Economic Planning in India

Economic planning means setting goals for the country’s development and figuring out how to achieve them. It involves the following steps:

1. Identifying Problems: First, planners list out the major problems the economy is facing.
2. Setting Priorities: Problems are arranged by importance, with the most urgent ones at the top.
3. Short-term vs Long-term Problems: Some problems are solved quickly (like in a year), while others take more time and need step-by-step planning.
4. Setting Targets: Targets are fixed — like how much production should increase or how many jobs should be created in a set time.
5. Estimating Resources: Resources like money, manpower, buildings, equipment, etc., are calculated.
6. Arranging Resources: Planners figure out where resources will come from — like taxes for the government or loans for businesses.
7. Execution: Once everything is ready, the plan is implemented in an organized way.
8. Monitoring: Regular review is done to check progress and make improvements if needed.

Objectives of Economic Planning in India

1. Economic Development: Main goal is to increase national income and per capita income.
2. More Employment: To reduce unemployment and use human resources better.
3. Self-Sufficiency: To produce more essential goods within the country and reduce dependence on imports.
4. Economic Stability: To avoid problems like inflation (price rise) or deflation (price fall).
5. Social Welfare: Improve health, education, and emergency services for all.
6. Balanced Regional Growth: Reduce the gap between developed and underdeveloped states.
7. Sustainable Growth: Ensure growth in all sectors — agriculture, industry, and services.
8. Reducing Inequality: Use tools like taxation and job schemes to reduce income gaps.
9. Social Justice: Help the poor by providing them jobs and basic services.
10. Higher Living Standards: Aim for a better life by increasing income and fair income distribution.

History of Economic Planning in India

• Before Independence: Even before 1947, Indian leaders thought about planning. Thinkers like Dadabhai Naoroji, M.C. Ranade, and R.G. Dutt highlighted economic issues.
• Soviet Influence: USSR’s planning model gained attention during the Great Depression (1930s) as it avoided the crisis through planning.

Major Pre-Independence Planning Efforts

• Visvesvaraya Plan (1934): A 10-year plan proposed by M. Visvesvaraya aimed at modernizing India’s economy.
• National Planning Committee (1938): Started by Subhash Chandra Bose and led by Jawaharlal Nehru. It studied different sectors and made recommendations.
• Bombay Plan (1944): Proposed by industrialists like J.R.D. Tata. Focused on doubling income and developing both agriculture and industry.
• People’s Plan (1945): Created by M.N. Roy. Focused on agriculture and nationalizing land but lacked resources and was impractical.
• Gandhian Plan: Proposed by Sriman Narayan. Focused on rural development and small-scale industries.
• Sarvodaya Plan (1950): Based on Gandhian ideas. Emphasized land reforms, cottage industries, and self-reliance.

Planning by British India (1941–1946)

• Post-War Planning: British government set up committees to plan India’s reconstruction after World War II.
• Advisory Planning Board (1946): Suggested plans for increasing production and proper use of energy and minerals.

Planning After Independence

• Need for Planning: After independence and partition, India faced economic problems like poverty and unemployment.
• Constitutional Support: The Indian Constitution (1950) included guidelines (Directive Principles) for economic and social justice.
• Planning Commission (1950): Set up on 15th March 1950, to create five-year plans and guide India’s economic development.
  

Planning Commission: How It Started and What It Aimed To Do

After independence, India chose a socialist and mixed economy system. This means both private businesses and government control worked together. While private companies were encouraged, the government had control over major industries and resources.

To manage this system and guide development, the Planning Commission was set up in March 1950 by the Indian government. Its main goal was to improve people’s lives by using the country’s resources wisely, increasing production, and creating jobs.

The Planning Commission had to:

• Understand the country’s resources (money, materials, people).
• Make development plans using those resources.
• Decide which areas needed more focus.
• Suggest how to solve problems that slowed down development.
• Monitor how the plans were working and give advice for improvement.

The Commission worked in line with the ideas of the Indian Constitution, including the Preamble, Fundamental Rights, and Directive Principles.

