Five-Year Plans of India

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From 1947 to 2017, the Indian economy was premised on the concept of planning. This was
carried through the Five-Year Plans, developed, executed, and monitored by the Planning
Commission (1951 - 2014) and the NITI Aayog (2014 - 2017). With the Prime Minister as the ex-
officio Chairman, the commission has a nominated Deputy Chairman, who holds the rank of a
Cabinet Minister. Montek Singh Ahluwalia is the last Deputy Chairman of the Commission
(resigned on 26 May 2014). The Eleventh Plan completed its term in March 2012 and the Twelfth
Plan is currently underway.[1] Prior to the Fourth Plan, the allocation of state resources was based
on schematic patterns rather than a transparent and objective mechanism, which led to the
adoption of the Gadgil formula in 1969. Revised versions of the formula have been used since
then to determine the allocation of central assistance for state plans. [2] The new government led
by Narendra Modi, elected in 2014, has announced the dissolution of the Planning Commission,
and its replacement by a think tank called the NITI Aayog (an acronym for National Institution for
Transforming India).

Contents
[hide]

1History
2First Plan (19511956)

3Second Plan (19561961)

4Third Plan (19611966)

5Fourth Plan (19691974)

6Fifth Plan (19741978)

7Rolling Plan (19781980)

8Sixth Plan (19801985)

9Seventh Plan (19851990)

10Annual Plans (19901992)

11Eighth Plan (19921997)

12Ninth Plan (19972002)

13Tenth Plan (20022007)

14Eleventh Plan (20072012)

15Twelfth Plan (20122017)

16See also

17References

18External links

History[edit]
Five-Year Plans (FYPs) are centralized and integrated national economic programs. Joseph
Stalin implemented the first Five Year Plan in the Soviet Union in the late 1920s. Most communist
states and several capitalist countries subsequently have adopted them. China and India both
continue to use FYPs, although China renamed its Eleventh FYP, from 2006 to 2010, a guideline
(guihua), rather than a plan (jihua), to signify the central governments more hands-off approach
to development. India launched its First FYP in 1951, immediately after independence under
socialist influence of first Prime Minister Jawaharlal Nehru. [3]
The First Five-Year Plan was one of the most important because it had a great role in the
launching of Indian development after the Independence. Thus, it strongly supported agriculture
production and it also launched the industrialization of the country (but less than the Second
Plan, which focused on heavy industries). It built a particular system of mixed economy, with a
great role for the public sector (with an emerging welfare state), as well as a growing private
sector (represented by some personalities as those who published the Bombay Plan).

First Plan (19511956)[edit]

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The first Indian Prime Minister, Jawaharlal Nehru presented the First Five-Year Plan to
the Parliament of India and needed urgent attention. The First Five-year Plan was launched in
1951 which mainly focused in development of the primary sector. The First Five-Year Plan was
based on the HarrodDomar model with few modifications.
The total planned budget of Rs.2069 crore(2378 crore later) was allocated to seven broad
areas: irrigation and energy (27.2%), agriculture and communitydevelopment
(17.4%), transport and communications (24%), industry (8.4%), social services (16.64%), land
rehabilitation (4.1%), and for other sectors and services(2.5%). The most important feature of this
phase was active role of state in all economic sectors. Such a role was justified at that time
because immediately afterindependence, India was facing basic problemsdeficiency
of capital and low capacity to save.
The target growth rate was 2.1% annual gross domestic product (GDP) growth; the achieved
growth rate was 3.6% the net domestic product went up by 15%. Themonsoon was good and
there were relatively high crop yields, boosting exchange reserves and the per capita income,
which increased by 8%. National income increased more than the per capita income due to rapid
population growth. Many irrigation projects were initiated during this period, including
the Bhakra, Hirakudand Damodar Valley dams. The World Health Organization (WHO), with
the Indian government, addressed children's health and reduced infant mortality, indirectly
contributing to population growth.
At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started as
major technical institutions. The University Grants Commission (UGC) was set up to take care of
funding and take measures to strengthen the higher education in the country. Contracts were
signed to start five steel plants, which came into existence in the middle of the Second Five-Year
Plan. The plan was quasi successful for the government.

