Indian Planning System | Management Optional Notes for UPSC PDF Download

Introduction

• India faces the imperative of enhancing employment opportunities, augmenting incomes, revitalizing investments and economic growth, addressing the complexities of the financial sector, managing international trade challenges, and confronting persistent issues such as inadequate education, healthcare, pollution, and water scarcity.
• In situations where resources are scarce and the demand for welfare provisions is substantial, the role of planning becomes indispensable. Previously overseen by the Planning Commission, planning efforts in India underwent a transformation in 2014 with the establishment of NITI Aayog, a policy think tank aimed at fostering a more inclusive and grassroots-oriented approach to planning.
• According to its mandate, NITI Aayog serves as a catalyst for driving change within India's intricate federal socio-economic framework. However, concerns have been raised by experts regarding NITI Aayog's autonomy in providing guidance to the government while simultaneously acting as a representative of the administration and implementing various projects.

Objectives of Economic Planning in India

The foundational objectives of economic planning in India encompass various aspects aimed at fostering comprehensive development and addressing societal needs. These objectives are as follows:

• Economic Development: The paramount objective of Indian planning is to spur economic growth, measured by increases in Gross Domestic Product (GDP) and Per Capita Income.
• Enhanced Employment: Indian economic planning endeavors to optimize the utilization of the country's abundant human resources by bolstering employment opportunities.
• Self-Sufficiency: India aims to achieve self-sufficiency in critical commodities while concurrently boosting exports. This goal gained prominence during the third five-year plan (1961-1966).
• Economic Stability: In addition to fostering economic growth, Indian economic planning targets stable market conditions, striving to maintain moderate inflation rates while averting deflationary pressures that could lead to structural economic imbalances.
• Social Welfare and Efficient Service Delivery: Each five-year plan, alongside proposals by the NITI Aayog, seeks to enhance welfare and social services, encompassing areas such as education, healthcare, and emergency assistance, for all segments of society.
• Regional Development: India's economic strategy endeavors to mitigate regional development disparities by addressing variations in economic development across states, aiming to bridge the gap between economically advanced regions and those lagging behind.
• Sustainable and Comprehensive Development: Economic planning in India aims for holistic development across sectors including agriculture, industry, and services, ensuring sustainability and inclusivity.
• Reduction of Economic Inequality: Since independence, Indian economic planning has prioritized reducing inequality through measures such as progressive taxation, job creation, and affirmative action.
• Social Justice: Integral to all other objectives, social justice aims to uplift impoverished sections of society by providing employment opportunities and essential social services.
• Improved Quality of Life: Indian economic planning endeavors to elevate the standard of living by increasing per capita income and fostering equitable income distribution.

Types of Planning

In today's mixed economies, various types of planning strategies are employed:

• Indicative Planning: This approach proposes broad principles and recommendations to achieve objectives, allowing the private sector considerable autonomy while directing its efforts towards specific goals.
• Comprehensive/Imperative Planning: Utilized in socialist countries, this centralized planning model involves extensive control over all aspects of planning and resource allocation by the state, often resulting in limited consumer choice and rigid government policies.

Evolution of Economic Planning in India

• The inception of planned economy in India traces back to the 1930s, inspired by socialist ideologies embraced by national leaders. The notable progress achieved by the USSR through its five-year plans significantly influenced India's planning endeavors.
• In 1934, Sir M. Visvesvaraya articulated "Planned Economy in India," outlining a constructive blueprint for India's growth over the subsequent decade. His visionary goal aimed at orchestrating a shift of labor from agriculture to industry and doubling the national GDP within ten years, marking a seminal contribution to the realm of planning. This period also witnessed the development of India's economic perspective during key sessions of the Indian National Congress from 1931 to 1936.
• The establishment of the National Planning Committee in 1938 marked the first organized effort towards formulating a national plan for India. Led by Congress President Subhash Chandra Bose and chaired by Jawaharlal Nehru, this committee laid the groundwork for economic planning. However, its findings remained undocumented until 1948-49.
• In 1944, a group of Bombay industrialists, including JRD Tata and GD Birla, proposed the "Bombay Plan," aiming to double per capita income and triple national income within 15 years. Although not officially adopted, its principles influenced subsequent planning initiatives.
• Other notable planning proposals during this era included the People's Plan drafted by MN Roy, emphasizing agrarian reforms, and the Gandhian Plan by Sriman Nayaran, advocating rural development through cottage industries.
• Post-independence, India embarked on a series of Five-Year Plans to harness its resources for rapid economic development within a mixed economy framework. These plans aimed at mobilizing and allocating resources judiciously to achieve overall development goals.
• Since the adoption of the 12th Five-Year Plan in 2012, India has continued its planning efforts, focusing on raising living standards, ensuring economic stability, achieving self-sufficiency, reducing inequality, and modernizing the economy.
• Initially influenced by socialist ideals, India's Five-Year Plans have evolved over time, shifting from an emphasis on expanding the public sector to facilitating growth through government intervention.

