The Third Five Year Plan - Humanities/Arts PDF Download

1. Introduction to the Third Five Year Plan:

The circumstances in which the preparation of the Third Five Year Plan began were different from those which had attended the birth of the Second. There was a financial crisis, a foreign exchange crisis, and a food crisi.Foreign opinion was critical of India’s “over-ambitious” Plans which allegedly ’emphasised welfare at the expense of efficiency and reduction of economic inequalities at the cost of rapid economic development.’

It was against this gloomy background that the Planning Commission began to consider, around November, 1958 the general pattern of resources and outlay for the Third Plan. The final version of the Plan received the approval of the Parliament on 31 August, 1961, although it came into force with retrospective effect from the 1st of April, 1961.

2. Objectives of the Third Five Year Plan:

The Plan had the following aims:

(a) To secure an increase in national income of over 5% per year, the pattern of investment being so designed as to sustain this rate of growth during subsequent plan pe

(b) To achieve self-sufficiency in food grains and increase agricultural produc­tion to meet the requirements of industry and exports;

(c) To expand basic industries like steel, chemicals, fuel, and power and establish machine-building capacity so as to meet the requirements of further industrialisation within a period of ten years or so mainly from the country’s own resources;

(d) To utilise to the fullest extent possible the man power resources of the country and to ensure a substantial expansion in employment op­portunities;

(e) To establish progressively greater equality of opportunity and bring about reduction in disparities in income and wealth and a more even distribution of economic power.

3. Outlay of the Third Five Year PlanIn order to achieve these objectives, the Plan proposed an outlay of Rs. 7,500 crores in the public sector. Of this, Rs. 6,300 crores represented investment and Rs. 1,200 crores represented expenditure on staff and subsidies etc. Invest­ment by private sector was estimated at Rs. 4,100 crores thus making a total of Rs. 10,400 crores during the five year period.

This order of investment was expected to raise national income by 30% and per capita income by 17%. Actual expenditure in the public sector, however, amounted to Rs. 8576.5 crores.

4. Priorities of the Third Five Year Plan:

The plan’s priorities were quite like those of the second. Transport and communications came in the first place with nearly 1/4 of the outlay. Industry, including village and small industries, came second with 23% of the actual outlay. The third place was occupied by agriculture, including irrigation and community development.

Although the priority accorded to agriculture was the same as in the Second Plan (20.4% of the outlay in the Third as against 20% in the Second Plan) the funds utilised were much larger. Percentage expenditure on social services remained more or less the same at 17.3% in the Third Plan as against 18% in the second.

5. Financing of the Third Five Year Plan:

As can be seen, actual expenditure in the public sector amounted to Rs. 8577 crores as against Rs. 7,500 crores provided for in the plan. The Government was thus able to raise Rs. 1,077 crores over and above the original estimates.

Of this amount of Rs. 8,577 crores, Rs. 5,012 or 58% came from domestic budgetary sources; Rs. 2,433 crores or 28.2% through external assistance; the balance of Rs. 1,133 crores or 13.3% was raised through deficit financing.

Over the Plan period, the total revenue receipts of the centre, the states and Union territories rose by 100%. This impressive increase was the result of intensification of resource-mobilisation in the country. The yield from addi­tional taxation exceeded the target of Rs. 1,710 crores by Rs. 1,182 crores

How­ever, “a good part of the fresh taxation undertaken at the centre and in the states during the Third plan period was absorbed by increases in non-plan expenditure including, among others, defence, additional emoluments and allowan­ces to government employees so that the contribution of additional taxation towards plan resources was smaller than might appear from the total yield.”

The con­tribution of the railways and the public sector enterprises also fell short of the target. Since current receipts covered a steadily decreasing amount of expendi­ture, the gap was filled partly through public borrowing, deficit-financing, and partly through foreign assistance. Loans were taken on a larger scale.

In-fact, during the first three years of the Plan, resources from domestic borrowing con­stituted more than 50% of the total public expenditure on development.

As regards deficit-financing, its amount was actually double of that originally provided although its percentage share declined from 26.4 of the total public expenditure in the First plan to 13.3% in the Third. This was really unfortunate in view of the inflationary situation which had already developed in the country

An equally disturbing feature was our increased dependence on foreign aid which rose from 10% in the First to 28.2% of the total public sector expenditure in the Third Plan.

6. Progress of the Third Five Year Plan:

The implementation of the Third Plan ran into un-expected early difficulties. The first was the Sino-Indian conflict and then, towards the concluding stage of the plan, came the Indo-Pakistan hostilities. As if to make a bad situation worse, while the foreign aid was suspended, the rain gods also failed the country in 1965 — 66.

