The Planning Commission was established in March 1950 by a resolution of the Indian government with the stated objective of promoting a rapid rise in the standard of living of the people through efficient exploitation of the country’s resources, increased production, and employment opportunities for all in the service of the community. The planning commission was tasked with the job of conducting assessments of the country’s resources, supplementing insufficient resources, devising plans for the most efficient and balanced use of resources, and establishing priorities.
The Planning Commission’s foundation
Jawaharlal Nehru was the planning commission’s first chairman. The first five-year plan was introduced in 1951, and two following five-year plans were formulated until 1965 when the conflict between India and Pakistan forced a pause. Drought in two consecutive years, currency depreciation, a general increase in costs, and resource depletion delayed the planning process, and after three yearly plans between 1966 and 1969, the fourth five-year plan began in 1969.
The first plan was unable to get off the ground in 1990 due to the rapidly changing political situation at the center and in heavy industries, but since the launch of the ninth plan in 1997, the emphasis on the public sector has waned, and the country’s current thinking on planning, in general, is that it should become increasingly indicative.
Currently, India’s Planning Commission lacks constitutional authority. Hegde was appointed Deputy Chairman of the Planning Commission in November 1989, following the National Front Government’s takeover of the Centre. Immediately upon taking office, he indicated that the government intended to give the Commission constitutional stature. The reconstituted commission will consist of three opposition-led state Chief Ministers, each of whom would serve a one-year term. However, no change was possible because the government was deposed after about a year.
The Planning Commission’s Functions
The planning commission’s functions were defined in the 1950 resolution that established it as follows:
- Conduct an assessment of the country’s material, capital, and human resources, including technical staff, and look into the possibility of supplementing those that are determined to be lacking in comparison to the nation’s requirements.
- After establishing priorities, specify the stages in which the plan should be carried out and the resources that will be allocated to ensure each stage is completed on time.
- Develop a strategy for the most efficient and balanced use of the country’s resources.
- Indicate the issues impeding economic development and the circumstances that, in light of the existing social and political climate, should be set to ensure the plan’s success.
- Determine the type of machinery that will be required to ensure the proper execution of each stage of the plan in its entirety.
- Make such interim or ancillary recommendations as it deems necessary to facilitate the performance of its assigned duties, or in light of prevailing economic conditions, current policies, measures, and development programs, or in light of any specific problems referred to it for advice by the federal or state governments.
- Periodically evaluate the progress made in carrying out each step of the plan and recommend any required adjustments to policy and measures.
National Development Council of India
On 6 August 1952, the Indian government established a National Development Council. The prime minister of India, the chief minister of state, and members of the planning commission comprise the council. The planning commission’s secretary is also the council’s secretary.
Its functions are as follows:
- To conduct periodic reviews of the national plan’s operation.
- To examine critical social and economic policy issues affecting national development
- To recommend steps for achieving the national plan’s objectives and targets, including measures to ensure the people’s active involvement and cooperation, to increase the community’s efficiency, and to build up national development resources through sacrifice shared fairly by all citizens.
The NDC is comprised of the prime minister, all union cabinet ministers, all state and union territory chief ministers, and members of the planning commission. The Delhi Administration is represented by the Lt. Governor and Chief Executive Councilor of the remaining union territories, as well as their respective chief ministers. Additionally, other union and state ministers may be invited to join in the NDC’s deliberations.
- To establish criteria for the development of the National Plan, including an assessment of the plan’s resources
- To take into account the national plan, as developed by the planning commission
- To examine critical social and economic policy issues affecting national development
- To conduct periodic reviews of the plan’s operation and to recommend any necessary measures for achieving the national plan’s objectives and targets, including measures to ensure citizens’ active participation and cooperation, to improve the efficiency of administrative services, to ensure the full development of less developed regions and sections of the community, and to build up resources for n
Thus, the NDC currently establishes the criteria for the development of the national plan. In this new structure, the planning role is delegated to the commission, which is responsible for developing the plan in accordance with these standards.
Historical Perspective of Planning
In India, planning gets its objectives and social premises from the constitution-enshrined directive principles of state policy. The public and private sectors are regarded as mutually reinforcing. Apart from organized industry, the private sector includes small-scale enterprises, agriculture, commerce, and housing, as well as associated fields. Individual efforts and private initiatives are regarded as vital and desirable components of the national effort to achieve maximum voluntary collaboration in development.
