Model Answer
0 min readIntroduction
Economic planning in India emerged as a central tenet of nation-building post-Independence, driven by the belief that state intervention was crucial for addressing widespread poverty, inequality, and underdevelopment. Inspired by the Soviet model, the initial approach emphasized self-reliance, import substitution, and a dominant public sector. This commitment to planned development was enshrined in the Constitution through Directive Principles of State Policy (Article 39), aiming for a welfare state. The journey of economic planning in India has been dynamic, adapting to changing global and domestic circumstances, and witnessing a shift from centralized planning to a more market-oriented approach.
The Nehruvian Era (1951-1964): The Foundation of Planning
The First Five-Year Plan (1951-56) focused on agricultural development and irrigation, drawing heavily on the Harrod-Domar model. It was largely successful, achieving a growth rate of 2.1% annually. The Second Five-Year Plan (1956-61) emphasized industrialization, particularly heavy industries like steel and power, guided by the Mahalanobis model. This plan aimed for rapid industrialization but faced challenges due to resource constraints and infrastructure bottlenecks. The establishment of the Planning Commission in 1950, under the chairmanship of Jawaharlal Nehru, was a landmark event, institutionalizing the planning process.
The Indira Gandhi Period (1966-1977): Nationalization and Social Justice
The Third and Fourth Five-Year Plans (1966-68 & 1969-74) faced disruptions due to the Indo-Pak wars and economic crises. The focus shifted towards self-reliance and social justice. A significant feature of this period was the nationalization of banks in 1969 and the abolition of privy purses in 1971, aimed at reducing economic inequality. The introduction of the 20-Point Programme in 1975 aimed to alleviate poverty and improve the living standards of the poor. However, these plans were less successful in achieving their targets.
The Rajiv Gandhi Era (1984-1989): Modernization and Liberalization Attempts
The Sixth and Seventh Five-Year Plans (1980-85 & 1985-90) witnessed a renewed focus on modernization and technological advancements. Rajiv Gandhi initiated some liberalization measures, including deregulation of industries, reduction of import tariffs, and promotion of exports. The National Education Policy of 1986 and the Jawahar Rozgar Yojana (1989) were significant initiatives aimed at human capital development and employment generation. However, the balance of payments crisis in 1991 necessitated a more drastic shift in economic policy.
The Post-1991 Reforms: Liberalization, Privatization, and Globalization
The economic crisis of 1991 led to the adoption of the New Economic Policy (NEP), marking a paradigm shift from centralized planning to a market-oriented economy. Key elements of the NEP included:
- Liberalization: Deregulation of industries, removal of licensing requirements, and reduction of trade barriers.
- Privatization: Disinvestment in public sector undertakings (PSUs).
- Globalization: Integration with the global economy through increased foreign investment and trade.
The Eighth, Ninth, Tenth, Eleventh, and Twelfth Five-Year Plans (1992-97, 1997-2002, 2002-07, 2007-12, and 2012-17 respectively) focused on sustained economic growth, poverty reduction, and human development. The NITI Aayog replaced the Planning Commission in 2015, signifying a move away from top-down planning towards a more collaborative and decentralized approach.
Recent Developments & Beyond
Currently, India is moving towards a more decentralized planning model, focusing on state-level initiatives and sustainable development goals (SDGs). The emphasis is on improving infrastructure, promoting digital economy, and enhancing skill development. The ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives reflect a renewed focus on self-reliance and domestic manufacturing. The government is also prioritizing inclusive growth and addressing regional disparities.
| Plan | Period | Focus | Growth Rate (%) |
|---|---|---|---|
| First | 1951-56 | Agriculture & Irrigation | 2.1 |
| Second | 1956-61 | Heavy Industries | 4.8 |
| Third | 1961-66 | Agriculture & Industry | 2.3 |
| Eleventh | 2007-12 | Inclusive Growth | 8.2 |
Conclusion
The evolution of economic planning in India reflects a dynamic adaptation to changing circumstances and evolving economic thought. From the initial socialist-inspired model to the post-1991 liberalization, the journey has been marked by both successes and failures. While the centralized planning model played a crucial role in laying the foundation for industrial development, the liberalization reforms unleashed the potential of the private sector and accelerated economic growth. The current emphasis on decentralized planning, sustainable development, and inclusive growth suggests a continued evolution towards a more resilient and equitable economic future.
Answer Length
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