Five Years Plans | Economy for UPSC 2024 (Pre & Mains) PDF Download

 Page 1


CHAPTER 7  
FIVE YEAR PLANS 
 
7.1 Introduction : Indian planning is an open process. Much of the controversy and the 
debates that accompany the preparation of the plans are public. The initial aggregate 
calculations and assumptions are either explicitly stated or readily deducible, and the 
makers of the plans are not only sensitive but responsive to criticism and suggestions 
from a wide variety of national and international sources. From original formulation 
through successive modifications to parliamentary presentation, plan making in India 
has evolved as a responsive democratic political process and the culmination of the 
same in the final document is an impressive manifestation of the workings of an open 
society. But by its very nature it also generates many problems from the point of view of 
mapping an optimal strategy for economic development. 
 
7.2 History of Planning in India & Origin of Five Year Plans:  
 
7.2.1 Though the planned economic development in India began in 1951 with the 
inception of First Five Year Plan , theoretical efforts had begun much earlier , even prior 
to the independence. Setting up of National Planning Committee by Indian National 
Congress in 1938 , The Bombay Plan & Gandhian Plan in 1944, Peoples Plan in 
1945 (by post war reconstruction Committee of Indian Trade Union), Sarvodaya Plan 
in 1950 by Jaiprakash Narayan were steps in this direction. 
7.2.2 Five-Year Plans (FYPs) are centralized and integrated national economic 
programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late 
1920s. Most communist states and several capitalist countries subsequently have 
adopted them. China and India both continue to use FYPs, although China renamed its 
Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to 
signify the central government’s more hands-off approach to development.  
7.2.3 After independence, India launched its First FYP in 1951,  under socialist 
influence of first Prime Minister Jawaharlal Nehru. The process began with setting up of 
Planning Commission in March 1950 in pursuance of declared objectives of the 
Government to promote a rapid rise in the standard of living of the people by efficient 
exploitation of the resources of the country, increasing production and offering 
opportunities to all for employment in the service of the community. The Planning 
Commission was charged with the responsibility of making assessment of all resources 
of the country, augmenting deficient resources, formulating plans for the most effective 
and balanced utilisation of resources and determining priorities.  
7.2.4 The first Five-year Plan was launched in 1951 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. 
7.2.5 The Eighth Plan could not take off in 1990 due to the fast changing political 
situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual 
Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural 
adjustment policies. 
7.2.6 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. 
Page 2


CHAPTER 7  
FIVE YEAR PLANS 
 
7.1 Introduction : Indian planning is an open process. Much of the controversy and the 
debates that accompany the preparation of the plans are public. The initial aggregate 
calculations and assumptions are either explicitly stated or readily deducible, and the 
makers of the plans are not only sensitive but responsive to criticism and suggestions 
from a wide variety of national and international sources. From original formulation 
through successive modifications to parliamentary presentation, plan making in India 
has evolved as a responsive democratic political process and the culmination of the 
same in the final document is an impressive manifestation of the workings of an open 
society. But by its very nature it also generates many problems from the point of view of 
mapping an optimal strategy for economic development. 
 
7.2 History of Planning in India & Origin of Five Year Plans:  
 
7.2.1 Though the planned economic development in India began in 1951 with the 
inception of First Five Year Plan , theoretical efforts had begun much earlier , even prior 
to the independence. Setting up of National Planning Committee by Indian National 
Congress in 1938 , The Bombay Plan & Gandhian Plan in 1944, Peoples Plan in 
1945 (by post war reconstruction Committee of Indian Trade Union), Sarvodaya Plan 
in 1950 by Jaiprakash Narayan were steps in this direction. 
7.2.2 Five-Year Plans (FYPs) are centralized and integrated national economic 
programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late 
1920s. Most communist states and several capitalist countries subsequently have 
adopted them. China and India both continue to use FYPs, although China renamed its 
Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to 
signify the central government’s more hands-off approach to development.  
7.2.3 After independence, India launched its First FYP in 1951,  under socialist 
influence of first Prime Minister Jawaharlal Nehru. The process began with setting up of 
Planning Commission in March 1950 in pursuance of declared objectives of the 
Government to promote a rapid rise in the standard of living of the people by efficient 
exploitation of the resources of the country, increasing production and offering 
opportunities to all for employment in the service of the community. The Planning 
Commission was charged with the responsibility of making assessment of all resources 
of the country, augmenting deficient resources, formulating plans for the most effective 
and balanced utilisation of resources and determining priorities.  
7.2.4 The first Five-year Plan was launched in 1951 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. 
7.2.5 The Eighth Plan could not take off in 1990 due to the fast changing political 
situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual 
Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural 
adjustment policies. 
7.2.6 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. 
7.3 Outline of Various Five year Plans:  
 