Thus, the vagaries of monsoons dis-organised our agriculture and vagaries of external assistance dis-organised industry. Inflation and mounting costs further complicated the situation. As a consequence, actual development often fell short of targets, particularly in the field of agriculture, irrigation, power, or­ganised industry, and housing.

a. National Income:During the Third Plan, national income rose by 20% in the first four years but declined by 5.6% in the last year of the plan. This meagre growth rate of 2.5%” of national income was almost completely neutralized by the 2.5% rate of growth of population so that the per capita real income in 1965-66 was about the same as in 1960-61.

b. Agriculture:Agricultural output during the Third Plan followed an erratic trend. After relative stagnation in the first three years, there was a bumper crop in 1964-65 when the output of practically all crops reached record levels. The aggregate index of agricultural production in this year was about 12% higher than in 1960-61.

However, the last year, 1965-66, witnessed a steep fall in production on account of an unprecedented drought when the index of agricultural production declined from 150 in 1964-1965 to 121 in 1965-66. In the earlier 1950’s, over the period of the First Five-Year Plan, the output of all agricultural commodities had gone up by 22.2%. In the Second Plan, there was a similar increase of 21.7%.

Consequently, the per capita availability of cereals fell from 14 ounces to 12.5 ounces per day while that of pulses came down from 2.4 ounces a day to 1.6 ounces a day. The production of other agricultural commodities such as oil-seeds, raw-cotton, and jute also declined.

The decline in agricultural production was also reflected in its share of the national income which came down from 49.4% in 1960-61 to 46.2% in 1965-66.

The fall in the growth rate of agricultural production not only depressed the rate of growth of the economy but also led to an alarming increase in the dependence on imports of food grains and other agricultural commodities. During the Third Plan, the country imported 25 million tons of food grains, 3.9 million bales of cotton and 1.5 million bales of jute.

This dismal performance notwithstanding, the Third Plan marked the beginning of the new agricultural strategy. The Intensive Agricultural Districts Programme was launched in 1960-1961 and its modified version, The Intensive Agricultural Area Programme in 1964-65, In the earlier plans, increase in agricultural produc­tion was brought about by extending the area under cultivation.

However, now the emphasis was on intensive cultivation. The distribution of fertilizers was more than doubled in the five years 1960-61 to 1964-65 . While these programmes were concerned with the promotion of intensive agriculture, they operated within the limitations set by existing crop varieties which had relatively low response to fertilizers.

A major change occurred with the introduction of the high yielding varieties. Hybrid seeds began to be widely adopted by 1963. In wheat, a begin­ning of great importance was made in 1963-64 by trying out the Mexican varieties on a selected basis. Paddy seeds of exotic varieties such as Taichung native I were introduced in 1965.

In order to lend support to the new strategy, several new institutions such as the National Seeds Corporation, Agro-industries Corporations in the States, The Cooperative Development Corporation and the Agricultural Refinance Corporation were set up.

c. Industry: Performance in the field of industry was not as bad. The first four years of the Plan witnessed about 8-10% annual increase in industrial production. In 1965-66, however, with the dislocation caused by the Indo-Pakistan conflict and the consequent disruption in the flow of foreign aid that caused a severe shortage of many raw-materials and components, the growth slowed down to 5.3%.

Over the plan period as a whole, industrial production increased by 37.3% as compared with 32% growth registered during the second Plan, the annual growth rate being 8.2% as compared with the target of 11%.

Among industries in which Plan targets of capacity or production were fully or nearly realised were aluminium, automobiles, electric transformers, cotton, textile machinery, machine tools, sugar, jute textile, power-driven pumps, diesel engines and petroleum products.

Aluminium production rose by 3 1/2 times, of chemical machinery by 6 times, selected machine tools 4 times and production of nitrogenous fertilizers more than doubled. There was substantial expansion in the production of other products such as steel, cement, Bicycles and Sewing machines whose production increased by 88%, 35%, 46% and 41% respectively.

The increase in industrial production apart, India’s industrial structure became increasingly sophisticated as can be seen from the fact that the share of the machinery group in the total value added through manufacturing, which was a bare 8% in 1950-51, rose to 22% by the end of the Third Plan; that of intermediates increased from 23 to 43% but the share of consumer goods industries declined from 68% to 34%.

d. Power: Average annual growth rate of power generating capacity was 12.5%, the installed capacity having increased from 5.6 million K.W. to 10.17 million K.W. Consequently, the per capita consumption of electricity increased from 38 K.W.H at the beginning of the plan to 61.4 K.W.H. at its end.

