REASONS FOR FAILURE

One should expect the Planning Commission to have underlined shortcoming of the earlier Plans,
to have analysed their underlying causes and to have pronounced on the nature of change that
would be called for in order that these shortcomings were not perpetuated. Instead, one finds the
Commission putting up before the public a Plan which is just a repetition of the earlier ones, with
all kinds of pious promises incorporated.
The figures are altered in absolute terms, but the growth rate envisaged remains about the same as
in the previous Plans - 5.5 per cent cumulative. I would not for a moment suggest that the
aggregate investment contemplated, which would amount to just about 15-16 per cent of the
national income, would be an impossibility, provided a 5.5 per cent cumulative growth rate was
realized.
Yet, I would ask myself-what has happened to our economy and what new things have been
prescribed in our "Draft Outline" which would make the situation so drastically different during
the coming five years from what it has been in the past? Let us not forget that the per capita
income, as estimated by the Planning Commission, is just the same today as it was five years back.
From this point of view, we are indeed starting from exactly the same position as we were in when
the Commission formulated the Third Five Year Plan.
What institutional changes are contemplated which would make mobilization of finance easier
now than it was before, and what efficiency factor is dropped in, which would make our capital
co-efficient in industry as well as in agriculture significantly higher in future than it has been till
now? One would expect the Planning Commission to answer these questions. The Draft Outline of
the Fourth Plan does nothing of the sort.
The concentration of efforts or resources on a few selected areas rather than covering wider
areas was the major critique of that plan. Besides, instability of the government to provide
sufficient quantity of inputs necessary for expansion and establishing an institutional
infrastructure, no specific output targets etc were some of the problems encountered, others
were poor administration and poor project preparation.
The Indira Gandhi government's first plan was the fourth five year plan (1969-1974)
developed in response to drought, devaluation, and an inflationary recession. The country
was struggling with an exploding population, rising unemployment, poverty, and a stagnant
economy. In addition, as the Indo-Pakistani War of 1971 and the Bangladesh Liberation War
unfolded, the situation in East Pakistan (now independent Bangladesh) became increasingly
severe. Industrial development funds have to be diverted to the war effort. As a result, this
plan period was no better than the previous three-year plan.
INDO-PAK WAR AND BANGLADESH LIBERATION WAR
The scenario in East Pakistan (now Bangladesh) became dire as the Indo-Pakistani War of
1971 and Bangladesh Liberation War took place. Funds earmarked for the economic
improvement needed to be diverted for the struggle fare effort.

Although East Pakistan had a larger population, West Pakistan dominated the divided country
politically and received more money from the common budget.
 Spending on West Spending on East
Amount spent on East
Year Pakistan (in millions Pakistan (in millions of
as percentage of West
of Pakistani rupees) Pakistani rupees)
1950–55 11,290 5,240 46.4
1955–60 16,550 5,240 31.7
1960–65 33,550 14,040 41.8
1965–70 51,950 21,410 41.2
Total 113,340 45,930 40.5
Source: Reports of the Advisory Panels for the Fourth Five Year Plan 1970–75, Vol. I,
published by the planning commission of Pakistan.

East Pakistan was already economically disadvantaged at the time of Pakistan's creation yet
this economic disparity only increased under Pakistani rule. Factors included not only the
deliberate state discrimination in developmental policies but also the fact that the presence of
the country's capital and more immigrant businessmen in the Western wing directed greater
government allocations there. Due to low numbers of native businessmen in East Pakistan,
substantial labour unrest and a tense political environment, there were also much lower
foreign investments in the eastern wing. The Pakistani state's economic outlook was geared
towards urban industry, which was not compatible with East Pakistan's mainly agrarian
economy.

Bengalis were under-represented in the Pakistan military. Officers of Bengali origin in the
different wings of the armed forces made up just 5% of overall force by 1965; of these, only a
few were in command positions, with the majority in technical or administrative posts. West
Pakistanis believed that Bengalis were not "martially inclined" unlike Pashtuns and Punjabis;
the "martial races" notion was dismissed as ridiculous and humiliating by Bengalis.

Moreover, despite huge defence spending, East Pakistan received none of the benefits, such
as contracts, purchasing and military support jobs. The Indo-Pakistani War of
1965 over Kashmir also highlighted the sense of military insecurity among Bengalis, as only
an under-strength infantry division and 15 combat aircraft without tank support were in East
Pakistan to thwart any Indian retaliations during the conflict.

PROBLEM OF BANGLADESHI REFUGEES

Influx of Bangladeshi refugees before and after 1971 Indo-Pak war was an important issue
during the implementation of this plan.
SUCCESSIVE MONSOON FAILURES
Due to two successive year of drought (1972-1974), India again faced food crisis.

At the end of this plan, India also performed the Smiling Buddha underground nuclear test in
1974. This test was partially in response to the US deployment of the Seventh Fleet in the
Bay of Bengal to warn India against attacking West Pakistan and widening the war. The
international community took several harsh measures against India, which affected the
domestic economy.

ASIAN OIL CRISIS OF 1973

After the Fourth Arab-Israel War in October, 1973, the oil-producing Arab countries decided
to use oil as a political weapon against countries like U.S A U.K., France, Germany, Holland,
etc. which had been supporting Israel. This created a scarcity of oil in the world market. The
price of crude oil, which in 1973 was only two dollars a barrel, increased to 30 dollars a
barrel in 1974.
This unprecedented price hike of oil made the financial position of a number of countries
precarious and plunged them into economic crisis.

The oil crisis of 1974 not only affected the countries who were supporters of Israel but it also
hit hard countries like India which had never supported Israel but had been friendly to the
Arab cause.

The life of many Indians is already deeply affected by the oil crisis. Because of the increase
in gasoline prices — it now costs about 40 cents a litre, which is slightly more than a quart,
compared with 20 cents in October — fewer cars are seen on the streets of New Delhi and
Bombay, and many businessmen and civil servants are using buses for the first time. The cost
of a rickshaw ride has climbed 50 I per cent.

Before the oil crisis, India was spending only 11 per cent of her foreign exchange earnings on
the import of oil but after the oil crisis, India had to spend nearly 65 per cent of its hard-
earned foreign exchange on the import of oil. The plight of a country which spends of its
foreign exchange earnings on the import of oil alone can be better imagined than described.

The Oil Crisis of 1973 skyrocketed the oil and fertilizer prices leading to very high inflation.
The nation's new five‐year development plan, set to start this year, is under drastic overhaul.
Anywhere from 50 per cent to 80 per cent of India's export earnings will be spent on oil bills,
compared with about 20 per cent last year.