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Major Failures of National Planning Commission

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  • Last Updated : 02 Feb, 2022

The National Planning Commission (NPC) of India was constituted on the 15th of March 1950. The NPC was founded by a Resolution of the Government of India as an advisory and a specialized institution. It was an extra-constitutional, non-statutory, and advisory body. The Commission has effectively played an important role in India’s rejuvenation from the reins of the British to an independent nation with ambitious developmental goals.

In 2014 however, the NPC was replaced by the Niti Aayog a more vibrant organization compared to the NPC. It aims at achieving goals of sustainable development by adopting cooperative federalism thereby enhancing the participation of the states in the developmental activities of the nation.  

Despite the many developmental goals fulfilled by the NPC, the body has been accused of a lot of criticisms. The Commission has often been criticized for being a soviet styled-bureaucratic body that stifled the economic growth of the country.

Major Drawbacks and Failures of the National Planning Commission:

1. Inadequate Growth Rate

The actual Growth Rate of the Indian economy was much less compared to the targeted rate of growth. Barring the First and the Sixth Five Year Plans, the actual rate of growth remained way below the aimed growth rates of GNP and per capita income. There was a gap between the aimed target and the actual growth rate which is 4.4% against the 5% targeted growth rate. This difference between the target growth rate and the achieved growth rate portrays the failure of the Five Year Plans. India continues to be one of the poorest nations even today despite 50 years of economic planning.

2. Failure to Eliminate Poverty

Poverty is one of the major impediments which continue to haunt India. More than a quarter of the population in the rural areas which is 25.7 percent live below the poverty line. In the urban areas, the situation is a little better than the rural areas where 13.7 percent of the population live below the poverty line. Altogether about 22 percent of the Indian population is carrying out their livelihood while sustaining themselves below the poverty line. Despite numerous schemes launched by the Planning Commission via the Five Year Plans the problem of poverty has not been eliminated properly.

3. Impact on Unemployment

The removal of unemployment was yet another major objective of the Planning Commission, but the employment generation could not achieve major success as a result the number of unemployed has been rising steadily. At the end of the First Five Year Plan 53 lakh people were found to be unemployed, the numbers kept increasing with the next plans and it rose to 349 lakhs by 2004-2005. After the end of the 12th Five Year Plan in 2017, India’s unemployment rate hit a 45 year high of 6.1 percent in 2017-2018. There has been an increase in employment opportunities through the Five Year Plans but the supply of labour has preceded that, this has led to a further increase in the number of unemployed. This is mostly because the Five Year plans focused more on growth rather than employment. The government’s focus was more towards adopting growth-oriented capital intensive strategies rather than employment generation strategies.

4. Failure to reduce inequality of income and wealth

Throughout the planning period, the rich have turned richer while the poor have become poorer. Even though the incidence of poverty went down to some extent, the incidence of inequality increased significantly owing to the concentration of wealth in the hands of a few wealthy people. India’s richest 1 percent acquired about 73% of the country’s total wealth according to a survey by the International Rights group Oxfam while 67 crore Indians which comprise the population’s poorest lot saw an average increase in their wealth by only 1%. This can be attributed significantly to the increase in the prices of essential goods, inflation which has favored the rich but deprived the poor.

5. Regional imbalance

The five-year plans aggravated the gap between the states furthermore. A lot of changes were expected from the Planning Commission concerning developmental activities, but instead, it emphasized more on macro, sectoral, economic, and national aspects while it lacked the regional thrust. This has led to an unequal distribution of resources between the states. The backward areas continue to be neglected and underdeveloped while the metropolis has seen a surge of developmental activities.

6. Impact on Inflation

All the benefits of economic planning have been overshadowed by the negative impact of price inflation. The prices of all the essential commodities have continued to increase at a steady pace causing a lot of hardship for the vast majority of the people. In the First Five Year Plan the prices had come down considerably but the second plan saw a 63% rise in prices of goods. The third, fourth, fifth, fifth plan recorded a 5.8%, 9%, and 3.6% rise respectively. The prices rose by 4% in 2004-2005 and in November 2013, when the 12th Five Year Plan was in operation the inflation reached an all-time high of 12.17%. The prices of fuel and power had risen to 10.3 % in October 2013 while food prices rose by 18.2%. The RBI had to raise its benchmark interest rate to 7.75% from 7.5% in order to control the rapidly rising inflation rates. Growth without stability has been a characteristic of Indian planning.

7. Failure to Implement Land Reforms

Land reform measures have been largely neglected by the five-year Plans. The policy decisions of transferring ownership of land to the peasantry were not implemented properly. The government was not eager to implement these measures which aimed at progressive agriculture and socialism this led to the alienation of a large number of peasants and brought them more hardship.

8. Inability to Check the flow of Black Money

For several reasons, there has been a concentration of a large amount of black money with a section of the wealthy population. These people have misused the available resources and indulged in illegal activities, which has also led to the misallocation of resources. The schemes adopted to check the concentration of black money have also failed to serve their purpose.

9. ‘One Size Fits All’ approach

The majority of the plans were designed keeping in mind the ‘one size fits all’ approach, they were not designed keeping in mind the requirements of the region and the masses, as a result, most of the plans implemented failed to produce palpable results.

The Planning Commission has failed to keep abreast of the changing scenario of economic development around the world. Federalism is the essence of modern-day governance but the centralized structure of the Planning Commission fails to adapt itself to this spirit of cooperation between the center and states. The Indian economy is steadily developing itself with a rise in GDP at purchasing power parity ranking just below USA and China. India at this hour of economic boom needs a more robust and dynamic institution to stabilize the economic scenario by taking proficient policy decisions. The government institutions as well must develop themselves adequately to cater to the changing scenario and the increasing levels of development.

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