Second Plan (19561961)[edit]

The Second Plan was particularly in the development of the public sector and "rapid
Industrialisation". The plan followed the Mahalanobis model, an economic development model
developed by the Indian statistician Prasanta Chandra Mahalanobis in 1953. The plan attempted
to determine the optimal allocation of investment between productive sectors in order to
maximise long-run economic growth. It used the prevalent state of art techniques of operations
research and optimization as well as the novel applications of statistical models developed at
the Indian Statistical Institute. The plan assumed a closed economy in which the main trading
activity would be centred on importing capital goods. [4][5]
Hydroelectric power projects and five steel plants at Bhilai, Durgapur, and Rourkela were
established with the help of Russia, Britain (the U.K) and West Germany
respectively. Coal production was increased. More railway lines were added in the north east.
The Tata Institute of Fundamental Research and Atomic Energy Commission (AEC) was
established as research institutes. In 1957 a talent search and scholarship program was begun
to find talented young students to train for work in nuclear power.
The total amount allocated under the Second Five-Year Plan in India was Rs.48 billion. This
amount was allocated among various sectors: power and irrigation, social services,
communications and transport, and miscellaneous.
"The target growth rate was 4.5% and the actual growth rate was 4.27%. [6]"

Third Plan (19611966)[edit]

The Third Five-year Plan, stressed agriculture and improvement in the production of wheat, but
the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus
towards the defence industry and the Indian Army. In 19651966, India fought a War with
Pakistan. There was also a severe drought in 1965. The war led to inflation and the priority was
shifted to price stabilisation. The construction of dams continued.
Many cement and fertilizer plants were also built. Punjab began producing an abundance
of wheat.
Many primary schools were started in rural areas. In an effort to bring democracy to the grass-
root level, Panchayat elections were started and the states were given more development
responsibilities.
State electricity boards and state secondary education boards were formed. States were made
responsible for secondary and higher education. State road transportation corporations were
formed and local road building became a state responsibility.
The target growth rate was 5.6%, but the actual growth rate was 2.4%. [6]
Due to miserable failure of the Third Plan the government was forced to declare "plan holidays"
(from 196667, 196768, and 196869). Three annual plans were drawn during this intervening
period. During 196667 there was again the problem of drought. Equal priority was given to
agriculture, its allied activities, and industrial sector. The government of India declared
"Devaluation of Rupee" to increase the exports of the country. The main reasons for plan
holidays were the war, lack of resources, and increase in inflation after that plan holiday was
created.

Fourth Plan (19691974)[edit]

At this time Indira Gandhi was the Prime Minister. The Indira Gandhi government nationalised 14
major Indian banks and the Green Revolution in India advanced agriculture. In addition, the
situation in East Pakistan (now Bangladesh) was becoming dire as the Indo-Pakistan War of
1971 and Bangladesh Liberation War took funds earmarked for industrial development. India
also performed the Smiling Buddha underground nuclear test (Pokhran-1) in Rajasthan on May
18, 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of
Bengal. The fleet had been deployed to warn India against attacking West Pakistanand
extending the war.
The target growth rate was 5.6%, but the actual growth rate was 3.3%. [6]

Fifth Plan (19741978)[edit]

The Fifth Five-Year Plan laid stress on employment, poverty alleviation (Garibi Hatao),
and justice. The plan also focused on self-reliance in agricultural production and defence. In
1978 the newly elected Morarji Desai government rejected the plan. The Electricity Supply Act
was amended in 1975, which enabled the central government to enter into power generation and
transmission.[7][citation needed]
The Indian national highway system was introduced and many roads were widened to
accommodate the increasing traffic. Tourism also expanded. The twenty-point programme was
launched in 1975. It was followed from 1974 to 1979.
The Minimum Needs Programme (MNP) was introduced in the first year of the Fifth Five Year
Plan (197478). The objective of the programme is to provide certain basic minimum needs and
thereby improve the living standards of the people.
The target growth rate was 4.4% and the actual growth rate was 4.8%. [6]

Rolling Plan (19781980)[edit]

The Janata Party government rejected the Fifth Five-Year Plan and introduced a new Sixth Five-
Year Plan (19781980). This plan was again rejected by the Indian National
Congress government in 1980 and a new Sixth Plan was made.The Rolling Plan consists of
three kind of plans that were proposed. The First Plan is for the present year which comprises
the annual budget and Second is a plan for a fixed number of years, which may be 3, 4 or 5
years. Plan number two is kept changing as per the requirements of the Indian economy. The
Third Plan is a perspective plan which is for long terms i.e. for 10, 15 or 20 years. Hence there is
no fixation of dates in for the commencement and termination of the plan in the rolling plans. The
main advantage of the rolling plans is that they are flexible and are able to overcome the rigidity
of fixed five year plans by mending targets, the object of the exercise, projections and allocations
as per the changing conditions in the countrys economy. The main disadvantage of this plan is
that if the targets are revised each year, it becomes very difficult to achieve them which are laid
down in the five-year period and it turned out to be a complex plan. Frequent revisions resulted in
lack of stability in the economy which is essential for its balanced development and progress.

