five-year-plans-in-india

Amity Law School, Lucknow

ECONOMICS ASSIGNMENT

‘FIVE YEARS PLANS IN INDIA’

Submitted to: Submitted by:

Dr. A. K. Sharma Animesh Kumar
B.A.LL.B.(H) 2009-14
Enrol.No.A8108309035

Five Year Plans in India BRIEF STUDIES

PREFACE
This assignment take cares of the topic “FIVE YEAR PLANS IN INDIA” of

Economics- III from social development perspective. Brief introduction,

objectives and outcomes & achievements of plans, all have acquired very

important place as a subject of Economic planning. I am sure my effort would

these inclusions and will keep on guiding me as faculty have done earlier. I am

extremely thankful to my faculty Dr. Anuj Kumar Sharma sir for the special

care and extra time given to me for preparation of this assignment I took too

much time to complete the given task.

Animesh Kumar’s Economics Assignment | Amity Law School, Lucknow i


ACKNOWLEDGMENT

This assignment is intended to cover the “Five Years Plans in India”. Basic
and pre-requisite information have been included.

I acknowledge the inspiration and blessing of my respected faculty Dr. Anuj
Kumar Sharma. He made my all doubt crystal clear.

I am full of gratitude to my seniors Pratik Mishra, Mayank Dubey, Swastik
Viswakarma and Abhas Sharma for the patience shown and encouragement
given to complete this assignment.

My heartful thanks are due to my friends Priyanshu, Gaurav and Purusharth for
providing relevant resources.

In the last but not the least, my sense of gratitude is due to AMITY LAW
SCHOOL, LUCKNOW.

Every effort has been made to avoid errors and mistakes; however their
presence cannot be ruled out.

Animesh Kumar

Animesh Kumar’s Economics Assignment | Amity Law School, Lucknow ii


INDEX
1. INTRODUCTION..........................................................................................................1

2. FIRST FIVE YEAR PLAN (1951-56)...........................................................................2

3. SECOND FIVE YEAR PLAN (1956-61)......................................................................6

4. THIRD FIVE YEAR PLAN (1961-66).........................................................................8

5. FOURTH FIVE YEAR PLAN (1969-74)....................................................................10

6. FIFTH FIVE YEAR PLAN (1974-79).........................................................................14

7. SIXTH FIVE YEAR PLAN (1980-85)........................................................................17

8. SEVENTH FIVE YEAR PLAN (1985-90).................................................................19

9. EIGHTH FIVE YEAR PLAN (1992-97).....................................................................24

10. NINTH FIVE YEAR PLAN (1997-2002)...................................................................26

11. TENTH FIVE YEAR PLAN (2002-07).......................................................................27

12. ELEVENTH FIVE YEAR PLAN (2007-2012)...........................................................28

13. INDIA’S 12TH FIVE YEAR PLAN TO FOCUS ON ‘INCLUSIVE GROWTH’.....30

14. CONCLUSION............................................................................................................31

Animesh Kumar’s Economics Assignment | Amity Law School, Lucknow iii


INTRODUCTION

When India gained independence, its economy was grovelling in dust. The British had left the
Indian economy crippled and the fathers of development formulated 5 years plan to develop
the Indian economy. The five years plan in India is framed, executed and monitored by the
Planning Commission of India. The economy of India is based in part on planning through
its Five-Year Plans, which are developed, executed and monitored by the Planning
Commission. The Planning Commission was set up in March, 1950 by a Resolution of the
Government of India which defined the scope of its work in the following terms:

“The Constitution of India has guaranteed certain Fundamental Rights to the citizens of India
and enunciated certain Directive Principles of State Policy, in particular, that the State shall
strive to promote the welfare of the people by securing and protecting as effectively as it may
a social order in which justice, social, economic and political, shall inform all the institutions
of the national life, and shall direct its policy towards securing, among other things,—

 that the citizens, men and women equally, have the right to an adequate means of
livelihood;
 that the ownership and control of the material resources of the community are so
distributed as best to sub serve the common good ; and
 that the operation of the economic system does not result in the concentration of
wealth and means of production to the common detriment.

The Planning Commission will—

1. make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such of
these resources as are found to be deficient in relation to the nation's requirements ;
2. formulate a Plan for the most effective and balanced utilisation of the country's
resources ;
3. on a determination of priorities, define the stages in which the Plan should be carried
out and propose the allocation of resources for the due completion of each stage ;
4. indicate the factors which are tending to retard economic development, and determine
the conditions which, in view of the current social and political situation, should be
established for the successful execution of the Plan ;
5. determine the nature of the machinery which will be necessary for securing the
successful implementation of each stage of the Plan in all its aspects ;
6. appraise from time to time the progress achieved in the execution of each stage of the
Plan and recommend the adjustments of policy and measures that such appraisal may
show to be necessary ; and
7. make such interim or ancillary recommendations as appear to it to be appropriate
either for facilitating the discharge of the duties assigned to it ; or, on a consideration
of the prevailing economic conditions, current policies, measures and development
programmes ; or on an examination of such specific problems as may be referred to it
for advice by Central or State Governments."

Animesh Kumar’s Economics Assignment | Amity Law School, Lucknow 1


Major Bodies Behind the Making of Five Year Plans
The organisation was set up to formulate basic economic policies, draft plans and watch its
progress and implementation. It consists of:
(i) Planning Commission of India
(ii) National Planning Council
(iii) National Development Council and State Planning Commissions

FIRST FIVE YEAR PLAN (1951-56)
In July, 1951 the Planning Commission presented a draft outline of a plan of development for
the period of five years from April, 1951 to March, 1956. The Plan included a number of
development projects which had been already taken in hand as well as others which had not
yet been begun. The Draft Plan was divided into two parts, the first involving an expenditure
of Rs. 1,493 crores and consisting largely of projects in execution which were to be
implemented in any case, and the second proposing an outlay of Rs. 300 crores which was to
be undertaken if external assistance were available. While the execution of development
schemes which had been included in the plan after consultation with the Central Ministries
and the State Governments was not to be affected, the Draft Outline was addressed to the
country for general discussion and comment in the following words :

“Planning in a democratic State is a social process in which, in some part, every citizen
should have the opportunity to participate. To set the patterns of future development is a task
of such magnitude and significance that it should embody the impact of public opinion and
the needs of the community. We have, therefore, felt it necessary, before presenting our
proposals in complete detail, to offer a Draft Outline of the Plan. The Draft is intended to be a
document for the widest possible public discussion. We hope to have further consultations
with the Central Ministries, State Governments and our own Advisory Board and Panels, and
also to obtain the views of Members of Parliament before we finalise the Plan."

Objectives:
i) To increase food production.
ii) To fully utilise available raw materials.
iii) To check inflationary pressure.

Since its publication, the Draft Outline has been examined in detail by the Central
Government and the State Governments. ) It was based on Harrod-Domar Model. It has been
discussed in Parliament and most of the Legislatures in the States. A large number of
organisations representing industry, commerce, labour, farmers and other interests have
expressed their views. At the request of the Planning Commission, many educational
institutions set up seminars of teachers and students to study the plan and send their
comments to the Commission. Many district boards and municipal committees also
commented on the Plan. In every district groups of officials and non-officials met together to
study the Plan in relation to their local problems. Ever since its publication the Draft Outline
has been a subject of extensive comment in the daily press and in periodicals. A considerable
volume of literature in the form of books and pamphlets prepared by independent writers has
also become available. Thus, as a result of the discussion which has taken place, every aspect
of the proposals in the Draft Outline has been subjected to the fullest possible examination.

The Planning Commission has endeavoured to make a careful study of the material which has
been received during the past eighteen months. It has had the opportunity also of working out


details of many projects and pursuing its own studies in different fields. In each sphere of
national development the Commission has conferred with the Central and State Governments
and their experts as well as with men and women of knowledge and experience outside the
Government. The Commission also consulted its Advisory Board and some of its Panels.
Recently, the Commission has held consultations with representatives of the principal
political parties, leading women workers and some members of Parliament.

The first Indian Prime Minister, Jawaharlal Nehru presented the first five-year plan to
the Parliament of India on 8 December 1951. The plan addressed, mainly, the agrarian sector,
including investments in dams and irrigation. The agricultural sector was hit hardest by
the partition of India and needed urgent attention.[3] The total planned budget of 206.8
billion (US$23.6 billion in the 1950 exchange rate) was allocated to seven broad
areas: irrigation and energy (27.2 percent), agriculture and community development (17.4
percent), transport and communications (24 percent), industry (8.4 percent),social
services (16.64 percent), land rehabilitation (4.1 percent), and for other sectors and services
(2.5 percent).[4] 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 after
independence, India was facing basic problems—deficiency 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%. The monsoon 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 Dam and Hirakud Dam. The World Health Organization, 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 Grant Commission 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.

