Professional Documents
Culture Documents
Objectives
• To understand the strategies adopted in various plans keeping in view the short-term
Structure
10.1 Introduction
10.5 Summary
During the freedom struggle, the Indian National Congress had made a commitment that
after the attainment of independence, the country would work on a planned model of
development. With this end in view, the Government of India set up the Planning
Commission in 1950 to assess the human and material resources of the country so as to
formulate a plan for their balanced and effective utilisation. The main purpose of
planning was to initiate the process of Industrialisation and development which had
remained inhibited due to an alien government. The national government was committed
to raising the level of living of the Indian people by pursuing the task of development.
This task cold not be completed during the short period of five years: it required
sustained efforts spread over a number of plans. Neither was it possible to achieve all the
objectives in one go. Each five year plan can, therefore, be viewed as a milestone
During the freedom struggle, there was a commitment made by our national leaders that
soon after the attainment of independence, they would embark on a programme for the
The Planning Commission, therefore, laid down the long-term goals of planning. They
were :
(iv) To establish a socialist based on equality and socialist justice and absence of
exploitation.
The First Five Year Plan released in 1952 stated the long-term economic goals of
social justice which constitute the accepted objectives of planning under present day
conditions are not really so many different ideas but a series of related aims which the
country must work for . None of these objectives can be pursued to the exclusion of
others, a plan of development must place balanced emphasis on all of them:. Planning
For the attainment of these objectives, it was necessary to specify the socio-economic
framework in which the Indian economy was to function. One choice was to move to a
complete transformation to socialism in which all the means of production will be owned
by the state (Society model). This required total natioanlisation of all the spheres of
economic and social life. The other choice was to follow the capitalist mode of
production providing total freedom to private enterprise to undertake the task of national
development. The nation, under the leadership of Prime Minister Jawaharlal Nehru,
rejected the Soviet Model because it led to the emergence of totalitarian state which
stifled democratic freedoms. Since Indian society did not favour the idea of dictatorship
At the same time private property symbolize which is a basic tenet of the capitalist mode
of production helped exploitation of the peasant and workers by the capitalist classes in
their unbridled effort towards profit maximization. The Directive Principles of the Indian
livelihood;
b) that the ownership and control of the resources of the community are so
c) that the operation of the economic system does not result in the concentration
The Government of India, therefore, also rejected the free capitalist mode of
development. It opted for the framework of mixed economy in India in which private
enterprise and public enterprise were to co exit. It could be argued that in every
economy, capitalist or socialist public and private sectors do exit side by side. But this
was a very narrow view of the co-existence of the public and private sectors. The
distinguishing feature of the Indian mixed economy model was that it emphasised that the
private enterprise should reconcile the element of self-interest with social interest and in
case, it fails to do so, the government would be left with no option but to take over the
control of such sectors of the economy. This implied that in such areas where either the
private enterprise fails to subordinate its self-interest, the government would deliberately
extend the area o the public sector. The state, therefore, decided to limit ownership in
areas wherein it was felt that such ownership came in conflict with social ownership.
In agriculture, for instance, the zamindari system was abolished and surplus lands
acquired by the state were transferred to farmers or landless labourers. The legislation
also provided a ceiling on holdings. The whole purpose was that land being the principal
source of livelihood in the rural areas its ownership be more evenly distributed. The state
did not favour “collectivesiation” in the form of big farms, but worked on the principle of
To direct investment in the desired lines of production, the state decided to control the
“commanding heights” of the economy, viz., banking and insurance. Left to the private
sector, investment would be driven by market forces based on profit motive. But areas
of profit maximization may not be areas of maximizing social welfare. For instance,
private sector was not willing to invest in economic infrastructure such as multipurpose
may not provide adequate investment in education and health facilities so that access to
education and health facilities becomes available to the poor and deprived sections of the
society. The state, therefore, decided to undertake the development of the economic
also south to provide social infrastructure in the form of education and health so that the
poor are enabled to acquire these facilities either free or at a very low and affordable cost.
