ECONOMIC PLANNING

First Eleven Five Year Plans:

1950-51 to 2007-2012
Objectives of Economic Planning

Long term objectives:

 Achieve higher level of national and per
capita income
 Full employment
 Reduce inequalities
 Set up a socialist society-equality & justice
 Objectives of Economic Planning…

Two broad headings:

 Economic planning & removal of poverty:

a. rapid economic growth

b. increase in employment
 Economic planning & social justice:

a. Reduction of inequality of income

b. establishment of a socialist society
First Five year plan (1951-56)
Objectives:
 to improve the standard of living of the people.
total outlay - Rs. 2,069 crores
This amount was allocated to various areas. They are:
 Community and agriculture development
 Energy and irrigation
 Communications and transport
 Industry
 Land rehabilitation
 Social services
First five year plan India….
 Target of GDP growth - 2.1% per year.
 Actual growth of GDP had been 3.6% per year.
 Projects related to irrigation-the Mettur Dam, Bhakra
Dam, and Hirakud Dam.
 Rehabilitation of landless agricultural workers
 Emphasis on agriculture and rehabilitation of refugees
 Improvement of roads, civil aviation, railways, telegraphs,
and posts.
 Basic industry which includes the manufacture of
fertilizers and electrical equipment
 Small scale and village industries
 improved the living condition of the people, of historical
importance
Second five year plan India (1956-1961)
Objectives:

 Economy reached a stage where agriculture can

be assigned lower priority
 Forward thrust given for the development of
heavy and basic industries
 Big push so that economy takes off
 Industrial policy 1956 announced
 Rapid industrialization- emphasis on
development of heavy and basic industries- iron
and steel, heavy chemicals, heavy engineering
and machine building
 Plan was moderately successful
 Third Five Year Plan India (1961-1966)
 Intended to make a more determined effort to develop the nation
Objectives:
 Increase the national income by 5% per year
 Increase production of agriculture create self sufficiency in food grains
 Provide employment opportunities for all
 Establish equality among all
 Economy is still primarily agrarian so emphasis to be on agriculture.
 Increase in agricultural production would lead to the growth
 Fertilizer and cement plants were built
 Stress to development of social services and education in India.
Third Five Year Plan India….

 Third five year plan in India improved the quality

of life of Indian citizens
 But a failure because of a severe famine, in 1965-
66, two major conflicts with China and Pakistan
 1966-69 there were just Annual Plans, also called
a period of Plan holiday.
Fourth five year plan(1969-74)
Objectives:
 Aimed at annual growth rate of 5.5 %
 Self reliance and provide a national minimum
 First 2 yrs were good then it failed
 Failure of monsoons, decline in food grain
production, decline in industrial production, rise
in prices and then Indo Pak war in 1972
 Able to achieve only 3.4% GNP growth against
target of 5.5%
 A failed plan
Fifth Five Year Plan(1974 -1979)
Background of the Fifth Five Year Plan India:

 Onset of the Fifth Five Year Plan India in the 1970s, the
international economy in a turmoil.
 Sectors such as food, oil, and fertilizers prices sky-rocketed.
 Attaining self-reliance in food and energy top priority.
 Economy affected by several inflationary pressures.
 Food grain production above 118 million tons
 Improvement of infrastructural facilities like the functioning of the
power plants and the rise in the supply of coal, steel, and
fertilizers.
 Indian exports crossed 18%, and the large earnings from exports
Fifth Five Year Plan(1974 -1979)…..
Objectives :
 Reduce social, regional, and economic disparities
 Enhance agricultural productivity
 Initiate land reforms
 Check rural and urban unemployment
 Emphasize household industries like carpet-weaving, handlooms,
sericulture, and handicrafts
 Encourage self-employment
 Encourage import substitution in areas like industrial machinery,
chemicals, paper, iron and steel and non-ferrous metals
 Initiate appropriate use of fiscal, credit and production support
policies in the cottage industry sector
 Develop labor intensive technological improvements
Terminated in 1978 when the Janata party came to power
Sixth Five Year Plan India(1980 -1985)
 Main objectives- speedy industrialization, rise in the
employment level, poverty reduction, and acquisition of
technological self-reliance.
 Background of Sixth Five Year Plan India:
 At the onset Rajiv Gandhi, prioritized speedy industrial
development, special emphasis on information technology
sector.
 From the Fifth Five Year Plan, the nation had self
sufficiency in food.
 Industrial sector was diversified, science and technology
made a significant advance.
 Programs on improvement of public health and epidemic
control to reduce infant mortality and increase life
expectancy.
 Investments in Indian healthcare sector.
 Sixth Five Year Plan India(1980 -1985)….
Objectives:
 Industrialization
 Increase growth rate of the economy
 Promotion of efficient use of resources
 Improve productivity level
 Modernization for economic and technological self-reliance
 Control poverty and unemployment
 Develop indigenous energy sources and efficient energy usage
 Improved quality of life
 Minimum Needs Program for the poor
 Reduce discrepancies in income and wealth
 Check the growing population
 Promote education