With the large-scale import of food grains in 1951 and inflationary pressures on the economy, the first plan 1951–56 gave agriculture, particularly irrigation and electricity projects, the greatest emphasis. Approximately 44.6 percent of the overall public sector outlay of Rs 2069 crore (later increased to Rs 2378 crore) was earmarked for this purpose. The plan planned to increase investment from 5% to around 7% of national income.
The second five-year plan (1956-57 to 1960-61) aimed to encourage a pattern of development that would eventually result in the formation of a socialistic social structure in India. Its primary objectives were
- A 25% increase in national income,
- Rapid industrialization with a special emphasis on the development of basic and heavy industries,
- A significant expansion of employment opportunities, and
- A reduction in income and wealth inequality and more equitable distribution of economic resources.
By 1960-61, the strategy planned to increase investment from approximately 7% of national income to 11%. It placed a premium on industrialization, increased production of iron and steel, heavy chemicals such as nitrogen fertilizers, and the growth of the heavy engineering and machine-building industries.
The third plan (1961-1962 through 1965-1966) aimed to accelerate the transition to self-sustaining growth. Its immediate objectives included the following:
- Ensure an annual increase in national income of more than 5% and a pattern of investment that can sustain this rate of development in successive plan periods
- Attain self-sufficiency in food grains and boost agricultural production to fulfill industrial and export requirements
- Expand fundamental industries such as steel, chemicals, fuel, and electricity, and construct machine-building capability so that the requirements for further industrialization may be met within about a decade, primarily from domestic resources.
- Fully utilize the country’s human resources and assure a significant increase in job possibilities, and
- Establish progressive increases in opportunity equality and a reduction in income and wealth inequality, as well as a more even allocation of economic power.
The plan sought to increase national income by around 30%, from Rs 14500 crore in 1960-61 to approximately Rs 19000 crore in 1971. By 1965-66 (at 1960-61 prices), and per capita income increased by almost 17%, from Rs 330 to Rs 386.
The scenario produced by the Indo-Pakistan conflict in 1965, two consecutive years of severe drought, currency depreciation, general price increases, and eroding resources available for plan goals all contributed to the delay in finalizing the fourth four-year plan. Rather than that, from 1966 and 1969, three annual plans were developed within the framework of the fourth plan’s draught concept.
The Fourth Plan (1969-74) attempted to accelerate development by minimizing agricultural production volatility and the impact of foreign aid uncertainty. It tried to improve the level of living by promoting equality and social justice through programs. The plan placed a premium on improving the conditions of the less fortunate and weaker sections, particularly through employment and education.
To promote equity, efforts were made to reduce the concentration of wealth, income, and economic power. The plan sought to increase net domestic product from Rs 290781 crore in 1969-70 to Rs 38306 crore in 1973-74 (at 1968-69 factor costs). The anticipated average annual compound rate of growth was 5.7 percent.
The Fifth Plan
The fifth plan, which ran from 1974 to 1979, was formulated against the backdrop of high inflation. The plan’s main goals were to attain self-sufficiency and implement steps to improve the living standards of persons living in poverty. This strategy also placed a strong premium on bringing inflation under control and achieving economic stability. It aimed for a national income growth rate of 5.5 percent each year. The fifth plan period’s four-yearly plans have been finished. After that, it was decided to stop the fifth plan era when the yearly plan for 1978-79 ended.
The Planning Commission’s New Role
The Janata Government came to power at the Centre in 1977. The new government believed that the plan’s goals and approaches should be altered. The government believes that the system of capital-intensive industry and mechanized farms has failed, and that cottage enterprise should be prioritized.
It was also argued that the Commission’s job and function should now be to boost productivity by expanding self-employment opportunities. The Government recommended to the Commission that the plan ideas be altered so that more emphasis is placed on agriculture, cottage, and small-scale enterprises. Efforts should also be devoted toward the development of rural infrastructure.
The Planning Commission was also reconstituted, and at its first meeting on July 3, 1977, the Commission decided that the goal of the Five-Year Plan should be to significantly reduce unemployment and income disparities, as well as to make enough provision for addressing public requirements.
