Economy - Five Year Plans

Economy - Five Year Plans

Revision Test + Five Year Plan

• The goals of the five-year plans are growth, modernization, self-reliance, and equity.
• • Growth: It refers to an increase in the country’s capacity to produce the output of goods and services within the country. A good indicator of economic growth, in the language of economics, is a steady increase in the Gross Domestic Product (GDP).
  • Modernization: To increase the production of goods and services the producers have to adopt new technology.
  • Self-reliance: A nation can promote economic growth and modernization by using its resources or by using resources imported from other nations. The first seven five year plans gave importance to self-reliance which means avoiding imports of those goods which could be produced in India itself.
  • Equity: It is important to ensure that the benefits of economic prosperity reach the poor sections as well instead of being enjoyed only by the rich.

First Five Year Plan (1951–1956)

• The First Five-year Plan was launched in 1951 which mainly focused on the development of the primary sector. The First Five-Year Plan was based on the Harrod–Domar model with few modifications.
• The target growth rate was 2.1% annual gross domestic product (GDP) growth; the achieved growth rate was 3.6% the net domestic product went up by 15%.
• At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as major technical institutions. The University Grants Commission (UGC) was set up to take care of funding and take measures to strengthen higher education in the country.

Second Five Year Plan (1956–1961)

• The Second Plan focused on the development of the public sector and "rapid Industrialisation". The plan followed the Mahalanobis model, an economic development model developed by the Indian statistician Prasanta Chandra Mahalanobis in 1953.
• The plan attempted to determine the optimal allocation of investment between productive sectors to maximize long-run economic growth.
• It used the prevalent state-of-the-art techniques of operations research and optimization as well as the novel applications of statistical models developed at the Indian Statistical Institute. The plan assumed a closed economy in which the main trading activity would be centered on importing capital goods.
• Hydroelectric power projects and five steel plants at Bhilai, Durgapur, and Rourkela were established with the help of Russia, Britain (the U.K) and West Germany respectively. Coal production was increased. More railway lines were added in the northeast.
• The Tata Institute of Fundamental Research and Atomic Energy Commission of India was established as research institutes. In 1957, a talent search and scholarship program was begun to find talented young students to train for work in nuclear power.
• The second plan was a period of rising prices. The country also faced a foreign exchange crisis. The rapid growth in population slowed down the growth in the per capita income.
• The target growth rate was 4.5% and the actual growth rate was 4.27%.

Third Five-Year Plan (1961–1966)

• The Third Five-year Plan stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the defense industry and the Indian Army. In 1965–1966, India fought a war with Pakistan. There was also a severe drought in 1965. The war led to inflation and the priority was shifted to price stabilization. The construction of dams continued. Many cement and fertilizer plants were also built. Punjab began producing an abundance of wheat.
• Many primary schools were started in rural areas. To bring democracy to the grass-root level, Panchayat elections were started and the states were given more development responsibilities.
• State electricity boards and state secondary education boards were formed. States were made responsible for secondary and higher education. State road transportation corporations were formed and local road building became a state responsibility.
• The target growth rate was 5.6%, but the actual growth rate was 2.4%.

Plan Holidays (1966–1969)

• Due to the miserable failure of the Third Plan, the government was forced to declare "plan holidays" (from 1966–67, 1967–68, and 1968–69). Three annual plans were drawn during this intervening period. During 1966–67 there was again the problem of drought.
• Equal priority was given to agriculture, its allied activities, and the industrial sector.
• The government of India declared "Devaluation of Rupee" to increase the exports of the country. The main reasons for plan holidays were the war, lack of resources and an increase in inflation.

Fourth Plan (1969–1974)

• The Indira Gandhi government nationalized 14 major Indian banks and the Green Revolution in India advanced agriculture.
• Besides, the situation in East Pakistan (now Bangladesh) was becoming dire as the Indo-Pakistan War of 1971 and Bangladesh Liberation War took funds earmarked for industrial development.
• India also performed the Smiling Buddha underground nuclear test (Pokhran-1) in Rajasthan on May 18, 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of Bengal. The fleet had been deployed to warn India against attacking West Pakistan and extending the war.
• The target growth rate was 5.6%, but the actual growth rate was 3.3%.

Fifth Plan (1974–1979)

• The Fifth Five-Year Plan laid stress on employment, poverty alleviation (Garibi Hatao), and justice. The plan also focused on self-reliance in agricultural production and defense. In 1978 the newly elected Morarji Desai government rejected the plan. The Electricity Supply Act was amended in 1975, which enabled the central government to enter into power generation and transmission.
• The Indian national highway system was introduced and many roads were widened to accommodate the increasing traffic. Tourism also expanded. The twenty-point program was launched in 1975. It was followed from 1974 to 1979.
• The Minimum Needs Programme (MNP) was introduced in the first year of the Fifth Five-Year Plan (1974–78). The objective of the program is to provide certain basic minimum needs and thereby improve the living standards of the people. It is prepared and launched by D.P.Dhar.
• The target growth rate was 4.4% and the actual growth rate was 4.8%.

Rolling Plan (1978–1980)

• The Rolling Plan consisted of three kinds of plans that were proposed.
  • The First Plan was for the present year which comprised the annual budget and the Second was a plan for a fixed number of years, which may be 3, 4 or 5 years.
  • The Second Plan kept changing as per the requirements of the Indian economy.
  • The Third Plan was a perspective plan for long terms i.e. for 10, 15 or 20 years. Hence there was no fixation of dates for the commencement and termination of the plan in the rolling plans.
• The main advantage of the rolling plans was that they were flexible and were able to overcome the rigidity of fixed Five-Year Plans by mending targets, the object of the exercise, projections, and allocations as per the changing conditions in the country's economy.
• The main disadvantage of this plan was that if the targets were revised each year, it became difficult to achieve the targets laid down in the five years and it turned out to be a complex plan. Also, the frequent revisions resulted in a lack of stability in the economy.