The network of schools colleges, technical training centres, primary health centres,
Moreover, during the British period, defence and heavy and basic industries were not
allowed to be developed. But to have an independent industrial base for the Indian
economy so as to make it self-reliant, it was considered necessary that the public sector
should undertake investment in defence, heavy and basic industries. Since these
industries required lump sum investment and had a long gestation period, public
enterprise which sought investment in areas of short gestation and maximum profit was
unwilling to undertake investment in these areas. The state, therefore, planning the
The mixed economy framework in India was particularly marked with the deliberate
development of the public sector in (a) Defence, heavy and basic industries, (b) the
development of economic and social infrastructure and (c) in controlling the commanding
The deliberate enlargement of the public sector was symbolized by the phrase `the
development of socialist pattern of society’ in the early period of planning, which was
later replaced by the phrase `democratic socialism’. The basic philosophy of democratic
and along with this a programme of action towards reducing economic and social
disparities, thus ensuring a national minimum level of living for all. In other words,
growth with social justice within the framework of a democratic society were the tasks to
Dr. M. S. Minhas rightly states : “Securing rapid economic and growth and expansion of
been among the objectives of all plans.” (Minhas B. S., Planning and the Poor, P. 8).
As indicated earlier, the planning goals were long-term objectives. It is not possible to
achieve them the mobilization efforts of a single plan. Rather, planning required
continuous efforts for several plans to achieve these goals. Moreover, during the process
of implementation, some powerful political factors may require change of strategy and
thus, new priorities may require change in the Prioritisation of the objectives.
Since all the objectives cannot be achieved in one go, every plan has to specify the
strategy and thus indicate the priority of the objectives. In this way, as the planning
process gathers momentums, in every subsequent plan a recording of the priorities may
become necessary. It would be of interest to study the strategies adopted in the various
plans.
The First Five Year Plan (1951-56) was faced with three major problems : (i) Influx of
refugees from Pakistan and their rehabilitation; (ii) Severe shortage of food as a result of
the partition of the country and a major part of irrigated areas going over to Pakistan; and
(iii) mounting inflation due to the prevalence of shortages in economy as a result of
disequilibrium caused due to the Second World War and subsequently the partition of the
country.
The strategy of the First Five Year Plan was to achieve food self-sufficiency in the
shortest possible time and to control inflation. The Plan, therefore, aide at rapid
extension of irrigation so that the output of food grains and agricultural raw materials like
cotton and jute improves. This strategy helped to boost agricultural production,
especially of food grains and, thereby, control inflation. The First Plan, in its strategy,
accorded the highest priority to agriculture. The First Plan rightly mentioned : “We are
convinced that without substantial increase in the production of food and raw materials
development.”
The major aim of the strategy of the First Plan was to rehabilitate the economy ravaged
by war and partition. The plan did help to remove shortages that existed in the economy.
By the end of the Plan, food grain imports became negligible. The general price level
declined by 13 per cent, food prices also fell. Consequently the economy was stablised
and in this atmosphere of confidence generated by success of the First Plan, it was
For the Second Plan it was felt that economy had reached a stage at which agriculture
could be assigned a low priority and a forward thrust made in the development of heavy
and basic industries for a more rapid advance in future. The basic element of the
strategy of the Second Plan was to give a “big push” to the economy to build an industrial
base in terms of rapid expansion of iron and steel, non-ferrous metals, coal, cement,
heavy chemicals and other industries of basic importance. The Second Plan clearly stated
: “Investment in basic industries creates demands for consumer goods, but it does not
enlarge the supply of consumer goods in the short run; nor does it directly absorb any
The Second Plan, while emplacing a big push for heavy industry, was conscious of the
fact that it would cause shortages of consumer goods. It was therefore, felt that if was
imperative to simultaneously, develop cottage and small scale industries which are labour
intensive so that on the one hand, employment could be enlarged and on the other, the
in food grains, jut, cotton and oil seeds. Prices of food grains rose all over the country.
While three public sector steel plants were erected, their production was much behind
schedule. This was the case with many industries, too. Shortages of power were
slow.
