Economic Planning in India

Economic Planning in India

Economic planning refers to the process where the government sets goals and priorities for economic development and allocates resources accordingly. In India, economic planning played a central role in shaping the economy post-independence, particularly in promoting industrialization, self-sufficiency, and social welfare.

History and Background

• India’s economic planning journey started with the establishment of the Planning Commission in 1950.
• Inspired by Soviet-style central planning, India adopted Five-Year Plans to direct economic activities.
• The first Five-Year Plan (1951-56) focused on agriculture and irrigation, while later plans expanded into industry, infrastructure, and social sectors.

Objectives of Economic Planning

• Achieve rapid economic growth.
• Promote social justice and reduce inequality.
• Develop basic industries and infrastructure.
• Enhance self-reliance (reducing dependence on imports).
• Ensure balanced regional development.
• Address poverty, unemployment, and social welfare.

Phases of Economic Planning

Phase 1 (1951-1965): Agricultural Focus and Heavy Industries

• Focused on land reforms, irrigation, and food production (First Plan).
• Second and Third Plans emphasized heavy industries and public sector dominance.

Phase 2 (1966-1980): Crisis and Green Revolution

• Due to wars (1962, 1965) and droughts, India faced severe food shortages.
• Introduction of Green Revolution technologies boosted agricultural output.
• Focus shifted to poverty alleviation (Garibi Hatao).

Phase 3 (1980-1991): Pre-Liberalisation Reforms

• Emphasis on technological modernization and limited liberalisation.
• The economy suffered from inefficiency, high fiscal deficits, and external debt crisis by 1991.

Phase 4 (Post-1991): Liberalisation and Globalisation

• Economic reforms of 1991 dismantled licensing, liberalised trade and investment, and redefined planning.
• Focus shifted to market-led growth with planning supporting infrastructure, social welfare, and investment climate improvement.

NITI Aayog – Shift from Central Planning to Policy Think Tank

• In 2015, the Planning Commission was replaced by NITI Aayog.
• NITI Aayog acts as a policy advisory body, focusing on cooperative federalism, data-driven governance, and bottom-up planning.

Achievements and Shortcomings of Planning in India

Achievements

• Established basic industries and self-reliance in some sectors.
• Developed agriculture through the Green Revolution.
• Expanded infrastructure (dams, roads, electricity).
• Improved social indicators like literacy and health (though unevenly).

Shortcomings

• Excessive bureaucratic controls stifled innovation.
• Public sector inefficiency led to huge financial burdens.
• Poverty and inequality persisted despite planned interventions.
• Over-centralisation ignored local needs and preferences.

Statement-based MCQs

MCQ 1
Consider the following statements regarding India’s economic planning:

1. The Planning Commission was established in 1947 before the Constitution came into effect.
2. India’s planning process initially adopted elements from the Soviet Union’s centralised planning model.
3. NITI Aayog retains the power to approve Five-Year Plans for the central government.

Which of the statements given above is/are correct?
a) 1 only
b) 2 only
c) 2 and 3 only
d) 1, 2 and 3

MCQ 2
Which of the following were primary objectives of India’s Five-Year Plans?

1. Promoting rapid industrialisation
2. Reducing poverty and unemployment
3. Ensuring balanced regional development

Select the correct answer using the code below:
a) 1 only
b) 2 and 3 only
c) 1, 2 and 3
d) 1 and 2 only

MCQ 3
Which of the following developments led to the replacement of the Planning Commission with NITI Aayog?

1. Increasing need for cooperative federalism.
2. Shift towards a market-oriented economy after 1991 reforms.
3. Desire for greater flexibility and data-driven policy-making.

Select the correct answer using the code below:
a) 1 only
b) 1 and 2 only
c) 2 and 3 only
d) 1, 2 and 3

MCQ 4
During which Five-Year Plan was the Green Revolution introduced in India?
a) First Five-Year Plan
b) Second Five-Year Plan
c) Third Five-Year Plan
d) Fourth Five-Year Plan

MCQ 5
Which of the following correctly distinguishes between the Planning Commission and NITI Aayog?
a) Planning Commission approved centrally designed plans; NITI Aayog acts as a policy think tank.
b) Planning Commission worked with the private sector, while NITI Aayog focuses only on public policy.
c) Planning Commission worked through consultative mechanisms, while NITI Aayog relies only on data analysis.
d) Planning Commission was abolished before the 1991 economic reforms.