India's Five-Year Plans: A History of Economic Development

From 1947 to 2017, the Indian economy was guided by a system of centralized planning, implemented through the Five-Year Plans. These plans were developed, executed, and monitored by the Planning Commission (1951-2014) and its successor, NITI Aayog (2015-2017).

The First Plan (1951-1956): Focus on Agriculture

The first Five-Year Plan aimed to address the challenges faced by India following independence, including the partition and World War II. Its primary focus was on agricultural development and rebuilding the country's infrastructure.

• The plan prioritized irrigation and energy, agriculture, transport and communications, industry, social services, rehabilitation of landless farmers, and other sectors.
• The Harrod-Domar model was adopted, with modifications, to guide the plan.
• The plan aimed for a 2.1% annual GDP growth rate, achieving a higher rate of 3.6%.
• Key projects included the Bhakra, Hirakud, and Damodar Valley dams.

The Second Plan (1956-1961): Rapid Industrialization

The Second Plan shifted focus to industrialization, adopting the Mahalanobis model to optimize investment allocation between productive sectors for long-term growth. The plan aimed for a closed economy with emphasis on importing capital goods.

• The plan led to the establishment of hydroelectric power projects and five steel plants with international assistance.
• Coal production increased, railway lines expanded, and research institutes were established, including the Tata Institute of Fundamental Research and the Atomic Energy Commission.
• The plan aimed for a 4.5% growth rate, achieving 4.27%.
• Criticisms of the plan focused on its reliance on deficit financing and state control of the economy.

The Third Plan (1961-1966): Challenges and Shifts

The Third Plan focused on agricultural development, particularly wheat production. However, the Sino-Indian War of 1962 and the Indo-Pakistani War of 1965 disrupted the plan. A severe drought in 1965 further aggravated the economic situation.

• Emphasis shifted to the defense industry and price stabilization in response to the wars and drought.
• The plan included expansion of dams, cement and fertilizer plants, and primary schools in rural areas.
• India borrowed from the IMF and devalued the rupee for the first time in 1966.
• The plan aimed for a 5.6% growth rate, achieving only 2.4%.

Plan Holidays (1966-1969): A Period of Adjustment

Due to the setbacks of the Third Plan, the government declared plan holidays from 1966 to 1969. Three annual plans were implemented during this period to address the country's immediate economic challenges.

• The main reasons for the plan holidays were wars, resource shortages, and rising inflation.
• The focus was on agriculture, industrial development, and stabilizing prices.
• The government devalued the rupee again to boost exports.

The Fourth Plan (1969-1974): Growth with Stability

The Fourth Plan focused on achieving growth with stability and self-reliance. It adopted the Gadgil formula for resource allocation, emphasizing a more equitable distribution of wealth.

• The Indira Gandhi government nationalized 14 major banks and implemented the Green Revolution to boost agriculture.
• The Indo-Pakistani War of 1971 and the Bangladesh Liberation War diverted funds from industrial development.
• The plan introduced the concept of a buffer stock of food grains and launched the Drought Prone Area Program (DPAP).
• The plan aimed for a 5.6% growth rate, achieving 3.3%.

The Fifth Plan (1974-1978): Poverty Alleviation and Self-Reliance

The Fifth Plan emphasized employment, poverty alleviation (Garibi Hatao), and justice, alongside self-reliance in agriculture and defense.

• The plan introduced the Minimum Needs Programme (MNP) to improve living standards.
• It focused on expanding tourism and implementing the twenty-point programme.
• The plan aimed for a 4.4% growth rate, achieving 4.8%.
• The Janata Party government rejected the Fifth Plan and introduced a new one, which was subsequently rejected by the Congress government.

The Rolling Plan (1978-1980): Flexibility and Adaptability

The Rolling Plan was introduced as a more flexible alternative to the fixed Five-Year Plans. It comprised three kinds of plans: a one-year plan (annual budget), a plan for a fixed number of years (3, 4, or 5 years), and a long-term perspective plan (10, 15, or 20 years).