10.3.3 Strategy during the Third Five Year Plan (1961-62 to 1956-66)
The working of the Second Plan indicated the had reality that without a sharp increase in
agricultural production, it was not possible to push for a faster rate of economic
development to emphasize agriculture on the one hand and heavy industry on the other.
The strategy of the Third Plan therefore emphasised that agriculture should be expanded
as far as possible and rural economy may be diversified so as to reduce the pressure of
population on agriculture. While giving top priority to agriculture, the Third Plan also
laid equal stress on the development of heavy and basic industries such as steel, fuel and
power, machine building and chemicals vitally needed for rapid economic development.
The Third Plan strategy set as its goal the establishment of a self-reliant and self
generating economy.
Three major factors seriously jolted the implementation of the Third Plan. They were : (i)
The Chinese invasion of India in 11962, (ii) The armed conflict with Pakistan in 1965,
and (iii) Exceptionally bad monsoons in 1965-66 leading to serious draught which
Implementation of the Third Plan was seriously jeopardized by the abnormal factors
which interrupted the smooth working of the Plan. Serious shortfalls in targets of
especially cotton textiles. Shortages of consumer goods as also a fall in the production of
food grains led to a sharp increase in prices. Price index of food articles rose by 48 per
cent during the Third Plan and of industrial raw material and manufactures by 33 percent
and 22 percent respectively. Since the rate of growth of the economy suffered a setback
and as against 5 per cent growth of national income per annum, actual achievement was
barely 2.5 per cent per annum, there was an increase in unemployment. The backlog of
unemployment which was around 7 million at the end of the Second Plan increased to
The setback to the credibility of planning was so strong that the country shifted to a
“Plan Holiday”. It was only when the economy recovered from the recession which was
witnessed during 1966-67 and thereafter, that the country launched the Fourth Plan.
10.3.4 Strategy during the Fourth Five Year Plan (1969-70 to 1973-74)
The Fourth Plan set before itself two objectives, viz., “Growth with Stability” and
To achieve the objective of growth with stability, efforts were to be made to stablised
prices of foodgrains and the price level in general. For this purpose, the Plan adopted the
application of good quality seeds with adequate doses of fertilisers in areas of assured
To achieve the objective of self-reliance, the financing of the Fourth Plan was to be
managed by a large additional mobilization of internal resources which would not give
rise to inflationary pressures. It was planned that PL480 imports of foodgrains would be
done away with by the year 1971. Besides this, foreign aid net of debt charges and
interest payments was to be reduced to half by the end of the Fourth Plan.
The strategy adopted in the Fourth Plan did not yield the desired results. National income
measured at 1960-61 prices increased by an average by 3.3 per cent per annual and the
increase in per capita income was merely 1.2 per cent per annum. Consequently, the
attainment of a national minimum with this record of performance was wishful thinking.
The Plan failed to bring about 5.5% increase in national income – the target fixed for the
Plan.
Equally disturbing was the situation on the agricultural front. The actual growth rate of
agricultural production was much less as compared to the anticipated growth of 5 per cent
per annum. While evidence of a break-through in wheat crop was available, success of
high yielding varieties in ice was only marginal. In respect of June, cotton fibres as well
Growth rate of industrial production was much les than the targeted growth of 8 percent
per annum. The major factors responsible for this situation were : (i) shortages and
irregular supplies of raw materials, components, (ii) shortage of poor, (ii) transport
Fourth Plan did not achieve the objective of growth with stability because the achieved
growth rate was far short of the target. The wholesale price dines (WPI) rose by 57.3 per
cent during the Plan period (1969-70 to 1973-74) and the WPI for food grains increased
by 47.3 per cent. These developments adversely affected the welfare of the poor section
of the society. However, the performance of the Plan on the self-reliance front was
better. For the entire plan period, exports as a percentage of imports accounted for about
92 per cent. Export growth averaged at the rage of 12.3 per cent per annum as against
10.3.5 Strategy during the Fifth Five Year Plan (1974-75 to 1979-80)
Two major objectives of the Fifth Plan were : “Removal of poverty and attainment of
self-reliance.” For this purpose, the main elements of the strategy were :
drinking water, medical care in rural areas, nutrition, home sites for landless
(iii) Emphasis on agriculture, key and basic industries and industries producing
(iv) An adequate public procurement and distribution system for assured supply of
prices.
