The essence of planning is that economic activity is regulated by the state with a view to achieving well-defined goals within a specific period of time. The targets are not entirely related to economic growth in income terms but also encompass social development aspects.
The Soviet Union was the first country to adopt national planning in order to rapidly industrialize the economy.
The Planning Commission was established in march, 1950 by a Government of India resolution with Prime Minister as Chairperson. The functions assigned to the Planning Commission were to assess & allocate plan resources, formulate plans & programmes for area development, determine implementation methodology, identify resource constraints & apprise & adjust implementation.
The initial mandate of the Planning Commission was to establish heavy industries through public investment as a means for achieving rapid industrialisation. The Planning Commission from 1950 to 2014 formulated twelve five-year plans.
TYPES OF PLANNING:
Though there are many variants of planning, planning can be classified into two broad categories –
- Imperative Planning: in the socialist system, all economic decisions were centralised in the hands of state with collective ownership of resources. In the Communist system all resources were to be owned & utilised by the state. Communist China was the purest example of such planning.
- Indicative Planning: the features of such planning are as follows – every economy following the indicative planning were the mixed economy. Unlike a centrally planned economy, indicative planning works through the market rather than replaces it.
There are still many other types of planning depending upon the point of view we are looking with. Planning could be national or regional from the territorial point of view. From the political point of view planning could be central, state or local. From the participatory point of view, it can be categorised into centralised & decentralised planning.
Ideas on a planned economy crystallised in the 1930s in India when the Nationalists leaders came under the influence of socialist philosophy. In 1934, M. Visvesvaraya, civil engineer & dewan of Mysore, published his Planned Economy for India, a constructive blueprint for the development of India in a ten-year programme. He envisaged a shift of labour from agriculture to industries & doubling of national income in the 10-year programme.
In 1938 the National Planning Committee (NPC) was set up with Jawahar Lal Neheru its Chairman to evolve a national plan for India. But the second world war & resignation of the Congress ministries interrupted the work.
Eight industrialists of Bombay (J.R.D. Tata, G.D. Birla, A.D. Shroff, John Mathai etc.) got together to prepare A Plan of Economic Development for India in 1944, popularly known as Bombay Plan. It was a 15-year plan envisaging doubling the per capita income and trebling the national income during this period.
In August 1944, the British Government of India created the Planning & Development Department. The Department prepared a short-term plan for post-war reconstruction of the country’s economy & a long term plan for economic development. However, the Department was abolished in 1946.
Almost alongside the Bombay Plan came the People’s Plan drafted by M.N.Roy on behalf of the Indian Federation of Labour. The plan was inspired by Marxist socialism & aimed at providing basic necessities of life to the people.
A Gandhian Plan was put forward by Sriman Narayan Aggarwal in 1944. It was a modest plan aimed at developing a decentralised self-sufficient village-based society.
Jaiprakash Narayan drew inspiration from the Gandhian community work as well as the Sarvodaya idea of Vinoba Bhave to drew up the Sarvodaya Plan in 1950 after the government of independent India had decided upon the policy of five-year plan. The Sarvodaya Plan laid emphasis on agriculture & agro industries on the small cottage industries level. It aimed at self-reliance & freedom from foreign aid & technology & laid emphasis on land reforms & decentralised participatory planning.
Immediately after the independence of India, the All India Congress Committee(AICC) appointed the Economic Programme Committee (EPC) with Jawahar Lal Neheru as the Chairman. The EPC recommended in 1948 the creation of a permanent planning commission.
ROLE OF ECONOMIC PLANNING:
Planning is very much needed even in the open market economy. Although the market forces & price mechanism would take care of growth & production in general, planning is required to focus on the developmental aspect. Plans need to be concentrated on infrastructure & social sectors & those areas in which private initiatives is not easily forth coming.
A role for planning is also seen in expanding the market, making it work competitively & providing access to both big & small economic agents. This is done through a legislative framework, smoother functioning of stock exchanges & financial intermediaries, removing obstacles in movement of goods & consumer protection. And where the market takes a short-term view, such as in the protection of environment, state intervention is unavoidable.
