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TheFive-Year Plans of India were a series of national development programmes implemented by theGovernment of India from 1951 to 2017.[1] Inspired by theSoviet model, theseplans aimed to promote balancedeconomic growth, reduce poverty and modernise key sectors such as agriculture, industry, infrastructure and education.[2]
ThePlanning Commission, chairedex-officio by theprime minister, conceptualised and monitored the plans until its replacement by theNITI Aayog (National Institution for Transforming India) in 2015. The plans evolved to address changing developmental priorities, introducing innovations like theGadgil formula in 1969 for transparent resource allocation to states.[3] While the five-year plans significantly shaped India's economic trajectory, they were discontinued in 2017, transitioning to a more flexible framework under the NITI Aayog.[4][5][6]
Five-Year Plans (FYPs) are centralized and integrated national socio-economic programs.Joseph Stalin implemented the firstFive-Year Plan in the Soviet Union in 1928. Most communist states and several capitalist countries subsequently have adopted them. China continues to use FYPs, although China renamed its Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to signify the central government's more hands-off approach to development. India launched its First FYP in 1951, soon after independence, under the socialist influence of India's first prime minister,Jawaharlal Nehru.[7]
The first Indian prime minister, Jawaharlal Nehru, presented the First Five-Year Plan to theParliament of India and needed urgent attention. The First Five-year Plan was launched in 1951 which mainly focused on the development of theprimary sector of the economy. The First Five-Year Plan was based on theHarrod–Domar model with few modifications.
This five-year plan's president was Jawaharlal Nehru andGulzarilal Nanda was the vice-president. The motto of the First Five-Year Plan was "Development of agriculture" and the aim was to solve different problems that formed due to the partition of the nation, second world war. Rebuilding the country after independence was the vision of this plan. Another main target was to lay down the foundation for industry, agriculture development in the country and to provide affordable healthcare, education in low price to people.[8]
The total planned budget of₹2,069 crore (₹2,378 crore later) was allocated to seven broad areas:irrigation andenergy (27.2%),agriculture andcommunity development (17.4%),transport andcommunications (24%),industry (8.6%),social services (16.6%),rehabilitation of landless farmers (4.1%), and for other sectors andservices (2.5%). The most important feature of this phase was active role of state in alleconomic sectors. Such a role was justified at that time because immediately afterindependence,India was facing basic problems—deficiency ofcapital and low capacity to save.
The target growth rate was 2.1% annualgross domestic product (GDP) growth; the achieved growth rate was 3.6% and the net domestic product went up by 15%. Themonsoon was good and there were relatively highcrop yields, boostingexchange reserves and theper capita income, which increased by 8%. National income increased more than the per capita income due to rapid population growth. Many irrigation projects were initiated during this period, including theBhakra,Hirakud andDamodar Valley dams. TheWorld Health Organization (WHO), with theIndian government, addressed children'shealth and reducedinfant mortality, indirectly contributing topopulation growth.
At the end of the plan period in 1956, fiveIndian Institutes of Technology (IITs) were started as major technical institutions. TheUniversity Grants Commission (UGC) was set up to take care of funding and take measures to strengthen thehigher education in the country. Contracts were signed to start five steel plants, which came into existence in the middle of the Second Five-Year Plan. The plan was deemed successful for the government having outperformed growth projections.
The Second Plan focused on the development of thepublic sector and "rapid Industrialisation". The plan followed theMahalanobis model, aneconomic development model developed by the IndianstatisticianPrasanta Chandra Mahalanobis in 1953. The plan attempted to determine the optimal allocation of investment between productive sectors in order to maximise long-run economic growth. It used the prevalent state-of-the-art techniques of operations research and optimization as well as the novel applications of statistical models developed at theIndian Statistical Institute. The plan assumed a closed economy in which the main trading activity would be centred on importingcapital goods.[9][10] From the Second Five-Year Plan, there was a determined thrust towards substitution of basic and capital good industries.
Hydroelectric power projects and five steel plants atBhilai,Durgapur, andRourkela were established with the help of theSoviet Union,Britain (the U.K) andWest Germany respectively.Coal production was increased. Morerailway lines were added in the north east.
TheTata Institute of Fundamental Research andAtomic Energy Commission of India were established as research institutes. In 1957, a talent search and scholarship program was begun to find talented young students to train for work in nuclear power.
The total amount allocated under the Second Five-Year Plan in India was Rs. 48 billion. This amount was allocated among various sectors: power and irrigation, social services, communications and transport, and miscellaneous. The second plan was a period of rising prices. The country also faced foreign exchange crisis. The rapid growth in population slowed down the growth in the per-capita income.