At the conceptual level, the strategy of the Fifth Plan was to shift the focus from the
heavy industry model of the Second Plan to wage goods model so that the welfare of
the masses, more especially the poor could be taken care of. This explain its shift of
elementary education, drinking water, medical care, home-sites for the homeless
population.
But a review of the Fifth Plan indicates that the Fifth Plan allocation pattern did not
result in a higher growth rate of wage goods. In fact, the Plan document did not even
review of the Fifth Plan indicates a 3.9 percent increase in national income but the
performance of the Plan in increasing the supply of food grains and other wage goods
has not been commensurate with general price level which rose by 33.5 percent
during 91973-74) to 1977-78) the first four years of the Fifth Plan. The consumer
price index shot by 33.2 percent during the same period. Thus although the Fifth Plan
conceptualized to increase the supply of wage goods so that it could make a serious
dent on poverty and unemployment yet it did not work out in allocation pattern and
the poor did not show an increase. Neither did unemployment decline.
Approach to the Fifth Plan” asserted way back in 1972 : “The elimination of object
poverty will not be attained as a corollary to a certain acceleration in the rate of growth
of the economy alone.” The Approach paper suggested a strategy that was “to launch a
poverty.” Following this approach the Janata’s Sixth Plan (1978-83) adopted the
following strategy :
of mass consumption;
d) raising the income of the lowest class through a revised minimum need
programme.
industries intended to lower the capital-intensity of production and increase the supply of
wage goods needed by the masses. In the conceptual frame, it was akin to the strategy
outlined in the Fifth Plan. The Janata Party Government started the implementation of
the Plan in 1978 but after hardly a year and half of its functioning, fell and was replaced
by the Congress (I) Government which abandoned the Janata Plan and reformulated the
Sixth Plan.
10.3.7 Strategy of the Congress (I) during Sixth Five Year Plan (1980-85)
Congress (I) Sixth Plan outlining its strategy stated : “The strategy adopted for the Sixth
investment, output and exports and to provide through special programmes designed for
the purpose, increased opportunities for employment especially in the rural areas and
unorganized sector and meet the minimum basic needs for the people.” Planning
Commission. The Sixth Five Year Plan (1980-85), p.34. The main emphasis of the
planners was to strengthen the infrastructural base of the economy. The planners were
conscious of the weaknesses of the Nehur-Mahalanobis strategy adopted from the Second
for poverty removal. The Sixth Plan, therefore, mentioned: “The attack on the problem
growth by itself may not, however, suffice, other programmes and policies will need to
The strategy of the Sixth Plan of strengthening infrastructure facilities on one hand and
by special programmes to remove poverty on the other was quite successful during 1980-
85. National income increased on an average by 5.2 per cent during the Sixth Plan and
per capita income rose by about 3.1 per cent per annum. The number of unemployed
which was around 12 million at the beginning of the Plan came down to 9.2 million at the
end of the Plan. The proportion of population below the poverty line declined from 48.3
per cent in 1977-78 to about 37.4 per cent in 1983-84 and further to 35.0 per cent at the
end of the Sixth Plan. The country was moving towards self-reliance by reducing its
dependence of imports in strategic commodities viz., food grains, petroleum products and
fertilisers. Thus the Sixth Plan enabled the country to make faster progress towards the
The development strategy of the Seventh Plan aimed at a direct attach on the problem of
poverty, unemployment and regional imbalances. The Seventh Plan emphasised policies
opportunities and raise productivity. These three objectives were central to the Seventh
Plan. Thus the focus of the Plan was on Food, Work and Productivity.
The progress of the Seventh Plan revealed that the net national product (NNP) grew at the
rate of 5.5 per cent annual, and the per capita NNP at 3.5 per cent per annum. The Indian
economy thus crossed the proverbial barrier of the Hindu rate growth of about 3-3.5 per
Agricultural production grew at an annual average rate of 3.9 per cent and industrial
production a t the rate of 8.6 per cent. Both the targets were fulfilled.
