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Contents
THE COLONIAL LEGACY- CONTRIBUTIONS OF THE BRITISH EMPIRE TO INDIAN
BACKWARDNESS .......................................................................................................................2
Changes brought about by the British Empire in India: ...........................................................2
INDIA’S ECONOMY AT INDEPENDENCE ....................................................................................3
ECONOMIC PLANNING IN INDIA - AN ANALYSIS OF FIVE-YEAR PLANS...................................4
Why was “Planning” Followed or Adopted? ........................................................................4
Features of Indian Planning: .................................................................................................4
Objectives of Economic Planning After Independence: ......................................................4
LIST OF 5 YEAR PLANS AND TIME PERIOD: ...........................................................................5
Periodization of Indian Growth Experience: ........................................................................5
FIRST FIVE YEAR PLAN (1951-56): .........................................................................................5
SECOND FIVE YEAR PLAN (1956-61): ....................................................................................6
MAHALANOBIS STRATEGY ................................................................................................6
THIRD FIVE YEAR PLAN (1961-66): ........................................................................................7
THREE ANNUAL PLANS (1966-69) .........................................................................................7
FOURTH FIVE YEAR PLAN (1969-74): ....................................................................................7
FIFTH FIVE YEAR PLAN (1974-79): .........................................................................................8
SIXTH FIVE YEAR PLAN (1980-85): ........................................................................................9
SEVENTH FIVE YEAR PLAN (1985-90): ...................................................................................9
TWO ANNUAL PLANS ............................................................................................................9
EIGHTH FIVE YEAR PLAN (1992-97).....................................................................................10
NINTH FIVE YEAR PLAN (1997-2002) ..................................................................................10
TENTH FIVE YEAR PLAN (2002-07) ......................................................................................11
ELEVENTH FIVE-YEAR PLAN (2007-12) ................................................................................11
TWELFTH FIVE YEAR PLAN (2012-17)..................................................................................12

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THE COLONIAL LEGACY- CONTRIBUTIONS OF THE BRITISH EMPIRE TO INDIAN

BACKWARDNESS

Changes that took place under the british rule-

"Development of Underdevelopment"

Many changes were positive in nature in India under

the British Empire but they were aimed at taking
India further towards underdevelopment by turning
its growth subservient to British interests

Changes brought about by the British Empire in India:

Exporter of Raw Material & Importer of Finished Goods
• Indian Textile Industry was destroyed through heavy customs duty (78%) on their
import to England
• Duty Free Export of British Mass Machine goods to India
• India provided Raw Material to England's Finished Goods
• 1950- 90% of India's needs of machine tools was met through imports
Revenue & Expenditure Policy Of the British
• One-third of total expediture was made on Army, which was used to maintain
british rule in India
• Debts of Banks of England were repaid using Indian Money
• Indian Revenue was used to pay for British Imperial Pursuits in other parts of the
world- Expenses of British wars in China

Drain Of Wealth- Dadabhai Naoroji

• Revenues of India were sent away to England rather than getting re-invested in
development of India.
Railways
• The Construction of Railways was Done Using British Capital (Iron ore and
Machinery) rather than developing Indian industries to construct the railways
• The purpose was to drain Indian wealth in order to develop british industries

Commercialisation Of Agriculture
• Diverted from food crops to cash crops
• Cash crops used by the British to produce and sell finished goods, which were
exported worldwide
• Production of Food Crops Fell

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INDIA’S ECONOMY AT INDEPENDENCE

Indian economy at the time of independence was overwhelmingly rural and agricultural in
character with nearly 85% of population living in villages and deriving their livelihood from
agriculture and related pursuits.

The backwardness of Indian economy is reflected in its unbalanced occupational structure

with 72 percent of working population engaged in agriculture. Even with such a large
proportion of working population dependent on agriculture, India was not self-sufficient in
food production.

Agricultural activities contributed nearly 50% to India’s national income.

Low level of industrialization at independence is clear from the following statistics (1950)
Sector Contribution to National Employment
Income
Agriculture 50% 72%
Industry 17% 11%
Services 33% 17%

(2017)
Sector Contribution to National Employment
Income
Agriculture 16.4% 42.74%
Industry 28% 23.79%
Services 55.2% 33.48%

Colonial India At 1947-1991

Exploitation Independence

1947- Agriculture, Industry,

Services, Foreign
Trade, Demographics,
1991-
1991 Employment, Poverty,
Infra present
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ECONOMIC PLANNING IN INDIA - AN ANALYSIS OF FIVE-YEAR PLANS

Why was “Planning” Followed or Adopted?