 
Plan 
First Plan 
(1951 - 56) 
Target Growth 
: 2.1 %  
Actual Growth 
3.6 %  
It was based on Harrod-Domar Model. 
Influx of refugees, severe food shortage & mounting inflation 
confronted the country at the onset of the first five year Plan. 
The Plan Focussed  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. Objectives of rehabilitation of refugees, 
food self sufficiency  & control of prices were  more or less achieved.
Second Plan 
(1956 - 61) 
Target Growth: 
4.5% Actual 
Growth: 4.3% 
Simple aggregative  Harrod Domar Growth Model was again used for 
overall projections and the strategy of resource allocation to broad 
sectors as agriculture & Industry was based on two & four sector 
Model prepared by  Prof. P C Mahalanobis. (Plan is  also called 
Mahalanobis Plan). 
Second plan was conceived in an atmosphere of economic stability . 
It was felt agriculture could be accorded lower priority.  
The Plan Focussed on  rapid industrialization- heavy & basic 
industries  . Advocated huge imports through foreign loans. 
The Industrial Policy 1956 was based on establishment of a 
socialistic pattern of society  as the goal of economic policy. 
Acute shortage of forex led to pruning of development targets , price 
rise was also seen ( about 30%) vis a vis decline in the earlier Plan & 
the 2
nd
 FYP was only moderately successful. 
Third Plan  
(1961 - 66) 
|Target 
Growth: 5.6% 
Actual Growth: 
2.8% 
At its conception, it was felt that Indian economy has entered a “take-
off stage”. Therefore, its aim was to make India a 'self-reliant' and 
'self-generating' economy. 
Based on the experience of first two plans (agricultural production 
was seen as limiting factor in India’s economic development) , 
agriculture was given top priority to support the exports and industry.
The Plan was thorough failure in reaching the targets due to 
unforeseen events - Chinese aggression (1962), Indo-Pak war 
(1965), severe drought 1965-66. Due to conflicts the approach during 
the later phase was shifted from development to defence & 
development. 
Three Annual 
Plans (1966-
69) 
euphemistically 
described as 
Plan holiday. 
Failure of Third Plan that of the devaluation of rupee( to boost 
exports) along with  inflationary recession led to postponement of 
Fourth FYP. Three Annual Plans were introduced instead. 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 
It paved the path for the planned growth ahead. 
Page 3


CHAPTER 7  
FIVE YEAR PLANS 
 
7.1 Introduction : Indian planning is an open process. Much of the controversy and the 
debates that accompany the preparation of the plans are public. The initial aggregate 
calculations and assumptions are either explicitly stated or readily deducible, and the 
makers of the plans are not only sensitive but responsive to criticism and suggestions 
from a wide variety of national and international sources. From original formulation 
through successive modifications to parliamentary presentation, plan making in India 
has evolved as a responsive democratic political process and the culmination of the 
same in the final document is an impressive manifestation of the workings of an open 
society. But by its very nature it also generates many problems from the point of view of 
mapping an optimal strategy for economic development. 
 
7.2 History of Planning in India & Origin of Five Year Plans:  
 
7.2.1 Though the planned economic development in India began in 1951 with the 
inception of First Five Year Plan , theoretical efforts had begun much earlier , even prior 
to the independence. Setting up of National Planning Committee by Indian National 
Congress in 1938 , The Bombay Plan & Gandhian Plan in 1944, Peoples Plan in 
1945 (by post war reconstruction Committee of Indian Trade Union), Sarvodaya Plan 
in 1950 by Jaiprakash Narayan were steps in this direction. 
7.2.2 Five-Year Plans (FYPs) are centralized and integrated national economic 
programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late 
1920s. Most communist states and several capitalist countries subsequently have 
adopted them. China and India both continue to use FYPs, although China renamed its 
Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to 
signify the central government’s more hands-off approach to development.  
7.2.3 After independence, India launched its First FYP in 1951,  under socialist 
influence of first Prime Minister Jawaharlal Nehru. The process began with setting up of 
Planning Commission in March 1950 in pursuance of declared objectives of the 
Government to promote a rapid rise in the standard of living of the people by efficient 
exploitation of the resources of the country, increasing production and offering 
opportunities to all for employment in the service of the community. The Planning 
Commission was charged with the responsibility of making assessment of all resources 
of the country, augmenting deficient resources, formulating plans for the most effective 
and balanced utilisation of resources and determining priorities.  
7.2.4 The first Five-year Plan was launched in 1951 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. 
7.2.5 The Eighth Plan could not take off in 1990 due to the fast changing political 
situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual 
Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural 
adjustment policies. 
7.2.6 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. 
7.3 Outline of Various Five year Plans:  
 