1988-89, current account deficit as a percentage of GDP went up to the high level of 3
percent and in 1989-90, it was 2.4 per cent. This was much higher than the target of 1.6
per cent fixed for the Plan. It was feared that if by suitable policies of import substitution
and import restriction, the balance of payments deficit was not reduced, the country
would be caught in a debt trap. Although Wholesale Price Index rose on an average by
6.6 per cent, the consumer price index rose by 9.4 percent on an average much higher
than WPI. This affected the welfare of the weaker sections of society.
Although modernization and productivity upgrdation are laudable objectives, yet their
technologic did not enlarge employment commensurate with the needs of the economy.
10.3.9 Planning Strategy during the Eighth Five Year Plan (1992-97)
Janata Dal Government which came to power in November 1990 fell after a short span of
less than a year. It was followed by the Chandrasekahr Government which also fell in
1991 after the Congress (I) withdrew its support. In June 191, the government headed by
Shri P. V. Narasimham Rao reconstituted the Planning Commission with Mr. Pranab
Mukherjee as the Deputy Chairman and a new document eighth Five Year plan (1992-97)
The country at the time of the formulation of the Eighth Plan was faced with the problem
of growing fiscal deficit and sudden depletion of foreign exchange reserves which created
a serious balance of payments crisis. Due to the paucity of foreign exchange, imports had
to be drastically cut. As a consequence, growth rate slumped to a low level of 2.5 percent
in 1991-92. The major challenge before the government was to initiate recovery of the
Eighth Plan set before itself the task of correcting major imbalances facing the Indian
(i) Increasing fiscal and budgetary deficits, mounting public debt had to
be restructured.
down from the high level of an average of 2.4 percent reached in the
Seventh Plan.
Besides meeting these challenges, the Eighth Plan targeted to achieve a growth rate of 5.6
per cent on an average and to achieve other goals, viz., improvement in the level of
living, health and education of the people, full employment, elimination of poverty and
Since the process of economic reforms was initiated by the government, the strategy of
sector, the Eighth Plan redefined the role of the public sector to the following areas :
(i) the public sector should make investment only in areas where investment is of
(ii) The public sector will concentrate on meeting social needs of the society like
society.
The private sector supported by market mechanism was assigned a bigger role to build a
culture of high productivity and cost efficiency. The process of planning has to be
indicative and the government through an appropriate mix of policy instruments should
influence the decisions of various economic agencies both in the public sector and
private sectors to achieve desired goals. Outlining its strategy, the Eighth Plan stated :
“Planning and market mechanism should be so detailed that one is complementary to the
planning will be the larger guiding force, keeping the long-term social goals in the
perspective.” Planning Commission, (1992), The Eighth Five Year Plan (1992-97), p. 30.
A review of the progress of the first 4 years of the Eighth Plan reveals that the economy
has now turned the corner and the growth rate of NNP which had slumped to 2.5 percent
by May 1995 were around US $ 17 billion in May 1996. The position as yet is
comfortable. There is no doubt that exports account for about 92 per cent of imports in
But on the front of social justice, the situation is not encouraging. Firstly, consumer price
index for agricultural labourers has shown an annual average rise by 11.6 per cent and
that for industrial workers by 10.3 per cent. This has adversely affected the welfare of
the poor. Secondly, the number of poor which was 298 million in 1990-91 has increased
proportion of the poor which was 35.5 per cent in 1990-91 has gone up to 39.0 per cent in
193-94.
