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BPSC Mains GS-2 Masterclass · Indian Economy

Achievements of Indian PlanningAnd the Changes Planning Needed

In 1951 India faced mass poverty, food shortage, illiteracy and a weak industrial base, and chose planning as the answer. Twelve Five-Year Plans later, what did planning achieve, where did it fall short, and why did India replace the Planning Commission with NITI Aayog?

Institutions1950Planning Commission

set up by Nehru; replaced by NITI Aayog.

Agriculture51 → 292 MTFoodgrains

From the First Plan to 2019-20.

Education12% → 74%Literacy

From 1947 to Census 2011.

Energy1,362 MW → 373 GWPower capacity

From 1947 to the present grid.

Roads21,000 → 1.42 lakh kmNational highways

From 1947 to 2019.

New model15–7–3Vision–Strategy–Agenda

years: NITI Aayog's planning documents.

Part 1 · Planning for development

Why India Chose Planning, and How It Works

The problems at independence, the steps of economic planning, and the architects who designed India's plans.

Planners around a large table in the 1950s with maps of dams, steel plants and fields spread out

Problems at independence

After the independence, there were numerous problems before Indian government. Besides mass poverty and inequality there was the problem of food shortage and inflation. Illiteracy, lack of health care, lack of infrastructure, low productivity in agriculture and storage of food grains etc. were other serious problems facing the country.

Since these were to be solved over the long period, 'Planning' for economic development was the answer to solve these problems.

Structural change in planning

Structural change in economic planning means the dramatic shift in the way economic planning is done. The new economic developments, global shifts in the economic scenario, changes in resource availability and technological innovation etc all create the condition for the need of necessary structural change in the successful economic planning.

Economic planning: the steps

Economic planning is a process which involves the following steps (this part can be skipped in the exam answer):

Preparing a list of the problems facing the economy.
Rearranging the list on the basis of priority.
The next step is to identify the problems which are to be solved in the immediate short run and the other problems which are to be addressed over the long period.
Fixing a target to achieve the desired goal.
- The target could be a specified time period within which the problem must be solved.
Estimating the amount of resources needed for achieving the target. Resources include financial resource, human resource, physical resource etc.
Mobilizing the resources, both financial and human, is another important task. This means that the planners must know the sources of arranging the required resources.
Once the resources are arranged, implementation and execution process starts in an organized manner to achieve the desired goal.
Example: Like a family planning a wedding: list what is needed, decide what comes first, set a date, estimate the cost, arrange the money, then carry it out.

Five-Year Plans and the Planning Commission

Indian government adopted five year plan starting from first five year plan in 1951 for development. The idea was to make a list of important problems to be solved keeping in view the given resources and the capacity to arrange the resources. Then make a review after five years of what has been done and rectify the mistakes accordingly in the next five year plan period and so on.
Some of the great architects of Indian planning include Jawaharlal Nehru, P.C. Mahalanobis, D.R. Gadgil, V.K.R.V. Rao. After becoming the first prime minister of independent India, Nehru established the Planning Commission in 1950.
The major function of the Planning Commission was to formulate plans keeping in view the resources of the country and suggesting the best methods to utilize them effectively and in a balanced manner.

Part 4 · The principal achievements

What Planning Achieved

Growth, food security, diversified industry, infrastructure, education, falling poverty, science and technology, and trade.

Achievements in Economic Growth: it was a major objective of planning.

Since 1947, India has achieved tremendous progress in raising growth, income levels and standards of living.
- In Pre-independence time, the average annual increase in national income was registered to be only 1.2 per cent from 1901 to 1947.
National income increased many times.
- Targeted growth rate was achieved in 1st, 5th, 6th, 7th and 8th plan. The other plans couldn't achieve the target.
- India has become the fifth-largest economy in 2019, overtaking the United Kingdom and France.
- By PPP measurement, India is 3rd largest in the world.
Similarly, the per capita income has attained growth but the rate of growth has been very slow. During the first 30 years of planning the per capita income grew at a very slow rate of 1.2 per cent per year. Recently this growth rate has increased to some extent.
Coming to agriculture, the food grain production has gone up from 51 million tonnes at the beginning of the first plan to 291.95 million tonnes in 2019-20.
- Particularly the production of rice, wheat has been spectacular, but production of pulses and oil seeds etc., has been below target.
In terms of industrial development, a major achievement has been the diversification of Indian industries.
- There has been expansion of transport and communications, growth in generation and distribution of electricity and considerable progress in steel, Coal, aluminium, engineering goods, chemicals, fertilizers and petroleum products.