 
Plan 
First Plan 
(1951 - 56) 
Target Growth 
: 2.1 %  
Actual Growth 
3.6 %  
It was based on Harrod-Domar Model. 
Influx of refugees, severe food shortage & mounting inflation 
confronted the country at the onset of the first five year Plan. 
The Plan Focussed  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. Objectives of rehabilitation of refugees, 
food self sufficiency  & control of prices were  more or less achieved.
Second Plan 
(1956 - 61) 
Target Growth: 
4.5% Actual 
Growth: 4.3% 
Simple aggregative  Harrod Domar Growth Model was again used for 
overall projections and the strategy of resource allocation to broad 
sectors as agriculture & Industry was based on two & four sector 
Model prepared by  Prof. P C Mahalanobis. (Plan is  also called 
Mahalanobis Plan). 
Second plan was conceived in an atmosphere of economic stability . 
It was felt agriculture could be accorded lower priority.  
The Plan Focussed on  rapid industrialization- heavy & basic 
industries  . Advocated huge imports through foreign loans. 
The Industrial Policy 1956 was based on establishment of a 
socialistic pattern of society  as the goal of economic policy. 
Acute shortage of forex led to pruning of development targets , price 
rise was also seen ( about 30%) vis a vis decline in the earlier Plan & 
the 2
nd
 FYP was only moderately successful. 
Third Plan  
(1961 - 66) 
|Target 
Growth: 5.6% 
Actual Growth: 
2.8% 
At its conception, it was felt that Indian economy has entered a “take-
off stage”. Therefore, its aim was to make India a 'self-reliant' and 
'self-generating' economy. 
Based on the experience of first two plans (agricultural production 
was seen as limiting factor in India’s economic development) , 
agriculture was given top priority to support the exports and industry.
The Plan was thorough failure in reaching the targets due to 
unforeseen events - Chinese aggression (1962), Indo-Pak war 
(1965), severe drought 1965-66. Due to conflicts the approach during 
the later phase was shifted from development to defence & 
development. 
Three Annual 
Plans (1966-
69) 
euphemistically 
described as 
Plan holiday. 
Failure of Third Plan that of the devaluation of rupee( to boost 
exports) along with  inflationary recession led to postponement of 
Fourth FYP. Three Annual Plans were introduced instead. 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 
It paved the path for the planned growth ahead. 
Fourth Plan 
(1969 - 74) 
Target Growth: 
5.7% Actual 
Growth: 3.3% 
Refusal of supply of essential equipments and raw materials from the 
allies during Indo Pak war resulted in twin objectives of “ growth with 
stability “ and “progressive achievement of self reliance “ for the 
Fourth Plan. 
 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. Implementation of Family Planning Programmes were 
amongst major targets of the Plan. 
Influx of Bangladeshi refugees before and after 1971 Indo-Pak war 
was an important issue along with price situation deteriorating to 
crisis proportions and the plan is considered as big failure. 
Fifth Plan 
(1974-79) 
Target Growth: 
4.4% Actual 
Growth: 4.8% 
The final Draft of fifth plan was prepared and launched by D.P. Dhar
in the backdrop of economic crisis arising out of run-away inflation 
fuelled by hike in oil prices  and failure of the Govt. takeover of the 
wholesale trade in wheat.  
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 
Due to high inflation, cost calculations for the Plan proved to be 
completely wrong and the original public sector outlay had to be 
revised upwards. After promulgation of emergency in 1975, the 
emphasis shifted to the implementation of Prime Ministers 20 Point 
Programme. FYP was relegated to the background  and when Janta 
Party came to power in 1978, the Plan was terminated. 
Rolling Plan 
(1978 - 80) 
There were 2 Sixth Plans. Janta Govt. put forward a plan for 1978-
1983 emphasising on employment, in contrast to Nehru Model
which  the Govt criticised for concentration of power, widening 
inequality  & for mounting poverty  . However, the government lasted 
for only 2 years. Congress Govt. returned to power in 1980 and 
launched a different plan aimed at directly attacking on the problem 
of poverty by creating conditions of an expanding economy. 
Sixth Plan 
(1980 - 85) 
Target Growth: 
5.2% Actual 
Growth: 5.7% 
The Plan focussed on  Increase in national income, modernization of 
technology, ensuring continuous decrease in poverty and 
unemployment through schemes for transferring skills(TRYSEM) and 
seets(IRDP) and providing slack season employment (NREP), 
controlling population explosion etc. Broadly , the sixth Plan could be 
taken as a success as most of the target were realised even though 
during the last year (1984-85) many parts of the country faced severe 
famine conditions and agricultural output was less than the record 
output of previous year. 
Seventh Plan 
(1985 - 90) 
Target Growth: 
5.0% Actual 
Growth: 6.0% 
The Plan aimed at accelerating food grain production, increasing 
employment opportunities & raising productivity  with focus on ‘food, 
work & productivity’.   
The plan was very successful as the economy recorded 6% growth 
rate against the targeted 5% with the decade of 80’s struggling out of 
the’ Hindu Rate of Growth’.  
 