And yet, there was con­siderable short fall in this vital field —the target being 13.5 million K.W. The out break of hostilities in 1962 and 1965 and several other factors delayed the implementation of several projects so that “power supply at the end of the plan remained unsatisfactory”.

e. Transport and Communications: A substantial investment of Rs. 2,113 crores was made for the expansion and improvement of transport facilities in the country. As a result, goods traffic carried by road just doubled while that carried by railways increased by 33% during the course of the Third Plan. Similarly, passenger traffic carried by rail rose by 23% and that by road by 44%.

Of the two main modes of transport, railways and roads, the latter underwent a more rapid expansion so that the share of roads in the total passenger traffic increased from 42% to 46% and in goods traffic, from 16% to 22.5%. As regards shipping, India added, during the course of the Plan, 6.73 lakh tons to its gross registered tonnage.

Despite this considerable expansion of transport capacities, serious imbalan­ces emerged from time to time. Transport difficulties were experienced, in the early years of the Plan, in the movement of coal from Bengal and Bihar coal fields.

Measures were taken to increase rail capacity and to augment rolling stock. In the latter part of the plan, however, some of this capacity turned out to be surplus since the traffic targets, originally laid down, did not materialise, mainly on account of the slow growth of the economy.

f. Social Services: Educational and Health facilities also under-went considerable expansion. The enrolment in classes I-V increased by 44%; in classes VI-VIII by 57% and in classes IX-XI by 46%. All in all, 61% of the children in the age group 6-14 years were going to school. Efforts were also made to improve text books and teaching methods while the number of stipends and scholarships, especially for the background classes, increased.

Medical and Health facilities also im­proved. Thirty new medical colleges were established and the number of primary health centre increased by 65%.

However, the tasks remaining unfulfilled were many. Much delay had already occurred in complying with the constitutional directive which enjoins on the state “to endeavour to provide, within a period of 10 years from the commencement of this constitution, free and compulsory education for all children until they complete the age of 14 years”.

Despite expansion of university education, only 2.3% of the total eligible youngmen received education at the degree or post­graduate level. The position in respect of medical facilities was still worse where India had only 0.49 hospital beds per 1000 persons.

g. Balance of Payments: The Third Plan was characterised by a growing trade deficit and mounting debt obligations. While exports, after virtual stagnation during the first two Plans, rose at an annual average compound rate of 4.1% (Rs. 660 crores in 1960-61 to Rs. 806 crores in 1965 —66), the annual average level of imports also went up from Rs. 976 crores in the Second to Rs. 1,245 crores in the Third Plan.

In the face of rising food and other imports but insufficient exports, serious strains developed on the balance of payments side. Hostilities in 1965 followed by a bad harvest and suspension of foreign aid further aggravated an already difficult situation. This led the country to seek larger and larger foreign assistance besides having recourse to frequent borrowing from the I.M.F.

7. Critical Assessment of the Third Five Year Plan:

The progress made in the Third Plan was rather disappointing. There were serious shortfalls in such vital sectors as agriculture, irrigation, power and industry. Production of food grains, oil seeds, cotton and jute, provision of ir­rigation facilities and generation of power were all behind schedule. In the field of industry, production of steel, cement, fertilizers and coal was also short of the plan targets.

But a major failure of the plan was in the field of prices where the general index in 1965-66 was 32% higher than in 1960-61. This increase in the price level necessitated increased grants of dearness allowance to government, employees and industrial workers.

The resulting increase in non-plan expenditure adversely affected the govt’s capacity to step up investments. At the same time, the cost of production in the economy increased and profitability of enterprises was reduced.

The Plan also failed to create enough jobs to meet the growing demand for employment. Against an estimated 25 million un-employed persons in the country, the Third Plan could create only 14 million additional jobs. Thus, the number of the unemployed at the end of the plan was greater than at the beginning.

The truth is that the end of the plan saw the country caught in a deep crisis which had shown a tendency to deepen since 1956. True, the Second Plan was partially rescued but only at the expense of creating bottlenecks which, by the first year of the Third Plan, brought economic growth, as measured by per capita income, to half.

It would be wrong to attribute every gap between promise and performance to natural causes or to suggest that every imbalance that arose was an ‘inevitable problem of growth’. Much was certainly due to downright bad planning.

The major limitation, however, lay in the socio-economic structure of the country which, apart from the abolition of the Zamindari system, hardly underwent any change after Independence.

Rather, semi-feudal relations over large parts of the countryside, the power of commercial and money lending capital in vast sectors, the strength of Indian monopoly and foreign capital in Indian industry and banking were all maintained. It was due to this regressive socio-economic structure that the resources of the country were not fully utilised, investments were badly distributed, domestic market could not expand and overall development was arrested. The Government could have unleashed the long-suppressed developmental impulses by freeing the country of the stranglehold of feudal cum monopoly interests.