Sixth Plan (19801985)[edit]

The Sixth Five-Year Plan marked the beginning of economic liberalisation. Price controls were
eliminated and ration shops were closed. This led to an increase in food prices and an increase
in the cost of living. This was the end of Nehruvian socialism. The National Bank for Agriculture
and Rural Development was established for development of rural areas on 12 July 1982 by
recommendation of the Shivaraman Committee. Family planning was also expanded in order to
preventoverpopulation. In contrast to China's strict and binding one-child policy, Indian policy did
not rely on the threat of force[citation needed]. More prosperous areas of India adopted family planning
more rapidly than less prosperous areas, which continued to have a high birth rate.
The Sixth Five-Year Plan was a great success to the Indian economy. The target growth rate was
5.2% and the actual growth rate was 5.7%. [6] The only Five-Year Plan which was done twice.
[clarification needed]

Seventh Plan (19851990)[edit]

The Seventh Five-Year Plan marked the comeback of the Congress Party to power. The plan laid
stress on improving the productivity level of industries by upgrading of technology.
The main objectives of the Seventh Five-Year Plan were to establish growth in areas of
increasing economic productivity, production of food grains, and generating employment through
"Social Justice".
As an outcome of the Sixth Five-Year Plan, there had been steady growth in agriculture, controls
on the rate of inflation, and favourable balance of payments which had provided a strong base
for the Seventh Five-Year Plan to build on the need for further economic growth. The Seventh
Plan had strived towards socialism and energy production at large. The thrust areas of the
Seventh Five-Year Plan were: social justice, removal of oppression of the weak, using modern
technology, agricultural development, anti-poverty programmes, full supply of food, clothing, and
shelter, increasing productivity of small- and large-scale farmers, and making India an
independent economy.
Based on a 15-year period of striving towards steady growth, the Seventh Plan was focused on
achieving the prerequisites of self-sustaining growth by the year 2000. The plan expected the
labour force to grow by 39 million people and employment was expected to grow at the rate of
4% per year.
Some of the expected outcomes of the Seventh Five-Year Plan India are given below:

Balance of payments (estimates): Export 330

billion (US$5.1 billion), Imports (-)540 billion (US$8.4 billion),
Trade Balance (-)210 billion (US$3.3 billion)
Merchandise exports (estimates): 606.53
billion (US$9.5 billion)

Merchandise imports (estimates): 954.37

billion (US$14.9 billion)

Projections for balance of payments: Export 607

billion (US$9.5 billion), Imports (-) 954
billion (US$14.9 billion), Trade Balance- (-) 347
billion(US$5.4 billion)

Under the Seventh Five-Year Plan, India strove to bring about a self-sustained economy in the
country with valuable contributions from voluntary agencies and the general populace.
The target growth rate was 5.0% and the actual growth rate was 6.01%. [8]

Annual Plans (19901992)[edit]

The Eighth Plan could not take off in 1990 due to the fast changing political situation at the centre
and the years 199091 and 199192 were treated as Annual Plans. The Eighth Plan was finally
formulated for the period 19921997.

Eighth Plan (19921997)[edit]

198991 was a period of economic instability in India and hence no five-year plan was
implemented. Between 1990 and 1992, there were only Annual Plans. In 1991, India faced a
crisis in foreign exchange (forex) reserves, left with reserves of only about US$1 billion. Thus,
under pressure, the country took the risk of reforming the socialist economy. P.V. Narasimha
Rao was the tenth Prime Minister of the Republic of India and head of Congress Party, and led
one of the most important administrations in India's modern history, overseeing a major
economic transformation and several incidents affecting national security. At that time
Dr. Manmohan Singh (later Prime Minister of India) launched India's free market reforms that
brought the nearly bankrupt nation back from the edge. It was the beginning
ofliberalization, privatisation and globalization (LPG) in India.
Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the gradual
opening of the Indian economy was undertaken to correct the burgeoning deficit and foreign
debt. Meanwhile, India became a member of the World Trade Organization on 1 January 1995.
The major objectives included, controlling population growth, poverty reduction, employment
generation, strengthening the infrastructure, institutional building, tourism management, human
resource development, involvement of Panchayati rajs, Nagar Palikas, NGOs, decentralisation
and people's participation.
Energy was given priority with 26.6% of the outlay.
The target growth rate was 5.6% and the actual growth rate was 6.8%.
To achieve the target of an average of 5.6% per annum, investment of 23.2% of the gross
domestic product was required. The incremental capital ratio is 4.1. The saving for investment
was to come from domestic sources and foreign sources, with the rate of domestic saving at
21.6% of gross domestic production and of foreign saving at 1.6% of gross domestic production.
[9]