The target of employment growth fixed for the Eighth Plan was 2.6 per cent per annum,
but the achievement is only 2.0 per cent. During the first 4 years of liberalisation, target
of employment has lagged behind by over 9 million. This is due to the capital intensive
Agricultural growth has stagnated despite the availability of seven continuous good
monsoons. Besides, production of food grains grew by only 1.5 per cent per annum
during the first 4 years of the Eighth Plan. Less than one-third of the food grains
provided by the public distribution are available to the poor, the rest are appropriated by
the better – off sections. Multinationals, which have been permitted indiscriminately
even in the consumer goods sector are displacing labour in traditional consumer goods
It may, therefore, be concluded that the record of the Eight Plan may be considered as
satisfactory on the growth front, but the market-oriented strategy has failed the people on
The three major strategies that have been adopted in India since the beginning of the
developed the heavy industry model based on the Soviet experience. This model
popularly known as Nehru-Mahalanobis Model formed the basis of the Second Plan. This
model continued to be the principal strategy of the various Plans with minor
modifications till 1977 when the Janata Party Government conceived the Gandhian
1. The model emphasised the rapid development of heavy industry with the aim
reliant into arms father capital-goods sector. The Second Plant outlining the
“In long run, the rate of Industrialisation and the growth of the national economy would
depend upon the increasing production of coal, electricity, iron and steel, heavy
machinery, heavy chemicals and heavy industries generally – which would increase the
capacity for capital formation. One important aim is to make India independent as
goods from other countries. The heavy industry must, therefore, be expanded with all
possible speed.” Planning Commission, The Second Five Year Plan – The Framework.
The main arguments providing justification for heavy industry model were :
a) The British rule deliberately denied the development of heavy industry and
Colonial System.
agriculture, but also for the development of all other sectors of the economy.
Role of Public and Private Sector Since the private sector was not likely to undertake
investments in heavy industry sector which had a long gestation period, but had low
profitability, the government decided to give this responsibility to the public sector.
The government conceived of the public sector as the engine of growth to carry
facilities. The role of the private sector was complementary to public sector in
expanding the production of consumer goods and such other areas in which public
Role of foreign aid Mahalanobis model admitted the use of foreign aid facilitate the
growth of capital goods and infrastructure sectors, but it emphasised the fact that the
be emphasised so that bulk of imports are paid for by the increase in exports.
Role of Small industries Nehru Mahalanobis model was conscious of the fact that
massive investments, though very essential in the heavy industry sector, would not
goods and generate more employment, investment be made in small industry. The
industry – not the small industries that may be put up. This does not mean that small
industries should be ignored. They are highly important in themselves for production
and for employment.” (Government of India, Problems in the Third Plan – A Critical
Miscellany, p. 51)
achieved without agricultural advance and progress… Everyone knows that unless we
concerned. We cannot import both food and machinery.” Ibid., pp. 35-36.
Evaluation of Nehru-Mahalanobis Strategy
The main achievements of the strategy followed during first six plans, but for the
short period of two yeas rule of the Janata Party (1977-78 to 1979-90) are as under :
• There has been a vast expansion of the capital goods sector via the heavy industry
model. Sixth Draft Plan of the Janata Party Government accepted this
that over this period a stagnant and dependent economy has been modernized and
made more self-reliant” (Planning Commission, Draft Five Year Plan (1978-83),
p.1.)
• There was an expansion of the social infrastructure in the form of health and
• A smart rise in saving and investment rates was witnessed in the country.
1. Although agriculture did progress, but with relatively small allocation for
the one hand and failed to absorb the rapidly growing labour, on the other.
3. The public sector expansion led to the emergence of high cost economy with
government and those the State Government like state electricity boards, roads
transport undertakings and irrigation works etc. incurred losses year after year
and the state exchequer was required to pay these losses out of the general tax
Janata Party Draft Five Year Plan (1978-83) noted a number of weaknesses of the Nehru-
Mahalanobis model : The model failed to provide a national minimum level of living
despite four decades of planning. Nearly 40 per cent of the population lived below the
poverty line. The number of unemployed and under-employed continued to remain high
and increased with every successive plan. Inequalities of income and wealth had grown
between the rural and urban areas. The country failed to overcome shortages of food
Gandhian model of development was emphasised by the Janata Party. The model
emphasised the rapid development of agriculture and small industries. Village and small
industries were emphasised from the point of view of production as well as employment.