1. Market Mechanism of Growth led development could not be relied upon due to
low capacity of market segments in pushing up growth
2. Market mechanism led growth might not trickle down- poverty alleviation,
employment, productivity etc needed planning
3. Intervention by the government would ensure the right pace and direction of
development
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Features of Indian Planning:

Indicative Economic Planning

• The public and private sector worked together under a mixed
economy model
• Government used INDUCEMENT in agri and consumer industries to
push forward private sector
Physical Planning
• Allocation of men, material and power to achieve targets

Social Planning
• Socially prosperous classes got to impact planning due to their
political influence. The purpose of raising socially backward classes
was met in a limited manner due to politicisation of social structures.

Objectives of Economic Planning After Independence:

1. Economic growth
2. Self-reliance
3. Removing unemployment
4. Reducing income inequalities
5. Eliminating poverty
6. Modernization
7. Inclusiveness
8. Sustainable growth

The achievement of these objectives will be discussed below through five-year plans.

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LIST OF 5 YEAR PLANS AND TIME PERIOD:

First five-year plan - 1951 to 1956

Second five-year plan - 1956 to 1961
Third five-year plan - 1961 to 1966
Annual plans - 1966 to 1969
Fourth five-year plan - 1969 to 1974
Fifth five-year plan - 1974 to 1979
Sixth five-year plan - 1980 to 1985
Seventh five-year plan - 1985 to 1990
Eighth five-year plan - 1992 to 1997
Ninth five-year plan - 1997 to 2002
Tenth five-year plan - 2002 to 2007
Eleventh five-year plan - 2007 to 2012
Twelfth five-year plan - 2012 to 2017

Periodization of Indian Growth Experience:

Period Characterisation growth

1951-1965 Foundational 4.1% Hindu rate of growth
years
1965-1970 Crisis years 3% Hindu rate of growth
1970-1980 Turbulent years 2.9% Era of subsidies
Garibi hatao
emergency
1980-1990 Transitional 5.6% Trade liberalization
years Tax rates reduced
public expenditure on essential
services
1991-2003 Reform years 5.5% First phase of structural
reforms
2003-2008 High growth 8.8% Benefits of reforms
years

FIRST FIVE YEAR PLAN (1951-56):

Target growth: 2.1%
Actual growth: 3.6%

1. At that time, economy was facing the problem of large-scale foodgrains import,
influx of refugees and pressure of price rise.
2. First five-year plan was launched in 1951 and was based on “Harrod-Domar
Model”.
3. This plan gave high priority to price stability and agriculture including irrigation
and power projects.
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4. Heavy focus on transport and communication; limited focus on industrialization

SECOND FIVE YEAR PLAN (1956-61):

Target growth: 4.5%
Actual growth: 4.3%

1. Mahalanobis Strategy- highest priority to heavy industries. Rapid development

of public sector

MAHALANOBIS STRATEGY
Mahalanobis strategy:
• Developing a sound base- self sufficiency & availability of resources
• heavy industrialisation
• development of capital goods
• growth of consumer goods industries left to market forces
• Import substitution
why heavy industrialisation?
• productivity of labour in manufacturing in high
• Population pressure on land in India was high, which meant people had to be transferred
to other sectors (other than agri)

What was Import substitution? Positives and Negatives?

• developing industrial structure behind tariff walls (no competition from outside)
• demand for industrial imports increased rapidly than demand for its exports. To counter
the resulting BOP problem, Import sustitution was followed
• industrial development led employment
• positive- expected advancement of domestic capital based industries
• negative- lack of competition means sub-standard quality goods and higher prices of
products
• negative- technological innovation affected negatively
• negative- protedctionist policies under import subsctitution results in capital intensive
industries

Self Sufficiency
• The narrow concept of self sufficiency was followed under mahalanobis strategy

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THIRD FIVE YEAR PLAN (1961-66):

Target growth: 5.6%
Actual growth: 2.8%

1. The primary goal of the third five-year plan was to establish India as a self-
reliant and a self-generating economy.
2. Self-sufficiency was proclaimed for the first time- narrow concept of self
sufficiency

3. Based on the experience of first two plans (agricultural production was seen as
limiting factor in India’s economic development), agriculture was given top
priority to support the exports and industry.

4. The Plan was thorough failure in reaching the targets due to unforeseen events -
Chinese aggression (1962), Indo-Pak war (1965), severe drought 1965-66.