 
Eighth Plan 
The eighth plan was postponed by two years because of political 
uncertainty at the Centre  
Page 4


CHAPTER 7  
FIVE YEAR PLANS 
 
7.1 Introduction : Indian planning is an open process. Much of the controversy and the 
debates that accompany the preparation of the plans are public. The initial aggregate 
calculations and assumptions are either explicitly stated or readily deducible, and the 
makers of the plans are not only sensitive but responsive to criticism and suggestions 
from a wide variety of national and international sources. From original formulation 
through successive modifications to parliamentary presentation, plan making in India 
has evolved as a responsive democratic political process and the culmination of the 
same in the final document is an impressive manifestation of the workings of an open 
society. But by its very nature it also generates many problems from the point of view of 
mapping an optimal strategy for economic development. 
 
7.2 History of Planning in India & Origin of Five Year Plans:  
 
7.2.1 Though the planned economic development in India began in 1951 with the 
inception of First Five Year Plan , theoretical efforts had begun much earlier , even prior 
to the independence. Setting up of National Planning Committee by Indian National 
Congress in 1938 , The Bombay Plan & Gandhian Plan in 1944, Peoples Plan in 
1945 (by post war reconstruction Committee of Indian Trade Union), Sarvodaya Plan 
in 1950 by Jaiprakash Narayan were steps in this direction. 
7.2.2 Five-Year Plans (FYPs) are centralized and integrated national economic 
programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late 
1920s. Most communist states and several capitalist countries subsequently have 
adopted them. China and India both continue to use FYPs, although China renamed its 
Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to 
signify the central government’s more hands-off approach to development.  
7.2.3 After independence, India launched its First FYP in 1951,  under socialist 
influence of first Prime Minister Jawaharlal Nehru. The process began with setting up of 
Planning Commission in March 1950 in pursuance of declared objectives of the 
Government to promote a rapid rise in the standard of living of the people by efficient 
exploitation of the resources of the country, increasing production and offering 
opportunities to all for employment in the service of the community. The Planning 
Commission was charged with the responsibility of making assessment of all resources 
of the country, augmenting deficient resources, formulating plans for the most effective 
and balanced utilisation of resources and determining priorities.  
7.2.4 The first Five-year Plan was launched in 1951 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. 
7.2.5 The Eighth Plan could not take off in 1990 due to the fast changing political 
situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual 
Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural 
adjustment policies. 
7.2.6 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. 
7.3 Outline of Various Five year Plans:  
 