The target growth rate was 4.5% and the actual growth rate was 4.27%.[11]
The plan was criticized byclassical liberal economistB.R. Shenoy who noted that the plan's "dependence on deficit financing to promote heavy industrialization was a recipe for trouble". Shenoy argued that state control of the economy would undermine a young democracy. India faced an external payments crisis in 1957, which is viewed as confirmation of Shenoy's argument.[12]
The Third Five-year Plan stressed agriculture and improvement in the production of wheat, but the briefSino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the defence industry and the Indian Army. In 1965, India fought awar with Pakistan. There was also a severe drought in 1964-65. The war led to inflation and the priority was shifted to price stabilisation. The construction ofdams continued. Manycement andfertilizer plants were also built.Punjab began producing an abundance ofwheat.
Manyprimary schools were started in rural areas. In an effort to bring democracy to the grass-root level,Panchayat elections were started and thestates were given more development responsibilities.For the first time India resorted to borrowing from IMF. Rupee value devalued for the first time in 1966.
State electricity boards and state secondary education boards were formed. States were made responsible forsecondary andhigher education. State road transportation corporations were formed and local road building became a state responsibility.
The target growth rate was 5.6%, but the actual growth rate was 2.4%.[11]
It was based on John Sandy andSukhamoy Chakraborty's model[citation needed].
Due to miserable failure of the Third Plan the government was forced to declare "plan holidays" (from 1966 to 1967, 1967–68, and 1968–69). Three annual plans were drawn during this intervening period. During 1966–67 there was again the problem of drought. Equal priority was given to agriculture, its allied activities, and industrial sector. The government of India declared "Devaluation of Rupee" to increase the exports of the country. The main reasons for plan holidays were the war, lack of resources and increase in inflation.
The Fourth Five-Year Plan was delayed for more than a year amid disagreements over India's economic development strategy.[13]
The plan adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power. It was based on theGadgil formula focusing on growth with stability and progress towards self reliance. At this timeIndira Gandhi was theprime minister.
The Indira Gandhi governmentnationalised 14 major Indian banks (Allahabad Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Central Bank of India, Canara Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, Syndicate Bank, UCO Bank, Union Bank and United Bank of India[14]) and theGreen Revolution in India advanced agriculture. In addition, the situation inEast Pakistan (nowBangladesh) was becoming dire as theIndo-Pakistan War of 1971 andBangladesh Liberation War took funds earmarked for industrial development.
The target growth rate was 5.6%, but the actual growth rate was 3.3%.[11]
The Fifth Five-Year Plan laid stress onemployment,poverty alleviation (Garibi Hatao), andjustice. The plan also focused onself-reliance in agricultural production and defence. In 1978 the newly electedMorarji Desai government rejected the plan. The Electricity Supply Act was amended in 1975, which enabled the central government to enter into power generation and transmission.[15]
TheIndian national highway system was introduced and many roads were widened to accommodate the increasingtraffic.Tourism also expanded. The twenty-point programme was launched in 1975. It was followed from 1975 to 1979.
TheMinimum Needs Programme (MNP) was introduced in the first year of the Fifth Five-Year Plan (1974–78). The objective of the programme is to provide certain basic minimum needs and thereby improve the living standards of the people. It is prepared and launched by D.P.Dhar.
The target growth rate was 4.4% and the actual growth rate was 4.8%.[11]
TheJanata Party government rejected the Fifth Five-Year Plan and introduced a new Sixth Five-Year Plan (1978–1980). This plan was again rejected by theIndian National Congress government in 1980 and a new Sixth Plan was made. The Rolling Plan consisted of three kinds of plans that were proposed. The First Plan was for the present year which comprised the annual budget and the Second was a plan for a fixed number of years, which may be 3, 4 or 5 years. The Second Plan kept changing as per the requirements of theIndian economy. The Third Plan was a perspective plan for long terms i.e. for 10, 15 or 20 years. Hence there was no fixation of dates for the commencement and termination of the plan in the rolling plans. The main advantage of the rolling plans was that they were flexible and were able to overcome the rigidity of fixed Five-Year Plans by mending targets, the object of the exercise, projections and allocations as per the changing conditions in the country'seconomy. The main disadvantage of this plan was that if the targets were revised each year, it became difficult to achieve the targets laid down in the five-year period and it turned out to be a complex plan. Also, the frequent revisions resulted in the lack of stability in the economy.
