Indian Economic Development 2

INDIAN ECONOMIC DEVELOPMENT
Chapter-2
Five Year Plans In India:
Goals And Achievements
Presented by-
JAHNVI PATNI
SARTHAK PANDIYA
INTRODUCTION
It was concluded from the previous chapter that the
economy we inherited from the British was backward and
stagnant. Agriculture was the main source of subsistence
and secondary and tertiary sectors of the economy was
insignificant. Life expectancy rate was low and the
population was facing abject poverty. Such an economy
couldn’t be left to the market forces of supply and demand
to trace its own path of development. The political leaders
could not simply watch what the producer planned to
produce and what the consumers planned to buy. They also
could not except for a miracle that can break the shackles of
poverty. Hence, direct participation of the govt. was an
obvious need of the hour. And, this implied recourse to
ECONOMIC PLANNING.
WHAT IS ECONOMIC PLANNING?
“Economic planning means utilisation of country’s
resources in different development activities accordance
with national priorities", states Planning Commission.
Economic planning is a process under which a central
authority defines a set of targets to be achieved within a
specified period of time, keeping in view the needs and
means of the country. Economic planning focuses on the
economical use of the country‘s resources in diverse areas
of production activity on the basis of well defined national
priorities.
[NOTE: Planning Commission is the central authority of
India, which formulates India ‘s 5 year plans among other
function]
ECONOMIC PLANNING WITH AND
WITHOUT THE FREE PLAY OF THE
MARKET FORCES
The concept of economic planning for the country’s growth
was 1st conceived by the then Soviet Union in 1928. In the
Soviet Union, it was a model of economic planning with
state as the owner of means of production. It was a model of
planning based on the principle of ‘Statism’where free play
of market was not allowed and where a relatively price
structure was determined by the central authority for
maximising social welfare. It is a model of a socialist society,
briefly called Socialism. When India embarked upon the
programme of planning in 1951,the Soviet Union had
already completed several years of planned development
However, there was a notable difference in the nature
of planning model adopted by India as compared to
Soviet Union. While in Soviet Union, planning was
based on the principle of statism ,in India it was based
on the principle of mixed economy. At the same time,
planning in India, was not simple a directive planning
as under capitalism. Instead it was a Comprehensive
planning covering both economics as well as social
areas of planning.
------------------------------------------------------------
Capitalism, Socialism and Mixed
Economy…
‘CAPITALISM’
It is an economic system in which major economic decision-
 what goods and services are to be produced?
 how goods and services are to be produced?
 for whom goods and services are to be produced?
are left to the free play of the market forces, or the forces
of supply and demand. There is a private ownership of the
means of production and all economic decisions are taken
with a view point of maximising profit. Thus:-
--- only those goods are produced which yield high profits.
---technology used which is cost-efficient.
---people are supplied goods who have the necessary
purchasing power.
‘SOCIALISM’
It is an economic system in which major economic

decision are taken by the govt, keeping in view the
collective interest of the society. Growth with social
justice is the principle merit of socialism. But it gives
no choice to the consumer or does not respect
consumer’s sovereignty.
‘MIXED ECONOMY’
 It is an economic system in which key economic
decisions are left to the free play of market forces ,but
not without certain controls and regulations by the
govt. While the market forces would ensure maximum
profit of the individual and the govt. will ensure
maximum social welfare.
 Mixed economy is the basic framework of planning in
India.
LONG PERIOD AND SHORT
PERIODGOALS OF PLANNING
IN INDIA…
Long Period Goals
 Long Period Goals are common to all the 5 Year
Plans are studied as objective of planning.
Long Period Objectives
==GDP GROWTH
Increase in GDP implies increase in the level of output in the
economy. Increase in GDP is an imp. Object of 5 year plans in
India. Per capita availability of goods and services must
consistently increase , implying an increase in the standard of
living of them people.
==FULL EMPLOYMENT
Full employment refers to a situation when all the people in the
working age group are getting work. This is a social objective
of planning. It implies that the process of economic growth
should not be hijacked by the richer sections of the society
==EQUITABLE DISTRIBUTUION OF EQUITY
Growth that causes a wedge between the rich and the poor
finds no justification in terms on Goals of Planning. Benefits
of growth must spread across larger sections of the society.
Equitable distribution of growth implies social equality.
==MORDENISATION
It means updation and adoption of technology in the process
of growth either by increasing pool of resources or by using
innovative technology.
==SELF-SUFFICIENCY
It means dependency on domestically produced
good ,particularly Food grains.
Short Period Goals
Short period objectives vary from plan to plan depending
on current needs of the economy. When the first plan was
Initiated, the country was battling severe shortage of food
grains. Accordingly, the First Plan focused on higher
agriculture production as the principal objectives. We find
that the short period objectives of planning, discussed
earlier. Depending upon our needs and means.
Features of Economic Policy
PursuedUnder Planning till 1991
 Heavy Reliance on Public Sector
 Regulated Development of Private Sector
 Protection of Small Industry and Regulation of Large-
Scale Industry
 Development of Heavy Industry of Strategic Significance
 Thrust on Saving and Investment
 Protection from Foreign Competition
 Focus on Import Substitution
 Restriction on Foreign Capital
 Centralised Planning
Achievement of the Goals of
Planning
 Increase in National Income
1st Plan 4.2( 2004-2005 prices in %)
12th Plan 8.0( 2004-2005 prices in %)
 Increase in Per Capita Income

1st Plan 2.6%
11th Plan 6.3%
 Rise in Rate of Capital Formation
1950-51 10%
2014-15 33.0%
 Institutional and Technical Change

 Growth and Diversification of Industry
 Economic Infrastructure
 Social Infrastructure
 Employment
 International trade
Faliures of Planning
 Abject Poverty
 High rate of Inflation
 Unemployment Crises
 Deficient Infrastructure
 Skewed Distribution
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INDIAN ECONOMIC DEVELOPMENT

It is an economic system in which major economic

 Increase in Per Capita Income

 Institutional and Technical Change

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