All the development projects included in the Draft Outline are of course included in the Plan
as it has been now prepared and, as mentioned earlier, many of them are in progress. A
number of additions and changes in presentation have been made. The principal changes
made in the Plan as compared to the Draft Outline are explained, however, by the attempt to
strengthen the Plan, with due regard to the resources which could be foreseen, at those points
at which it was felt that the earlier proposals fell short of the needs of the country. In the field
of agriculture and community development, for instance, additional programmes have been
introduced with a view to ensuring that the targets of agricultural production will be reached.
These include a provision of Rs. 90 crores for community development projects, Rs. 30
crores for additional minor irrigation programmes and provision for the establishment of a
national extension organisation. Among other urgent problems for which provision has been
made may be mentioned soil conservation, resettlement schemes for landless agricultural
workers, and training and experiments in co-operative organisation. In the field of irrigation
and power development, in addition to providing for projects already in hand, funds have
been allocated for undertaking certain new river valley schemes which are considered vital



for the development of large regions served by them. To keep pace with progress in other
sectors of the economy, especially in industry and irrigation and power, increased provision
has been made for railways, roads, civil aviation, posts and telegraphs and ports. Programmes
for major ports which did not find a place in the Draft Outline have now been included in the
Plan.

In the Draft Outline, owing to the greater urgency of the programmes for agriculture and
irrigation, the provision made for the development of industry in the public sector was
insufficient. In the Plan as now presented, in addition to providing for an integrated steel
plant, Rs. 50 crores have been allocated for further expansion of basic industries,including
manufacture of heavy electrical equipment and fertilisers, and for increased transport
facilities required for industry and mineral development. Village industries, small-scale
industries and handicraft, whose importance for the economy as a whole can scarcely be
exaggerated, have been given greater emphasis in the Plan. In addition to the setting up of
new boards for khadi and village industries and for handicrafts, the imposition of a cess on
mill made cloth to assist the development of khadi and handloom, and measures taken for the
reservation of certain lines of production in favour of the handloom industry, the Central
Government's plan provides Rs. 15 crores for cottage and small-scale industries.

In the field of social services also, the Plan has several important programmes. These include
a national malaria control scheme estimated to cost Rs. 10 crores, increased provision for
scheduled tribes and scheduled areas and for scheduled castes and other backward classes,
including criminal tribes, a programme for industrial housing costing about Rs. 49 crores,
increased allocation for technical education and provision for youth camps and labour service
for students. Provision is also made for carrying forward the rehabilitation of displaced
persons from West Pakistan and it has been made clear that if circumstances so warrant it will
be necessary to provide larger funds for the rehabilitation of displaced persons from East
Pakistan.

In three other directions important additions have been made. In order to avoid adverse
effects on the implementation of the Plan in the States on account of monsoon failures which
occur from time to time in different parts of the country, a provision of Rs. 15 crores for
assistance to scarcity-affected areas has been made in the Central Government's plan.
Secondly, each State plan is being broken up into plans for districts and sub-divisions of
districts so that these may be further supplemented through the effort and co-operation of the
local people. In the nature of things, State plans cannot provide for all the possible needs of
the people and it is necessary both to integrate them with the programmes of district boards
and municipalities and to add to them other local programmes designed to meet the felt needs
of the people. In addition, to assist local works to which the people themselves contribute in
labour and otherwise, the Plan allocates a sum of Rs. 15 crores over the next three years.
Finally, a national plan which embraces both the public and the private sectors may yet be
incomplete unless the enthusiasm and support of large numbers of voluntary organisations
and voluntary workers engaged in constructive work can be harnessed for national
development. To provide an increasing field of work for the ' people's sector ', as it were, the
Plan provides a sum of Rs. 4 crores to be utilised for assistance to voluntary social welfare
organisations at the instance of a social welfare board to which a great deal of administrative
authority may be devolved. A word may also be added about the provision of Rs. 50 lakhs
made in the Plan for research and investigation into social, economic and administrative
problems relating to national development. In many fields sufficient data are wanting to
enable policies to be formulated. It is proposed, therefore, to organise, in co-operation with



universities and other institutions, special investigations into selected problems of
development.

Besides the plan for the public sector, the Planning Commission has formulated development
programmes for forty-two industries in the private sector. These programmes have been
prepared in co-operation with the Ministry of Commerce and Industry and after full
discussion with representatives of individual industries. The programmes for industrial
development have been indicated briefly in this report and are to be presented in a separate
volume.

The Five Year Plan sets out the programmes of development and also outlines general
proposals and policies in each field of development. The report is divided into three parts.
The first part contains an analysis of the process of development in an under-developed
economy and indicates the long-term goals towards which national effort is to be directed.
The objectives, priorities and techniques of planning are set out at some length and an
assessment is made about the resources which have to be mobilised in order to carry out the
Plan. The first part of the report concludes with a summary statement of the Five Year Plan
and of what is sought to be achieved through it. The second part of the report is concerned
with administration and public co-operation. Several suggestions are offered for the reform of
public administration. On the question of administration of development programmes at the
district level, where vital nation-building work is undertaken and the participation of the
people is all-important, a number of proposals are offered for consideration and action on the
part of State Governments and other authorities. This portion of the report closes with the
consideration of the problems of public co-operation in national development, a theme which,
because of its high importance and urgency, recurs throughout the report. In the third part of
the report, we outline the various programmes of development. These are grouped under
three broad heads, namely, agriculture, irrigation and community development; industry and
communications; and social services and employment. Each aspect of development is taken
up in turn, needs and resources assessed and the Commission's own proposals for policy and
action presented. In a separate volume, details are given concerning the principal
development schemes included in the Five Year Plan.

Important questions of policy relating, for instance, to the land problem, the food problem,
provision of finance for agriculture, common production programmes for small-scale and
large-scale industries, selection of irrigation and power schemes and conservation of mineral
resources have been under close examination in the Planning Commission. In making its
recommendations, the Commission is conscious that the framing of social and economic
policies in different fields is a continuous process and that, within the framework of priorities
and objectives now formulated, such changes as may be necessary in the interest of national
development will be made as further experience is gained and ideas are tested in practice. In
the field of policy the Central and State Governments have to act in close co-operation with
one another. Such co-operation will be greatly facilitated as a result of the setting up in
August, 1952 of the National Development- Council which includes the Prime Minister of
India and the Chief Ministers of all States.

The fulfilment of the Five Year Plan calls for nation-wide co-operation in the tasks of
development between the Central Government and the States, the States and the local
authorities, with voluntary social service agencies engaged in constructive work, between the
administration and the people as well as among the people themselves. Although several
programmes included in the Plan are already under way, it is important that, through sacrifice



borne equally by all citizens, the effort and resources of the entire nation should be mobilised
in support of the Plan so that, during the coming years, the tempo of development can be
greatly increased and the Plan becomes a focus of intense activity and a field of common
endeavour throughout the country.

SECOND FIVE YEAR PLAN (1956-61)
The second five-year plan focused on industry, especially heavy industry. Unlike the First
plan, which focused mainly on agriculture, domestic production of industrial products was
encouraged in the Second plan, particularly in the development of the public sector. 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
Statiatical Institute. The plan assumed a closed economy in which the main trading activity
would be centered on importing capital goods.

The main objective was to launch upon industrialisation and strengthen the industrial base of
the economy. It was in this light that the 1948 Industrial Policy Resolution was revised and a
new resolution of 1956 was adopted. The Second Plan started with an emphasis on the
expansion of the public sector and aimed at the establishment of a socialistic pattern of
society.

Objectives:
i) A sizeable increase in national income so as to raise the level of living.
ii) Rapid industrialisation of the country with particular emphasis on the development of
basic and key industries.

The Plan was considered in draft by the National Development Council which passed the
following Resolution on the 2nd May, 1956:

"HAVING considered the Draft Second Five Year Plan,

"THE National Development Council places on record its general approval and acceptance of
the objectives, priorities and programmes embodied in the Plan; and

"RELYING on the enthusiasm and support of the people;

"AFFIRMS the common determination of the Central Government and the Governments of
all the States of the Union of India to carry out the Plan, and to improve upon the targets set
out in it; and

"CALLS upon all the citizens of India to work wholeheartedly for the full and timely
realisation of the tasks, targets and aims of the Second Five Year Plan."

The beginning and the end of a Five Year Plan are vital dates in the nation's history. Each
Five Year Plan is both an assessment of the past and a call for the future. It seeks to translate
into practical action the aspirations and ideals of the millions in the country and gives to each



of us the opportunity of service in the common cause of eliminating poverty and raising
standards of living.

The First Five Year Plan ended in March 1956. Its approach and outlook are part of our
common thinking. It has laid the foundations for achieving the socialist pattern of society—a
social and economic order based upon the values of freedom and democracy, without caste,
class and privilege, in which there will be a substantial rise in employment and production
and the largest measure of social justice attainable.

