India started its journey for growth and development as a planned economy. The efforts for planning in India started even before independence. When India became free, it formally adopted Five year Plans for the development of Indian economy. The first Prime Minister of India Pd. Jawaharlal Nehru is known as “father of Planning” in India while great economist and statistics expert P.C. Mahalonobis as “architect of planning”.
The main objectives of FYPs in India included (i) economic growth, (ii) self reliance, (iii) removal of poverty and inequality, (iv) modernization and (v) social justice. The FYPs in India adopted a “mixed economic planning” wherein both public sector (government sector) and private sector would take up economic activities but the public sector was given the “commanding heights” which meant that the leading role for growth and industrialization would be played by the public sector. Later about 17 economic activities/sectors were reserved for public sector alone in the industrial policy. This step was later considered by the critics as detrimental to growth of private enterprises in Indian economy as it led to lack of competition, which is necessary for efficiency.
The FYPs were based on what is called “Mahlanobis strategy” which emphasized on large sacle industrialization, capital intensive industrialization, self reliance and import substitution, commanding heights to public sector and protection to nascent industries of the country. In the initial few decades the strategy did served its purported goals well but the strategy somehow over lasted its utility which is considered responsible for many distortions in the Indian economy especially lack of competition, throttling private enterprise, making the economy inward looking and “statist” or “drigist” leading to License Permit Raaz, inefficiency delays and even corruption.
The Mahalanobis strategy was closer to Nehruvian model of growth. Gandhian model subscribed to the idea of self sufficient villages, promotion of small scale and cottage industri es and sustainable development. Although many of the Gandhian ideas were factored in the FYPs, the Gandhaian planning was given a place only at the margins for a long time.
Five year Plans focused on all the sectors of the economy viz. agriculture Industry and services. The FYP plans were initially based on “trickledown theory” which believed that economic growth should be given priority over distribution as the fruits of development would gradually trickle down to the lowest strata thereby raising the living standards of people over time. It was found by mid-sixties that the trickle down is too slow to remove poverty and unemployment and raise living standards. Therefore, the Five Year Plans adopted direct programmes for poverty alleviation and employment creation.
Five year Plans in India were interrupted during the famine period of 1966-69, which is referred to as “plan holiday”. During these years only annual plans were pursued instead of five year plans. Later again there was interruption in Five Year Plans twice i.e. in 1979-80 the terminal year of the 5th FYP and again in 1990, the terminal year of 7th FYP.
The focus of FYPs shifted over the planning period. For instance the first five year plan focused on agriculture sector while the second and third FYPs focused on industrial growth. Likewise the 4th and 5th FYPs focused on removal of poverty, unemployment and inequality and enhancing agricultural productivity. The sixth and seventh FYPs focused on energy and modernization. The 8th FYP focused on energy, social sector and human development. The subsequent FYPs focused on infrastructure, energy, human and sustainable development and inclusive growth.
Here is a very brief account of evolution of planning in India.
National Planning Committee
- Meghnad Saha had persuaded Netaji Subhash Chandra Bose to set up a National Planning Committee in 1938. In the beginning M. Visvesvaraya had been elected head of the Planning Committee.
- Later Jawaharlal Nehru was made head of the National Planning Committee.
- Later the Advisory Planning Board was formally established under K. C. Neogy that functioned from 1944 to 1946.
The Bombay Plan
- The Bombay Plan was was published in 1944/1945 by eight leading Indian industrialists.
- Titled A Brief Memorandum Outlining a Plan of Economic Development for India, the signatories of the Plan were Jamshedji Ratanji Dadabhoy Tata, Ghanshyam Das Birla, Ardeshir Dalal, Sri Ram, Kasturbhai Lalbhai, Ardeshir Darabshaw Shroff, Sir Purshottamdas Thakurdas and John Mathai.
- The plan proposed state intervention in the economic development of the nation after independence.
- The Plan went through two editions: the first was published in January 1944. This first edition became “Part I” of the second edition, published in 2 volumes in 1945 under the editorship of Purushottamdas Thakurdas.
- Although Jawaharlal Nehru, the first Prime Minister of India, did not officially accept the plan, “the Nehruvian era witnessed [what was effectively] the implementation of the Bombay Plan; a substantially interventionist state and an economy with a sizeable public sector.
People’s Plan
- In the year 1945 M.N.Roy prepared the people’s plan.
- The plan gave equal importance to both agriculture and industries.
- In post independence India the radical suggestions of the People’s Plan was given a limited trial by the Left Democratic Front government of Kerala (1996-2001) headed by Sri. E.K. Nayanar tried proposing to involve the masses in the process of decision making in the field of local self-government.
- It was conceptualised by late E M S Namboodiripad, the foremost leader of the Communist Party of India (Marxist) in Kerala.
- Such a plan intended to involve people in planning at local government level in planning and implementation in accordance with priorities of an area. It favoured local self-government and institutions such as a Panchayat, Municipality or Corporation.
Planning Commission
- As India adopted a planned model of growth and development soon after getting independence, the Planning Commission was established on 15 March 1950.
- The Planning Commission was designed to be chaired by the Prime Minister of India and Pd. Jawaharlal Nehru was its first chairman.
- Authority for creation of the Planning Commission was not derived from the Constitution of India or statute; it remained as an arm of the Central Government of India.
- In his first Independence Day speech in 2014, Prime Minister Narendra Modi announced his intention to dissolve the Planning Commission. It has since been replaced by a new institution named NITI Aayog.
- The main objective of the Planning Commission was to oversee the country’s economic and social development, chiefly through the formulation of five-year plans. The commission’s original mandate was to raise the standard of living of ordinary Indians by efficiently exploiting the country’s material and human resources, boosting production, and creating employment opportunities for all.
- The planning Commission periodically assessed the country’s resources; prepared approach papers and drafts for five-year plans, along with strategies for implementing them; and monitored the execution of the plans, gave mid-term appraisal and recommended policies for course correction and adjustments required to improve implementation and realize the plan targets.
- The Planning Commission started the first Five Year Plan in 1951 and since then 12 FYPs were implemented by it. 12th Five Year Plan of the Government of India (2012–17) was India’s last Five Year Plan.
- The Five Year Plans in India were successful in creating basic and core industries, socio-economic overheads and basic infrastructure. The plans also adopted and successfully implemented Green Revolution, a technological revolution to enhance production and productivity in Indian agriculture. The Five year Plans were also successful in reducing poverty ratio in India from 50% at the time of independence to about 30% by the end of the 12th The plans also had programmes for removal of unemployment and regional inequality apart from many welfare programmes for the vulnerable sections.
- Later the planning Commission was criticized for lack of representation of states, discriminatory against the states ruled by the opposition parties, playing a role in resource allocation while it was politically partisan and advocating populist programmes and subsidies.
- It was alleged to have supported statist policy giving commanding heights to public sector while keeping open only limited and residuary areas for the private enterprise. This throttled competition.
- The Planning Commission also focused more on “import substitution” strategy for economic growth and self reliance and did not focus as much on “export led growth” strategy.
- Overtime the institution had also grown bigger.