Ninth Plan (19972002)[edit]

The Ninth Five-Year Plan came after 50 years of Indian Independence. Atal Bihari Vajpayee was
the Prime Minister of India during the Ninth Five-Year Plan. The Ninth Five-Year Plan tried
primarily to use the latent and unexplored economic potential of the country to promote economic
and social growth. It offered strong support to the social spheres of the country in an effort to
achieve the complete elimination of poverty. The satisfactory implementation of the Eighth Five-
Year Plan also ensured the states' ability to proceed on the path of faster development. The
Ninth Five-Year Plan also saw joint efforts from the public and the private sectors in ensuring
economic development of the country. In addition, the Ninth Five-Year Plan saw contributions
towards development from the general public as well as governmental agencies in both the rural
and urban areas of the country. New implementation measures in the form of Special Action
Plans (SAPs) were evolved during the Ninth Five-Year Plan to fulfill targets within the stipulated
time with adequate resources. The SAPs covered the areas of social infrastructure, agriculture,
information technology and Water policy.
Budget
The Ninth Five-Year Plan had a total public sector plan outlay of 859,200 crore (US$130 billion).
The Ninth Five-Year Plan also saw a hike of 48% in terms of plan expenditure and 33% in terms
of the plan outlay in comparison to that of the Eighth Five-Year Plan. In the total outlay, the share
of the center was approximately 57% while it was 43% for the states and the union territories.
The Ninth Five-Year Plan focused on the relationship between the rapid economic growth and
the quality of life for the people of the country. The prime focus of this plan was to increase
growth in the country with an emphasis on social justice and equity. The Ninth Five-Year Plan
placed considerable importance on combining growth oriented policies with the mission of
achieving the desired objective of improving policies which would work towards the improvement
of the poor in the country. The Ninth Five-Year Plan also aimed at correcting the historical
inequalities which were still prevalent in the society.
Objectives
The main objective of the Ninth Five-Year Plan was to correct historical inequalities and increase
the economic growth in the country. Other aspects which constituted the Ninth Five-Year Plan
were:

Population control
Generating employment by giving priority to agriculture and rural
development

Reduction of poverty

Ensuring proper availability of food and water for the poor

Availability of primary health care facilities and other basic

necessities

Primary education to all children in the country

Empowering the socially disadvantaged classes like Scheduled

castes, Scheduled tribes and other backward classes

Developing self-reliance in terms of agriculture

 Acceleration in the growth rate of the economy with the help of
stable prices

Strategies

Structural transformations and developments in the Indian

economy.
New initiatives and initiation of corrective steps to meet the
challenges in the economy of the country.

Efficient use of scarce resources to ensure rapid growth.

Combination of public and private support to increase

employment.

Enhancing high rates of export to achieve self-reliance.

Providing services like electricity, telecommunication, railways

etc.

Special plans to empower the socially disadvantaged classes of

the country.

Involvement and participation of Panchayati Raj

institutions/bodies and Nagar Palikas in the development
process.

Performance

The Ninth Five-Year Plan achieved a GDP growth rate of 5.4%

against a target of 6.5%
The agriculture industry grew at a rate of 2.1% against the target
of 4.2%

The industrial growth in the country was 4.5% which was higher
than that of the target of 3%

The service industry had a growth rate of 7.8%.

An average annual growth rate of 6.7% was reached.

The Ninth Five-Year Plan looks through the past weaknesses in order to frame the new
measures for the overall socio-economic development of the country. However, for a well-
planned economy of any country, there should be a combined participation of the governmental
agencies along with the general population of that nation. A combined effort of public, private,
and all levels of government is essential for ensuring the growth of India's economy.
The target growth was 7.1% and the actual growth was 6.8%.

Tenth Plan (20022007)[edit]

The main objectives of the Tenth Five-Year Plan were:

Attain 8% GDP growth per year

Reduction of poverty rate by 5% by 2007

Providing gainful and high-quality employment at least to the

addition to the labor force
 Reduction in gender gaps in literacy and wage rates by at least
50% by 2007

20-point program was introduced

Target growth: 8.1% growth achieved: 7.7%

The tenth plan was expected to follow a regional approach

rather than sectoral approach to bring down regional inequalities

Expenditure of 43,825 crore (US$6.8 billion) for tenth five

years

Out of total plan outlay, 921,291 crore (US$140 billion) (57.9%) was for central government
and 691,009 crore (US$110 billion) (42.1%) was for states and union territories.