Concept of a Rolling Plan
The Commission resolved to implement the Rolling Plan Concept with effect from April 1, 1978, in order to increase planning flexibility and realism. The Five-Year Plan will continue to be established on a five-year basis under this approach, but plan targets, resources, and other elements will be changed annually in light of the performance of various sectors.
It was also suggested that the plan include time-bound annual goals, with a focus on eliminating unemployment and reducing wealth disparities. The State Governments were advised in the Annual Plan Guidelines for 1978-79 to ensure that irrigation and other projects that were already underway were finished as soon as practicable. Priority should be given to the irrigation and power sectors under the new plans, with agriculture and allied activities receiving funding at least at the same rate as in the previous year.
The sixth plan’s main goal was to get rid of the property (1980-85). The idea was to work on both agriculture and industry infrastructure at the same time. The emphasis was placed on addressing interconnected problems through a systematic approach that included increased management, efficiency, and intensive monitoring in all sectors, as well as the active participation of people in formulating specific development schemes at the local level and ensuring their speedy and effective implementation.
The Seventh Plan
The seventh plan, which ran from 1985 to 1990, focused on policies and programs aimed at boosting food-grain production, increasing employment possibilities, and increasing productivity while adhering to the key planning ideals of growth, modernization, self-reliance, and social justice.
Due to overall favorable weather conditions, implementation of various trust programs, and concerted efforts of the government and farmers, food grain production increased by 3.23 percent during the seventh plan, compared to a long-term growth rate of 2.68 percent between 1967-68 and 1988-89 and a growth rate of Rs 2.55 percent in the 1980s. In addition to current initiatives, unique programs like Jawahar Rozgar Yojana were introduced to reduce unemployment and, as a result, the incidence of poverty. The Gross Domestic Product rose at an average rate of 5.8% over this plan period, exceeding the targeted growth rate by 0.8 percent. Two Annual Plans were launched in 1990-92.
Due to the rapidly shifting political environment at the center, the eighth five-year plan (1990-95) was unable to take flight. The new government, which took office in June 1991, decided that the eighth five-year plan would begin on April 1, 1992, and that the annual plans for 1990-91 and 1991-92 would be considered separately. The primary focus of these yearly plans, which were developed within the framework of the approach to the eight five-year plans (1990-95), was to maximize employment and social reform.
The eighth five-year plan (1992-97) began immediately after the implementation of structural adjustment and macro-stabilization policies, which were necessary by the worsening balance of payments and the inflationary situation in 1990-91. The strategy targeted a 5.6 percent average yearly growth rate and a 7.5 percent average industrial growth rate. Some of the most notable aspects of economic performance throughout the eighth five-year plan include:
(1) By 1995, all people will have access to safe drinking water, and by 2000, everyone will be healthy.
(2) To achieve an annual average growth rate of 6% between 1990 and 1995.
(3) To promote ecological balance and protect the environment.
(4) To lower the number of people living in poverty by another 10%.
(5) Universal primary education and the eradication of illiteracy among the working-age population.
(6) To alleviate the problem of rural and urban poor unemployment, a 4% employment growth rate must be achieved.
(7) To achieve self-sufficiency and modernization by utilizing science and technology effectively.
(8) By the end of the eighth plan, ensure an annual average food grain supply of 19.5 kg per person.
(9) To promote the growth of women, children, and other marginalized populations.
However, there was a gap in spending in the central sector due to the PSUs’ and departments’ insufficient mobilization of internal and extra-budgetary resources. The ninth plan called for an annual average growth rate of 5.6 percent, however, this plan period had an average annual growth rate of 6.8 percent.
In the 50th year of India’s independence, the 9th plan (1997-2002) was launched. The United Front Government’s plan focused on “Growth with Social Justice and Equality.” The Ninth Plan aimed to rely primarily on the private sector – both domestic and foreign (FDI) – and the state was expected to play a greater role as a facilitator and to become more involved in the social sector, such as education, health, and infrastructure, where private sector participation was expected to be limited.
It prioritized agriculture and rural development in order to create enough productive jobs and reduce poverty. Up to the 9th FYP, the goals of the five-year plans have been met.
From 1950-51 to 2002-03, the national income – the net national product increased by 8.7%, from Rs 132367 crore to Rs 1156714 crore (at 1993-94 prices), reflecting a compound annual growth rate of 4.2 percent. All aggregates measured at factor cost at 1993-94 prices had increased three times from Rs 3687 to 10964 (at 1993-94 prices), exhibiting a compound growth rate of 2.1 percent.