Work on the Second Five Year Plan has been in progress for about two years. In April 1954,
the Planning Commission requested State Governments to arrange for the preparation of
district and village plans, especially in relation to agricultural production, rural industries and
co-operation. The preparation of such plans was undertaken as it was felt that in sectors
which bear closely on the welfare of large numbers of people, local planning is an essential
.means for securing the maximum public participation and voluntary effort. While plans for
districts and villages and for national extension and community project areas have to be fitted
within the framework of State plans which, in turn, take cognizance of plans prepared from
the point of view of the economy of the country as a whole, the district is still the pivot of the
whole structure of planning. At this point plans from different sectors come intimately into
the life of the people.

The study of wider aspects of national planning also commenced during 1954. Towards the
end of the year the assistance of the Indian Statistical Institute was obtained for the study of
technical and statistical problems relating to national planning, and a number of working
papers were prepared at the Institute. In March 1955, the results of these and other studies
were brought together in Professor P. C. Mahalanobis's 'Draft Recommendations for the
Formulation of the Second Five Year Plan' (referred to as the 'plan-frame') and in a 'Tentative
Framework for the Second Five Year Plan' which was prepared by the Economic Divisions of
the Ministry of Finance and the Planning Commission. These documents were considered in
April 1955 by the Planning Commission's Panel of Economists, which drew up a
'Memorandum on Basic Considerations Relating to the Plan-Frame'. Members of the Panel
also prepared a number of studies on individual aspects.

The 'plan-frame' and the other documents mentioned above were considered by the National
Development Council early in May 1955. The National Development Council generally
agreed with the basic approach of the draft 'plan-frame' and 'tentative framework' and with
the policy considerations relating to it which were put forward in the Memorandum of the
Panel of Economists. The Council also agreed that the Second Five Year Plan should be
drawn up so as to be capable of leading to an increase in national income of about 25 per cent
over a period of five years and of providing employment opportunities to 10 to 12 million
persons. Further, the Council directed that the Second Five Year Plan should be drawn up so
as to give concrete expression to policy dficisions relating to the socialist pattern of society.

Between July and December 1955, the Planning Commission held discussions with Central
Ministries and with State Governments. Discussions with each State afforded an opportunity
to review the broader aspect of individual State plans in consultation with Chief Ministers
Detailed examination of the proposals of States took place in working groups in which senior
officials from the Central Ministries, State Governments and the Planning Commission
collaborated.



During January 1956, a Draft Memorandum embodying the proposals which emerged from
these discussions was considered by the National Development Council and the Consultative
Committee of the Members of Parliament. In the light of these discussions and other
comments, a Draft Outline was published in February 1956 for general information and for
eliciting comments and suggestions. Suggestions received on the Draft Outline were taken
into consideration in the preparation of the Draft Second Five Year Plan.

In the course of the past year certain considerations have impressed themselves upon the
minds of those concerned with the formulation of the Second Five Year Plan. A Plan for a
period of five years has to be viewed in the social and economic perspective of a longer
period. It has to be worked in a flexible manner so that, through annual plans, adjustments are
effected in the light of economic and financial trends, increase in production in agriculture
and industry, and progress in different sectors of the Plan. Close coordination has to be
arranged in the related fields of industry, transport, minerals and power, so that the
expenditure incurred on each group of connected projects yields the maximum return. As the
National Development Council recognised, to offset inflationary pressures associated with a
period of rapid development, it is imperative that the targets of agricultural production
proposed in the Plan should be further improved upon. At each stage adequate supplies of
food and cloth and of essential consumer goods will have to be provided at reasonable prices
and a careful watch on the working of the national economy maintained.

Our Second Five Year Plan seeks to rebuild rural India, to lay the foundations of industrial
progress, and to secure to the greatest extent feasible opportunities for weaker and under-
privileged sections of our people and the balanced development of all parts of the country.
For a country whose economic development was long retarded these are difficult tasks but,
given the effort and the sacrifice, they are well within our capacity to achieve.

The Plan which is now presented to Government for submission to Parliament is a result of
the labours of large numbers of persons in the Central Government, in the States at various
levels and leaders of thought and opinion in every part of the country. In its preparation men
and women in all walks of life have given generously of their time and experience. The
enthusiasm and the widespread participation which have gone into the making of the Second
Five Year Plan are the best augury for its fulfilment.

THIRD FIVE YEAR PLAN (1961-66)

In the third Plan, the emphasis was on long-term development. The Third Plan report stated
that during the five-year period concerned, the Indian economy “must not only expand
rapidly but, at the same time, become self-reliant and self-generating.”
Objectives:
i) An increase in national income of more than 5 per cent annually. The investment pattern
laid down must be capable of sustaining this growth rate in the subsequent years.
ii) An increase in the agricultural produce and to achieve self sufficiency by increasing food
grain production.
iii) Greater equality of opportunities, more even distribution of economic power and reducing
wealth and income disparities.
The third plan stressed on agriculture and improving production of wheat, but the brief Sino-
Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards
the Defence industry. In 1965-1966, India fought a war with Pakistan. 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
grassroots level, Panchayats 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 of GDP
(gross domestic product) was 5.6 percent. The achieved growth rate was 2.84 percent.

Two Five Year Plans have helped strengthen the foundations of economic and social life and
stimulated industrial and economic growth and scientific and technological advance.

The Third Five Year Plan seeks to give a more precise content to the social objectives of the
Constitution and represents a large advance towards their realisation. It takes account of the
successes and the failures in the first two Plans and sets the tasks to be fulfilled in the
perspective of development over the next fifteen years and more.

Work on the preparation of the Third Plan commenced towards the end of 1958 and was
carried out in three main stages. The first, leading to the publication of the Draft Outline early
in July, 1960, comprised detailed studies by working groups set up at the Centre and in the
States. Parliament gave its general approval to the Draft Outline in August, 1960.

The Draft Outline was discussed throughout the country and served as the basis for the
preparation of the plans of States. These were considered with the Chief Ministers of States
between September and November, 1960. In January, 1961, the National Development
Council made its recommendations concerning the overall size and the structure of the Third
Plan; the Council also set up a Committee on Savings to suggest ways of securing the
maximum mobilisation of resources for the Third Plan. Finally, on May 31 and June 1, 1961,
the National Development Council considered the Draft Report on the Third Plan and
generally approved it.

The objectives and priorities of the Third Plan were considered carefully by five
Parliamentary Committees in November, 1960, and every effort has been made in this Report
to avail of the suggestions and comments offered by these Committees. Several aspects of the
Plan were placed from time to time before the Committee of Members of Parliament from
different political parties presided over by the Prime Minister. The Consultative Committee
of Members of Parliament associated with the Planning Commission also reviewed the Plan
at various stages.

Throughout the preparation of the Plan, leading public men and scholars, professional
associations, organisations representing industry and labour, and independent experts
generously gave of their time and experience. The Planning Commission had the benefit of
advice and suggestions from its Panel of Economists, Panel of Scientists, and Panels on Land
Reform, Agriculture, Education, Health and Housing. It was also helped by studies initiated
by the Programme Evaluation Organisation, the Research Programmes Committee, the
Committee on Plan Projects, the Central Statistical Organisation, the Indian Statistical
Institute and other leading organisations engaged in research. Efforts to prepare plans at the



district, block and village level, specially for the development of agriculture, cooperation,
education and rural industries, were an integral part of the process of drawing up the plans of
States as well as the National Plan. These local plans are a vital element in the success of
Panchayati Raj, which places in the hands of the people of each area the initiative and
responsibility for their own development and the means and resources for rapid advance.

The preparation of the Third Plan has been, thus, a vast national undertaking in which
valuable contributions have come from many sources, and at every stage there has been the
closest collaboration with the State Governments and the Central Ministries.

The Third Plan represents the first phase in a scheme of long-term development extending
over the next fifteen years or so, the preparation of which will now be taken in hand. In the
course of this period, India's economy must not only expand rapidly but must, at the same
time, become self-reliant and self-generating. This' long-term approach is intended to provide
a general design of development for the country's natural resources, agricultural and
industrial advance, changes in the social structure and an integrated scheme of regional and
national development.

The Plan sets large objectives and targets for the five-year period. They are large only in
comparison with the past, not in relation to needs or to the nation's capacity to achieve. They
constitute a minimum which must be assured, but their true purpose is to open the way to a
still more intensive endeavour and a deeper sense of urgency.

The size of the task and the many-sided challenge should not be underestimated. The greatest
stress in the Plan has to be on implementation, on speed and thoroughness in seeking
practical results, and on creating conditions for the maximum production and employment
and the development of human resources. Discipline and national unity are the very basis of
social and economic progress and the achievement of socialism. At each step, the Third Plan
will demand dedicated leadership at all levels, the highest standards of devotion and
efficiency from the public services, widespread understanding and participation by the
people, and willingness on their part to take their full share of responsibility and to bear
larger burdens for the future.