Foodgrain production (million tonnes)

2019-20291.95
195151

National highways (km)

20191,42,126
194721,000

Net irrigated area (Mha)

Now68.3
194719.4

Literacy rate

201174.04%
194712%

Limitations of planning

There have also been some limitations of planning:

Poverty still persists and India has largest number of poor in the world.
High unemployment.
Regional imbalance.
Inequality: As per Oxfam report: The top 10% of the Indian population holds 77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%.
Gender inequality persists:
- Only 5% of women CEOs.
- India was ranked 112th in World Economic Forum's Global Gender Gap Index 2019-2020, having addressed only 66.8% of the gap.
Caste conflict, untouchability etc → lacking social justice.
Malnutrition etc.

Conclusion on achievements

Thus, while we have achieved several mile-stones, we still have a long way to go to become a developed country. India continues to be a lower-middle-income country. More emphasis on Education, skill, infrastructure etc are the way forward.

Part 5 · From the Planning Commission to NITI Aayog

The Structural Changes Planning Needed

The Planning Commission showed policy fatigue. The necessary changes in the planning process are already being undertaken via the formation of NITI Aayog (the question was asked in 2001).

The old Planning Commission

Before formation of NITI Aayog, the Planning Commission was responsible for the economic planning. The functions assigned to the Planning Commission were to assess and allocate plan resources, formulate plans and programs for area development, determine implementation methodology, identify resource constraints and appraise & adjust implementation etc.
Planning Commission was witnessing policy fatigue necessitating structural changes in central planning process. Some of the major issues with the early planning process was top-down one size fit all nature of planning, it had little relevance for the market economy even after LPG reforms, its role in public–private partnerships was restrictive. Because of these issues Government dismantled Planning commission and formed NITI Aayog.

Cooperative federalism

The change in focus from central planning to cooperative federalism:

Through the NITI Aayog, India will move away from the one size fits all approach and forge a better match between schemes and needs of States. Replacing a Union-to-State one-way flow of policy by a genuine and continuing partnership with the states.
The NITI Aayog was mandated to foster cooperative federalism, evolve a national consensus on developmental goals, redefine the reforms agenda, act as a platform for resolution of cross-sectoral issues between Center and State Governments.

Bottom-up planning: To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels. A three-tier planning and review mechanism should be developed through district, state and national level planning committee.
Participative: To provide advice and encourage partnerships between the key stake-holders and national and international Think Tanks, as well as educational and policy research institutions.
Indicative planning: Under such planning government tries to solve the problem of imperfect information in market economies by coordination of private and public investment through forecasts and output targets.
- The resulting plans aim to supply economically valuable information as a public good that the market by itself cannot disseminate.
- Such planning has more relevance in post-LPG reform era.
Example: Imperative planning orders a steel plant to be built; indicative planning publishes a forecast that India will need X million tonnes of steel by 2030 and lets private and public firms decide how to supply it.
NITI Aayog will act with speed, to provide the strategic policy vision for the government as well as deal with contingent issues.
- To foster collaborative federalism through structured support initiatives and mechanisms with the states on a continuous basis, recognizing that strong states make a strong nation.

Planning after NITI Aayog: three documents instead of one plan

Thus, holistic approach should be taken in all the stages of economic planning. Government is already taking these steps particularly after formation of NITI Aayog. Post formation of NITI Aayog, government still has planned development in action. However, the only difference is that the process of planning is entirely different. The first major difference is that instead of a single five year plan, the country will have three plans spread over three different time periods.

15-year Vision

First is a 15 year "Vision" that encompasses overall goals and objectives of the country for next 15 years.

7-year Strategy

Second is a 7 year "Strategy" which lays the roadmap of development for next seven years dividing those goals and objectives into two parts.

3-year Action Agenda

Third and Final is a "Three Year Action Agenda" which states the tasks and targets to be accomplished in next three years time frame, further dividing the strategy into two parts. Unlike a five-year plan, the three-year action agenda would not be as comprehensive as the five-year plan and is not expected to go into minute details of each sector and schemes programmes and their probable allocation.

“While we have achieved several mile-stones, we still have a long way to go to become a developed country.”

— BPSC Mains answer, 2019

Curated for BPSC, UPSC & State PCS Civil Services Aspirants | Indian Economy Master Module

Explore More Beyond the Book Modules

Achievements of Indian PlanningAnd the Changes Planning Needed

Why India Chose Planning, and How It Works

Economic planning: the steps

Five-Year Plans and the Planning Commission

What Planning Set Out to Achieve

The objectives of planning in India

Twelve Plans in Brief

What Planning Achieved

Limitations of planning

The Structural Changes Planning Needed

The old Planning Commission

Cooperative federalism

Planning after NITI Aayog: three documents instead of one plan

BPSC Mains Previous Year Questions

Evaluate the principal achievements of Indian economic planning.

What structural changes are necessary in the successful economic planning?