Government of Tamil Nadu

Department of Employment and Training

Course : TNPSC Combined Civil Services Examination - IV(Group IV / VAO)

Subject : Indian Economy
Topic : Five Year Plan models – an assessment

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 Indian Economy 1

Five Year Plan models – an assessment

ECONOMIC PLANNING
Meaning and need for planning
Planning is essential to achieve the goal. It is part of the organization. National planning is
needed to define the goals and achieve the objective of a nation. Economic planning is the gift
by Soviet Union to the world. It is the first country to practice economic planning on a national
scale. Planning involves economizing of scarce resources.

Laissez faire polices

It is a policy in which there is minimum interference in the economic affairs by the government.

Characteristics of economic planning

In a planned economy, major economic decisions such as what and how much is to be
produced, when and where it is to be produced and to whom it is to be allocated is determined by
the central authority such as state, through the Planning Commission. Soviet Russia implemented
its first five year plan in 1928.
The nature of planning is determined by the type of economic system – capitalism,
socialism, mixed economy – in which it is practiced.
There will be partial planning in capitalist economy (U.K) but socialist economy is a
totally planned economy (E.g. former Soviet Russia). In mixed economy like India, both public
sector and private sector play important roles in economic planning. Usually, the period of plan
is five years.

Types of planning
1. Centralized planning
In a socialist economy (e.g. former Soviet Russia), there was centralized planning, it was
planning by direction. In a socialist state, most of the means of production are owned by state.
All basic economic decisions will be made by the central authority.

2. Planning by Inducement
In a democracy, planning is done by inducement. For example, ours is a mixed economy
where there is a public sector and private sector. The government has to persuade the industries
in private sector to fulfill the goals of the plan through inducements such as tax concessions and
by providing incentives.
 Indian Economy 2

3. Indicative planning
In this type of planning, the government invites representatives of industry, and business
and discusses with them in advance what it proposes to do in the plan under question and
indicate to them its priorities and goals. Then the plan is formulated after detailed discussion
with varied interest. Planning in France is a good example of indicative planning.
After we embraced liberalization and privatization policies in 1991, even Indian
planning, in a way has become indicative planning.
Economic plan can be divided in to midterm plan, short term plan and perspective plans.
Our five year plans are in fact, midterm plans. Short term plans are annual plans. Perspective
plans are long term plans and the period ranges from 20 – 25 years.

Rolling plan
Unlike the five year plan with fixed targets, in the case of rolling plan at the end of each
year, targets will be fixed by adding one more year to the plan.

Evolution of planning in India

In 1934, Vishweshvarayya has published a book titled “Planned Economy in India” in
which he presented a constructive draft for the development of India in next ten years.

National planning committee

The first attempt to develop a national plan for India came up in 1938. In that year,
Congress President Subash Chandra Bose has set up a National Planning Committee with
Jawaharlal Nehru as its President. However, the report of the committee could not be prepared.

Bombay plan
In 1944, Eight industrialists of Bombay viz Mr.JRD Tata, GD Birla, Purshottamdas,
Thakur das, Lala Shriram, Kasthuribai Lalbhai, A D Shroff, Ardeshir Dalal ,John Mathai
working together prepared “A Brief Memorandum Outlining a Plan for Economic
Development of India”. This is known as “Bombay plan”. This plan envisaged doubling the per
capita income in 15 years and tripling the national income during this period. Nehru did not
officially accept the plan, yet many of the ideas of the plan were inculcated in other plans which
came later.

People’s plan
People‟s plan was drafted by M N Roy. This plan was for the period of ten years and gave
greatest priority to Agriculture. Nationalization of all agriculture and production was the main
feature of this plan. This plan was based on Marxist socialism.
 Indian Economy 3

Gandhian plan
This plan was drafted by Sriman Narayan Agarwal, Principal of Wardha Commercial College. It
emphasized the economic decentralization with primary concern to rural development by
developing the cottage industries. The Objective was to raise the material as well as the cultural
level of the Indian Masses.

Sarvodaya Plan
Sarvodaya plan (1950) was drafted by Jaiprakash Narayan. This Plan itself was inspired by
Gandhian plan, and Sarvodaya idea of Vinoba-Bhave. This Plan emphasized on Agriculture,
Small and Cottage industries.

Planning and Development department

In August 1944, the British India government set up “Planning and Development
Department” under the charge of Ardeshir Dalal, but this department was abolished in 1946.

Year Five Year Plan Objectives Target Achieved

1951 – 56 First Plan It is based on Harrod – Domar model. 2.1 3.6
It gave importance to agriculture.
1956 – 61 Second plan It is based on Mahalanobis model. It 4.5 4.0
focused on rapid industrialization
particularly heavy industries and capital
goods. It planned to establish socialistic
pattern of society. It is also called Big Push
Model. Rourkela, Bhilai and Durgapur Steel
plants were established during this plan.
Perambur Integral coach factory was
created.
1961 – 65 Third plan It focused on agriculture and balanced 5.6 2.2
regional developments. This plan was a
failure due to war with china in 1961 – 62
and Pakistan in 1965 – 66. It is based on
Ragner Frisch and Sandee Model.
1966 – 69 Annual plan We had three annual plans from 1966 – 69.
This period is known as plan holiday.It is
the period of Green Revolution. In 1966,
Exports increased and imports reduced due
to the decrease in value of Rupees.
1969 – 74 Fourth plan It was based on Gadgil strategy with special 5.7 3.2
focus to the ideas of growth with stability
and progress towards self reliance.
 Indian Economy 4

1974 – 79 Fifth plan This was launched with the slogan “Garibi 4.4 5.2
Hatao”. This plan was abolished by Janata
party govt in 1977. It is based on Jawaharlal
Nehru and T N Krishnan Model.
TRYSEM was implemented in 1979.
1978 – 83 Rolling plan This plan was launched by Janata party govt
in 1978. The Indira Gandhi govt abolished it
in 1980 itself.
1980 – 85 Sixth plan It aimed at a direct attack on poverty by 5.2 5.2
creating a condition for an expanding
economy. Lakdavala formulated it. „Bekari
Hatao‟ or unemployment eradication is
the slogan of the plan. It is based on
Jawaharlal Nehru and Harrod Domar
Model.
1985 – 90 Seventh plan It was launched with the motto 'Growth, 5.0 5.8
Modernization, Self reliance and Social
Justice.
Jawahar Rozgar Yojana – 1989.
1990 – 92 Annual plans We had two annual plans during 1990 – 92
because of fast changing government.
1992 – 97 Eighth plan It was launched after the economic 5.6 5.8
reforms of July 1991.This plan envisages a
market based development with greater
role for private sector in the economy. It is
indicative plan. It is called Rao- Manmohan
Model or LPG Model.
1997 – 02 Ninth plan It gave top priority to fiscal consolidation. It 6.5 5.4
is based on Neo Gandhian Model.
2002 – 07 Tenth plan It gave greater importance to NDC in its 7.9 7.7
formulation.M S Brendhand Model.The
updated 20 point programme was launched.
2007- 12 Eleventh plan It emphasized on inclusive growth. 9.0 7.9
Upgrading agricultural growth rate to 4%.
Creating 70 million jobs.
Reducing child mortality rate by 1/1000
providing clean drinking water for all