Sixth Plan (1980–1985)

• The Sixth Five-Year Plan marked the beginning of economic liberalization. Price controls were eliminated and ration shops were closed. This led to an increase in food prices and an increase in the cost of living. This was the end of Nehruvian socialism.
• The National Bank for Agriculture and Rural Development was established for the development of rural areas on 12 July 1982 by recommendation of the Shivaraman Committee.
• Family planning was also expanded to prevent overpopulation. In contrast to China's strict and binding one-child policy, Indian policy did not rely on the threat of force. More prosperous areas of India adopted family planning more rapidly than less prosperous areas, which continued to have a high birth rate.
• Military Five-Year Plans became coterminous with Planning Commission's plans from this plan onwards.
• The Sixth Five-Year Plan was a great success to the Indian economy. The target growth rate was 5.2% and the actual growth rate was 5.7%.

Seventh Plan (1985–1990)

• The plan laid stress on improving the productivity level of industries by upgrading of technology.
• The main objectives of the Seventh Five-Year Plan were to establish growth in areas of increasing economic productivity, production of food grains, and generating employment through "Social Justice".
• The Seventh Plan had strived towards socialism and energy production at large. The thrust areas of the Seventh Five-Year Plan were: social justice, removal of oppression of the weak, using modern technology, agricultural development, anti-poverty programs, a full supply of food, clothing, and shelter, increasing the productivity of small- and large-scale farmers, and making India an independent economy.
• The target growth rate was 5.0% and the actual growth rate was 6.01% and the growth rate of per capita income was 3.7%.

Annual Plans (1990–1992)

• The Eighth Plan could not take off in 1990 due to the fast-changing economic situation at the center and the years 1990–91 and 1991–92 were treated as Annual Plans.

Eighth Plan (1992–1997)

• In 1991, India faced a crisis in foreign exchange (forex) reserves, left with reserves of only about US$1 billion. Thus, under pressure, the country took the risk of reforming the socialist economy.
• At that time Dr. Manmohan Singh (later prime minister of India) launched India's free-market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning of liberalization, privatization and globalization (LPG) in India.
• Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy was undertaken to correct the burgeoning deficit and foreign debt. Meanwhile, India became a member of the World Trade Organization on 1 January 1995. The major objectives included controlling population growth, poverty reduction, employment generation, strengthening the infrastructure, institutional building, tourism management, human resource development, involvement of Panchayati raj, Nagar Palikas, NGOs, decentralization and people's participation.
• The energy was given priority with 26.6% of the outlay.
• The target growth rate was 5.6% and the actual growth rate was 6.8%.

Ninth Plan (1997–2002)

Objectives

• The main objective of the Ninth Five-Year Plan was to correct historical inequalities and increase the economic growth in the country with “Growth With Social Justice & Equality”. Other aspects which constituted the Ninth Five-Year Plan were:
  • Population control.
  • Generating employment by giving priority to agriculture and rural development.
  • Reduction of poverty.
  • Ensuring proper availability of food and water for the poor.
  • Availability of primary health care facilities and other necessities.
  • Primary education to all children in the country.
  • Empowering the socially disadvantaged classes like Scheduled castes, Scheduled tribes, and other backward classes.
  • Developing self-reliance in terms of agriculture.
  • Acceleration in the growth rate of the economy with the help of stable prices.

Tenth Plan (2002–2007)

• The main objectives of the Tenth Five-Year Plan:
  • Attain 8% GDP growth per year.
  • Reduction of poverty rate by 5% by 2007.
  • Providing gainful and high-quality employment at least to the addition to the labor force.
  • Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.
  • The 20-point program was introduced.
  • Target growth: 8.1% – growth achieved: 7.7%.
  • The Tenth Plan was expected to follow a regional approach rather than a sectoral approach to bring down regional inequalities.

Eleventh Plan (2007–2012)

• Eleventh Plan was aimed “Towards Faster & More Inclusive Growth”
• It aimed to increase the enrolment in higher education of 18–23 years of age group by 2011–12.
• It focused on distance education, the convergence of formal, non-formal, distant and IT education institutions.
• Rapid and inclusive growth (poverty reduction).
• Emphasis on the social sector and delivery of service therein.
• Empowerment through education and skill development.
• Reduction of gender inequality.
• Environmental sustainability.
• To increase the growth rate in agriculture, industry, and services to 4%, 10%, and 9% respectively.
• Reduce the total fertility rate to 2.1.
• Provide clean drinking water for all by 2009.
• Increase agriculture growth to 4%.

Twelfth Plan (2012–2017)

• The objectives of the Twelfth Five-Year Plan were:
  • To create 50 million new work opportunities in the non-farm sector.
  • To remove gender and social gap in school enrolment.
  • To enhance access to higher education.
  • To reduce malnutrition among children aged 0–3 years.
  • To provide electricity to all villages.
  • To ensure that 50% of the rural population has access to proper drinking water.
  • To increase green cover by 1 million hectares every year.
  • To provide access to banking services to 90% of households.
• The plan aims towards the betterment of the infrastructural projects of the nation avoiding all types of bottlenecks.
• The document presented by the planning commission is aimed to attract private investments of up to US$1 trillion in the infrastructural growth in the 12th five-year plan, which will also ensure a reduction in the subsidy burden of the government to 1.5 percent from 2 percent of the GDP (gross domestic product). The UID (Unique Identification Number) will act as a platform for cash transfer of the subsidies in the plan.