Eleventh Plan (20072012)[edit]

Rapid and inclusive growth. (poverty reduction)
Emphasis on social sector and delivery of service therein.

Empowerment through education and skill development.

Reduction of gender inequality.

Environmental sustainability.

To increase the growth rate in agriculture, industry and services

to 4%, 10% and 9% respectively.

Reduce total fertility rate to 2.1.

Provide clean drinking water for all by 2009.

Increase agriculture growth to 4%.

Twelfth Plan (20122017)[edit]

Main article: 12th Five-Year Plan (India)
The Twelfth Five-Year Plan of the Government of India has been decided to achieve a growth
rate of 8.2% but the National Development Council (NDC) on 27 December 2012 approved a
growth rate of 8% for the Twelfth Five-Year Plan.[10]
With the deteriorating global situation, the Deputy Chairman of the Planning Commission Montek
Singh Ahluwalia has said that achieving an average growth rate of 9 percent in the next five
years is not possible. The Final growth target has been set at 8% by the endorsement of the plan
at the National Development Council meeting held in New Delhi.
"It is not possible to think of an average of 9% [in the 12th plan]. I think somewhere between 8
and 8.5 percent is feasible, Ahluwalia said on the sidelines of a conference of State Planning
Boards and departments. The approached paper for the 12th Plan, approved last year, talked
about an annual average growth rate of 9%.
When I say feasible... that will require major effort. If you dont do that, there is no God given
right to grow at 8 percent. I think given that the world economy deteriorated very sharply over the
last year...the growth rate in the first year of the 12th Plan (201213) is 6.5 to 7 percent.
He also indicated that soon he should share his views with other members of the Commission to
choose a final number (economic growth target) to put before the countrys NDC for its approval.
The government intends to reduce poverty by 10% during the 12th Five-Year Plan. Ahluwalia
said, We aim to reduce poverty estimates by 9% annually on a sustainable basis during the Plan
period". Earlier, addressing a conference of State Planning Boards and Planning departments,
he said the rate of decline in poverty doubled during the 11th Plan. The commission had said,
while using the Tendulkar poverty line, the rate of reduction in the five years between 200405
and 200910, was about 1.5%points each year, which was twice that when compared to the
period between 199395 to 200405. [11] The plan aims towards the betterment of the
infrastructural projects of the nation avoiding all types of bottlenecks. The document presented
by the planning commission is aimed to attract private investments of up to US$1 trillion in the
infrastructural growth in the 12th five-year plan, which will also ensure a reduction in the subsidy
burden of the government to 1.5 percent from 2 percent of the GDP (gross domestic product).
The UID (Unique Identification Number) will act as a platform for cash transfer of the subsidies in
the plan.

See also[edit]
Five-year plans of China
Five-Year Plans of Romania

Five-Year Plans for the National Economy of the Soviet Union

Common minimum programme

References[edit]
1. Jump up^ Planning Commission, Government of India : Five
Year Plans. Planningcommission.nic.in. Retrieved on 2012-03-
17.
2. Jump up^ Planning Commission (24 February 1997). "A
Background Note on Gadgil Formula for distribution of Central
Assistance for State Plans" (PDF). Retrieved2010-09-17.

3. Jump up^ Sony Pellissery and Sam Geall "Five Year Plans" in
Encyclopedia of Sustainability, Vol. 7 pp. 156160

4. Jump up^ Jalal Alamgir, India's Open-Economy Policy:

Globalism, Rivalry, Continuity (London and New York:
Routledge 2008), Chapter 2.

5. Jump up^ Baldev Raj Nayar, Globalization And Nationalism:

The Changing Balance Of India's Economic Policy, 19502000
(New Delhi: Sage, 2001).

6. ^ Jump up to: L. N. Dash (2000). World bank and

a b c d e

economic development of India. APH Publishing.

p. 375. ISBN 81-7648-121-1.

7. Jump
up^http://www.powermin.nic.in/indian_electricity_scenario/pdf/
Historical%20Back%20Ground.pdf

8. Jump
up^ http://planningcommission.nic.in/plans/planrel/fiveyr/9th/vo
l1/v1c2-1.htm

9. Jump up^ Agrawal, A N (1995). Indian Economy: Problems of

development and planning. pune: Wishwa Prakashan. p. 676.
 10. Jump up^ "National Development Council approves 12th Five
Year Plan". Indian Express. 2012-12-27. Retrieved 2013-07-
10.

11. Jump up^ [1] [dead link]

External links[edit]
Official website of the Planning Commission of India

[show]

India topics
Categories:
Economic planning in India
Economic history of India
Five-year plans
Five-year plans of India
Nehru administration
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