Economic Planning in India Meaning and Objectives

Table of Contents:-

Meaning of Economic Planning in India
Definition of Economic Planning in India
Emergence of Economic Planning in India
Historical Emergence of Economic Planning in India
Objectives of Economic Planning in India

Meaning of Economic Planning in India

Economic Planning in India can be defined as the long-term plans and decisions made by the central government for the development of the economy. This includes government spending on various schemes and programmes related to economic development. In other words, economic planning is the process of achieving economic ability through the effective utilisation of national resources for the benefit of society.

Contrary to this laissez-faire approach involves no decision making. It is usually dependent on the market forces to decide the nature, speed and direction of economic development.

Therefore, an inclusive economic plan has to be prepared by the government with the integration of public and private sectors. This is done to achieve the objectives of the economy through the implementation of the Five Year Plan since 1951.

Definition of Economic Planning in India

According to Fedynand Zwei –. “Economic planning in this sense would mean drawing up economic schemes with foresight and on a large scale it may be called planning within the economy”.

According to the Indian Planning Commission, “Economics planning is, essentially a way of organising and utilising resources to maximum advantage in terms of defined social ends”.

According to Prof. Lews Lordwin, “Planned economy is a scheme of economic organization in which individual and separate plants, an enterprise of industries are treated as coordinated units of one single system to utilise available resources to achieve the maximum satisfaction of the people’s needs within given time”.

Emergence of Economic Planning in India

Indian planting is an open process. Stakeholders usually make public the disagreements and discussions related to plan preparations. The initial aggregate calculations and assumptions are either explicitly stated or madly deducible, and the makers of the plans are not only sensitive but responsive to criticism and suggestions from a wide range of international and national sources.

The process of plan-making in India has evolved as a responsive democratic political process, from the initial formulation to subsequent modifications and parliamentary presentation. The wide political participation in the preparation of the plan is understandable if one realises that the plan is only intended as a set of prescriptions for economic behaviour but represents the diverse aspirations of nations for social advancement.

Historical Emergence of Economic Planning in India

The major points in the historical emergence of planning in India are given as follows:-

1) Pre-Independence Planning Initiatives

Though the planned economic development in India officially started in 1951 with the inception of the First Five-Year Plan, theoretical efforts had begun long before, even before the country’s independence. The setting up of the National Planning Committee by the Indian National Congress took place in 1938. The Bombay Plan and Gandhian Plan in 1944, the Peoples Plan in 1945 (by the post-war reconstruction Committee of the Indian Trade Union), and the Sarvodaya Plan in 1950 by Jaiprakash Narayan stepped in this direction.

2) The Origins and Spread of Five-Year Plans

The primary objective of the Five-Year Plans is to outline a nation’s economic priorities. Joseph Stalin implemented the first Five-Year Plans in the Soviet Union in the late 1920s. Many communist states and several capitalist countries subsequently adopted them. China and India both continue to use FYPS, although China re-named its Eleventh FYP. From 2006 to 2010, there was a shift in approach by the central government, moving from a traditional plan (jihua) to a guideline (guihua). This change signified a more hands-off approach to development.

3) The Inception of India’s First Five-Year Plans

After gaining independence, India launched its First Five-Year Plans in 1951, under the socialist influence of first Prime Minister Jawaharlal Nehru. The process began with the setting up of the Planning Commission in March 1950 in pursuance of the declared objectives of the government to promote a rapid rise in the standard of living of the people by efficiently utilizing the country’s resources, increasing production and offering opportunities for all in service to the community. The Planning Commission was charged with the responsibility of assessing the country’s resources, augmenting deficient resources formulating plans for the most effective and balanced utilisation of resources and determining priorities.

4) The Inauguration of India’s First Five-Year Plan

In 1951, India launched the first Five-Year Plan, followed by two more plans until 1965, when the Indo-Pakistan conflict caused a break. Two consecutive years of drought, currency devaluation, inflation, and resource erosion disrupted the planning process. After completing three Annual Plans between 1966 and 1969, the government initiated the fourth Five-Year Plan (FYP) in 1969.

5) Annual Plans in 1990-91 and 1991-92

The rapidly evolving political environment prevented the commencement of the Eighth Plan in 1990, resulting in the designation of 1990-91 and 1991-92 as Annual Plans. However, the official launch of the Eighth Plan took place in 1992, following the implementation of structural adjustment policies.

6) Shifting Perspectives on Planning in India

During the first eight Plans, the emphasis was on expanding the public sector through substantial investments in basic and heavy industries. However, there has been a decrease in the emphasis on the public sector, reflecting the evolving perspective on planning in the country. The current perspective suggests that planning should increasingly be indicative rather than heavily reliant on the public sector.

Objectives of Economic Planning in India

1) Economic Stability

Stability ensures economic growth. It is very important to maintain the price level and structural balance in the economy. The control of inflation and unemployment brings economic stability. During the working of the Second Five Year Plan, the price level started increasing and has continued till now. Since then, the government has taken several measures to reduce and control the price level.

2) Social Justice

Social justice refers to the equitable distribution of income and wealth within a society. There should be no discrimination between rich and poor. All the citizens of the society should receive equal opportunities and privileges.

Following are the four important aspects of social justice:

To apply democratic principles in the political structure of the nation,
To ensure social and economic equality and eliminate regional imbalances,
To remove the centralisation of economic power, and
To uplift weaker sections of society.

3) Modernisation of the Economy

Modernisation refers to those institutional and structural changes in economic activities which would transform the colonial and feudal countries into an independent and progressive economy. Improving the standard of living, adopting advanced technology, promoting R&D activities, increasing industrial outputs, expanding banking and non-banking institutions, and more can achieve modernisation.

4) Full Employment

Underdeveloped countries are suffering from a persistent problem of unemployment. The developing country like India is also facing the severe problem of unemployment. Hence, economic planning aims to attain full employment and eliminate unemployment from the economy.

5) Alleviating Three Main Bottlenecks

Economic planning also aims to improve three main bottlenecks of the Indian economy, i.e., the level of agricultural production, the capacity of manufacturing units and the balance of payment. These areas serve as three pillars of the economy that can increase economic development.

6) Economic Self-Reliance

Self-reliance means ‘to stand out independently’. Given Five Year Plans. India intends to be self-sufficient in its national resources and powers rather than remain dependent on foreign reserves. Initially, India imported various foreign aid in the form of advanced technology, natural resources, and foreign investment for economic development. The importance of self-reliance was realised during the formulation of the Fourth Five-Year Plan. Thus, from then onwards, the government gave more emphasis to high agricultural production and promoted exports.

7) Rapid Economic Growth

The main objective of economic planning is to achieve a high rate of economic growth. This can be measured by an increase in the per capita income of the economy. Economic growth involves the development of various sectors like agriculture, power, transport, communication, etc. It also includes poverty reduction, improved standard of living, high literacy rate, low unemployment rate, etc. Since 1951, the Five Year Plans have put in efforts to improve and increase the economic growth rate. In 2014, India recorded an economic growth rate of 5.6%.