The Planning Commission

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Theeconomy of Indiais based in part on planning through its five-year plans, which are developed, executed and monitored by

thePlanning Commission of India. The eleventh plan completed its term in March 2012 and the twelfth plan is currently

underway.[1]Prior to the fourth plan, the allocation of state resources was based on schematic patterns rather than a transparent

and objective mechanism, which led to the adoption of theGadgil formulain 1969. Revised versions of the formula have been used

since then to determine the allocation of central assistance for state plans.[2]

The first Indian Prime Minister,Jawaharlal Nehrupresented the first five-year plan to theParliament of Indiaand needed urgentattention.[3]The total planned budget of 2069 crore was allocated to seven broad areas:irrigationandenergy(27.2

percent),agricultureandcommunity development(17.4 percent),transportandcommunications(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 problemsdeficiency of capital and low capacity to save.

The target growth rate was 2.1% annualgross domestic product(GDP) growth; the achieved growth rate was 3.6%[5]Thenet

domestic productwent up by 15%. Themonsoonwas good and there were relatively highcrop yields, boosting exchange reserves

and theper capita income, which increased by 8%. National income increased more than the per capita income due to

rapidpopulation growth. Many irrigation projects were initiated during this period, including theBhakra DamandHirakud Dam.

TheWorld Health Organization, with the Indian government, addressed children's health and reducedinfant mortality, indirectly

contributing to population growth.

At the end of the plan period in 1956, fiveIndian Institutes of Technology(IITs) were started as major technical institutions.TheUniversity Grant Commissionwas set up to take care of funding and take measures to strengthen the higher education in the

country.[6]Contracts were signed to start five steel plants, which came into existence in the middle of the second five-year plan. The

plan was successful.

Target Growth: 2.1% Actual Growth: 3.6% [5]

[edit]First Plan (1951-1956)

Industrial sector Energy, Irrigation Transport, Communications Land rehabilitation Social services Development of

agriculture and community Miscellaneous issues

The target set for the growth in the gross domestic product was 2.1percent every year. In reality, the actual achieved with regard to

gross domestic product was 3.6 percent per annum. This is a clear indication of the success of the 1st five year plan.

Some important events that took place during the tenure of the 1st five year plan: The following Irrigation projects were started

during that period: Mettur Dam Hirakud Dam Bhakra Dam.

The government had taken steps to rehabilitate the landless workers, whose main occupation was agriculture. These workers were

also granted fund for experimenting and undergoing training in agricultural know how in various cooperative institutions. Soil

conservation, was also given considerable importance. The Indian government also made considerable effort in improving posts and

telegraphs, railway services, road tracks, civil aviation. Sufficient fund was also allocated for the industrial sector. In addition

measures were taken for the growth of the small scale industries.

[edit]Second Plan (19561961)

The second five-year plan focused on industry, especiallyheavy 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 thepublic sector.

The plan followed theMahalanobis model, aneconomic developmentmodel developed by the IndianstatisticianPrasanta Chandra

Mahalanobisin 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 theIndian Statistical Institute. The plan assumed a closed economy in

which the main trading activity would be centered on importing capital goods.[7][8]

Hydroelectric powerprojects and five steel mills atBhilai,Durgapur, andRourkelawere established.Coalproduction was increased.

Morerailwaylines were added in the north east.
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TheAtomic Energy Commissionwas formed in 1958 withHomi J. Bhabhaas the first chairman. TheTata Institute of Fundamental

Researchwas established as a research institute. In 1957 a talent search and scholarship program was begun to find talented

young students to train for work in nuclear power.

The total amount allocated under the second five-year plan in India was Rs. 4,800 crore. This amount was allocated among various

sectors:

Power and irrigation

Social services

Communications and transport

Miscellaneous

Target Growth:4.5% Growth achieved:4.0%[5]

[edit]Third Plan (19611966)

The third plan stressed on agriculture and improvement in the production of wheat, but the briefSino-Indian War of 1962exposed

weaknesses in the economy and shifted the focus towards the Defence industry or Indian army. In 19651966, India fought a [Indo-

Pak] War with Pakistan. Due to this there was a severe drought in 1965. The war led to inflation and the priority was shifted to price

stabilisation. The construction ofdamscontinued. Manycementandfertilizerplants were also built.Punjabbegan producing an

abundance ofwheat.