THREE ANNUAL PLANS (1966-69)

• This period of the three consecutive Annual Plans was euphemistically described as
“Plan Holiday”.
• Prevailing crisis in agriculture and serious food shortage necessitated the emphasis
on agriculture during the Annual Plans.
• During these plans a whole new agricultural strategy was implemented. It involving
wide-spread distribution of high-yielding varieties of seeds, extensive use of
fertilizers, exploitation of irrigation potential and soil conservation.
• During the Annual Plans, the economy absorbed the shocks generated during the
Third Plan.

FOURTH FIVE YEAR PLAN (1969-74):

Target growth: 5.7%
Actual growth: 3.3%

1. Refusal of supply of essential equipments and raw materials from the allies
during Indo Pak war resulted in twin objectives of “growth with stability “and
“progressive achievement of self-reliance” for the Fourth Plan. This plan was
based on ‘Gadgil Strategy’.

2. Focus on Growth with Stability- Fluctuation in Agri production targeted

3. Main emphasis was on growth rate of agriculture to enable other sectors to

move forward. First two years of the plan saw record production. The last three
years did not measure up due to poor monsoon.

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4. Decision to stop concessional imports of foodgrains from USA under PL480

5. Implementation of Family Planning Programmes were amongst major targets of

the Plan.
6. Implementation of Family Planning Programmes were amongst major targets of
the Plan
7. Energy crisis towards end of the plan

FIFTH FIVE YEAR PLAN (1974-79):

Target growth: 4.4%
Actual growth: 4.8%

1. It proposed to achieve two main objectives: 'removal of poverty' (Garibi Hatao)

and 'attainment of self-reliance'.

2. This was planned through the promotion of higher growth rates, better income
distribution, and also a significant increase in the domestic rate of saving.

3. MINIMUM NEEDS PROGRAM- highest priority to removal of poverty

4. The plan period was badly disturbed by the emergency (1975) and a change of the
government in 1977 when Janata Party came to power.

5. After promulgation of emergency in 1975, the emphasis shifted to the

implementation of Prime Ministers 20 Point Programme.

6. When Janata Party came to power, it introduced its own sixth five-year plan for
the period 1978-83 and termed it as Rolling Plan. However, in 1980 Congress again
came to power and abandoned the plan of Janata Party. Congress launched a
fresh new Sixth five-year plan for the period 1980-85.

7. The Rolling Plan (1978-80) of the Janata Government emphasized on employment,

in contrast to Nehru Model which the Govt criticized for concentration of power,
widening inequality & for mounting poverty. However, the government lasted for
only 2 years. Congress Govt. returned to power in 1980 and launched a different
plan aimed at directly attacking on the problem of poverty by creating conditions
of an expanding economy.

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SIXTH FIVE YEAR PLAN (1980-85):

Target growth: 5.2%
Actual growth: 5.7%

1. This plan was launched with the slogan of ‘Garibi Hatao’ (alleviate poverty).

2. Focus on rural development and Agri- resulted in high fiscal deficit, BOP problems,
high inflation and inefficient utilization of resources

3. High and sustained growth and self-reliance became the centerpiece

4. Some of the major issues addressed by the Plan were – emphasis on socio-economic
infrastructure in rural areas; eliminating rural poverty and reducing regional
disparities through the ‘Integrated Rural development Programme 1979’ (IRDP).

5. A number of national level programmes and schemes were launched (like National
Rural employment programme of 1980 or NREP) during this plan which tried to cater
to the specific areas and specific concerns of socio-economic development which was
called the ‘target-group approach’.

6. New energy strategy- more usage of domestic energy sources

SEVENTH FIVE YEAR PLAN (1985-90):

Target growth: 5.0%
Actual growth: 6.0%

1. This plan emphasized on rapid foodgrain production, increased employment

creation and productivity in general. (food, work & productivity)

2. The basic tenets of planning, i.e. growth, modernization, self-reliance and social
justice remained as the guiding principles.

3. Agricultural development led growth strategy was adopted.

TWO ANNUAL PLANS

• The eighth plan was postponed due to the fast-changing political situation at the
Centre. Also, the reason for the delay was the pathbreaking economic reforms being
suggested by the Eighth Five-year plan.
• The new government, which assumed power at the Centre in June 1991, decided to
initiate 8th five-year plan for the period 1992-97 and that the fiscals 1990-91 and
1991-92 would be treated as two separate annual plans.

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EIGHTH FIVE YEAR PLAN (1992-97)

Target growth: 5.6%
Actual growth: 6.8%

• Worsening Balance of Payment position, rising debt burden, widening budget

deficits, recession in industry and inflation were the key issues during the launch of
the plan.

• The plan undertook drastic policy measures to combat the bad economic situation
and to undertake an annual average growth of 5.6% through introduction of fiscal &
economic reforms including liberalisation under the Prime Ministership of Shri P V
Narasimha Rao.