In developing like ours, in which there is a major problem of poverty, unemployment & rapidly growing population, a lot of people will be left behind in the race of economic prosperity if the state is not involved.
Planning provides a direction to the country – it supervises the nation’s progress towards its goal & objectives.
OBJECTIVES OF PLANNING:
Indian planning derives its objectives & goals from the Preamble & Directive Principles of State Policy enshrined in the Constitution of India. Based on this Planning Commission set out the following objectives of planning:
- To increase production to the maximum possible extent so as to achieve higher level of national & per capita income
- To achieve full employment
- To reduce inequalities of income & wealth
- To set up a socialist society based on equality & justice & absence of exploitations
Besides, self-reliance too has been an objective in the long term. Within this framework, each Five-year plan evolves its own short-term objectives taking into account fresh possibilities & existing constraints.
REVIEW OF PLANNING:
First Five-Year Plan (1951-56):
- The highest priority was given to agriculture to overcome food crisis & to curb inflation.
- At that time India was faced with the problem of influx of refugees, severe food shortage & mounting inflation.
- The success achieved in many field during this plan was remarkable & in many cases targets were achieved.
- The first five plan was based on Harod-Domer Model.
- During this period National Development Council constituted (1952).
- First Finance Commission was set up (1952-57)
- National Thermal Power Corporation Limited was established (1955).
- Initiated the first Estate Duty (1953) in India
- All India Rural Credit Survey Committee constituted
- Industrial Credit & Investment Corporation Limited was set up
Second Five-Year Plan (1956-61):
- the second five-year plan was based on Mahalanobis Model.
- Professor Mahalanobis gave the highest priority to strengthening the industrial base of the economy.
- In this light the 1948 industrial policy resolution was revised & the new resolution of 1956 was adopted.
- Emphasis was on extension of the public sector & establishment of the socialistic pattern of society.
- Establishment of three still mills in the public sector at Durgapur (West Bengal), Rourkela (Orissa) & Bhilai (Madhya Pradesh).
- Production of new items like – tractors, newsprints, motorcycles, scooters, sulpha & anti-biotic drugs.
Third Five-Year Plan (1961-66):
- The emphasis in the third plan was on long-term development.
- The third plan was a failure in many ways.
- The cause of failure included the war with China & the conflict with Pakistan, poor monsoon in 1964-65 & 1965-66 & lack of coordination between Central and State governments.
- There was a fall in agricultural production.
- Considerable rise in prices of food products and consumer articles.
- Industrial productions fell below expectations.
- The plan target was met only in transport, communications & social service sectors.
- Food Corporation of India started functioning from 1965
- Agricultural Price Commission had been established in 1965
Annual Plan or Plan Holiday (1966-69):
- Instead of full-fledged five-year plan, three annual plans were formulated.
- For Indo-Pak conflict (1965), two successive years of severe drought, devaluation of currency, high level of inflation, the government decided to go for an annual plan.
- The main objective of the annual plan was to remove strains in the economy arising from the sharp fall in agricultural production & to curb the inflationary pressure.
- The Annual Plans helped in uplifting the economy.
- Agricultural production increased.
- Recession was controlled
Fourth Five-Year Plan (1969-74):
- The plan was based on Gadgil strategy with special focus to the ideas of growth with stability & progress towards self-reliance.
- Preference was given to quick-yielding projects as well as to light industry at the expense of heavy industry.
- Both agricultural & industrial production increased.
- This plan witnessed tendency of centralisation.
Fifth five-year plan (1974-79):
- During this plan highest priority was given to the removal of poverty & attainment of self-reliance.
- The commitment to poverty alleviation led to the formulation of the Twenty Point Programme in 1975.
- Inflation was high.
- The Reserve Bank of India was given the job of taking measures to stabilise the price situation.
- The plan period saw a change of government at the Centre with the first non-congress government taking over in 1977.