Manyprimary schoolshave been started in rural areas. In an effort to bring democracy to the grassroot level,Panchayatelections

have been started and thestateshave been given more development responsibilities.

State electricity boards and state secondary education boards were formed. States were made responsible

forsecondaryandhigher education. State road transportation corporations were formed and local road building became a state

responsibility.


[edit]Fourth Plan (19691974)

At this timeIndira Gandhiwas thePrime Minister. The Indira Gandhi governmentnationalised14 major Indian banks and theGreen

Revolution in Indiaadvanced agriculture. In addition, the situation inEast Pakistan(nowBangladesh) was becoming dire as

theIndo-Pakistani War of 1971andBangladesh Liberation Wartook Funds earmarked for the industrial development had to be

diverted for the war effort. India also performed theSmiling Buddhaunderground nuclear testin 1974, partially in response to

theUnited Statesdeployment of theSeventh Fleetin theBay of Bengal. The fleet had been deployed to warn India against

attackingWest Pakistanand extending the war.


[edit]Fifth Plan (19741979)

Stress was by laid onemployment,povertyalleviation, andjustice. The plan also focused onself-reliancein agricultural production

and defence. In 1978 the newly electedMorarji Desaigovernment rejected the plan. Electricity Supply Act was enacted in 1975,

which enabled the Central Government to enter into power generation and transmission.[citation needed]

TheIndian national highway systemwas introduced and many roads were widened to accommodate the

increasingtraffic.Tourismalso expanded.

Target Growth: 4.4% Actual Growth: 5.0[5]

[edit]Sixth Plan (19801985)

The sixth plan also marked the beginning ofeconomic liberalisation.Price controlswere eliminated and ration shops were closed.

This led to an increase in food prices and an increase in thecost of living. This was the end ofNehruvian socialismandRajeev

Gandhiwas prime minister during this period.
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Family planningwas also expanded in order to preventoverpopulation. In contrast to China's strict and bindingone-child policy,

Indian policy did not rely on the threat of force[citation needed]. More prosperous areas of India adopted family planning more rapidly than

less prosperous areas, which continued to have a highbirth rate. The sixth five year plan was a great success...


[edit]Seventh Plan (19851990)

The Seventh Plan marked the comeback of theCongress Partyto 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.

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 thrust areas of the 7th Five year plan have

been enlisted below:

Social Justice

Removal of oppression of the weak

Using modern technology

Agricultural development

Anti-poverty programs

Full supply of food, clothing, and shelter

Increasing productivity of small- and large-scale farmers

Making India an Independent Economy

Based on a 15-year period of striving towards steady growth, the 7th Plan was focused on achieving the pre-requisites of self-

sustaining growth by the year 2000. The Plan expected a growth in labour force of 39 million people and employment was expected

to grow at the rate of 4 percent per year.

Some of the expected outcomes of the Seventh Five Year Plan India are given below:

Balance of Payments (estimates): Export 33000crore(US$6.0 billion), Imports (-) 54000crore(US$9.9 billion), TradeBalance (-) 21000crore(US$3.8 billion)

Merchandise exports (estimates): 60653crore(US$11.1 billion)

Merchandise imports (estimates): 95437crore(US$17.5 billion)

Projections for Balance of Payments: Export 60700crore(US$11.1 billion), Imports (-) 95400crore(US$17.5 billion),Trade Balance- (-) 34700crore(US$6.4 billion)

Under the Seventh Five Year Plan, India strove to bring about a self-sustained economy in the country with valuable contributions

from voluntary agencies and the general populace.