the root of the problems of poverty and inequality. There is a strong need to demarcate
areas with high employment potential and investment should be directed in such areas so
that the pattern of investment becomes employment-orated and the economy increases its
model brought out the hard reality that while in India only 39 workers
were employed per 100 acres in 1971, in Japan, South Korea and
Egypt, the number of workers employed per 100 acres ranged between
states of Punjab and Haryana also corroborates the view that these
The main aim of following this path was to enlarge employment, have
(iv) Heavy and basic industries to be developed by the public sector – The
Gandhian model did recognise the need for the development of heavy
and basic industries and assigned this role for the public sector.
production end and not at the level of consumption of fiscal measures. It did emphasize
employment as the principal means of providing national minimum and removal of
poverty.
privatisation and globalisation of the economy. Firstly, areas hitherto reserved fro the
public sector were to be opened to the private sector. Although the government failed to
transfer the ownership of public sector undertakings to the private sector in view of the
strong opposition by the workers and left parities, it did liberate the economy and opened
areas of heavy industry and economic infrastructure to the private sector – both domestic
and foreign.
Secondly, the government abolished licensing in all industries except a small list of 10
Thirdly, it free the MRTP companies from the ceiling on assets. This implied that even
big business, was allowed to invest without any ceiling being prescribed by the
considerations of growth dominates more with the government than those of monopoly
control.
Fourthly, foreign direct investment was facilitated. Automatic approvals for direct
foreign investment upto 51 per cent in high priority areas were granted. Government was
even prepared to consider proposals involving more than 51 per cent equity on a case-
by-case basis.
them greater autonomy. For this the Memorandum of Understanding (MOU) was
devised and PSUs managements and boards were made more professional.
Lastly, to globalise the economy the government followed a policy of reducing import
barriers and also one of encouraging export promotion. Such a course would facilitate
the free flow of foreign capital and technology and thus help to modernise our economy.
Rao-Manmohan Model of development has also been the subject of criticism. The main
(i) The model was by passed agriculture and agro-based industries which are the
(ii) The model has a very narrow focus since it emphasises the corporate sector
(iv) MNCs after entry in various joint venture raise their equity to 51 per cent level
or even more and thus push out the Indian partners. This has led to the Indian
MNCs after entry in various joint ventures raise their equity to 51 per cent level or
even more and thus push out the Indian partner. This has led to the Indian industry
To sum up, Rao-Manmohan model has succeeded on growth by raising GDP growth
rate to more than 6 per cent level, but it has failed on equity, employment and poverty
removal.
The three models of development have been addressed to solving the problems of growth,
Manmohan Model emphasised the role of private sector – Indian and foreign – in the
globalisation.
But in the ultimate analysis, the stage of development of a society has to be measured by
unemployment and (iii) impact of reducing inequalities and providing social justice.
Societies have to harmonies the priorities to achieve growth, employment and equity in
10.5 SUMMARY
(iv) to establish a social society based on equality and social justice and absence of
exploitation.
either the `Command Model’ of the Soviet society or the pure capitalist mode of the
private enterprise. The distinguishing feature of the Indian model was that it deliberately
pushed the expansion of the public sector to build infrastructure and heavy industry and it
subordinated the private sector to reconcile the element of self-interest with social
interest.
The various measures taken in social interest to establish a socialist pattern of society
included :
3. Education and health facilities which were denied to the people were extended
Strategy indicates laying down of priorities within the overall objectives at a print of
time. The strategy changes with progress towards the long-term goals as also depends on
to control inflation. The highest priority was, therefore, given to agriculture and
irrigation.
controlling inflation.
The strategy of the First Plan intended to give a big push to `heavy industry’ and
relatively low priority to agriculture. However, the plan was conscious about increasing
The planners realised that without a sharp increase in agricultural production, it was not
two –legged strategy of development with emphasis on agriculture on the one hand and
heavy industry on the other, was adopted. Third plan gave top priority to agriculture with
eh development of heavy and basic industries. Main aim of the Plan was establishment
The rate of growth of the economy suffered a serious setback, prices rose sharply and
Serious setback to the credibility of planning. Government abandoned five year plans
and a period of `Plan Holiday’ with three annual plans (1966-67 to 1968-69 began.