 
Plan 
First Plan 
(1951 - 56) 
Target Growth 
: 2.1 %  
Actual Growth 
3.6 %  
It was based on Harrod-Domar Model. 
Influx of refugees, severe food shortage & mounting inflation 
confronted the country at the onset of the first five year Plan. 
The Plan Focussed  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. Objectives of rehabilitation of refugees, 
food self sufficiency  & control of prices were  more or less achieved.
Second Plan 
(1956 - 61) 
Target Growth: 
4.5% Actual 
Growth: 4.3% 
Simple aggregative  Harrod Domar Growth Model was again used for 
overall projections and the strategy of resource allocation to broad 
sectors as agriculture & Industry was based on two & four sector 
Model prepared by  Prof. P C Mahalanobis. (Plan is  also called 
Mahalanobis Plan). 
Second plan was conceived in an atmosphere of economic stability . 
It was felt agriculture could be accorded lower priority.  
The Plan Focussed on  rapid industrialization- heavy & basic 
industries  . Advocated huge imports through foreign loans. 
The Industrial Policy 1956 was based on establishment of a 
socialistic pattern of society  as the goal of economic policy. 
Acute shortage of forex led to pruning of development targets , price 
rise was also seen ( about 30%) vis a vis decline in the earlier Plan & 
the 2
nd
 FYP was only moderately successful. 
Third Plan  
(1961 - 66) 
|Target 
Growth: 5.6% 
Actual Growth: 
2.8% 
At its conception, it was felt that Indian economy has entered a “take-
off stage”. Therefore, its aim was to make India a 'self-reliant' and 
'self-generating' economy. 
Based on the experience of first two plans (agricultural production 
was seen as limiting factor in India’s economic development) , 
agriculture was given top priority to support the exports and industry.
The Plan was thorough failure in reaching the targets due to 
unforeseen events - Chinese aggression (1962), Indo-Pak war 
(1965), severe drought 1965-66. Due to conflicts the approach during 
the later phase was shifted from development to defence & 
development. 
Three Annual 
Plans (1966-
69) 
euphemistically 
described as 
Plan holiday. 
Failure of Third Plan that of the devaluation of rupee( to boost 
exports) along with  inflationary recession led to postponement of 
Fourth FYP. Three Annual Plans were introduced instead. 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 
It paved the path for the planned growth ahead. 
Fourth Plan 
(1969 - 74) 
Target Growth: 
5.7% Actual 
Growth: 3.3% 
Refusal of supply of essential equipments and raw materials from the 
allies during Indo Pak war resulted in twin objectives of “ growth with 
stability “ and “progressive achievement of self reliance “ for the 
Fourth Plan. 
 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. Implementation of Family Planning Programmes were 
amongst major targets of the Plan. 
Influx of Bangladeshi refugees before and after 1971 Indo-Pak war 
was an important issue along with price situation deteriorating to 
crisis proportions and the plan is considered as big failure. 
Fifth Plan 
(1974-79) 
Target Growth: 
4.4% Actual 
Growth: 4.8% 
The final Draft of fifth plan was prepared and launched by D.P. Dhar
in the backdrop of economic crisis arising out of run-away inflation 
fuelled by hike in oil prices  and failure of the Govt. takeover of the 
wholesale trade in wheat.  
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 
Due to high inflation, cost calculations for the Plan proved to be 
completely wrong and the original public sector outlay had to be 
revised upwards. After promulgation of emergency in 1975, the 
emphasis shifted to the implementation of Prime Ministers 20 Point 
Programme. FYP was relegated to the background  and when Janta 
Party came to power in 1978, the Plan was terminated. 
Rolling Plan 
(1978 - 80) 
There were 2 Sixth Plans. Janta Govt. put forward a plan for 1978-
1983 emphasising on employment, in contrast to Nehru Model
which  the Govt criticised for concentration of power, widening 
inequality  & for mounting poverty  . However, the government lasted 
for only 2 years. Congress Govt. returned to power in 1980 and 
launched a different plan aimed at directly attacking on the problem 
of poverty by creating conditions of an expanding economy. 
Sixth Plan 
(1980 - 85) 
Target Growth: 
5.2% Actual 
Growth: 5.7% 
The Plan focussed on  Increase in national income, modernization of 
technology, ensuring continuous decrease in poverty and 
unemployment through schemes for transferring skills(TRYSEM) and 
seets(IRDP) and providing slack season employment (NREP), 
controlling population explosion etc. Broadly , the sixth Plan could be 
taken as a success as most of the target were realised even though 
during the last year (1984-85) many parts of the country faced severe 
famine conditions and agricultural output was less than the record 
output of previous year. 
Seventh Plan 
(1985 - 90) 
Target Growth: 
5.0% Actual 
Growth: 6.0% 
The Plan aimed at accelerating food grain production, increasing 
employment opportunities & raising productivity  with focus on ‘food, 
work & productivity’.   
The plan was very successful as the economy recorded 6% growth 
rate against the targeted 5% with the decade of 80’s struggling out of 
the’ Hindu Rate of Growth’.  
 
 
Eighth Plan 
The eighth plan was postponed by two years because of political 
uncertainty at the Centre  
(1992 - 97) 
Target Growth 
5.6 % 
Actual Growth 
6.8% 
Worsening Balance of Payment position, rising debt burden , 
widening budget deficits, recession in industry  and inflation 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% through introduction of fiscal & economic reforms including 
liberalisation  under the Prime Minister ship of Shri P V Narasimha 
Rao.  
Some of the main economic outcomes during eighth plan period were 
rapid economic growth (highest annual growth rate so far – 6.8 %), 
high growth of agriculture and allied sector, and manufacturing 
sector, growth in exports and imports, improvement in trade and 
current account deficit. High growth rate was achieved even though 
the share of public sector in total investment had declined
considerably to about 34 %.  
Ninth Plan 
(1997- 2002) 
Target Growth: 
6.5% Actual 
Growth: 5.4% 
The Plan prepared under United Front Government focussed on 
“Growth With Social Justice & Equality “ Ninth Plan aimed to 
depend predominantly on the private sector – Indian as well as 
foreign (FDI) & State was envisaged to increasingly play the role of 
facilitator  & increasingly involve itself with social sector viz education 
, health etc and infrastructure where private sector participation was 
likely to be limited. It assigned priority to agriculture & rural 
development with a view to generate adequate productive 
employment and eradicate poverty  
Tenth Plan 
(2002 - 2007) 
Target Growth 
8 % 
Actual Growth 
7.6 % 
Recognising that economic growth cant be the only objective of 
national plan, Tenth Plan had set ‘monitorable targets’ for few key 
indicators (11) of development besides 8 % growth target. The 
targets included reduction in gender gaps in literacy and wage rate, 
reduction in Infant & maternal  mortality rates, improvement in 
literacy, access to potable drinking water cleaning of major polluted 
rivers, etc. Governance was considered as factor of development & 
agriculture was declared as prime moving force of the economy. 
States role in planning was to be increased with greater involvement 
of Panchayati Raj Institutions. State wise break up of targets for 
growth and social development sought to achieve balanced 
development of all states.    
Eleventh Plan 
(2007 - 2012) 
Target Growth 
9 % 
Actual  Growth 
8% 
Eleventh Plan was aimed “Towards Faster & More Inclusive 
Growth “after UPA rode back to power on the plank of helping Aam 
Aadmi (common man).  
India had  emerged as one of the fastest growing economy by the 
end of the Tenth Plan. The savings and investment rates had 
increased , industrial sector had responded well to face competition 
in the global economy  and foreign investors were keen to invest in 
India. But the growth was not perceived as sufficiently inclusive for 
many groups , specially SCs , STs & minorities as borne out by data 
on several dimensions like poverty, malnutrition, mortality, current 
daily employment etc .  
 