The Sixth Five-Year Plan marked the beginning ofeconomic liberalisation.Price controls were eliminated and ration shops were closed. This led to an increase infood prices and an increase in thecost of living. This was the end ofNehruvian socialism. TheNational Bank for Agriculture and Rural Development wasestablished for development of rural areas on 12 July 1982 by recommendation of the Shivaraman Committee.Family planning was also expanded in order to preventoverpopulation. More prosperous areas of India adopted family planning more rapidly than less prosperous areas, which continued to have a highbirth rate. Military Five-Year Plans became coterminous with Planning Commission's plans from this plan onwards.[16]
The Sixth Five-Year Plan was a great success to the Indian economy. The target growth rate was 5.2% and the actual growth rate was 5.7%.[11]
The Seventh Five-Year Plan was led by theCongress Party withRajiv Gandhi as the prime minister. The plan laid stress on improving the productivity level of industries by upgrading technology.
The main objectives of the Seventh Five-Year Plan were to establish growth in areas of increasing economic productivity, production of food grains, and generating employment through "Social Justice".
As an outcome of the Sixth Five-Year Plan, there had been steady growth inagriculture, controls on the rate of inflation, and favourable balance of payments which had provided a strong base for the Seventh Five-Year Plan to build on the need for further economic growth. The Seventh Plan had striven towards socialism and energy production at large. The thrust areas of the Seventh Five-Year Plan were: social justice, removal of oppression of the weak, using modern technology, agricultural development, anti-poverty programmes, full supply of food, clothing, and shelter, increasing productivity of small- and large-scale farmers, and making India an independent economy.
Based on a 15-year period of striving towards steady growth, the Seventh Plan was focused on achieving the prerequisites of self-sustaining growth by 2000. The plan expected the labour force to grow by 39 million people and employment was expected to grow at the rate of 4% per year.
Some of the expected outcomes of the Seventh Five-Year Plan India are given below:
Under the Seventh Five-Year Plan, India strove to bring about a self-sustained economy in the country with valuable contributions from voluntary agencies and the general populace.
The target growth rate was 5.0% and the actual growth rate was 6.01%.[17] and the growth rate of per capita income was 3.7%.
The Eighth Plan could not take off in 1990 due to the fast changing economic situation at the centre and the years 1990–91 and 1991–92 were treated as Annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural adjustment policies.
1989–91 was a period of economic instability in India and hence no Five-Year Plan was implemented. Between 1990 and 1992, there were only Annual Plans. In 1991, India faced a crisis inforeign exchange (forex) reserves, left with reserves of only aboutUS$1 billion. Thus, under pressure, the country took the risk of reforming the socialist economy.P.V. Narasimha Rao was the ninth prime minister of the Republic of India and head ofCongress Party, and led one of the most important administrations in India's modern history, overseeing a major economic transformation and several incidents affecting national security. At that time Dr.Manmohan Singh (later prime minister of India) launched India's free market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning ofliberalization,privatisation andglobalization (LPG) in India.
Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy was undertaken to correct the burgeoningdeficit and foreign debt. Meanwhile, India became a member of theWorld Trade Organization on 1 January 1995. The major objectives included, controlling population growth, poverty reduction, employment generation, strengthening the infrastructure, institutional building, tourism management, human resource development, involvement ofPanchayati rajs,Nagar Palikas,NGOs, decentralisation and people's participation.
Energy was given priority with 26.6% of the outlay.
The target growth rate was 5.6% and the actual growth rate was 6.8%.[18]
The Ninth Five-Year Plan came after 50 years of Indian Independence.Atal Bihari Vajpayee was the prime minister of India during the Ninth Plan. The Ninth Plan tried primarily to use the latent and unexplored economic potential of the country to promote economic and social growth.[citation needed]
The main objectives of the Tenth Five-Year Plan:
Out of total plan outlay,₹921,291 crore (US$110 billion) (57.9%) was for central government and₹691,009 crore (US$82 billion) (42.1%) was for states and union territories.
The Twelfth Five-Year Plan of theGovernment of India has been decided to achieve a growth rate of 9% but the National Development Council (NDC) on 27 December 2012 approved a growth rate of 8% for the Twelfth Plan.[19]
The objectives of the Twelfth Five-Year Plan were:
With the Planning Commission dissolved, no more formal plans are made for the economy, but Five-Year Defence Plans continue to be made. The latest would have been 2017–2022. However, there is no Thirteenth Five-Year Plan.[20]