Last year of the plan severe famine and low agricultural output.
Broadly the plan a success - achieved average growth rate of 5.5%
Seventh Five Year Plan India(1985 - 1989)

Background:

 The main objectives - establish growth in the

areas of increasing economic productivity,
production of food grains, generating employment
opportunities.
 Due to sixth plan- steady growth in agriculture,
control on Inflation, favorable balance of payments
 Strong base for the seventh five Year plan
Seventh Five Year Plan India(1985-1989)
Objectives:
 Social Justice
 Removal of oppression
 Using modern technology
 Agricultural development
 Anti-poverty programs
 Full supply of food, clothing, and shelter
 Increasing productivity of small and large scale farmers
 Making India an Independent Economy
 Achieving the pre-requisites of self-sustaining growth by the year
2000.
 Employment to grow at the rate of 4 percent per year
Seventh Five Year Plan India(1985 -1989)
 Anti-poverty program:
 Special emphasis to women, children, schedule tribes, and schedule castes.
 The poverty ratio to decline to 26 percent in 1989-90.
 Agriculture:
 Increase productivity of oilseeds, fruits, vegetables, pulses, cereals, fish, egg,
meat, and milk.
 Welfare:
 Education to girls, family welfare, healthcare, reduction in infant mortality
 Emergence of informatics, telematics, and hooking up of telecommunications
with computers for development in Communications.
 Stress on increasing supplementary modes of transport - inland waterways,
product pipelines, civil aviation, coastal shipping.
Eighth Five Year Plan (1992-97)

 Severe economic crisis due to balance of

payment crisis
 Rising debt burden
 Budget deficits
 Inflation and recession in industry
 Fiscal reforms were initiated
Ninth Five Year Plan (1997-2002)

 Focus was on growth with social justice

 Priority to agriculture and rural
development
 Eradication of poverty
 GDP growth of 7 % per annum
 Actually it achieved only 5.35% GDP
growth rate
Achievements of Planning in India- till
2002
Average Annual Growth Rate (At 1993-1994 prices)

Year Net national product Per

Capita

1950-51 to 1980-81 3.4 1.2

1980-81 to 1996-97 5.5 3.3

1996-97 to 2001-02 6.2 3.6

Increase in national and per capita
income
 Between 1950-51 and 2001-2002 growth process can be
divided into.
 A- 1950-51 to 1980-81
 NNP Annual Average Growth Rate 3.4%
 Per Capita NNP Growth Rate 1.2%
 B- 1981- 1997
 NNP Annual Average Growth Rate 5.5%
 Per Capita NNP Growth Rate 3.3%
 1996-97 and 2001-02
 NNP growth rate was 6.2%
 Per capita NNP increased by 3.6%
Growth performance in the five year plans
(at 1993-94 prices)

NNP at factor cost (% per annum)

Plans Target Actual

First Plan (1951-56) 2.1 3.6
Second Plan(1956-61) 4.5 4.1
Third Plan (1961-66) 5.6 2.8
Fourth Plan (1969-74) 5.7 3.3
Fifth Plan (1974-79) 4.4 4.8
Sixth Plan (1980-85) 5.2 5.7
Seventh Plan (1985-90 5 6
Eighth Plan (1992-97) 5.6 6.8
Ninth Plan (2002-07) 6.5 5.4
Progress in Agriculture
 Government has spent 23-24 % of the plan
outlay on agriculture and allied activities.
 Agriculture production increased considerably
but not to the extent planned
 Initial yrs of planning additions to output more
from extension of area under cultivation than
from increases in production per hectare
 Since 1960-61 only higher yields from land
cultivated- Green Revolution
Agriculture Production under Five
Year Plans (1951-2002)
1950-51 1970-71 2001-02 increase %
1951-2002