FOURTH FIVE YEAR PLAN (1969-74)

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-Pakistani War of 1971 and Bangladesh Liberation War took place.
Funds earmarked for the industrial development had to be diverted for the war effort. India
also performed the Smiling Buddha underground nuclear test in 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 Pakistan and extending the war. After the
„Plan Holiday‟, the Fourth Plan was begun in 1969.
Objectives:
i) To achieve stability and progress towards self-reliance.
ii) To achieve an overall rate of growth of 5.7 per cent annually.
iii) To raise exports at the rate of 7 per cent annually.



Planning is the vital instrument we have adopted to realise the social objective enshrined in
our Constitution. Though the Five Year Plans we have already achieve a significant increase
in the national income in the past eighteen years and laid the foundations of technological
advance. The Plan is fast modernising our agriculture and strengthening and diversifying our
industry. Above all, it has reinforced national unity and purpose.

The attack on our territory in 1962 and again in 1965 forced us to modify the pattern of
national expenditure. Before we could reconcile the competing claims of development and
defence, drought struck us. Foreign credits became uncertain, Recession followed. All these
seriously restricted our freedom of choice. We had to divert our energies to fight drought and
nean famine and their aftermath. For some time, long-term planning had to be virtually
suspended. But we succeeded in turning adversity to good use. We concentrated on import
substitution which further enlarged our industrial base. This along with the need for more
foreign exchange put us on the path of a more fruitful export drive. We maintained our
investment in development work, especially in intensive agricultural programmes.

A new period has how opened. There is a welcome upsurge in the economy, and the increases
in agricultural production have brought us nearer to self-sufficiency in food grains. But,
inevitably, there are other problems, and a fresh challenge to face. Rural disparities have
increased, partly owing to the very efforts we have made to move rapidly towards self-
sufficiency in food, and partly owing to certain tardiness in the matter of implementing the
land reforms. Although the industrial recession has waned, new industries are not coming up
fast enough and unemployment, especially of technically trained persons, continues to be
acute. We have a larger and, understandably enough, a more articulate population.

Planning is the method to which we are committed for meeting such challenges. We have
carried out three Five Year Plans. Each Five Year Plan has addressed itself especially to
problems which have emerged either because of new political and economic developments in
the country and in the world, or as a consequence of progress already achieved. The priorities
and the emphasis have necessarily changed and have had to be adjusted from Plan to Plan,
but we have always kept in view our long-term objectives.

The Fourth Plan represents a conscious, internally consistent and careful!} thought out
programme for the most efficient exploitation of our resources possible in existing
conditions. The basic aim is to raise the standard of living of the people, especially of the less
privileged sections of society. Our planning should result not only in an integrated process of
increased production, but rational distribution of the added wealth. The overriding inspiration
must be a burning sense of social justice. While increased production is of the utmost
importance it is equally important to remove or reduce, and prevent the concentration of
wealth and economic power. The benefits of development should accrue in increasing
measure to the common man and the weaker sections of society, so that the forces of
production can be fully unleashed. A sense of involvement, of participation by the people as a
whole, is vital for the success of any plan of rapid economic growth. This can only be evoked
by securing social justice, by reducing disparities of income and wealth, and by redressing
regional imbalances. A reorientation of our socio-economic institutions in this spirit is
accordingly, a first necessity.

One year of this Plan has already gone by. Between the Draft Plan and the present document,
certain important changes have been made. The projected investment in the public sector has
been stepped up so as to enable us to undertake a larger and bolder agenda of work. New



schemes have been added to help the small farmer throughout the country, especially in the
un-irrigated areas. The emphasis is squarely on areas that have hitherto suffered from neglect.
Transport and housing problems in urban regions will receive more attention. A small but
significant beginning is also being made with special programmes for children.

The Fourth Plan thus provides a necessary corrective to the earlier trend which helped
particularly the stronger sections in agriculture as well as in industry to enable them rapidly
to enlarge and diversify the production base. In the long run, the full potential of growth
cannot be realised unless the energies of all our people are put to profitable use. The
emphasis on spreading the impetus and benefits of economic growth to the weaker sections is
thus necessary in the interest of equality as well as growth. The Plan will now assist the less
prosperous sections of our farming population to improve their position and make a yet
bigger contribution to the national economy. Greater industrial activity and the modernisation
of agriculture such as is proposed through the wider use of electric power and the adoption of
intensive methods of cultivation in both irrigated and dry areas, would mean that a larger
proportion of young people seeking jobs could find employment nearer home. At the same
time, there are some new schemes, e.g.,for a network of service centres in the rural areas,
which will open out opportunities for young entrepreneurs.

The nationalisation of the fourteen big banks is evidence of our determination to bring a
greater volume of resources within the area of social decision. It has effected a major change
in our economic structure. It enables us to pay more attention to the "small man's" needs, and
it restricts the scope for the monopolistic operations of the privileged few. Among other areas
where social considerations have still to make a comparable impact are the enforcement of
land laws, the management of public sector enterprises, and the toning up of the
administration as a whole.

There can be no doubt that the responsibilities devolving upon the public sector —without
diminishing those of the private sector, in our mixed economy—will grew in range and
volume. Socialism involves a reordering of society on a rational and equitable basis and this
can only be achieved by assigning an expanding role to the public sector. Following the
reorganisation of credit policies resulting from the nationalisation of major banks, the public
sector can be expected more and more to occupy the commanding heights of the economy. It
alone would be in a position to undertake investments of the requisite magnitude in such
industries of vital importance to us as steel, machinery, machine tools, power generation,
ship-building, petrochemicals, fuels and drugs. Naturally, the administration of public
enterprises poses some problems of its own (here as in other countries) but they are not
insuperable and will be overcome as we gain experience.

In addition to the fight against poverty and economic inequalities, the Plan seeks to enlarge
the area of self-reliance in terms of financial resources and technological inputs. Here, too,
the public sector has an important part to play. Besides striving^ to set an example in better
management methods and ushering in a new pattern of worker management relations, the
public sector should increasingly base itself on domestic know-how. The public and private
sectors have both been too ready to look to foreign collaboration not only for financial but for
technological resources. Such collaboration may be unavoidable when new processes have to
be introduced but excessive reliance on it has induced a state of mind which inhibits the
development of our own technological skills and managerial talents. We should rely more
and more on our own machinery and technical know-how, even though it may entail some
initial risks and difficulties. This does not mean that we should be indifferent to the latest



developments in technology, especially in the fast growing sectors. But it would be folly to
forget that a nation's strength ultimately consists in what it can do on its own and not in what
it can borrow from others.

There has been a noticeable change in recent years in the climate of international economic
cooperation. It is now increasingly reaffirmed by responsible sections of public opinion in the
lending as well as in the borrowing countries that development assistance should not be
regarded as an instrument of foreign or commercial policy but as a means of correcting
dangerous imbalances in the world economy. However, "aid" is in reality credits which have
to be repaid; and even if such credits are available on terms which are concessional in some
respects, they often have features which are not consistent strictly with the objective of
development. For some time to come we can benefit by more external credits, especially
untied credits on concessional terms. But we have to take note of international realities as
they are and reduce our reliance on foreign credits.

The policy of self-reliance does not mean that we should be actually reducing imports from
the rest of the world. In fact, as the pace of development quickens, imports of industrial raw
materials, intermediates and special components will go up. But we propose to pay for them
increasingly through our own earnings from exports. Economic independence, therefore,
hinges to a considerable extent on how we fare in export markets; and our export
performance in turn would depend on the state of our economy at home and our success in
developing a purposive, planned approach to the problem.

The complaint that planning has led to a rise in prices and that planning is, therefore, harmful,
is misconceived and unfounded. Consumers with fixed incomes, particularly in urban areas
face hardship when prices rise; but at the other extreme, when prices are reduced or depressed
to uneconomic level, producers suffer and employment sags. If development means larger
real incomes to ever larger numbers of people, some price increases can hardly be avoided.
What we must ensure, however, is stability in respect of the core items of family
consumption. An adequate supply of food grains and articles of everyday use must be
maintained at fairly stable prices. Agricultural scientists who have brought about such notable
increases in yields of wheat, and to some extent of millets and rice, have now turned to the
task of bringing about similar gains in pulses and cash crops like oilseeds, cotton and
sugarcane. In general, the possible impact of development plans on the price situation has
been carefully studied, and every effort will be made to keep production and prices in
balance.

Planning certainly has its critics, but the fact remains that in modern conditions, and in a
developing country like ours, economic planning has become indispensable. Compared to the
tasks to be accomplished, the resources of money, trained manpower and administrative and
managerial skills are in short supply, and they have to be allocated primarily with a view to
the national interest rather than the interest of any private individual or group. This is, after
all, what the Plan seeks to do. At the same time, and through such rational allocation, it can
lead to an augmentation of the now scarce resources, and this gradually extend the limits of
our economic freedom.

For us in India, planning is a charter of orderly progress. It provides a framework of time and
space that binds sectors and regions together and relates each year's effort to the succeeding
years, impelling us all constantly to greater cooperative endeavour. By strengthening the



economic fabric of the country as a whole and of the different regions, it makes a powerful
contribution to our goal of national integration.

