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India’s Five Year Plan

Last Updated : 06 Apr, 2023
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Right after the approval of the new constitution on 26 January 1950, a planning commission was set up and constituted in March 1950 by the Indian government. The late Prime Minister Pandit Jawahar Lal Nehru was its first chairman.

Broad functions of the planning commission include:

1. Assessment of capital, material, and human resources.

2. Allocation of resources & determination of priorities.

3. Formation of a plan for its balanced and most effective utilization.

Five Year Plan

The planning commission proposed that India should formulate a plan for a period of 5 years for its development and economic growth, known as the Five Year Plan. Till now, twelve five-year plans have been completed in India. Under the influence of then Prime Minister Pt. Jawahar Lal Nehru, India established its first five-year plan inspired by the Soviet Union.

Till now, India has established twelve five-year plans. The first eight plans in India were focused on growing the public sector, but since the launch of the Ninth Plan, The focus has shifted towards making the government a growth facilitator.

Goals of Five Year Plan

The main aim of the five-year plan is to remove the economic backwardness of the country and make India a developed economy. It also ensures that the weaker sections of the population benefit from economic progress.

The basic goals of five-year plans are:

  • Growth
  • Modernisation
  • Self-Reliance
  • Equity

1. Growth

The primary and foremost objective of any economic plan is economic growth. The growth implies:

  • Either a large size of supporting services like banking and transport;
  • Or a larger stock of productive capital;
  • Or an increase in efficiency of productive capital & services.

Economic growth can be measured by the increase in the Gross Domestic Product(GDP) of the nation or country. GDP is the market value of all the goods & services produced in a country during a particular year. Higher GDP indicates that the general public can avail more benefits from the nation’s economic policies. 

This economic growth takes place due to an increase in the production capacity of goods & services or due to an influx of capital into the economy. The GDP of the country is derived from various sectors, the basic sectors of an economy are: Agriculture, Industrial, and Service sector, and every sector contribute to the composition of GDP. In some countries, the agricultural sector contributes more to the GDP, while in some countries, the service sector contributes more to the GDP. 

Increase in share of service sector in GDP

By 1990, the share of the service sector was 40.59%, more than that of agriculture and industry. This phenomenon of growing share of the service sector was accelerated in post 1991 period, which marked the beginning of globalization in the country.

2. Modernisation

Modernisation refers to the incorporation of technology into the economy. It helps in raising the standard of living of people in society. Inventions, advancements, and innovations in technology play a vital role in the growth of our economy and increasing its output. Modernisation includes:

  • Adopting New Technology: The main aim of modernisation is to increase the production of goods & services by using new technology. For example, the introduction of technology in agriculture resulted in increased output, and over the years, the Indian economy has also witnessed a rise in the IT sector due to modernisation.
  • Change in Social Outlook: Modernisation also needs changes in social outlooks, such as women empowerment or providing equal rights to women. A society can be more prosperous or civilised if it uses the talent of women employees in the workplace.

3. Self-Reliance

Post-independence Indian economy became too reliant on imports, Therefore, for seven editions of the five-year plan government encourages self-reliance. Self-reliance means anything that India is capable of manufacturing domestically will not be imported, especially food and agricultural products. In nutshell, Self-reliance means development through domestic resources.

Self-reliance was encouraged due to two reasons:

  • To reduce Foreign Dependence: As India recently got freedom from foreign control, it was necessary for India to become independent or self-reliant and reduce its dependency on foreign countries, especially for food or agricultural items.
  • To avoid Foreign Interference: The government of India was afraid that dependency on foreign countries for food supplies, capital, & technology may increase foreign interference in the economic policies of the country.

4. Equity

The previous goals focus on the development of the economy only. But only economic development is not sufficient. The five-year plan must focus on the development of society also. It is necessary to make sure that all the members of society equally enjoy these benefits from the economy. This is where equity comes in. In addition to the previous three goals (growth, modernisation, and self-reliance), equity is also important. Equity concentrates on ensuring that all citizens of the nation have their basic needs for clothing, food, and shelter properly met. It also tries to reduce the inequality and wealth gap in society. In short, equity aims at raising the standard of living of people and promoting social justice.

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