Third Year Plan Model

The Third Five Year Plan consists of no specific plan model. It is simply based on the different relations expressed by Prof. S. Chakravarty
in his famous article, The mathematical Frame work of Third Model.
It consists of thirteen equations describing various relationships.
The total investment is equal to the sum of the total domestic savings and net foreign aid
The net increase in the national income is equal to investment over whole period multiplied by output capital ratio
Saving time at t is equal to the period of saving plus saving in period t
The demand for agricultural production depends upon the level of population as well as per capita income
The increase in agricultural production is equal to investment in agricultural sector multiplied by capital output ratio
The total tax revenue is equal to the autonomous tax revenue plus tax revenue which depends upon time
The increase in the tax revenue is equal to the weighted average of the rates at which consumption, agricultural and non agricultural incomes
are increasing
Total govt. expenditure is equal to the sum of the current expenditure plus the proportion of total investment expenditure that is to be taken
Total increase in govt, debt is equal to the total expenditure minus total tax revenue and total amount of surpluses of pubic enterprises.
Total increase in output is equal to the increase in agricultural output and the non agricultural output.
Total investment is equal to investment in agricultural sector plus investment in non agricultural sector
Increase in output is either consumed or saved.
Increase in demand for agricultural goods is equal to increase in supply of agricultural goods.
Now we have a set of thirteen equations and fifteen unknown. So this model is a Decision Model as the number of unknown is more
than the equations. So the value of two variables must be taken from outside arbitrarily and the remaining would be determined from
the equation.
In this context Sandee observes, Due to peculiar structure of the model, this simple target is wider than it seems. As investment and
welfare go together, maximizing the one means maximizing the other. As gradual change has been assumed throughout, maximizing
consumption and investment at the end of the period has the same effect as maximizing these two over the period as a whole.
The third five year plan assumed the growth rate of population to be 2% per annum for the period 1961-71. The capital output ratio was
assumed to be 23: 1. The saving rate increased from 8.5% in 1960-61 to 11.5% in 1965-66.
Fourth Year Plan Model
The plan model used in Fourth Five Year Plan was Open Consistency Model prepared by Manne and Rudra with two different
divisions of Planning Commission-the Economic Division and the Perspective Planning Division. It included 30-sector consistency model
based on the conventional Leontief Inter Industry Open system.
For the Fourth Five Year Plan, Prof. Chakravarty, Prof Eckaus, Prof. Lefeber and Prof. Parekh discovered a temporal consistency model
called CELP Model.
This model is divided into eleven sectors.
The statistical data was obtained from 30 x 30 model by Prof. Manne and Rudra. The main function of the CELP model was to indicate
the sum of the consumption over the five year period.
The assumption of the model shows that consumption increases with respect to time does not fluctuate.

The main features of CELP model are as under:

1. It sums up the structural features of the preceding models making the preceding models as subcases of this model.
2. The development over time brought the economy from initial situation to the desired terminal situation.
3. It gives the clear idea of difference between investment at starting, investment in execution and completed investment.

The following lessons are yielded by this model:

1. The output of machinery and steel is primarily determined by the level of investment outlays, that of food-grains and cotton
textiles taken wholly by the outlay or domestic consumption and that of petroleum products and electricity depend upon both.
2. The output levels of metal based industries are sensitive to assumption with respect to the import substitution programme,
those of the other sectors are not.
3. The overall investment level is barely susceptible to the import substitution programme.