Foodgrains(in tonnes) 51 108 213 317

Rice(m tonnes) 21 42 93 343

Wheat (m tonnes) 7 24 73 942

Oilseeds (m tonnes) 5 10 21 320

Sugarcane (m tonnes) 57 126 297 421

Cotton ( m bales) 3 5 10 233

Jute (m bales) 3 6 12 300

Potatoes (m tonnes) 2 5 24 1100

Progress in Industry
 From 1951-2002 Government has
invested heavily on development of
industries, transport and communication,
electricity,etc.
 53-55 % of all planned outlay of
Government in each Five year Plan was
on these sectors
 Progress of Industrial Production
1950-51 1970-71 2001-02

Coal (m tonnes) 32 76 353

Iron ore (m tonnes) 3 32 76

Fertilizers (m tonnes) 0.02 1 15

Cement (m tonnes) 3 14 107

Finished steel (m tonnes) 1 5 31

Aluminium ('000 tonnes) 4 169 552

Petroleum, crude (m tonnes) 0.3 7 32

Electricity (billion kwh) 5 56 579

Net per capita availability of some essential
consumer goods in India
Items 1950-51 1970-71 2001-02

Cereals and Pulses (Kgs) 144 167 180

Sugar (Kgs) 5 7.4 16

Edible oils and vanaspati (Kgs) 3.2 4.5 10.2

Tea (gms) 362 401 650

Milk (kgs) 47 40 80

Eggs (number) 5 11 37

Cloth (meters) 14 16 32

Electricity, domestic (kwh) 2.4 7 76.8

Development of economic infrastructure
 Creation of economic infrastructure provided the base
for industrialization
 Expansion of road and rail transport
 Irrigation and hydro electric projects
 National and state highways
 Telecommunication network
 Modernization of semi-urban and rural areas
Diversification of exports and import
substitution
 Dependence for import of capital goods
declined
 Several consumer goods imported earlier
being produced at home
 Import substitution
 Exports of manufactures, mineral ores and
engineering goods
Development of a huge educational
system
 Totalenrolment of 239 lakhs in 1950-51
 In 1996-97 it was 1827 lakhs
Failures of Planning - till 2002
 Inefficiency of production in many public
sector companies
 Inefficiency in the generation of power,
transport, steel, fertilizers
 Not been able to employ proportionately
larger population in industry
 Inability to carry out effective land reforms,
still traditional methods of agriculture in so
many areas
Failures of Planning….
 Failure to eliminate poverty- 26 % of the
population still below poverty line
 Failure to provide employment to all
 Emphasis on growth rather than
employment
 Adoption of capital intensive methods
 At the end of 1996-97 total unemployment
and under employment -10.5 % of the
labor force
Failures of Planning….
 Failure to reduce inequalities of income
and wealth
 Failure to check growth of black money
 Failure to reduce concentration of
economic power
 Failure to implement land reforms
Tenth Five Year Plan
2002-2007
Background
 High expectations
 GDP growth in post reform pd- average of
6.1% in 8th & 9th plans from average of
5.7% in 1980s
 Literacy increased from 52% in 1991 to
65% in 2001
 Sectors like software services & IT
enabled services as sources of strength
Weaknesses in the economy
 Unemployment
 Stagnant infant mortality rate
 Power problem- 60 % of rural & 20 % of
urban households do not have power
connection
 Water , health, pollution, environmental
degradation
 Poverty not eradicated
The Development Strategy
 Redefinition of strategy - role of government
 Create a vibrant private sector & public sector make less
dominant
 Government’s role important but to be redefined
 Govt. Role in Social Sector, Infrastructure development
especially rural infrastructure & road development
 Telecommunication, power & ports private sector can
play a larger role
 Role of government- facilitate crucial investments while
still remain a public sector service provider
 Objectives of the Tenth Plan
 Target of GDP growth, 2002-7: 8 %
 Reduction of poverty ratio by 5 % by 2007 and by 15% by 2012
 Gainful employment to the addition to labor force over the Tenth Plan
 Universal access to primary education by 2007
 Reduction in decadal rate of population growth between 2001 and
2011 to 16.2%
 Increase in literacy to 75% by 2007
 Reduction of infant mortality rate to 45 per 1000 live births by 2007
and to 28 by 2012
 Reduction of maternal mortality ratio to 2 per 1000 live births by 2007
and to 1 by 2012
 Increase in forest & tree cover to 25% by 2007 and 33% by 2012
 All villages - access to potable drinking water by 2012
 Cleaning all major polluted rivers by 2007 & other notified stretches
by 2012
 Achievements of the Tenth Plan (2002-07)
9th plan(1997-2002) 10th plan(2002-2007)

