After the Indian independence in 1947, India embarked on a journey of planned economy until 2014 under Planning Commission. Afterwards, NITI Aayog replaced Planning Commission on 1 Jan 2015. It is much debatable whether Five Years planning system really worked or not. If India could have aligned itself more with the USA or adopted capitalist system earlier, the Indian economic picture could/might have been different. But there is no denying that it was not as easy choice as it seems today.
Topics Covered:
- Why Planning?
- Types of Planning
- Historical Background:
- Planning Commission
- Five Year Planning Overview
Why Planning?
As long as the state-system exists in the world, there will always be some short of planning. Because not everything can be produced under market system. For example, infrastructure, schools, defense and others. That's why, Indian leaders after the independence took the road to planning system.
1. Poverty and Inequality
The market system tends to create inequality as they are driven by profits. It rewards skilled workforce but poor without education and skill are left to their own fate. Thus, Indian leaders to reduce the poverty and persistent inequality launched the Five Years Plan.
2. Public Goods
As mentioned earlier, capitalist system follows the economic sectors which are profitable. In a country with very little purchasing power, very few foreign companies were interested to invest in India. Before investments flow to a country or market economic system takes place, at least a moderate infrastructure and skilled workforce are required. Roads, railways, bridges and other public goods needed to be developed.
3. Government Responsibilities
Not everything can be managed by market forces. Some economic aspects are state responsibilities. Education, access to health, drinking water, sanitation and environment protection are not private companies' responsibilities.
Types of Planning
There are mainly two types of planning: Indirect Planning and Direct Planning
Indirect Planning: In this planning approach, instead of direct planning, the government strives to achieve objective of planning through policies and regulatory framework. France is usually considered the best example of this type of planning
Direct planning: As the name suggests, government directly gets involved in economic activity through creation of state owned enterprises, and establishing quotas for different sectors.
Historical Experience
The planning system came to recognition in world when Soviets experimented with planning in 1928. During 1930s, the world was suffering from the shocks of 1929 Great Depression, but Russia remained largely unaffected due to planning system (although, it would be controversial to argue that). Soon almost two-thirds of the world started to adopt this world. Even Congress in 1929, stressed the need for changes in the economic system. The book written by M Visvesvaraya was a pioneer work in this direction which showed first systematic work on the planning in the Indian context. However, the word 'planned' had different meaning for people, some wanted focus on industries, some on agriculture and others wanted a totally capitalist economy.
National Planning Committee 1938
Planning was first initiated in the Congress by Subhas Chandra Bose who was also Congress President in 1938. Later Nehru became head of National Planning Committee along with 15 other members.
Bombay Plan (1944)
In 1944, J R D Tata, Thakurdas and six other industrialists published another development plan known as Bombay Plan. The central aim was to raise the national income through industrial growth. Some of the objectives mentioned in the Bombay Plan were:
- Doubling the per capita income in 15 years.
- Achieving 130% agricultural and 500% industrial growths. They wanted to reduce dependency on agriculture.
- To achieve the growth, they recommended an outlay of Rs. 10000 crore.
- However, due to its capitalist orientation, it couldn't be implemented.
Gandhian Plan (1944)
Based on Gandhian philosophy, the Gandhian Plan was presented by and ardent supporter of M K Gandhi, S N Agarwal. The plan recommended a decentralized economy with self-sufficient villages and industrial production.
People' Plan (1945)
It was a 10 year plan prepared by M N Roy. The recommendation were similar to Soviet planning model. The People's Plan recommended:
- Collectivization of agriculture and consumer goods.
- State owned enterprises
- Nationalization of land
Advisory Planning Board (1946)
The Interim Government of India formed the Advisory Planning Board in 1944 to create a report on how the planning system would work out in India. The Board submitted its report in Jan 1947 with following recommendations:
- Increase in production through a well structured plan.
- State control over the use of energy resources, distribution and price.
- Mineral exploitations should be state owned.
Planning Commission 1950
The working committee of Congress recommended creation of Planning Commission in 1947. Finally, the National Planning Commission was established on 15th March 1950.
The Planning Commission initially incorporated mostly socialist planning system with some aspects of mixed economy.
Five Year Planning Overview:
First five year plan was launched in 1951 and later two subsequent plans were launched till 1965.
However, the fourth plan couldn't be launched due to various reasons. The main reasons were Indo-Pak War 1965, two successive years of drought, devaluation of currency, and inflation. Instead of five years plan, three annual plans from 1966 to 1969 were launched. Fourth five year planning took off in 1969.
Further, when Indian economy was liberalized in 1990, two annual plans were launched in 1990-91 and 1991-92. So total five annual plans were launched between the period of 1947 to 2017.
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