• The Rolling Plan's flexibility allowed for adjustments to targets, projections, and allocations based on changing economic conditions.
• However, the frequent revisions led to difficulties in achieving long-term goals and instability in the economy.

The Sixth Plan (1980-1985): Liberalization and Economic Reform

The Sixth Plan marked the beginning of economic liberalization in India. Price controls were lifted, ration shops closed, and the economy moved away from Nehruvian socialism.

• The National Bank for Agriculture and Rural Development was established.
• Family planning policies were expanded to address population growth.
• The plan aimed for a 5.2% growth rate, achieving 5.7%.
• The Sixth Plan was considered a success, laying the foundation for further economic growth.

The Seventh Plan (1985-1990): Productivity, Technology, and Social Justice

The Seventh Plan focused on improving industrial productivity through technology upgrades and promoting social justice. The plan aimed to achieve self-sustaining growth by 2000.

• It prioritized employment generation, food grain production, and poverty alleviation.
• The plan aimed to create 39 million new jobs and achieve a 5.0% growth rate, achieving 6.01%.
• The Seventh Plan aimed to address social inequalities and promote self-reliance in the Indian economy.

Annual Plans (1990-1992): A Period of Transition

Due to economic instability, no formal Five-Year Plan was implemented between 1989 and 1991. Two Annual Plans were implemented in 1990-91 and 1991-92 to address the immediate economic challenges. The Eighth Plan was finally launched in 1992 after the implementation of structural adjustment policies.

The Eighth Plan (1992-1997): Liberalization, Privatization, and Globalization (LPG)

India faced a foreign exchange crisis in 1991, leading to the adoption of economic reforms that opened up the economy to liberalization, privatization, and globalization (LPG).

• The plan aimed to correct the fiscal deficit and reduce foreign debt.
• India joined the World Trade Organization in 1995.
• The plan emphasized modernization of industries, poverty reduction, and human resource development.
• The plan aimed for a 5.6% growth rate, achieving 6.8%.

The Ninth Plan (1997-2002): Unleashing Economic Potential

The Ninth Plan aimed to utilize India's untapped economic potential to promote economic and social growth. The plan continued the path of economic liberalization initiated in the Eighth Plan.

The Tenth Plan (2002-2007): Inclusive Growth and Poverty Reduction

The Tenth Plan prioritized inclusive growth and poverty reduction, aiming to achieve an 8% GDP growth rate, reduce the poverty rate by 5%, and create gainful employment opportunities.

• The plan emphasized a regional approach to reduce regional inequalities.
• The plan aimed to achieve a growth rate of 8.1%, achieving 7.7%.
• The Tenth Plan marked a significant period of economic expansion and social development in India.

The Eleventh Plan (2007-2012): Education, Skill Development, and Sustainability

The Eleventh Plan focused on education, skill development, environmental sustainability, and reducing gender inequality. It aimed to achieve an inclusive and sustainable growth model.

• The plan aimed to increase higher education enrollment, provide clean drinking water for all by 2009, and increase agricultural growth to 4%.
• The plan emphasized social sector development and the delivery of services.
• It aimed to reduce the total fertility rate to 2.1.

The Twelfth Plan (2012-2017): Infrastructure Development and Poverty Reduction

The Twelfth Plan aimed to achieve an 8% growth rate, create 50 million new jobs, reduce poverty by 10%, and improve infrastructure.

• The plan emphasized job creation, education, and health improvements.
• It focused on providing electricity to all villages, improving drinking water access, and increasing green coverage.
• The plan aimed to attract private investments of up to US$1 trillion in infrastructure.

The Future: Beyond the Planning Commission

With the dissolution of the Planning Commission in 2014, India no longer implements formal Five-Year Plans. However, Five-Year Defence Plans continue to be made. NITI Aayog, the think tank established to replace the Planning Commission, plays a significant role in guiding economic policy and development strategies for India.