FIFTH FIVE YEAR PLAN (1974-79)
The Plan was formulated against the background of sever inflationary pressure.
Objectives: In addition to removal of poverty and attainment of self-reliance, the Fifth Plan
had the following major objectives.
i) 5.5 per cent overall rate of growth in Gross Domestic objectives.
ii) Expansion of productive employment and fuller utilisation of existing skills and
equipment.
iii) A national programme for minimum needs and extended programmes of social welfare.
Stress was laid on employment, poverty alleviation, 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. Electricity Supply Act was enacted in 1975, which
enabled the Central Government to enter into power generation and transmission leaders.
The Indian national highway system was introduced for the first time and many roads were
widened to accommodate the increasing traffic. Tourism also expanded.

The Draft Fifth Five Year Plan was formulated in terms of 1972-73 prices and in the context
of the economic situation obtaining in the first half of the fiscal year 1973-74. Thereafter, two
major developments took place. The inflationary pressures gathered momentum till
September, 1974; and the balance of payment position worsened due to the steep rise in the
prices of imported oil and other materials.

The first intimations of the inflationary pressures came in 1972-73, thereafter these pressures
gathered strength in 1973-74 and continued unabated right upto September, 1974. During this
period, the index rose by 31.8%. Food articles and industrial raw materials accounted for
about two-third of the price increase. The prices of machinery, transport equipment and
manufactured goods contributed to a little over one-fourth to the overall increase in prices.
These pressures were first felt as a result of severe drought conditions in 1 972-73, followed
by shortages of various essential consumer goods and critical raw-materials and inputs.
Shortage of power together with higher international prices of imported inputs and their
inadequate availability led to the stagnation of industrial production during 1973-74. The
price situation was aggravated by continued expansion in money supply partly due to large
deficit financing and partly due to excessive expansion of bank credit to the commercial
sector. Thus in 1973-74 the money supply increased by 15.4% over and above the increase of
15.9% registered in 1972-73. Acting together with the unaccounted money unregulated
expansion of money supply in a situation of shortages provided an added impetus to the
activities of speculative and unsocial elements. Owing to the escalation of costs and prices,
even the administered prices of important intermediate goods such as steel, coal, cement and
aluminium had to be raised as a defensive action. The procurement and issue prices of
important cereals such as rice and wheat were also increased significantly. This not only had
a direct impact on the cost of living index but also strengthened the inflationary tendencies.

The balance of payment position also came under severe strain. Large quantities of food
grains and essential wage goods had to be imported. The four-fold increase in oil prices and
increase in prices of cereals, fertilisers, machinery and equipment, non-ferrous metals and
other imported goods severely eroded the resources. The value of the three principal items of



imports, namely food, fertilisers and POL accounted for as much as 53.2% of the total import
bill in 1974-75, as against 42.6% in 1973-74 and 23% in 1972-73. In absolute terms the
import bill for these items increased from Rs. 431 crores in 1972-73 to Rs. 1260 crores in
1973-74 and to about Rs. 2500 crores in 1974-75. No doubt value of exports also increased
but the balance of trade showed a deteriorating trend. The trade gap turned from a surplus of
Rs. 103.4 crores in 1972-73 to a deficit of Rs. 432 crores in 1973-74 and Rs. 1190 crores in 1
974-75. This trend was both on account of sharp deterioration in the terms of trade since 1
973 and larger imports of certain commodities mentioned above. Borrowings from IMF
including special oil facility to the extent of about Rs. 485 crores was resorted to in 1974-75
to meet the deficit in balance of payment. These developments together with uneasy
economic conditions in some countries abroad and unstable international monetary conditions
could not but have an adverse impact on the Plan.

Inevitably, the financial and physical magnitudes of the Plan as well as the balance of
payment position got distorted. Escalation in costs, higher outlays on public consumption and
non-development expenditure led to erosion of resources for the Plan resulting in staggering
of programmes owing to diminution in the size of investment in real terms. Investments in the
private sector also felt the impact. With such fluidity both at home and abroad, the
finalisation of the Plan had to await the emergence of a more stable situation.

Deferment of the finalisation of the Plan did not imply a Plan holiday but a rephrasing of the
Plan outlays, in the light of emerging circumstances. It implied that while planning, one had
inevitably to pay considerable attention to the short-term management of the economy.
Measures had to be devised urgently for containing inflation at home and for keeping the
economy in proper alignment with the fast changing international developments. Necessarily
priorities had to be defined even amongst the stated priorities, consistent with the objectives
of the draft Plan. Naturally, food and energy became the most important sectors for
investment planning. The successive Annual Plans had to be formulated on these
considerations.

The Annual Plan 1 974-75 was formulated at a time when the inflation rate was quite high. It
was, therefore, designed mainly to control inflation and increase production particularly in
the key sectors. The Plan outlays had to be kept at a modest level. Yet care was taken to
ensure adequate provisions for agriculture including irrigation and fertilisers, energy (power,
coal and oil), ongoing projects in steel, non-ferrous metals and certain basic consumer goods
industries. Emphasis was on fuller utilisation of the unutilised capacities. The piovision for
social services was restrained but kept at a reasonable level.

During the year, a comprehensive strategy was evolved and a package of measures—fiscal,
monetary and administrative—was introduced. It included mobilisation of additional
resources (both by the Centre and the States), allocation of funds to high priority projects,
restraint on growth of money supply and a crack down on anti-social elements. Disposable
incomes were regulated through impounding of certain additional incomes, imposition of
restrictions on dividends and compulsory savings by tax payers in the higher brackets. The
procurement prices of major agricultural crops were not allowed to rise. These measures
effected deceleration in the rate of growth of money supply, significant improvement in price
situation and easy availability of essential goods. The money supply increased by only 6.9%
in 1 974-75 as against an increase of 1 5.4% in the previous year. The index of wholesale
prices declined by 7.1% between September, 1974 and March, 1975.



Though inflation was contained, yet the economy was still operating under various
constraints. Agricultural production in 1 974-75 declined by 3.1 %. Industrial production
grew at 2.5%. While the rate of aggregate investment (net) increased from 13.6%, in 1973-74
to 14.8% in 1974-75, the rate of domestic savings (net) recorded a marginal increase from
12.8% in 1973-74 to 13.1% in 1 974-75. As already mentioned the balance of payment
deteriorated.

Having achieved a certain measure of price stability by the end of 1974-75, the Annual Plan
for 1975-76 could aim at growth under conditions of price stability. Agriculture, Irrigation,
Power, Coal, Oil and Fertilisers, therefore, continued to receive priority. Projects capable of
yielding quick results received special attention. Labour discipline and sustained anti-
hoarding/smuggling operations created an appropriate climate. An excellent harvest gave
timely vigour and push. The national income is estimated to have increased by 6 to 6.5%
during 1 975-76—agricultural production by about 10% and industrial output by 5.7%.
Procurement of nearly 1 3 million tonnes of food grains in 1 975-76, along with imports
enabled the build-up of a high level of stocks of food grains (17 million tonnes). The
wholesale price index fell from 307.1 at end of March, 1975 to 283.0 at the end of March,
1976—by about 8%,. The year 1975-76 closed with an overall budgetary surplus of over Rs.
200 crores against a deficit of Rs. 490 crores estimated earlier. The balance of trade
continued to be a matter for concern during 1975-76 and the trade gap was as high as Rs.
1216 crores. This was in spite of the fact that the value of exports had increased by 18.4%
and imports by only 14%. However, as a result of larger inflow of private remittances
because of effective action against smuggling and illegal dealings in foreign exchange and
increase in net foreign aid the balance of payments was not strained. The foreign exchange
reserves reached a high level of Rs. 1885 crores at the end of the year as against Rs. 969
crores at the end of the previous year.

With stability of prices and growth in economy achieved during 1 975-76, a bolder
programme of investment was drawn up for 1976-77. The Annual Plan 1976-77 envisages an
outlay of Rs. 7852 crores which represents an increase of 31.4% over the original Plan
allocation for 1975-76. The New Economic Programme and consideration of social justice
could receive greater attention. The high priority accorded to critical sectors of the
economy—agriculture including irrigation, energy and intermediate goods was continued.
Not only did on-going schemes receive full attention, but new starts in critical sectors could
also be envisaged on a selected basis. This strategy together with mobilization of additional
resources was expected to maximise the growth potential of the economy.

Thus, the efforts made so far have succeeded in checking inflationary tendencies and giving
the economic situation a promising turn. Some of the constraints which seriously hampered
the process of growth in the earlier period have been removed to a considerable extent. There
is easy availability of essential raw materials and inputs. There is greater economic discipline
and a renewed dynamism in the country at present. A considerable measure of price stability
has been achieved and it is hoped that the recent increase in price level will be contained by
effective measures which have been initiated. There is a large buffer stock of foodgrains with
the public agencies and the position of foreign exchange is satisfactory. The international
monetary system has also stabilised to a certain degree. The Planning Commission, therefore,
consider this an appropriate time to finalise the Fifth Plan. With this end in view a meticulous
and detailed examination of the development programme for the remaining two years of the
Fifth Five Year Plan has been undertaken. What emerges is a clearer delineation of the targets
and policies especially in relation to the priority sectors.