GDP growth of which 5.5 7.2

a. Agriculture 2.0 1.7
b. Industry 4.6 8.3
c. Services
8.1 9.0
Gross Domestic Savings (as a 23.1 28.2
% of GDP at market prices
Gross Domestic Investment (as 23.8 27.5
a % of GDP at market prices

Current Account Balance (as a - 0.7 0.7

% of GDP at market prices)

Combined Fiscal Deficit of 8.8 8.4

Centre & States (as a % of GDP
at market prices
Foreign Exchange Reserves 54.2 165.3
(US $ billion)

Rate of Inflation (based on WPI) 4.9 4.8

Achievements of the Tenth Plan (2002-07)….

 Not able to achieve target of 8% GDP growth

but took economy to higher trajectory of
growth at 7.2% as against 5.5% in 9th plan
 Gross domestic savings averaged 28.2% in
10th plan against 23.1% in 9th plan
 Economy able to reduce its incremental capital
output ratio from a level of 4.3 during 9th plan to
3.8 during 10th plan
 Foreign exchange reserves reached US$ 185
billion on Feb 2007
 Foreign investment flows-US$ 20.2 billion in
2005-06
Failures of Tenth Plan (2002-07)
 Reduction in size of plan: total planned outlay
of Rs 15,25,269 crs, actual allocation was of Rs
14,91,620 crs
 Failure to reduce poverty to the targeted
level: 10th plan targeted to reduce poverty ratio in
2006-07 to 19.2% as against 26.1% in 1999-
2000. Actual was 27.5% in 2004-05
 Inconsistency in Indian economy:
improvement in GDP growth not reflected in an
increase in poverty reduction, no percolation
effect of higher GDP growth
Failures of Tenth Plan (2002-07)
 Increasing unemployment:
Targeted to reduce unemployment from 9.11% in 2001-02
to 5.11% in 2006-07. Actual- 8.3% in 2004-05
 Dismal performance of Agriculture Sector:
 Target growth rate:
4%, actual- 1.7%
 No reduction in Regional Inequalities:
Richer states benefited from the growth process
 Failure to achieve targets of reducing Infant Mortality
Rate & malnutrition among children:
10th plan targeted to reduce IMR to 45 and Maternal
Mortality Rate to 2 per 1000 live births
Actually IMR was 58 and MMR was 4 in 2005
Eleventh Five Year Plan(2007-2012)
Background:

 Tenth Plan accelerated annual average GDP growth rate to

7.2% but not addressed the problems of common man
 Not an inclusive economic growth
 Agriculture lost its growth momentum
 No increase in jobs in organized sector despite faster growth
 Slow decline in percentage of population below the poverty
line
 Malnutrition levels high
 Lack of basic services- health, education, drinking water,
sanitation etc
 Rapid growth is the only solution
Objectives:
Macro economic Indicators for the 11th FYP
10th Plan 11th Plan
(Actual) (Average)
Growth Rate of GDP(%) 7.2 9.0
a. Agriculture 1.7 4.0
b. Industry 8.3 10.5
c. Services 9.0 9.9
Investment rate-% of GDP 27.8 35.0
a. Public 6.7 10.2
b. Private 21.1 24.9
Domestic Savings Rate 28.2 32.3
(% of GDP)

Current Account Balance (% 0.2 -2.8

of GDP)

Govt Fiscal Balance -8.0 -6.0

(% of GDP)