[edit]Eighth Plan (19921997)

198991 was a period of economic instability in India and hence no five-year plan was implemented. Between 1990 and 1992, there

were only Annual Plans. In 1991, India faced a crisis inForeign Exchange(Forex) reserves, left with reserves of only about US$1

billion. Thus, under pressure, the country took the risk of reforming the socialist economy.P.V. Narasimha Raowas the twelfth

Prime Minister of the Republic of India and head ofCongress Party, and led one of the most important administrations in India's

modern history overseeing a major economic transformation and several incidents affecting national security. At that time

Dr.Manmohan Singh(currently, Prime Minister of India) launched India's free market reforms that brought the nearly bankrupt nation

back from the edge. It was the beginning ofprivatisationandliberalisationin India.
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4/8

Modernizationof industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy

was undertaken to correct the burgeoningdeficitand foreign debt. Meanwhile India became a member of theWorld Trade

Organizationon 1 January 1995.This plan can be termed as Rao and Manmohan model of Economic development. The major

objectives included, controlling population growth, poverty reduction, employment generation, strengthening the infrastructure,

Institutional building, tourism management, Human Resource development, Involvement of Panchayat raj, Nagar Palikas, N.G.O'S

and Decentralisation and people's participation. Energy was given priority with 26.6% of the outlay. An average annual growth rate

of 6.78% against the target 5.6%[5]

was achieved.

To achieve the target of an average of 5.6% per annum, investment of 23.2% of the gross domestic product was required. The

incremental capital ratio is 4.1.The saving for invetsment was to come from domestic sources and foreign sources, with the rate of

domestic saving at 21.6% of gross domestic production and of foreign saving at 1.6% of gross domestic production.[10]

[edit]Ninth Plan (19972002)

Ninth Five Year Plan India runs through the period from 1997 to 2002 with the main aim of attaining objectives like speedy

industrialization, human development, full-scale employment, poverty reduction, and self-reliance on domestic resources.

Background of Ninth Five Year Plan India: Ninth Five Year Plan was formulated amidst the backdrop of India's Golden jubilee o f

Independence.

The main objectives of the Ninth Five Year Plan of India are:

to prioritize agricultural sector and emphasize on the rural development

to generate adequate employment opportunities and promote poverty reduction

to stabilize the prices in order to accelerate the growth rate of the economy

to ensure food and nutritional security.

to provide for the basic infrastructural facilities like education for all, safe drinking water, primary health care, transport, energy

to check the growing population increase

to encourage social issues like women empowerment, conservation of certain benefits for the Special Groups of the society

to create a liberal market for increase in private investments

During the Ninth Plan period, the growth rate was 5.35 per cent, a percentage point lower than the target GDP growth of 6.5 per

cent.[11]

[edit]Tenth Plan (20022007)

Attain 8% GDP growth per year.

Reduction ofpoverty rateby 5 percentage points by 2007.

Providing gainful and high-quality employment at least to the addition to the labour force.

Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.

20 point program was introduced.

Target growth:8.1% Growth achieved:7.7%

[edit]Eleventh Plan (20072012)

The eleventh plan has the following objectives:

1. Income & Poverty

AccelerateGDPgrowth from 8% to 10% and then maintain at 10% in the 12th Plan in order to double per capita

income by 201617

Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of benefits

Create 70 million new work opportunities.
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Reduce educated unemployment to below 5%.

Raise real wage rate of unskilled workers by 20 percent.

Reduce the headcount ratio of consumption poverty by 10 percentage points.

2. Education

Reduce dropout rates of children from elementary school from 52.2% in 200304 to 20% by 201112

Develop minimum standards of educational attainment in elementary school, and by regular testing monitor

effectiveness of education to ensure quality

Increaseliteracy ratefor persons of age 7 years or above to 85%

Lower gender gap in literacy to 10 percentage point

Increase the percentage of each cohort going to higher education from the present 10% to 15% by the end of the

plan.