SIXTH FIVE YEAR PLAN (1980-85)
The draft of the Sixth Five Year Plan (1978-1983) was presented in 1978. However, the plan
was terminated with the change of Government in January 1980. The new Sixth Five Year
Plan was implemented in April 1980.
Objectives:
i) To eliminate unemployment and underemployment.
ii) To raise the standard of living of the poorest of masses.
iii) To reduce disparities in income and wealth.

Soon after its reconstitution in April, 1980, the Planning Commission started work 'on the
Sixth Five Year Plan 1980—85. A number of working groups were set up to do the necessary
preparatory work and consultations were held with the Central Ministries and the
Consultative Committee of Members of Parliament on Planning. A basic paper entitled "Sixth
Five Year Plan 1980—85—A Framework" was presented to the National Development
Council on its 34th meeting held on August 30 and 31, 1980. The Council considered this
paper and directed the Planning Commission to proceed with preparation of the final draft of
the Sixth Plan. Thereafter, the Planning Commission held a series of wide ranging
consultations with groups of economists and other social scientists, experts on rural
development, eminent economic journalists, representatives of industry and trade, of trade
unions, credit institutions, and others. The Framework was also discussed in two meetings of
the Parliamentary Consultative Committee of the Ministry of Planning and was circulated to
all Members of Parliament and to editors of news papers for comments and suggestions.
Finally, extensive discussions were held with the States and the Union Territories on the State
Plans for 1980—85. The Commission also benefited by the useful data collection and
analytical work done by the Planning Commission in the past three years.

In the introduction to the Third Five Year Plan, Jawaharlal Nehru said "Planning is a
continuous movement towards desired goals". While the precise formulation of Plan
objectives adopted in successive plans has varied, the essential goals of Indian Planning have
been growth, removal of poverty and achievement of self-reliance. The Commission has kept
in view the pledges given to the people in formulating its proposals. Further it has used the
consultative mechanism to elicit the views of as wide a cross section of national opinion as
possible so as to evolve a broad national consensus on the objectives, strategies and
programmes of the Sixth Plan. Its overriding concern has been to give practical shape to the
nation's collective will for using all the latent resources and energies of the nation for an
effective attack on poverty, unemployment and inequalities.

The final size of the public sector outlay has been fixed at Rs. 97,500 crores at 1979-80
prices. This outlay is in real term 80 per cent higher than the outlay in the Fifth Five Year
Plan. The Commission would have liked wry much to be in a position to recommend larger
outlays in several sectors. However, given the constraint on the size of the Plan, and keeping
in view Plan objectives, an initially consistent and feasible inter-sectoral allocation has been
adopted to achieve a growth rate of 5.2 per cent. It should become possible to review these
allocations in the mid-Plan period as the combined efforts of the people and Government
succeed in raising resources and productivity. While the outlays on all major sectors of the
economy will at least be double in nominal terms compared to the Fifth Plan, the growth rate
of outlays in rural development and irrigation are even higher. This reflects the very high



priority given in the Sixth Plan to the objectives of employment generation and removal of
poverty. Similarly, the very high emphasis on investment in the energy sector represents our
resolve not to let energy availability become an undue constraint on the growth process.
Substantial provisions have Ken made for the special component plans for Scheduled Castes
and for tribal sub-plans. In addition, benefits will accrue to the Scheduled Castes and
Scheduled Tribes from the various sectoral programmes.

A substantial increase has been provided in Plan outlays for the special areas programmes in
keeping with the Plan objective of reducing regional disparities. In view of the particular
problems of the North Eastern Region, a substantial step up in the plans of the constituent
units of the Region and of the North Eastern Council is envisaged. These outlays will be in
addition to greatly enhanced levels of Central sector investments in the Region.

It has been possible to increase the size of the Sixth Plan over that envisaged in the
Framework, partly on account of the determination expressed by some States during the
course of final Plan discussions to exceed the estimates of additional resource mobilisation
that had originally been envisaged, for them. On this basis, the share of States and Union
Territories in the Plan is Rs. 50,250 crores, which works out to 51.54 per cent of the total
outlay. Determined efforts will have to be made by the Centre and States to realise the target
of additional resource mobilisation. This is an essential precondition for successful
implementation of the Sixth Plan. This point needs particular emphasis, as a major task of
economic policy in the Sixth Plan would be to create the necessary conditions for the
mobilisation of resources in a non-inflationary manner. Inflation is the most regressive form
of taxation. As the Framework points out, the Sixth Plan is being launched in difficult
conditions. Fortunately, .the acute inflationary pressures which prevailed in 1979-80 have
shown some signs of abatement in 1980-81. However, the situation cannot be said to be
completely under control yet and a great deal of ingenuity and irnaginatio.i, not to speak of
resolve, will be needed to device effective economic policies to reconcile the requirements of
.growth and stability.

As regards the external environment, it must be recognised that the economy continues to be
extremely vulnerable to increases in oil prices and to deterioration in our terms of trade
generally. A major task facing the country is to reduce our dependence on energy imports and
to promote exports and invisible earnings.. This is essential in order to achieve self-reliance.
Self-reliance, as should be obvious, but often is not, does not necessarily mean self-
sufficiency in all sectors of the economy. So long as the country is able to pay its way, it
cannot be said to be dependent on others. This calls for an all out effort to accelerate the rate
of growth of our exports to 9 to 10 per cent as envisaged. We must also rigorously promote
import substitution in all those sectors of the economy where we have a comparative
advantage.

Meaningful solutions to the problems of poverty, under-employment and unemployment can
only be found within the framework of a rapidly expanding economy. To that end, every
effort will have to be made to achieve the planned growth rate of 5.2 per cent in the Sixth
Plan. We recognise however that even this rate of growth will have to be supplemented by
more direct means of reducing the incidence of poverty, especially in the rural areas.
Programmes of direct productive benefit to the poor involving the transfer of assets, the
provision of inputs, credit, training and services, the generation of wage employment through
the National Rural Employment Programme and the provision of social services through the
Minimum Needs and other programmes, will be drawn together so that they focus upon the



level of the individual household, and raise at least 3000 of the poorest households above the
poverty line in each block during the Plan. Necessary changes in the extension and delivery
services will be given the highest priority. Simultaneously, every effort will be made to
secure voluntary adoption of the small family norm. In the ultimate analysis the success of
our efforts in eliminating poverty and unemployment will depend on the extent to which we
succeed in reducing the rate of population growth.

It need hardly be emphasised that the success of the Plan depends crucially on the efficiency,
quality and texture of implementation. The challenge ahead is to achieve an all round
improvement in production and efficiency, not merely in the functioning of the infrastructure
or the public sector, but in all segments of national life. We must get the most out of the
capital stock and human resources we have developed during the last thirty years. In this
context, a special responsibility devolves on that segment of the population which has
benefited disproportionately from planned development sc far and also on those who have
been fortunate enough to enjoy superior access to education and professional skills.

Ultimately, the requisite effort and the required sacrifices will only be made if faith in the
basic equity of our economic and social system is maintained, and the task which we set
ourselves is bold enough to capture the imagination of our citizens. These considerations
have implications both for the distributional objectives we build into our Plans, and for the
total size of the resources we mobilise for them. It is to be hoped that the Sixth Plan 1980-85,
despite all the constraints it faces, will not be found wanting on either of these criteria. The
translation of the promise 'it holds out into actual performance, however, is something that
can only be ensured by all of us collectively. It is only through sustained hard work,
discipline and self-restraint, particularly on the part of the more privileged sections of our
society, a willingness to subordinate narrow sectional loyalties to wider national interests; in
short; by recapturing some of the idealism and sense of adventure which inspired our freedom
struggle, that we can hope to meet effectively the formidable challenges that lie ahead.

SEVENTH FIVE YEAR PLAN (1985-90)
The draft of the Seventh Plan was approved on November 9, 1985 by the National
Development Council. The plan was part of the long-term plan for the period of 15 years.
Objectives:
i) Decentralisation of planning and full public participation in development.
ii) The maximum possible generation of productive employment.
iii) Removal of poverty and reduction in income disparities.
The Seventh 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 7th five year plans were to establish growth in areas of increasing
economic productivity, production of food grains, and generating employment opportunities.
As an outcome of the sixth five year plan, there had been steady growth in agriculture,
control on 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 7th
Plan had strived towards socialism and energy production at large.

