional advisory body which makes recommendations to the govt.
 Now, Planning commission has been replaced by NITI Aayog (National Institute
for Transforming India), functional from 1st January 2015.
NITI Aayog
 GOI policy think tank established by PM Narendra Modi.
 Mainly adopted to involve state govts (also UT’s) in economic policy making
process in order to improve centre-state coordination & promote cooperative
federalism.
 PM is the ex-officio Chairperson and Governing council includes CMs of states
and Governors of UTs. Full time staff includes a Vice Chairman (Rajiv Kumar) and
full time members (Dr VK Saraswat-former DRDO Chief, Prof Ramesh Chand-
Agri expert, Dr Vinod Paul-Public Health expert) and CEO(Amitabh Kant).
Objectives of Planning
 Increase in the national and per capita income
 Reduction in inequality of income and wealth
 Reduction in regional inequalities
 Price stability
 Increase in employment
 Social security to the poor and deprived sections of society
 Increase in capital formation
 Development of infrastructure
 Poverty alleviation
 All round economic development
Achievements of Economic Planning
 Increase in national income: Prior to planning, it was growing at a rate of 0.5% per
annum. During five year plans, it increased at an avg rate of 5.1% per annum from
1950-51 to 2016-17.
 Increase in per capita income: Before planning, increase in per capita income was
almost negligible but during period of planning it grew at an avg rate of 3% per
annum.
 Increase in capital formation: During period of planning, rate of savings and
investment has increased. In 1950-51, rate of capital formation was 8.7% of GDP.
In 2015-16, it increased to 33.2% of GDP.
 Reforms in Agriculture and Green Revolution: Land reforms although not fully
implemented but have helped in growth of agriculture production. In 1966,
adoption of green revolution has led to technological development of agriculture.
Production of food grains has increased four-fold. Area under irrigation has
increased to 46% in 2013-14 from 17% in 1950-51.
 Industrial development: Basic and capital goods industries like iron and steel,
chemical fertilizers have developed considerably. Achieved self-sufficiency in
consumer goods industries. In 2015-16, industrial production increased to 7.3%.
 Development of infrastructure: Improvement in roads, railways, power generation
capacity, transport and communication.
 Increase in employment: Govt has launched various schemes for promoting
employment like MGNREGA, NULM, NRLM etc.
 Export promotion and import substitution: Diversification of exports and large
scale imports substitutes of iron and steel, machinery, fertilizers.
 Balanced regional and economic growth
 Failures of Economic Planning
 No increase in standard of living of people. 21.9% of the people living below poverty line
indicate acute levels of poverty.
 Rise in prices: In 2015-16, inflation rate was 4.9 percent. It adversely affects the poor and
low income groups. Planning has been unable to check price rise. Feb 2022- 6.07%
 Increase in unemployment: there are still 2.45 crore (5.6%) unemployed people in the
country. They have failed to emphasize upon labour intensive technology.
 Less growth in agriculture: As green revolution benefited only a few states and only two
crops, wheat and rice. Sufficient irrigation facilities not available.
 Inequalities in income and wealth have increased. Bottom 20% of ppn accounts for 8.1%
of the total income and Top 20% account for 45.3% of the total income.
 Poor implementation of the five year plans due to corruption, red tapism and defective
administration
 Unbalanced growth of different regions and states of the country.
 Poor development of infrastructure.
 Strategy of Planning
Means detailed actions and policies to be adopted to achieve definite objectives.
The main elements of strategy are:
 Wider scope covering all sectors of the economy
 Mixed economy where it should include growth of both public and private sectors
 Growth of savings and investment
 Employment oriented by promoting labour intensive activities and encouragement
of self-employment.
 Balanced regional development.
 Progress of backward classes.
 Social welfare.
 Types of Planning
1. General Planning : Planning for all activities in an economy.
Partial Planning: Planning for a particular sector of the economy.
2. Centralized planning: Plan is formulated, directed and controlled by a central
planning authority.
Decentralized planning: Plans are framed by local, regional and individual
organizations.
3. Functional Planning: Planning which seeks to remove economic difficulties by
directing all planning activities within the existing economic and social structure.
Structural Planning: That type of planning that changes the social and economic
framework of the country.
4. Physical Planning: Planning taking into account the real physical resources of the
country.
Financial Planning: Planning whereby the allocation of resources in terms of money
is done.
5. Planning by inducement: Govt tries to achieve its objectives by influencing
investment decisions of the entrepreneurs by offering them incentives. Private
entrepreneurs are induced to consume, produce and invest.
Planning by direction: Wherein govt directly intervenes in the economic affairs.
Planning is carried out through commands, direct orders and instructions. There is a
central planning committee which takes all the decisions.
6. Prospective Planning: Refers to short term planning.
Perspective Planning: Refers to long term planning
7. Democratic Planning: Where plans are prepared by the consent of the people’s
representatives. It enjoys full support and cooperation by the people.
Totalitarian Planning or Communist planning: is where all economic activities are
conducted by the government. Central planning authority prepares for the plan for
almost the entire economy and economic sectors.
8. Indicative Planning: Indicative planning or planning by inducement is found in
capitalist countries as well as in mixed economies, like India. It recognizes not only
consumers’ sovereignty but also producers’ freedom so that the targets and priorities
of the plans are achieved. It then involves a middle path of planning mechanism and
market mechanism—a kind of coordination between private and public activities.
Imperative Planning: Under this type of planning, economic decisions are made
through a central planning authority instead of a market system. Allocation of re-
sources and the distribution of output among the people are determined centrally in
accordance with the predetermined plans and targets.