- The Janata government terminated the fifth plan in 1977-78.
- They launched the sixth plan for the period 1978-83, calling it a Rolling Plan.
- In 1980, the Congress came back to power.
- Launched Sixth plan for 1980-85.
Sixth five-year plan (1980-85):
- This plan was launched with the slogan of “Garibi Hatao”.
- A restructured twenty-point programme was launched in 1986.
- Several programmes were launched to address specific areas socio-economic development. These were – 1. National Rural Employment Programme. 2.Development of Women & Children In Rural Areas. 3.Rural Landless Employment Guarantee Programme.4. Self-Employment to the Educated Unemployed Youth. 5.Integrated Rural Development Programme.
- The sixth plan saw a fair amount of success in various sectors.
- However, the socio-economic programmes suffered from shortcomings in implementation.
Seventh five-year plan (1985-90):
- The seventh plan was set with a 15-year perspective.
- The aim was to create the conditions necessary foe self-sustaining growth & to provide basic minimum needs for all.
- The objectives included decentralisation of planning & full public participation in development.
- The maximum possible generation of productive employment.
- Removal of poverty & reduction in income disparities.
- Self-sufficiency in food.
- Integration of science & technology into the main stream of development planning.
- Emphasis was on the implementation of land reforms.
- The seventh plan is estimated to have achieved a growth rate of 6% per annum as against the target of 5% envisaged in the plan.
- The performance of agriculture was not very satisfactory.
- The balance of payment deteriorated further.
- Several developmental programmes were taken up. These were – 1. Jawahar Rozgar Yojana 2. Neheru Rozgar Yojana 3. Self-Employment Programme for Urban Poor 4. Operation Blackboard etc.
Eighth five-year plan (1992-97):
- The eighth plan whose term would have been 1990-95 could not take off due to the fast-changing political situation at the centre.
- The new government which assumed power in at the centre in June,1991 decided to commence the eighth plan for the period 1992-97
- The fiscals 1990-91 & 1991-92 should be treated as two separate Annual Plans.
- Eighth plan was launched in a typically new economic environment.
- The economic reforms were already started in July,1991 with the initiation of the structural adjustment & macro-stabilisation policies necessitated by the worsening balance of payments, higher fiscal deficit & unsustainable rate of inflation.
- This was the first plan which went for an introspection of the macro-economic policies which the country had been pursuing for many decades.
- Eighth plan was a plan for managing the transition from a centrally planned economy to market-led economy through indicative planning.
- The objectives included – generation of adequate employment, universalisation of elementary education & complete eradication of illiteracy among the people of the age group of 15 to 35 years. Provision of safe drinking water & primary health care facilities. Growth & diversification of agriculture to achieve self-sufficiency in food & generation of surplus for exports & strengthening the infrastructure.
- The average rate of growth of the economy rose to 6.8% during this plan period.
- The year 1996-97 emerged as one of the best years in respect of food grain production.
- The industrial sector suffered a setback in 1991-92 & the following years saw stagnation in the industrial production.
Ninth five-year plan (1997-2002):
- The ninth plan aimed at growth with social justice & equity.
- Priority was given to agriculture & rural development with a view to generating adequate productive employment & eradication of poverty.
- Emphasis was laid on seven basic minimum facilities.
- These included provisions of safe drinking water, availability of primary health service facilities, universalisation of primary education, public housing assistance to shelter less poor families, nutritional support to children, connectivity of all villages & habitations.
- The rate of growth of GDP during this period dropped to 55.3% against the target of 6.5%.
- The rate of growth declined in agriculture particularly.
- Service sector witnessed marginal increase in the growth rate.
- The emphasis shifted to decentralised planning at the district level based on assessment of community needs.
- The ninth plan made significant changes in the conceptual strategy of planning for women.
- In the matter of anti-poverty programme, while the Integrated Rural Development Programme (IRDP) concentrated on individual beneficiaries, the Swarna Jayanti Gram Swarozgar Yojana laid greater emphasis on social mobilisation & group formation.