The planning process is the precious gift of Pandit Jawaharlal Nehru to the people of India.
Indiraji nursed this tender plant with great and loving care. As she once put it, planning in our
country is a charter of orderly progress. It provides a framework of time and space that binds


sectors, regions and States together and relates each year's effort to the succeeding years. By
strengthening the social and economic fabric of the country as a whole and of the different
regions and States, it makes a powerful contribution to the goal of national integration. The
planning process has contributed a great deal to evolving a broad national consensus
regarding the basic objectives, strategies and design of our development policies. This has
helped to generate broad mass support for national economic policies which has added
greatly to the cohesion and stability enjoyed by our polity.

Removal of poverty, the building of a modern society making maximum possible use of
science and technology, and attainment of self-reliance are the basic objectives of planning in
India. The previous Plans have made valuable contribution to the achievement of these
national goals. I venture to think that the Seventh Plan consitutes yet another important
milestone in the nation's quest to rid this country of the ancient scourges of poverty,
ignorance and disease.

Effective planning must be based on a vision of the future. We need a long-term perspective
to translate the vision into reality and to make it operational. The Seventh Plan is, therefore,
set within a 15-year perspective. The aim is to create by the year 2000 the conditions
necessary for self-sustaining growth and to provide the basic material requisites of well-being
for all our people. This means that we have to sustain and accelerate the momentum of
economic growth. Agriculture, industry, the infrastructure and social services have to
function at progressively higher levels of efficiency and productivity. Full advantage must be
taken of advances in science and technology to bring about the needed structural
transformation of our economy. Simultaneously, measures designed to raise the productivity
and incomes of the poorer sections of society and poorer regions must be pursued with
greater vigour. The objectives and thrusts of the Seventh Plan have, therefore, been
formulated as part of the longer term strategy which seeks, by the year 2000, to virtually
eliminate poverty and illiteracy, achieve near full employment, secure satisfaction of the
basic needs of food, clothing and shelter and provide health for all. The Plan thus seeks to
assist in the establishment of an economy and polity which is modern, efficient, progressive,
humane and is informed by equity and social justice.

India's growth performance has improved considerably in the last decade. The Seventh Plan
seeks to take advantage of this favourable trend by aiming to stabilise the growth rate of the
economy at an average annual rate of 5 per cent. The targetted growth rates for the economy
as a whole, as well as for outputs of both agriculture (4 per cent) and industry (8 per cent),
imply a significant improvement over past trends. As such, major efforts will be needed to
achieve the growth targets of the Seventh Plan.

In formulating the Plan, the Planning Commission has kept in view the mandate given to it by
the National Development Council when it approved the Approach Paper last year. Food,
work and productivity have been the three basic priorities which guided the preparation of the
Plan. Furthermore, because of their critical importance in sustaining the growth process,
particular attention has been paid to raising the capability of the infrastructure and human
resource development with substantial increases in the proportions of outlays for these two
sectors as compared to the Sixth Plan.

The proposed pattern of resource allocation is designed to ensure that the country will remain
self-sufficient in food and that significant progress will be made in increasing the production
of vegetable oils, pulses, vegetables and horticulture. The objective is to build an expanded



system of food security, at rising levels of per capita consumption. As part of the strategy of a
more regionally balanced agricultural development and production, special emphasis has
been laid on increasing the productivity of rice in the Eastern States and on the development
of dryland agriculture. The Plan also lays considerable stress on enhancing the productivity
and incomes of small and marginal farmers. The agricultural programmes of the plan would
greatly benefit from the creation of an additional irrigation potential of about f3 million
hectares. Since variations in the rate of growth of agriculture are a major factor accounting
for regional differences in the pace of development, the agricultural strategy of the plan, with
its emphasis on more even and balanced distribution of agricultural growth, will also help to
reduce regional disparities.

In the field of employment, the major objective of the Plan is to ensure that the growth of
employment opportunities is faster than the growth of the labour force. Rapid agricultural
development (especially in areas agriculturally backward) expansion of irrigation facilities,
more intensive cropping and continuation of the employment-oriented programmes such as
the National Rural Employment Programme and the Rural Landless Employment Guarantee
Programme, wouli contribute significantly to the generation of additional employment
opportunities in rural areas. The faster rate of growtl of industry and a considerably expanded
housing programme in the private sector—for which attempts would be madi to provide
finance through institutional sources—would together generate a larger volume of
employment in thi non-agricultural sector than in the past. The Seventh Plan is thus an
employment-oriented Plan. Over the Plan perioc employment potential is expected to
increase by 40 million standard person years against an addition to the labour fore of 39
million persons. The employment potential will go up by 4 per cent per year, well above the
expected growth rat of labour force of about 2.5 to 2.6 per cent over the Seventh Plan.

Removal of poverty remains a central concern of planning in India. Consistent with this
objective, the Sevent Plan's development strategy and the pattern of growth emerging from it
are expected to lead to reduction in poverty at faster rate than in the past. The Plan envisages
an expanded coverage under the various anti-poverty programme. Taking into account the
highly comfortable position of food stocks with the public sector, it may be possible to expan
the employment-oriented anti-poverty programmes at a still faster rate than envisaged in the
Plan document. Evei effort will be made to plug various loopholes in the operation of anti-
poverty programmes and to integrate these an various sectoral and area development
programmes into a comprehensive design of integrated development of eac area. The Plan
pays special attention to the problems faced by the more vulnerable sections of our society
such t scheduled castes, scheduled tribes, women and children. The Plan recognises that in a
situation where poverty pervasive, the perception of needs and priorities must not be a merely
male perception but must take into acconi explicitly the special needs and problems of
women. As a result of these measures, the poverty ratio will decline fro 37 per cent in 1984-
85 to less than 26 per cent in 1989-90. In absolute terms, the number of poor persons
expected to fall from 273 million in 1984-85 to 211 million in 1989-90.

Promotion of efficiency and higher productivity have been another major concern in the
preparation of this Pla Increased and more efficient utilisation of existing assets both in
agriculture and industry will contribute to increasing ti efficiency of resource use and also
help in containing the rise in the capital output ratio. A coordinated approach irrigation,
drainage and land use management will be adopted to realise the multiple cropping potential
of the ne agricultural technology. In industry, emphasis is being placed on modernisation,
investment in balancing equipment ai technology up gradation to a much greater degree than



ever before. The policy framework for industrial growth in the Seventh Five Year Plan lays
special emphasis on setting up of plants of economic size and on the creation of an
environment where business firms have an adequate incentive to modernise, reduce cost,
improve the quality of th< products and upgrade their technology. New developments in
micro-electronics, informatics, telematics, biotechnol gies, material sciences, oceanography,
instrumentation and space technology offer exciting opportunities. A w conceived and
coordinated approach to the introduction of these emerging technologies in our production
process v further accelerate the pace of technical progress, structural change and growth of
productivity, efficiency and qual consciousness.

In order that agriculture and industry may grow faster, increased emphasis has been placed on
investments infrastructure so that shortages in power, transport and coal would not arise for
the scale of activities envisaged in t Plan. The Plan envisages a significant increase in the
share of energy in the public sector outlay. Nearly 31 per cent the total public sector outlay is
meant for energy. The generation of power is expected to grow at an average annual rate of
12.2 per cent over the Plan period. The Plan pays considerable attention to meeting the
energy needs of rural are, It seeks to extend the benefit of electricity to 1.18 lakh villages and
to energise 23.9 lakh pumpsets for irrigation. T supply of fuelwood has been included as an
additional component of the Minimum Needs Programme. The programi for the development
and utilisation of biogas and for the installation of new smokeless 'chulas' will be expanded
very substantially.

Another major thrust area in the Seventh Plan is human resource development. Public sector
outlays for social services show a significant increase as compared to the Sixth Plan. The
Plan seeks to facilitate development of 1 human potential in terms of self-respect, self-
reliance and a life of dignity. Apart from expansion of the exist programmes in education,
health, provision of clean drinking water and sanitation, new initiatives and innovat measures
are contemplated in these areas. The Plan seeks to provide adequate drinking water facilities
for the entire population both in urban and rural areas. By the end of the Plan period, the
infrastructure for primary health care will be fully operational with regard to village health
guides, sub-centres, primary health centres and multipurpose health workers. Thus, we would
have a country-wide system of health care, with a balanced mix of preventive, primitive and
curative services. Increased emphasis on protection and preservation of the ecological
balance and environment is another distinctive feature of the Seventh Plan.

As regards the financing of the Plan, in broad macro terms, the Plan is eminently bankable
and credible, as it projects only a modest increase in the rate of investment and domestic
savings during the Plan period. The rate of investment is projected to go up from 24.5 per
cent of GDP in 1984-85 to 25.9 per cent by 1989-90 and the rate of domestic savings is
projected to go up from 23.3 per cent to 24.5 per cent over the same period. The financing
pattern of the Plan seeks to limit recourse to deficit financing within limits of safety and
prudence. In the same manner, the external financing of the Plan is expected to involve a
deficit of not more than 1.6 per cent of GDP in the balance of payments on current account.
The debt service ratio will not exceed 20 per cent of current receipts during the Plan period.
Thus care has been taken to ensure that internal and external financing of the Plan does not
involve assumption of unacceptable risks.