3. Health

Reduceinfant mortality rateto 28 andmaternal mortality ratioto 1 per 1000 live births ReduceTotal Fertility Rateto 2.1

Provide clean drinking water for all by 2009 and ensure that there are no slip-backs

Reducemalnutritionamong children of age group 03 to half its present level

Reduceanaemiaamong women and girls by 50% by the end of the plan

4. Women and Children

Raise the sex ratio for age group 06 to 935 by 201112 and to 950 by 201617

Ensure that at least 33 percent of the direct and indirect beneficiaries of all government schemes are women and

girl children

Ensure that all children enjoy a safe childhood, without any compulsion to work

5. Infrastructure

Ensure electricity connection to all villages andBPLhouseholds by 2009 and round-the-clock power.

Ensure all-weather road connection to all habitation with population 1000 and above (500 in hilly and tribal areas)

by 2009, and ensure coverage of all significant habitation by 2015

Connect every village by telephone by November 2007 and provide broadband connectivity to all villages by 2012

Provide homestead sites to all by 2012 and step up the pace of house construction for rural poor to cover all the

poor by 201617

6. Environment

Increase forest and tree cover by 5 percentage points.

AttainWHOstandards of air quality in all major cities by 201112.

Treat all urban waste water by 201112 to clean river waters.

Increase energy efficiency by 20%

Target growth:8.33% Growth achieved:7.9%
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[edit]Twelfth Plan (20122017)

12th Five Year Plan of theGovernment of India(201217) had decided for the growth rate at 8.2% but NDC on 27th Dec 2012

approved 8% growth rate for 12th five year plan.;[12]

With the deteriorating global situation, the Deputy Chairman of the Planning Commission Mr Montek Singh Ahluwalia has said that

achieving an average growth rate of 9 per cent in the next five years is not possible. The Final growth target has been set at 8% by

the endorsement of plan at the National Development Council meeting held in New Delhi.

"It is not possible to think of an average of 9 per cent (in 12th Plan). I think somewhere between 8 and 8.5 per cent is feasible, Mr

Ahluwalia said on the sidelines of a conference of State Planning Boards and departments. The approached paper for the 12th Plan,

approved last year, talked about an annual average growth rate of 9 per cent.

When I say feasible...that will require major effort. If you dont do that, there is no God given right to grow at 8 per cent. I think given

that the world economy deteriorated very sharply over the last year...the growth rate in the first year of the 12th Plan (2012-13) is 6.5

to 7 per cent.

He also indicated that soon he would share his views with other members of the Commission to choose a f inal number (economic

growth target) to put before the countrys NDC for its approval.

Though the 12th Plan has taken off, it is yet to be formally approved. The Planning Commission has set a deadline of September for

taking the approval of the National Development Council. The council is expected to meet after July subject to the convenience of

the Prime Minister.

Poverty The government intends to reduce poverty by 10 per cent during the 12th Five-Year Plan. Mr Ahluwalia said, We aim to

reduce poverty estimates by 2 per cent annually on a sustainable basis during the Plan period.

According to the Tendulkar methodology, the percentage of population below the poverty line was 29.8 per cent at the end of 2009-

10. This number includes 33.8 per cent in the rural areas and 20.9 per cent in the urban areas.

Earlier, addressing a conference of State Planning Boards and Planning departments, he said the rate of decline in poverty doubled

during the 11th Plan. The commission had said, while using the Tendulkar poverty line, the rate of reduction in the five years

between 200405 and 200910, was about 1.5 percentage points each year, which was twice that when compared to the period

between 1993-95 to 2004-05.[13]what is the government focus of now a five-year plan, i.e. 20122017

]

The Planning Commission is an institution in theGovernment of India, which formulatesIndia'sFive-Year Plans, among other

functions.

History

See also:Five-year plans of India

Rudimentary economic planning, deriving thesovereign authority of the state, first initiated in India in 1938 byNetaji Subhas

Chandra Bosewhen he was the Congress president and drafted byMeghnad Saha. TheBritish Rajalso formally established a

planning board that functioned from 1944 to 1946. Industrialists and economists independently formulated at least three

development plans in 1944.

After India gained independence, a formal model of planning was adopted, and accordingly the Planning Commission, reporting

directly to thePrime Minister of Indiawas established on 15 March 1950, with prime ministerJawaharlal Nehruas the chairman.