List of Five-Year Plans in India [1951-2017]

• First Five-Year Plan (1951-1956): The objectives were largely achieved, with significant advancements such as the establishment of five Indian Institutes of Technology (IITs). Goals included refugee rehabilitation, rapid agricultural growth for food self-sufficiency, and inflation control.
• Second Five-Year Plan (1956-1961): Hindered by a lack of foreign exchange, it couldn't be fully implemented. Notable achievements included the construction of hydroelectric power plants and steel mills. The focus was on rapid industrialization following the Nehru-Mahalanobis model.
• Third Five-Year Plan (1961-1966): Marked by failures due to droughts and conflicts, efforts were made towards establishing a self-reliant economy.
• Plan Holidays – Annual Plans (1966-1969): Introduced new agriculture strategies to address crises and food shortages.
• Fourth Five-Year Plan (1969-1974): Achieved a 3.5% growth rate but faced challenges such as inflation. It emphasized growth with stability and self-reliance.
• Fifth Five-Year Plan (1974-1979): Grappled with high inflation but laid the groundwork for the Indian national highway system.
• Sixth Five-Year Plan (1980-1985): Saw substantial progress with a focus on poverty alleviation and population control.
• Seventh Five-Year Plan (1985-1990): Despite initial droughts, it achieved a 6% growth rate and focused on boosting food production and employment.
• Annual Plans (1989-1991): The period marked the beginning of privatization and liberalization in India.
• Eighth Five-Year Plan (1992-1997): Attained partial success with strong economic growth and a reduction in trade deficit.
• Ninth Five-Year Plan (1997-2002): Achieved a 5.4% GDP growth rate, emphasizing quality of life, job creation, and regional balance.
• Tenth Five-Year Plan (2002-2007): Successful in poverty reduction, expanding forest cover, and increasing literacy rates.
• Eleventh Five-Year Plan (2007-2012): Focused on rapid and inclusive growth, skill development, gender equality, and environmental sustainability.
• Twelfth Five-Year Plan (2012-2017): Targeted faster, sustainable, and inclusive growth with goals including agricultural output increase, manufacturing sector growth, and power generation capacity expansion.

Reasons for the Abolishment of the Planning Commission

The planning process in India faced several irregularities, especially post-liberalization, leading to the abolition of the Planning Commission. Some of the key shortcomings included:

• Reliance on Theoretical Tools: The Planning Commission primarily relied on complex mathematical models, often disconnected from ground realities due to issues such as aggregative input/output factors and data discrepancies.
• Duplication of Work: The creation of parallel departments within the Planning Commission resulted in duplicated efforts for central ministries and states, leading to inefficiencies.
• Arbitrary Target Setting: Targeted goals during each plan period were often undermined due to poor budgeting practices, lacking a clear yearly breakdown of the plan's objectives.
• Multi-Year Budgeting Issues: While multi-year budgeting was essential for programs with varying time spans, the five-year planning framework proved excessively long, resulting in dwindling schemes shortly after initiation.
• Misalignment with Annual Budgeting: The five-year plans did not align with the annual budgeting process, rendering them more academic exercises rather than practical implementation tools.
• Outdated Division of Spending: The divide between plan and non-plan government spending lost its relevance and needed elimination for improved efficiency.
• Ineffectiveness of Annual Plan Approval: The system of annual plan approval with states lost significance due to reduced central assistance and termination of on-lending to states, necessitating its abolition.

NITI Aayog

Established on January 1, 2015, by a Union Cabinet decision, NITI Aayog serves as the government's premier policy think tank, focusing on cooperative federalism and providing strategic guidance. Key objectives include:

• Advisory Role: NITI Aayog advises the Union and state governments, employing a bottom-up development approach to devise credible plans at the grassroots level.
• Promoting Cooperative Federalism: It fosters cooperation between the center and states, aiming for "strong states, strong nation" development.
• Coordination and Implementation: NITI Aayog facilitates inter-ministry, inter-state, and center-state coordination to expedite policy implementation.
• Governance Structure: Chaired by the Prime Minister, the governing council includes Chief Ministers of all states and Lieutenant Governors of Union Territories, with special invitees comprising experts and practitioners.
• Specialized Hubs: NITI Aayog operates through specialized hubs like the Team India Hub and Knowledge and Innovation Hub, promoting collaborative initiatives such as the "15-year road map" and Digital India.

Through these initiatives, NITI Aayog aims to address contemporary developmental challenges and foster inclusive growth across India.

Conclusion

Economic planning encompasses strategies aimed at achieving specific social and economic outcomes through coordinated efforts. This entails the Indian government's long-term initiatives to foster economic expansion and resource optimization. India's planning journey commenced with the establishment of the Planning Commission on March 15, 1950, followed by the initiation of the First Five-Year Plan on April 1, 1951. However, in 2015, the Planning Commission was dissolved, and the NITI Aayog was instituted as its successor.