It is, however, to be recognised that financing of the Seventh Plan would require determined
and more intense efforts for resource mobilisation. The ratio of taxation to GDP will have to
increase by two percentage points over the Plan period. The success of the Plan is crucially



dependent on the achievement of this target. Subsidies and other non-Plan expenditure will
have to be firmly contained if excessive recourse to deficit financing is to be avoided. In the
same manner, the public sector enterprises will have to generate larger resources if the
requirements of additional investments are to be financed in a non-inflationary manner. To
maintain the viability of external payments, it will be necessary to pay greater attention to
export promotion and to containing the growth of imports. Our export performance still
displays major structural weaknesses and in the interest of an orderly management of our
balance of payment, there will have to be a substantial improvement in the competitiveness
and quality of our exports. Simultaneously, we must adopt effective measures to curb the
growth of imports of petroleum, vegetable oils and sugar.

In a truly moving foreword to the Sixth Five Year Plan, Indiraji reminded us that the measure
of a Plan is not intention but achievement, not allocation but benefit. It is a statement of
universal validity and it applies as much to the Seventh Plan as to the earlier Plans. Thus the
impact of the Seventh Plan will depend on the earnestness and determination with which it is
implemented. The Seventh Plan document lists several areas where we must improve upon
past performance if we are to realise the objectives and goals of the Plan. This is not the place
to discuss these problem areas at length. However, since devising effective solutions for some
of these problems is crucial to the success of the Plan, a brief reference to some major
problem areas is justified.

First of all, the rehabilitation and revitalisation of the agricultural credit system is essential
for achieving the agricultural targets of the Plan. The mounting phenomenon of overdues
must be firmly controlled if the agricultural credit system is to finance adequately the input
requirements of agriculture.

Secondly, there must be a substantial improvement in the quality of agricultural and rural
development administration. The technical knowledge and skills of the official grass-roots
level administration need to be greatly improved if we are to impart a scientific temper to our
agriculture. District and block level planning has yet to take firm roots. Without the
introduction of effective block level/district level planning, the impact of large flows of
money through the various anti-poverty programmes will remain limited.

Thirdly, we must take a fresh look at not only the basic strategy but also the programme
content of the family welfare programme, so as to bring about a faster reduction in the rate of
population growth.

Fourthly, there must be a major improvement in productivity, efficiency and internal resource
generation of the public sector enterprises both of the Centre and of the States. Internal
resource generation is particularly weak in capital-intensive enterprises in sectors such as
power, coal, steel, transport and fertilisers. We need new administrative structures and new
concepts of management so as to enable the public sector to perform its dynamic role in the
process of capital accumulation.

Finally, we must adopt effective measures to bring about meaningful participation of the
people in all phases of national development. We need to tap fully the latent potential of the
Panchayati Raj institutions for harnessing the people's energies for nation building activities.
Simultaneously, we must also fully exploit the creative potential offered by voluntary
organisations engaged in development work.



Planning in our country is an instrument for achieving the nation's basic goals and objectives.
It was the dream of Mahatma Gandhi to wipe the tears from the eyes of each and every
individual in our country. 'We can be legitimately proud of the phenomenal progress made by
the country since we embarked on the path ot planned development. However, there are still
too many people with tears in their eyes. Our task is thus clear. We have to wage a still more
intensive campaign against poverty. Recent experience suggests that by harnessing the forces
of modern science and technology, it is possible, as never before, to ensure that chronic
poverty need not be the inevitable lot of the majority of humankind. Poverty eradication is an
attainable goal. However, it must not be assumed that development is like going to a free
dinner party. The standard of living is a matter of high productivity, and there are no short
cuts to it. Hard decisions will be necessary to mobilise the needed resources and to sustain the
tempo of modernisation and social development. Simultaneously, we must evolve new
structures, new attitudes, a new moral code, a new work ethic, a sort of cultural revolution, if
you wish, which lays emphasis on dedication, commitment to national goals and pursuit of
excellence so that we can make the best possible use of scarce national resources.

The task ahead is not easy. We face many challenges and uncertainties. But our country has a
tremendous built-in resilience and strength. It has weathered many a storm in the past. The
nation is firm in its resolve to work out an autonomous path of development suited to the
genius and needs of our people. The Seventh Plan represents a massive national endeavour to
build a new India free from the fear of want and exploitation. Its objectives, strategies and
programmes are designed to assist in the realisation of the nation's cherished goals. The Plan
is an expression of the collective will of the Indian people to move forward at a still faster
pace on the road to progress, prosperity, social justice and self-reliance.

EIGHTH FIVE YEAR PLAN (1992-97)

The Eighth Plan proposed a growth rate of 5.6 per cent per annum on an average during the
plan period. The Eighth Plan focused on (i) clear prioritisation of sectors/projects for
investment in order to facilitate implementation of the policy initiatives taken in the areas of
fiscal, trade and industrial sectors and human development.
Objectives:
i) Generation of adequate employment of achieve near full employment level by the turn of
the century.
ii) Containment of population growth through people‟s active co-operation and an effective
scheme of incentives and disincentives.
iii) Universalisation of elementary education and complete eradication of illiteracy among the
people in the age group of 15 to 35 years.

The launching of the First Five Year Plan in April 1951 initiated a process of development
aimed not only at raising the standard of living of the people but also opening out to them
new opportunities for a richer and more varied life. This was sought to be achieved by
planning for growth, modernisation, self-reliance and social justice. We have come a long
way over the past forty years. A largely agrarian feudal economy at the time of independence
has been transformed into one based on a well developed and a highly diversified
infrastructure with immense potential for industrialisation. Income and consumption levels
have significantly risen. Consumption basket has diversified. Incidence of poverty has visibly
declined. The average life expectancy has gone up. The death and the birth rates have
declined. Literacy has improved and the educational base has widened.



We now have a robust and resilient agricultural economy with near self-sufficiency in food
production. We have built a diversified industrial and service structure. We have a large pool
of skilled manpower and ample entrepreneurial capabilities. The growth performance of at
least a decade preceding the Eighth Plan has been impressive. We have the wherewithal for
further progress. Hence, the task before the Eighth Plan is to use these advantages for further
growth and lay strong foundations for even higher growth in the future.

The economy has passed through difficult circumstances during the last couple of years. The
growing fiscal gap and the sudden depletion of foreign exchange resources created a situation
which put severe strains on the economic system leading to drastic import curbs, high rate of
inflation and recession in industry. This in turn has led to the projection of very low growth in
1991-92, which happens to be the base year of the Eighth Plan. Corrective measures have
already been initiated by way of planned fiscal reforms and policy changes. The Eighth Plan
will thus have to reorient some of the development paradigms, since its objective is to lay a
sound foundation for higher growth and to achieve the most significant goals, namely,
improvement in the levels of living, health and education of the people, full employment,
elimination of poverty and a planned growth in population.

The public sector was assigned a place of commanding height in the Indian economic scene.
It was expected to create the basic infra-structure for development, be a pace setter in taking
risk and nurturing entrepreneurship, take care of the social needs, help the poor and the weak
and create an environment of equal opportunities and social justice. The public sector has
expanded considerably. Its expanse and its influence may not be measured just by the size of
its contribution to GDP or its share in investment, but by the fact that it touches every aspect
of life. In the process, it has made the people take the public sector for granted, oblivious of
certain crucial factors like efficiency, productivity and competitive ability. This has eroded
the public sector's own sense of responsibility and initiative. Many of the public sector
enterprises have turned into slow moving, inefficient giants. A certain amount of
complacency has set in which is not conducive to growth. While there are several social and
infrastructural sectors where only the public sector can deliver the goods, it has to be made
efficient and surplus generating. It must also give up activities which are not essential to its
role. The Eighth Plan has to undertake this task of reorientation.

The Eighth Plan will have to undertake re- examination and reorientation of the role of the
Government as well as the process of planning. It will have to work out the ways and means
of involving people in the developmental task and social evolution. It will have to strengthen
the people's participatory institutions. In keeping with these objectives, the process of
planning will have to be re- oriented so as to make planning largely indicative. This, in turn,
will imply a somewhat changed fole for the Planning Commission. The Planning
Commission will have to concentrate on anticipating future trends and evolve integrated
strategies for achieving the highest possible level of development of the country in keeping
with the internationally competitive standards. In place of the resource allocation role which
very largely characterised the working of the Planning Commission in the past, it will have to
concentrate on optimal utilization of the limited available resources. This will call for the
creation of a culture of high productivity and cost efficiency in the Government both at the
Centre and the States and the Planning Commission will have to play the role of a change
agent. At the same time, it must provide the broad blue-print for achieving the essential social
and economic objectives and indicate the directions in which the economy and the various
sub-sectors should be moving. It should pin-point areas in which advance action should be
taken to avoid serious bottlenecks. Planning must thus proceed from a vision of the society to


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