The Planning Commission does not derive its creation from either theConstitutionor statute, but is an arm of theCentral/UnionGovernment.

The first Five-year Plan was launched in 1951 which mainly focused in development of agricultural sector and two subsequent five-

year plans were formulated till 1965, when there was a break because of the Indo-Pakistan Conflict. Two successive years of

drought, devaluation of the currency, a general rise in prices and erosion of resources disrupted the planning process and after

three Annual Plans between 1966 and 1969, the fourth Five-year plan was started in 1969.
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The Eighth Plan could not take off in 1990 due to the fast changing political situation at the Centre and the years 199091 and

199192 were treated as Annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural adjustment

policies.

For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but

since the launch of the Ninth Plan in 1997, the emphasis on the public sector has become less pronounced and the current thinking

on planning in the country, in general, is that it should increasingly be of an indicative nature.

[edit]Organisation

The composition of the Commission has undergone a lot of change since its inception. With the prime minister as theex-

officioChairman, the committee has a nominated Deputy chairman, who is given the rank of a full Cabinet Minister. Mr.Montek

Singh Ahluwaliais presently the Deputy Chairman of the Commission.

Cabinet Ministerswith certain important portfolios act as ex-officio members of the Commission, while the full-time members are

experts of various fields like Economics, Industry, Science and General Administration.

Present ex-officio members of the Commission, are Finance Minister P Chidambaram, agriculture minister Sharad Pawar, home

minister Sushilkumar Shinde, health minister Ghulam Nabi Azad, chemicals and fertilisers minister M K Alagiri, communications

minister Kapil Sibal, law minister Ashwani Kumar, HRD minister M M Pallam Raju and minister of state for planning Rajeev Shukla.[1]

The Commission works through its various divisions, of which there are three kind:

General Planning Divisions

Programme Administration Divisions

The majority of experts in the Commission are economists, making the Commission the biggest employer of the Indian Economic

Services.

[edit]Functions

The Planning Commission's functions as outlined by the Government's 1950 resolution are following:

1. To make an assessment of the material, capital and human resources of the country, including technical personnel, and

investigate the possibilities of augmenting those resources which are found to be deficient in relation to the nation's

requirement.

2. To formulate a plan for the most effective and balanced utilisation of country's resources.

3. To define the stages, on the basis of priority, in which the plan should be carried out and propose the allocation of

resources for the due completion of each stage.

4. To indicate the factors that tend to retard economic development.

5. To determine the conditions which need to be established for the successful execution of the plan within the incumbent

socio-political situation of the country.

6. To determine the nature of the machinery required for securing the successful implementation of each stage of the plan in

all its aspects.

7. To appraise from time to time the progress achieved in the execution of each stage of the plan and also recommend the

adjustments of policy and measures which are deemed important vis-a-vis a successful implementation of the plan.

8. To make necessary recommendations from time to time regarding those things which are deemed necessary for

facilitating the execution of these functions. Such recommendations can be related to the prevailing economic conditions,

current policies, measures or development programmes. They can even be given out in response to some specific

problems referred to the commission by the central or the state governments.

From a highly centralised planning system, the Indian economy is gradually moving towards indicative planning where the Planning

Commission concerns itself with the building of a long-term strategic vision of the future and decide on priorities of nation. It works

out sectoral targets and provides promotional stimulus to the economy to grow in the desired direction. It also plays an integrative

role in the development of a holistic approach to the policy formulation in critical areas of human and economic development. In the

social sector, schemes that require coordination and synthesis like rural health, drinking water, rural energy needs, literacy and

environment protection have yet to be subjected to coordinated policy formulation. I t has led to multiplicity of agencies. The
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commission has now been trying to formulate and integrated approach to deal with this issue. The Planning Commission has asked

the States to hike the power tariff to save the ailing power sector. It also called upon the States to utilise the power subsidy for

improvement to essential services like drinking water supply, education and health for promoting inclusive growth. [2]
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The Planning Commission

Documents

Transcript of The Planning Commission