In five of the preceding nine plans, the economy outperformed the target, and even in the second plan, the difference was not significant. The failures in the third and fourth plans were mostly due to major exogenous shocks that could not have been expected, such as the 1965 and 1966 drought years and the 1965 Indo-Pakistan War. Three consecutive years of drought-hit the 4th plan (1971-73) as well as the first shock of rising oil prices in 1973.
More crucially, the economy’s growth rate had been consistently improving since the 4th plan until the 9th plan, when it suffered a setback. As a result, the evidence suggests that India’s planning record is fairly good and that it does, in fact, err on the side of caution.
Recognizing that economic growth could not be the main goal of the national plan, the Tenth Plan established’ monitorable targets’ for a few critical development indicators in addition to the 8% growth target. Reduced gender gaps in literacy and wage rates, reduced infant and maternal mortality rates, improved literacy, access to potable drinking water, and cleansing of major polluted rivers were among the goals. Agriculture was deemed the primary driving engine of the economy, and governance was regarded as a determinant of progress.
The role of states in planning was to be expanded, with Panchayati Raj Institutions playing a larger role. The goal of breaking down growth and social development targets by the state was to create a balanced development of all states. The national development council approved the tenth 5-year plan (2002-07) on December 21, 2002.
The plan has expanded on the NDC mandate’s goals of doubling per capita income in ten years and reaching an annual growth rate of 8% of GDP. Because economic growth is not the only goal, the plan attempts to use the benefits of growth to improve people’s quality of life by establishing the following key goals:
- By 2007, the poverty rate would have dropped from 26% to 21%.
- Population growth is expected to slow from 21.3 percent in 1991-2001 to 16.2 percent in 2001-11.
- At the very least, growth in gainful work must keep up with the increase in the labor force.
- By 2003, all children should be in school, and by 2007, all children should have completed five years of education.
- Reducing gender disparities in literacy and wage rates by half,
- From 65 percent in 1999-2000 to 75 percent in 2007, the literacy rate grew.
- Providing all villages with safe drinking water
- The infant mortality rate is expected to drop from 72 percent in 1999-2000 to 45 percent in 2007.
- From four in 1999-2000 to two in 2007, the maternal mortality ratio was lowered.
- Forest/tree cover increased from 19 percent in 1999-2000 to 25% in 2007, and
- Cleaning of major polluted river stretches.
The Eleventh Plan
The 11th Five-Year Plan (2007-12), authorized by the BDC in December 2007, is a comprehensive strategy for inclusive growth that builds on the economy’s strengths while addressing deficiencies that have emerged. Following UPA’s return to power on the promise of assisting Aam Aadmi, the eleventh Plan was intended “Towards Faster & More Inclusive Growth” (common man).
It set a goal of 9% growth over the next five years, with an acceleration during that time to reach 10% by the end of the plan. It also covers 26 other main performance metrics, including poverty, health, education, women and children, infrastructure, and the environment, and sets measurable targets for each. By the end of the Tenth Plan, India had become one of the world’s fastest-growing economies.
Savings and investment rates had risen, the industrial sector had performed admirably in the face of global competition, and foreign investors were eager to invest in India. However, many groups, particularly SCs, STs, and minorities, did not view the increase to be sufficiently inclusive, as evidenced by data on poverty, malnutrition, mortality, current day employment, and other factors. The new priorities for the public sector are outlined in this plan.
These include revitalizing agricultural dynamism and constructing the required accompanying infrastructure in rural areas, expanding access to health and education, particularly in rural areas, and implementing initiatives to improve living conditions and economic opportunities for the poor.
The proposal takes a multi-pronged approach to farm improvement. It allows for a significant extension of irrigation and water management schemes. The national food security program intends to increase grain and pulse production by 20 million tonnes over the next five years as a step toward food security. The national rural health mission, which is part of the strategy, intends to promote broad-based health care in rural areas. The Rashtriya Swasthya Bima Yojana would offer the population below the poverty line much-needed health insurance.