Page 5


CHAPTER 7  
FIVE YEAR PLANS 
 
7.1 Introduction : Indian planning is an open process. Much of the controversy and the 
debates that accompany the preparation of the plans are public. The initial aggregate 
calculations and assumptions are either explicitly stated or readily deducible, and the 
makers of the plans are not only sensitive but responsive to criticism and suggestions 
from a wide variety of national and international sources. From original formulation 
through successive modifications to parliamentary presentation, plan making in India 
has evolved as a responsive democratic political process and the culmination of the 
same in the final document is an impressive manifestation of the workings of an open 
society. But by its very nature it also generates many problems from the point of view of 
mapping an optimal strategy for economic development. 
 
7.2 History of Planning in India & Origin of Five Year Plans:  
 
7.2.1 Though the planned economic development in India began in 1951 with the 
inception of First Five Year Plan , theoretical efforts had begun much earlier , even prior 
to the independence. Setting up of National Planning Committee by Indian National 
Congress in 1938 , The Bombay Plan & Gandhian Plan in 1944, Peoples Plan in 
1945 (by post war reconstruction Committee of Indian Trade Union), Sarvodaya Plan 
in 1950 by Jaiprakash Narayan were steps in this direction. 
7.2.2 Five-Year Plans (FYPs) are centralized and integrated national economic 
programs. Joseph Stalin implemented the first FYP in the Soviet Union in the late 
1920s. Most communist states and several capitalist countries subsequently have 
adopted them. China and India both continue to use FYPs, although China renamed its 
Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to 
signify the central government’s more hands-off approach to development.  
7.2.3 After independence, India launched its First FYP in 1951,  under socialist 
influence of first Prime Minister Jawaharlal Nehru. The process began with setting up of 
Planning Commission in March 1950 in pursuance of declared objectives of the 
Government to promote a rapid rise in the standard of living of the people by efficient 
exploitation of the resources of the country, increasing production and offering 
opportunities to all for employment in the service of the community. The Planning 
Commission was charged with the responsibility of making assessment of all resources 
of the country, augmenting deficient resources, formulating plans for the most effective 
and balanced utilisation of resources and determining priorities.  
7.2.4 The first Five-year Plan was launched in 1951 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. 
7.2.5 The Eighth Plan could not take off in 1990 due to the fast changing political 
situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual 
Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural 
adjustment policies. 
7.2.6 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. 
7.3 Outline of Various Five year Plans:  
 
