Indian Economy

Five Year Plans

When India became an independent country, many questions had arisen in front of the country’s leaders at that time. The British had left the Indian economy handicapped; leaders had the challenges to make country’s economy  strong. A formal model of planning was adopted. The Planning commission was established on 15th March 1950, with Former Prime Minister Jawaharlal Nehru as the Chairman. The Planning Commission was directly reporting to the Prime Minister of India.

Now, it is known as NITI Aayog (National Institute for Transforming India Aayog) and established by Prime Minister Narendra Modi on 1st January 2015 and instead of presenting formal 5 Year Plans, its role has been changed to act as a catalyst and facilitator for the economic growth. It acts through a Council which has the members drawn from the Central and the State governments.

The First Five-Year Plan of India was presented by Pandit Jawaharlal Nehru in 1951.

  • First Plan (1951-56)
  • Second Plan (1956-61)
  • Third Plan (1961-66)
  • Fourth Plan (1969-74)
  • Fifth Plan (1974-79)
  • Sixth Plan (1980-85)
  • Seventh Plan (1985-90)
  • Eight Plan (1992-97)
  • Ninth Plan (1997-2002)
  • Tenth Plan (2002-2007)

Planning Commission was assigned the task of formulating plans for the most effective and balanced utilisation of resources and determining priorities. Since then the Planning Commission frames the centralized and integrated national economic programs at the interval of every five years, thereby known as the Five-Year Plans.

The First Five-Year Plan of India was presented by Pandit Jawaharlal Nehru in 1951.

First Plan (1951-56):

  • It was based on Harrod-Domar Model.
  • Focus on Agriculture, Price Stability, Power and Transport
  • It was a successful plan primarily because of good harvests in the last two years of the plan.

Second Plan (1956-61):

  • It also called Mahalanobis plan named after the well known statistician.
  • Focus on rapid industrialization
  • Advocated huge imports through foreign loans.
  • Shifted basic emphasis from agriculture to industry
  • During this plan prices increased by 30%, against a decline of 13% during the First plan

Third Plan (1961-66):

  • It stressed agriculture and improvement in the production of wheat, but the brief Sino-Indian war of 1962 exposed weaknesses in the economy and shifted the focus towards the defence industry and the Indian Army.
  • Complete failure in reaching the targets due to unforeseen events-Chinese aggression (1962), Indo-Pak war (1964), severe drought 1965-66.

Three Annual Plans (1966-69):

  • Prevailing crisis in agriculture and serious food shortage necessitated the emphasis on agriculture during the Annual Plans
  • During these plans a whole new agricultural strategy was implemented. It involving wide-spread distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation.
  • During the Annual Plans, the economy absorbed the shocks generated during the Third Plan.

Fourth Plan (1969-74):

  • Main emphasis was on growth rate of agriculture to enable other sectors to move forward
  • First two years of the plan saw record production. The last three years did not measure up due to poor monsoon
  • Influx of Bangladeshi refugees before and after 1971 Indo-Pak warwas an important issue

Fifth Plan (1974-79):

  • It proposed to achieve two main objectives: 'removal of poverty' (Garibi Hatao) and 'attainment of self reliance'
  • Promotion of high rate of growth, better distribution of income and significant growth in the domestic rate of savings were seen as key instruments
  • The plan was terminated in 1978 (instead of 1979) when Janta Party government rose to power

Rolling Plan (1978-80):

  • Janta government put forward a plan for 1978- 1983. However, the government lasted for only 2 years. Congress government returned to power in 1980 and launched a different plan.

Sixth Plan (1980-85):

  • Focus - Increase in national income, modernization of technology, ensuring continuous decrease in poverty and unemployment, population control through family planning etc

Seventh Plan (1985-90):

  • Focus - rapid growth in food-grains production, increased employment opportunities and productivity within the framework of basic tenants of planning
  • The plan was very successful, the economy recorded 6% growth rate against the targeted 5%

Eight Plan (1992-97):

  • The eighth plan was postponed by two years because of political uncertainty at the centre
  • Worsening Balance of Payment position and inflation during 1990-91 were the key issues during the launch of the plan
  • The plan undertook drastic policy measures to combat the bad economic situation and to undertake an annual average growth of 5.6%
  • Some of the main economic outcomes during eighth plan period were rapid economic growth, high growth of agriculture and allied sector, and manufacturing sector, growth in exports and imports, improvement in trade and current account deficit

Ninth Plan (1997-2002):

  • It was developed in the context of four important dimensions: Quality of life, generation of productive employment, regional balance and self-reliance.

Tenth Plan (2002-2007):

  • To achieve 8% GDP growth rate
  • Reduction of poverty ratio by 5 percentage points by 2007
  • Providing gainful high quality employment to the addition to the labour force over the tenth plan period
  • Universal access to primary education by 2007
  • Reduction in gender gaps in literacy and wage rates by atleast 50% by 2007 Reduction in decadal rate of population growth between 2001 and 2011 to 16.2%
  • Increase in literacy rate to 72% within the plan period and to 80% by 2012
  • Increase in forest and tree cover to 25% by 2007 and 33% by 2012.
  • Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012.

Eleventh Plan (2007-2012):

  • Accelerate GDP growth from 8% to 10%. Increase agricultural GDP growth rate to 4% per year
  • Create 70 million new work opportunities and reduce educated unemployment to below 5%
  • Raise real wage rate of unskilled workers by 20 %
  • 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 %
  • Reduce Total Fertility Rate to 2.1
  • Raise the sex ratio for age group 0-6 to 935 by 2011-12 and to 950 by 2016-2017
  • Provide clean drinking water for all by 2009
  • Attain WHO standards of air quality in all major cities by 2011-12
  • Increase energy efficiency by 20 percentage points by 2016-17


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