The majority of public sector programs in the 11th five-year plan are in areas that are traditionally the jurisdiction of state governments and where implementation depends on the active participation of local entities, particularly Panchayati raj institutions. This plan, more than others, focuses a higher emphasis on the involvement of Panchayati raj institutions. Since the commencement of planning in India, the following table shows the growth performance of the Indian economy in terms of GDP in relation to the targets stated in the successive plans.
The Twelfth Plan began at a time when the world economy was experiencing a second financial crisis, triggered by the Eurozone’s sovereign debt issues, which erupted in the Eleventh Plan’s last year. All countries, including India, were affected by the crisis. In 2011-12, our growth dropped to 6.2 percent, and this trend persisted into the first year of the Twelfth Plan when the economy grew at a rate of barely 5%.
As a result, the Twelfth Plan underlines that our first aim must be to restore rapid economic growth while ensuring that it is both inclusive and sustainable. The subtitle reflects the overarching goals and aspirations that the Twelfth Plan intends to achieve: ‘Faster, Sustainable, and More Inclusive Growth.’
Inclusiveness is achieved by reducing poverty, promoting group equality and regional balance, reducing inequality, empowering people, and so on, whereas sustainability is achieved by ensuring environmental sustainability, developing human capital through improved health, education, skill development, nutrition, information technology, and so on, and developing institutional capabilities, such as power, telecommunications, roads, and transportation, among other things.
In light of the fragile global recovery, the government adopted the 12th five-year plan (2012-17) paper on October 4th. It aims to achieve an annual average economic growth rate of 8.2%, down from the previous target of 9%. The approach paper’s central focus is quicker, more sustainable, and more inclusive growth. Officials estimate that the 12th plan’s average rate of gross capital formation will be 37 percent of GDP.
The estimated gross domestic savings rate is 34.2 percent of GDP, while the net external financing required to maintain macroeconomic balance is 2.9 percent of GDP. India’s average annual economic growth rate was 7.9% during the 11th Plan period (2007-12). This is, however, less than the 9% aim set forth in the 11th plan. The 12th plan, among other things, aims for a 4% increase in farm sector growth from 2012 to 2017. The manufacturing sector’s growth objective has been set at ten percent. The total plan size is anticipated to be Rs 47.7 lakh crore, which is 6% higher than the 11th plan (2007-12).
The strategy difficulties refer to several key areas where new techniques are required to achieve the intended outcomes. These are the following:
- Increasing the capacity for expansion
- Enhancing skills and generating jobs more quickly
- Markets for efficiency and inclusivity in environmental management
- Information, empowerment, and decentralization
- Technology and innovation are two words that come to mind while thinking about
- Providing India with a secure energy future
- Transportation infrastructure development at a faster pace
- Agriculture’s long-term expansion and transformation in rural areas
- Managing the urbanization process
- Better access to high-quality education
- Better health care, both preventative and curative
The 12th Five-Year Plan’s Highlights (2012-17)
- The objective for average growth has been established at 8.2 percent.
- In light of the current local and global circumstances, the growth rate has been reduced to 8.2 percent from the previously forecasted 9 percent.
- In light of the bleak internal and global environment, the growth rate has been decreased to 8.2 percent.
Increased spending in related sectors such as drinking water and sanitation would be included in the health budget.
- Infrastructure, health, and education are the key areas of focus.
- The commission agreed with Finance Minister P. Chidambaram’s proposal to make direct cash transfers of food, fertilizer, and petroleum subsidies before the conclusion of the 12th plan period.
- Agriculture expanded at a rate of 3.3 percent in the current plan period, compared to 2.4 percent in the previous plan period. The manufacturing sector’s growth objective has been set at ten percent.
- Following cabinet approval, the plan would be presented to the national development council, which includes all chief ministers and cabinet ministers and is chaired by the Prime Minister.
- The average yearly growth rate during the 11th plan period was 7.9%.
- During the five-year period of the 12th plan, the agriculture sector is expected to develop at a rate of 4%.
- The health and education sectors, according to commission vice-chairman Montek Singh Ahluwalia, are important emphasis areas for which the plan outlays have been increased.
- On September 15, a complete planning committee chaired by Prime Minister Manmohan Singh authorized the paper, which set the overall plan size at Rs 47.7 lakh crore.
- In terms of poverty reduction, the commission aims to reduce the poverty rate by 10%. Poverty currently affects roughly 30% of the population.