 
Plan 
First Plan 
(1951 - 56) 
Target Growth 
: 2.1 %  
Actual Growth 
3.6 %  
It was based on Harrod-Domar Model. 
Influx of refugees, severe food shortage & mounting inflation 
confronted the country at the onset of the first five year Plan. 
The Plan Focussed  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. Objectives of rehabilitation of refugees, 
food self sufficiency  & control of prices were  more or less achieved.
Second Plan 
(1956 - 61) 
Target Growth: 
4.5% Actual 
Growth: 4.3% 
Simple aggregative  Harrod Domar Growth Model was again used for 
overall projections and the strategy of resource allocation to broad 
sectors as agriculture & Industry was based on two & four sector 
Model prepared by  Prof. P C Mahalanobis. (Plan is  also called 
Mahalanobis Plan). 
Second plan was conceived in an atmosphere of economic stability . 
It was felt agriculture could be accorded lower priority.  
The Plan Focussed on  rapid industrialization- heavy & basic 
industries  . Advocated huge imports through foreign loans. 
The Industrial Policy 1956 was based on establishment of a 
socialistic pattern of society  as the goal of economic policy. 
Acute shortage of forex led to pruning of development targets , price 
rise was also seen ( about 30%) vis a vis decline in the earlier Plan & 
the 2
nd
 FYP was only moderately successful. 
Third Plan  
(1961 - 66) 
|Target 
Growth: 5.6% 
Actual Growth: 
2.8% 
At its conception, it was felt that Indian economy has entered a “take-
off stage”. Therefore, its aim was to make India a 'self-reliant' and 
'self-generating' economy. 
Based on the experience of first two plans (agricultural production 
was seen as limiting factor in India’s economic development) , 
agriculture was given top priority to support the exports and industry.
The Plan was thorough failure in reaching the targets due to 
unforeseen events - Chinese aggression (1962), Indo-Pak war 
(1965), severe drought 1965-66. Due to conflicts the approach during 
the later phase was shifted from development to defence & 
development. 
Three Annual 
Plans (1966-
69) 
euphemistically 
described as 
Plan holiday. 
Failure of Third Plan that of the devaluation of rupee( to boost 
exports) along with  inflationary recession led to postponement of 
Fourth FYP. Three Annual Plans were introduced instead. 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 
It paved the path for the planned growth ahead. 
Fourth Plan 
(1969 - 74) 
Target Growth: 
5.7% Actual 
Growth: 3.3% 
Refusal of supply of essential equipments and raw materials from the 
allies during Indo Pak war resulted in twin objectives of “ growth with 
stability “ and “progressive achievement of self reliance “ for the 
Fourth Plan. 
 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. Implementation of Family Planning Programmes were 
amongst major targets of the Plan. 
Influx of Bangladeshi refugees before and after 1971 Indo-Pak war 
was an important issue along with price situation deteriorating to 
crisis proportions and the plan is considered as big failure. 
Fifth Plan 
(1974-79) 
Target Growth: 
4.4% Actual 
Growth: 4.8% 
The final Draft of fifth plan was prepared and launched by D.P. Dhar
in the backdrop of economic crisis arising out of run-away inflation 
fuelled by hike in oil prices  and failure of the Govt. takeover of the 
wholesale trade in wheat.  
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 
Due to high inflation, cost calculations for the Plan proved to be 
completely wrong and the original public sector outlay had to be 
revised upwards. After promulgation of emergency in 1975, the 
emphasis shifted to the implementation of Prime Ministers 20 Point 
Programme. FYP was relegated to the background  and when Janta 
Party came to power in 1978, the Plan was terminated. 
Rolling Plan 
(1978 - 80) 
There were 2 Sixth Plans. Janta Govt. put forward a plan for 1978-
1983 emphasising on employment, in contrast to Nehru Model
which  the Govt criticised for concentration of power, widening 
inequality  & for mounting poverty  . However, the government lasted 
for only 2 years. Congress Govt. returned to power in 1980 and 
launched a different plan aimed at directly attacking on the problem 
of poverty by creating conditions of an expanding economy. 
Sixth Plan 
(1980 - 85) 
Target Growth: 
5.2% Actual 
Growth: 5.7% 
The Plan focussed on  Increase in national income, modernization of 
technology, ensuring continuous decrease in poverty and 
unemployment through schemes for transferring skills(TRYSEM) and 
seets(IRDP) and providing slack season employment (NREP), 
controlling population explosion etc. Broadly , the sixth Plan could be 
taken as a success as most of the target were realised even though 
during the last year (1984-85) many parts of the country faced severe 
famine conditions and agricultural output was less than the record 
output of previous year. 
Seventh Plan 
(1985 - 90) 
Target Growth: 
5.0% Actual 
Growth: 6.0% 
The Plan aimed at accelerating food grain production, increasing 
employment opportunities & raising productivity  with focus on ‘food, 
work & productivity’.   
The plan was very successful as the economy recorded 6% growth 
rate against the targeted 5% with the decade of 80’s struggling out of 
the’ Hindu Rate of Growth’.  
 