- Schemes started during this plan period were – Indira Awas Yojana (1999-2000), Antodaya Anna Yojana (2000), Sarva Shiksha Aviyan (2000)
Tenth five-year plan (2002-07):
- Some important steps taken during this period were – Doubling of per capita income in 10 years 2. For the first time the plan set monitorable targets for 11 indicators of development for the centre as well as for the state 3. “Governance” was considered a factor of development. 4.State’s role in planning to be increased with the greater involvement of PRIs. 5.Policy & institutional reforms in each sector i.e., reforms in the PSUs, legal reforms, administrative reforms, labour reforms etc. agriculture sector declared as prime moving source of the economy.
- Increased emphasis on the social sector i.e., education, health etc.
- Tenth plan emphasised on the disaster mitigation component.
- The tenth plan recorded an average growth of 7.7%
- Savings & investment rate increased significantly.
- The industrial sector responded well to economic reforms & showed that it was capable of competing in the global economy.
- Gender equality continued to be an elusive goal.
- During this plan some initiatives were taken to improve the quality of governance. These included – 1. enforcement of Right to Information Act, 2005. 2.A new Value Added Tax regime was introduced. 3.Initiatives on participatory governance were introduced under NREGA, NRHM etc. 4.A National Disaster Management Authority was established. 5.The Second Administrative Reforms Commission was constituted to prepare a detailed blueprint for revamping the public administration system. 6. An e-governance plan for 27 major areas was adopted.
Eleventh five-year plan (2007-12):
- The central theme of eleven five-year plan was “Towards Faster & More Inclusive Growth”.
- The eleventh plan vision also saw the need for PRIs to be empowered through devolution of functions, finances& functionaries.
- 27 monitorable targets were identified at the national level.
- GDP growth in the eleventh plan was nearly 8%.
- Agricultural GDP growth accelerated to an average rate of 3.7%.
- The percentage of population below poverty line declined.
- The rate of unemployment declined from 8.2% in 2004-05 to 6.6% in 2009-10.
- Institutional deliveries increased.
- Drop-out rate (class I-VIII) showed improvement.
- Net enrolment rate at primary level rose to a near universal 98.3% in 2009-10.
Twelfth five-year plan (2012-2017):
- The National Development Council approved the twelfth plan document in December, 2012.
- Its motto was – ‘Faster, sustainable and more inclusive growth’.
- This plan fully recognised that the objective of development was broad-based improvement in the economic & social condition of India.
- The plan document considered rapid growth of GDP to be an essential requirement for achieving this objective.
- The twelfth plan sought to reduce poverty by 10% point in the five-year period.
- Generation of 50 million of jobs in the non-farm sector.
- Aimed to raise farm sector growth rate 4%.
- Achieving of growth rate of 10% in the manufacturing sector.
- The plan aimed at increasing investment in infrastructure to 9% of the GDP by the end of the plan period.
- Increasing green cover by one million hectares every year.
- 30000 MW of renewable energy generation capacity in the plan period.
- Reducing infant mortality rate to 25 & maternal mortality rate to 1 per 1000 live births.
- Reducing total fertility rate to 2.1 by the end of this plan
- Reducing under nutrition among children aged 0-3 years to half of the NFHS-3 levels by the end of the plan.
- Gender & social gap in school enrolment to be eliminated by the end of the plan period.
- Providing banking services to 90% households by the end of this plan.
- While striving for faster &more inclusive growth, the twelfth plan also paid attention to the problem of sustainability.
CONCLUSION: An internal evaluation in Government revealed that Planning Commission was witnessing policy fatigue necessitating structural changes in central planning process. The Prime Minister announced the closure of the 65-years old Planning Commission on August 15, 2014. The National Institution for Transforming India (NITI) Aayog came in the place of Planning Commission as one of Indian democracy’s youngest institutions in 2015. It has been entrusted with the mandate of re-imagining the development agenda by dismantling old-style central planning. It was mandated to foster cooperative federalism, evolve a national consensus on developmental goals.