After recovery of the economy in 1968-69, the Fourth Plan was launched.
To achieve growth with stability seed water fertilizer technology was started to boost
The strategy was : to control inflation, and to reduce dependence on foreign aid.
Fourth Plan did not achieve the objective of growth with stability. Wholesale price index
of food grains rose by 47.3 per cent during the plan. However, performance on the self-
reliance front was better, since exports as a percentage of imports accounted for about 92
Main elements of the strategy : (i) 5.5% average growth rate of GDP, (ii) National
minimum needs programme, (iii) Emphasis on agriculture, key and basic industries
producing goods for mass consumption, (iv) A good public distribution system (PDS) to
supply essential commodities to the poor at reasonable prices, (v) Vigorous export
The Fifth Plan did not success in its objectives. No serious dent could be made on
poverty and unemployment. Supply of wage goods could not be adequately increased.
Janata’s Plan abandoned after the fall of the Janata Government in 1980.
To strengthen infrastructure facilities on the one hand and to remove poverty by special
The Sixth Plan was largely successful. There was a movement towards self-reliance by
Poverty ratio was reduced from 48.3% in 1977-78 to 37.4% in 1983-84. There was an
average rate of growth of GDP by 5.3% and per capital GDP by 3.1% during the plan.
GDP growth rate (average) was 5.5% per annum and GDP per capita by 3-3.5% per
annum.
Agricultural production grew at an annual average rate of 3.9% and industrial production
at 8.6%.
Strategy of the Eighth Plan was judicious use of market mechanism and planning to meet
social goals.
Growth rate of the economy picked up and was around 6.3% in 1994-95.
With these welcome developments, the situation from the point of view of social justice
b) Number of poor and population below the poverty line did not show a marked
decline.
Eighth Plan record may be satisfactory on the growth front, but the market-oriented
goods industries;
Public sector was given responsibility to develop it since private sector was not
willing to invest in heavy industry which required lumpy investment, had a long
of foreign aid, it was essential to increase exports so as to pay for the bulk of the
imports.
it was essential to encourage the production of consumer goods and generate more
advance in industries.
1. Legitimate pride in the development of capital goods sector via heavy industry;
of payments difficulties.
Nearly 40% of the population lived below the poverty line in 1978.
sector.
industries.
51 per cent of equity. Proposal requiring more than 51% equity could
iii) There has been indiscriminate entry of multinationals, thus generating a highly
iv) Multinationals have started the process of swallowing Indian firms by raising
Rao-Manmohan Model has succeeded on growth but failed on equity, employment and
poverty removal.
The three models have been emphasizing different strategies at different stages of
development to solve the problems of growth, employment, removal of poverty and self-
reliance.
Societies have to harmonies the priorities to achieve growth, employment and equity.
Capitalist Model of Development : Refers to the system in which all the means of
production rate under the ownership and management of a class known as capitalists and
who use these means of production with the sole aim of profit maximization.
Command Model : Refers to the Society type of planned development where all
only on the dictates of the centralized supreme authority that the system operates,
Commanding Heights of the Economy : The term was used with reference to control of
`banking and insurance’. Left to the market forces, investment will be directed by
market forces, but in case banking and insurance are nationalized, the control of
Democratic Socials : Economic growth with social justice within the framework of a
democratic society, thus ensuring minimum level of living for all and a programme of
maximum employment, along with a programme of action reducing economic and social
disparities.
Plan Holiday : A term coined to describe the period in which the country abandoned the
formulation of the five year plans and shirted to a system of annual plans. The period
Public Distribution System : Refers to the system of fair price shops to distribute article
of essential consumption to the poor at reasonable prices. The Government takes the
training institutes, primary health centres, hospitals, family planning and welfare centres
etc.
Government of India.
2. Discuss the planning strategy adopted in the Second Plan. Why was it
Development. What are its shortcomings ? How did the model get distorted
agree with the statement that while the model succeeded on growth, it failed
on equity ?