 
Eighth Plan 
The eighth plan was postponed by two years because of political 
uncertainty at the Centre  
(1992 - 97) 
Target Growth 
5.6 % 
Actual Growth 
6.8% 
Worsening Balance of Payment position, rising debt burden , 
widening budget deficits, recession in industry  and inflation 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% through introduction of fiscal & economic reforms including 
liberalisation  under the Prime Minister ship of Shri P V Narasimha 
Rao.  
Some of the main economic outcomes during eighth plan period were 
rapid economic growth (highest annual growth rate so far – 6.8 %), 
high growth of agriculture and allied sector, and manufacturing 
sector, growth in exports and imports, improvement in trade and 
current account deficit. High growth rate was achieved even though 
the share of public sector in total investment had declined
considerably to about 34 %.  
Ninth Plan 
(1997- 2002) 
Target Growth: 
6.5% Actual 
Growth: 5.4% 
The Plan prepared under United Front Government focussed on 
“Growth With Social Justice & Equality “ Ninth Plan aimed to 
depend predominantly on the private sector – Indian as well as 
foreign (FDI) & State was envisaged to increasingly play the role of 
facilitator  & increasingly involve itself with social sector viz education 
, health etc and infrastructure where private sector participation was 
likely to be limited. It assigned priority to agriculture & rural 
development with a view to generate adequate productive 
employment and eradicate poverty  
Tenth Plan 
(2002 - 2007) 
Target Growth 
8 % 
Actual Growth 
7.6 % 
Recognising that economic growth cant be the only objective of 
national plan, Tenth Plan had set ‘monitorable targets’ for few key 
indicators (11) of development besides 8 % growth target. The 
targets included reduction in gender gaps in literacy and wage rate, 
reduction in Infant & maternal  mortality rates, improvement in 
literacy, access to potable drinking water cleaning of major polluted 
rivers, etc. Governance was considered as factor of development & 
agriculture was declared as prime moving force of the economy. 
States role in planning was to be increased with greater involvement 
of Panchayati Raj Institutions. State wise break up of targets for 
growth and social development sought to achieve balanced 
development of all states.    
Eleventh Plan 
(2007 - 2012) 
Target Growth 
9 % 
Actual  Growth 
8% 
Eleventh Plan was aimed “Towards Faster & More Inclusive 
Growth “after UPA rode back to power on the plank of helping Aam 
Aadmi (common man).  
India had  emerged as one of the fastest growing economy by the 
end of the Tenth Plan. The savings and investment rates had 
increased , industrial sector had responded well to face competition 
in the global economy  and foreign investors were keen to invest in 
India. But the growth was not perceived as sufficiently inclusive for 
many groups , specially SCs , STs & minorities as borne out by data 
on several dimensions like poverty, malnutrition, mortality, current 
daily employment etc .  
 
The broad vision for 11
th
 Plan included several inter related 
components like rapid growth reducing poverty & creating 
employment opportunities , access to essential services in health & 
education, specially for the poor, extension if employment 
opportunities using National Rural Employment Guarantee 
Programme , environmental sustainability , reduction of gender 
inequality etc. Accordingly  various targets were laid down like 
reduction in unemployment( to less than 5 % among educated youth 
)  & headcount ratio of poverty ( by 10 %), reduction in drop out rates 
, gender gap in literacy , infant mortality , total fertility , malnutrition in 
age group of 0-3 ( to half  its present level), improvement in sex ratio, 
forest & tree cover, air quality in major cities, , ensuring electricity
connection to all villages & BPL households (by 2009) & reliable 
power by end of 11
th
 Plan , all weather road connection to habitations 
with population 1000& above (500 in hilly areas) by 2009, connecting 
every village by telephone & providing broad band connectivity to all 
villages by 2012   
 
The Eleventh Plan started well with the first year achieving a growth 
rate of 9.3 per cent, however the growth decelerated to 6.7 per cent 
rate in 2008-09 following the global financial crisis. The economy 
recovered substantially to register growth rates of 8.6 per cent and 
9.3 per cent in 2009-10 and 2010-11 respectively. However, the 
second bout of global slowdown in 2011 due to the sovereign debt 
crisis in Europe coupled with domestic factors such as tight monetary 
policy and supply side bottlenecks, resulted in deceleration of growth
to 6.2 per cent in 2011-12. Consequently, the average annual growth 
rate of Gross Domestic Product (GDP) achieved during the Eleventh
Plan was 8 per cent, which was lower than the target but better than 
the Tenth Plan achievement. Since the period saw two global crises -
one in 2008 and another in 2011 – the 8 per cent growth may be 
termed as satisfactory. The realised GDP growth rate for the
agriculture, industry and services sector during the 11th Plan period 
is estimated at 3.7 per cent, 7.2 per cent and 9.7 per cent against the 
growth target of 4 per cent, 10-11 per cent and 9-11 per cent 
respectively. 
The Eleventh Plan set a target of 34.8 per cent for domestic savings 
and 36.7 per cent for investment after experiencing a rising level of 
domestic savings as well as investment and especially after 
emergence of structural break during the Tenth Plan period.
However, the domestic savings and investment averaged 33.5 per 
cent and 36.1 per cent of GDP at market prices respectively in the 
Eleventh Plan which is below the target but not very far. 
Based on the latest estimates of poverty released by the Planning 
Commission, poverty in the country has declined by 1.5 percentage 
points per year between 2004-05 and 2009-10.The rate of decline 
during the period 2004-05 to 2009-10 is twice the rate of decline 
witnessed during the period 1993-94 to 2004-05. Though the new 
poverty count based on Tendulkar Formula has been subject of 
controversy , it is believed by the Committee that whether we use the 
old method or the new , the decline in percentage of population 
below poverty line is almost same.  
On the fiscal front , the expansionary measures taken by the 
government to counter the effect fo global slowdown led to increase 
in key indicators through 2009-10 with some moderation thereafter.