• Some of the main economic outcomes during eighth plan period were rapid
economic growth (highest annual growth rate so far – 6.8 %), high growth of
agriculture and allied sector, and manufacturing sector, growth in exports and
imports, improvement in trade and current account deficit. High growth rate was
achieved even though the share of public sector in total investment had declined
considerably to about 34 %.

NINTH FIVE YEAR PLAN (1997-2002)

Target growth: 6.5%
Actual growth: 5.4%

• The Ninth Five-year plan was launched when there was an all-round slowdown in the
economy led by the ‘South East Asian Financial Crisis (1996-97)”.
• The Plan prepared under United Front Government focused on “Growth with Social
Justice & Equality”.
• With a general nature of indicative planning, the Plan not only target an ambitious
high growth rate, but also tried to direct itself towards time-bound social objectives.
• There was an emphasis on the seven identified Basic Minimum Services (BMS) which
included safe drinking water, primary health service, universalization of primary
education, etc.
• Ninth Plan aimed to depend predominantly on the private sector – Indian as well as
foreign (FDI) & State was envisaged to increasingly play the role of facilitator &
increasingly involve itself with social sector viz education, health etc. and
infrastructure where private sector participation was likely to be limited.
• It assigned priority to agriculture & rural development with a view to generate
adequate productive employment and eradicate poverty.
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TENTH FIVE YEAR PLAN (2002-07)

Target Growth: 8%
Actual growth: 7.6%

• Recognising that economic growth can’t be the only objective of national plan, Tenth
Plan had set ‘monitorable targets’ for few key indicators (11) of development
besides 8 % growth target.
• The targets included doubling per capita income in 10 years, reduction in gender
gaps in literacy and wage rate, reduction in Infant & maternal mortality rates,
improvement in literacy, access to potable drinking water cleaning of major polluted
rivers, etc.
• Governance was considered as factor of development & agriculture was declared as
prime moving force (PMF) of the economy.
• States role in planning was to be increased with greater involvement of Panchayati
Raj Institutions.
• State wise break up of targets for growth and social development sought to achieve
balanced development of all states.

ELEVENTH FIVE-YEAR PLAN (2007-12)

Target growth: 9%
Actual growth: 8%

• Eleventh Plan was aimed “Towards Faster & More Inclusive Growth” after UPA rode
back to power on the plank of helping Aam Aadmi (common man).

• India had emerged as one of the fastest growing economy by the end of the Tenth
Plan. The savings and investment rates had increased, industrial sector had
responded well to face competition in the global economy and foreign investors
were keen to invest in India. But the growth was not perceived as sufficiently
inclusive for many groups, specially SCs, STs & minorities as borne out by data on
several dimensions like poverty, malnutrition, mortality, current daily employment
etc.

• The broad vision for 11th Plan included several inter related components like rapid
growth reducing poverty & creating employment opportunities, access to essential
services in health & education, especially for the poor, extension of employment
opportunities using National Rural Employment Guarantee Programme ,
environmental sustainability , reduction of gender inequality etc.
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• Since the period saw two global crises - one in 2008 (Global Financial crisis) and
another in 2011 (European sovereign debt crisis) – the 8 per cent growth may be
termed as satisfactory.

TWELFTH FIVE YEAR PLAN (2012-17)

• The Twelfth Plan commenced at a time when the global economy was going through
a second financial crisis, precipitated by the sovereign debt problems of the
Eurozone which erupted in the last year of the Eleventh Plan.
• The crisis affected all countries including India. Our growth slowed down to 6.2
percent in 2011-12 and the deceleration continued into the first year of the Twelfth
Plan, when the economy is estimated to have grown by only 5 percent.
• The Twelfth Plan therefore emphasizes that our first priority must be to bring the
economy back to rapid growth while ensuring that the growth is both inclusive and
sustainable.
• The broad vision and aspirations which the Twelfth Plan seeks to fulfil are reflected
in the subtitle: ‘Faster, Sustainable, and More Inclusive Growth’.
• Inclusiveness is to be achieved through poverty reduction, promoting group equality
and regional balance, reducing inequality, empowering people etc. whereas
sustainability includes ensuring environmental sustainability, development of human
capital through improved health, education, skill development, nutrition,
information technology etc. and development of institutional capabilities,
infrastructure like power telecommunication, roads, transport etc.
• Apart from the global slowdown, the domestic economy had also run up against
several internal constraints. Macro-economic imbalances had surfaced following the
fiscal expansion undertaken after 2008 to give a fiscal stimulus to the economy.
Inflationary pressures had built up.

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