Structure and Members of the Planning Commission

• Chairman: Prime Minister of India
• Deputy Chairman: Head of the Planning Commission’s work; prepared draft plans; attended Cabinet meetings
• Full-time and part-time members: Experts and ministers
• Ex-officio members: Finance Minister and Planning Minister

National Development Council (NDC) – 1952

This council supported the Planning Commission and helped in decision-making on development. It included:

• The Prime Minister (as the chairperson)
• Union Ministers
• Chief Ministers of States
• Members of the Planning Commission

Five-Year Plans: Growth of Indian Economy

India used Five-Year Plans to guide economic growth. Here’s a short summary of each:

First Plan (1951-56)

• Focus: Agriculture
• Growth: 3.6% (Target: 2.1%)
• Set up five IITs

Second Plan (1956-61)

• Focus: Industry
• Growth: 4.27% (Target: 4.5%)
• Based on Mahalanobis Model

Third Plan (1961-66)

• Focus: Self-reliance, wheat production
• Wars with China (1962) and Pakistan (1965) affected the economy
• Growth: 2.4% (Target: 5.6%)

Plan Holidays (1966-69)

• Three annual plans instead of a five-year plan due to wars and drought
• Focus on agriculture and exports

Fourth Plan (1969-74)

• Goals: Economic growth + self-reliance
• Banks were nationalized; Green Revolution started
• Growth: 3.3% (Target: 5.7%)

Fifth Plan (1974-78)

• Focus: Remove poverty (Garibi Hatao), employment, defense
• Growth: 4.8% (Target: 4.4%)
• Terminated early in 1978

Rolling Plan (1978-80)

• Flexible planning for short and long terms
• Later scrapped and replaced

Sixth Plan (1980-85)

• Focus: Remove poverty, modernize technology
• Growth: 5.7% (Target: 5.2%)

Seventh Plan (1985-90)

• Focus: Food, work, productivity
• Private sector given importance
• Growth: 6.01% (Target: 5%)

Annual Plans (1990-92)

• No full plan due to political instability
• Two yearly plans were made

Eighth Plan (1992-97)

• Focus: Human development (jobs, education, health)
• Introduced New Economic Policy
• Growth: 6.8% (Target: 5.6%)

Ninth Plan (1997-2002)

• Focus: Growth with social justice
• Growth: 5.6% (Target: 6.5%)

Tenth Plan (2002-2007)

• Aim: Double per capita income, reduce poverty
• Growth: 7.6% (Target: 8%)

Eleventh Plan (2007-2012)

• Theme: Inclusive growth
• Growth: 8% (Target: 9%)

Twelfth Plan (2012-2017)

• Theme: Faster, Inclusive, Sustainable Growth
• Target: 8% growth
• This was the last Five-Year Plan

End of Planning Commission and Rise of NITI Aayog

The Planning Commission was dissolved in 2014 because it no longer suited India’s changing needs. It was replaced by NITI Aayog on January 1, 2015, which promotes a “bottom-up” approach, focusing on state-level planning and cooperative federalism (center and states working together).

Why NITI Aayog Was Formed

• Planning Commission was outdated and didn’t suit the changing economy.
• India is diverse; different states need different plans.
• Centralized planning (same plan for all) no longer worked.
• NITI Aayog promotes customized planning with the help of states.

Objectives of NITI Aayog

• Support cooperation between states and center
• Help make village-level plans
• Focus on national security in planning
• Pay attention to the weaker sections of society
• Promote partnerships with think tanks and experts
• Encourage innovation and entrepreneurship
• Help resolve policy issues
• Act as a knowledge and research center

NITI Aayog Structure

• Chairperson: Prime Minister
• Vice-Chairperson: Appointed by PM
• Full-time Members: Experts
• Part-time Members: From universities or institutions
• Ex-officio Members: Union Ministers
• CEO: Appointed by PM
• Secretariat: Administrative staff

Special Wings of NITI Aayog

• Research Wing: Experts and scholars for deep studies
• Consultancy Wing: Helps states and center find best solutions
• Team India Wing: Members from all states and ministries work together