2. Planning
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2. Planning
2.1 What is Economic Planning?
Planning is the deliberate use of the state's power to set economic goals, estimate the resources available and decide how to use them over a fixed period. After Independence, India chose planning to speed up growth, cut poverty and build a modern economy.
Main objectives of Indian planning
Growth: a steady rise in national income and output.
Modernisation: new technology, industry and institutions.
Self-reliance: less dependence on imports and foreign aid.
Equity: fair distribution of income and removal of poverty.
Types of planning
Type |
Meaning |
Imperative planning |
The state gives orders and targets that must be followed, as in the former Soviet Union |
Indicative planning |
The state sets broad goals and guides the private sector through incentives. India moved towards this after the 1991 reforms |
Centralised planning |
All decisions are taken by one central authority |
Decentralised planning |
Plans are prepared at state, district and local levels |
2.2 Origins of Planning in India
Year |
Plan / Committee |
Key Point |
1934 |
Visvesvaraya Plan |
"Planned Economy for India" by M. Visvesvaraya, the first serious blueprint |
1938 |
National Planning Committee |
Set up by the Indian National Congress; chaired by Jawaharlal Nehru |
1944 |
Bombay Plan |
Prepared by eight leading industrialists; stressed state support for industry and infrastructure |
1944 |
Gandhian Plan |
By Shriman Narayan; focus on village industries and decentralised rural economy |
1945 |
People's Plan |
By M. N. Roy; based on socialist ideas and agricultural priority |
1950 |
Sarvodaya Plan |
By Jayaprakash Narayan; inspired by Gandhi and Vinoba Bhave |
2.3 Planning Institutions
Planning Commission (1950 to 2014)
Set up in March 1950 by a Government of India resolution. It was neither a constitutional nor a statutory body.
The Prime Minister was the Chairperson, and a Deputy Chairman ran its daily work.
It prepared Five Year Plans and advised on allocation of resources.
It was replaced by NITI Aayog on 1 January 2015.
National Development Council (NDC)
Set up in 1952, also a non-constitutional and non-statutory body.
Chaired by the Prime Minister; members include Chief Ministers and Planning Commission members.
It approved the Five Year Plans and acted as a link between the Centre and the states.
Remember
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2.4 Five Year Plans at a Glance
Plan |
Period |
Focus / Model |
Target (%) |
Result (%) |
1st |
1951-56 |
Agriculture, irrigation and power; Harrod-Domar model. Projects: Bhakra Nangal, Hirakud |
2.1 |
3.6 |
2nd |
1956-61 |
Rapid industrialisation, heavy industry; Mahalanobis model |
4.5 |
4.3 |
3rd |
1961-66 |
Self-reliant, self-generating economy; hit by wars and drought |
5.6 |
2.8 |
Plan holiday |
1966-69 |
Three Annual Plans after the failure of the 3rd Plan |
- |
- |
4th |
1969-74 |
Growth with stability; Gadgil formula for aid to states |
5.7 |
3.3 |
5th |
1974-79 |
Garibi Hatao, self-reliance; ended a year early in 1978 |
4.4 |
4.8 |
Rolling Plan |
1978-80 |
Introduced by the Janata government |
- |
- |
6th |
1980-85 |
Poverty removal; IRDP and NREP launched |
5.2 |
5.7 |
7th |
1985-90 |
Food, work and productivity |
5.0 |
6.0 |
Annual Plans |
1990-92 |
Political instability and the balance of payments crisis |
- |
- |
8th |
1992-97 |
Human development; first plan after LPG reforms 1991; indicative planning |
5.6 |
6.8 |
9th |
1997-2002 |
Growth with social justice and equity |
6.5 |
About 5.4 |
10th |
2002-07 |
Monitorable targets; 8% growth goal |
8.0 |
About 7.7 |
11th |
2007-12 |
Faster and more inclusive growth |
9.0 (revised 8.1) |
About 8.0 |
12th |
2012-17 |
Faster, more inclusive and sustainable growth |
8.0 |
Below target |
The 12th Plan was the last. After it ended in March 2017, no new Five Year Plan was drawn up.
2.5 Planning Models and Strategies
Model |
Key Idea |
Harrod-Domar |
Growth depends on the savings rate and the capital-output ratio. Used in the 1st Plan |
Mahalanobis (Feldman-Mahalanobis) |
Priority to capital goods and heavy industry to build a base for long-run growth. Used in the 2nd Plan |
Gadgil formula |
Formula for sharing central plan assistance among states, adopted in the 4th Plan |
Rolling plan |
A plan revised every year, with targets extended forward each year |
Remember
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2.6 NITI Aayog
NITI Aayog (National Institution for Transforming India) was formed on 1 January 2015 by a Cabinet resolution. It is a policy think tank, not a plan-making body with power over funds.
Structure
Chairperson: the Prime Minister.
Governing Council: Chief Ministers of all states and Lieutenant Governors of Union Territories.
Vice-Chairperson: appointed by the Prime Minister.
CEO: of Secretary rank, appointed by the Prime Minister for a fixed term.
Full-time members, part-time members and ex-officio members.
Planning Commission versus NITI Aayog
Feature |
Planning Commission |
NITI Aayog |
Approach |
Top-down; Centre set plans for states |
Bottom-up; cooperative federalism |
Role |
Formed Five Year Plans and allocated funds |
Think tank offering strategy and advice |
Funds |
Had power to allocate funds to ministries and states |
No power to allocate funds; that rests with the Finance Ministry |
States |
Limited role |
States are active partners through the Governing Council |
Focus |
Public sector and resource allocation |
Policy ideas, innovation, monitoring and long-term vision |
Major NITI Aayog initiatives and indices
Atal Innovation Mission to promote innovation and entrepreneurship.
Aspirational Districts Programme (2018) to improve backward districts.
SDG India Index, Composite Water Management Index, School Education Quality Index and India Innovation Index to rank states.
National Multidimensional Poverty Index, based on health, education and living standards.
Development Monitoring and Evaluation Office (DMEO) assesses government programmes.
Long-term documents: Three-Year Action Agenda, Seven-Year Strategy and 15-Year Vision.
2.7 Decentralised Planning
The 73rd and 74th Constitutional Amendments (1992) gave local bodies a role in planning and development.
Article 243ZD requires a District Planning Committee in every district to consolidate village and municipal plans.
The Eleventh and Twelfth Schedules list subjects for Panchayats and Municipalities.
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