In this article we will discuss about the Review of the First Eight Five Year Plans in India. After reading this article you will learn about: 1. Plan Outlays of First Eight Plans 2. Priority Pattern followed in the First Eight Plans 3. Achievements of Planning during the First Eight Plans.
Plan Outlays of First Eight Plans:
The Planning Commission finalised the overall plan outlays of these six plans which was shared by both the private sector and public sector. Table 11.1 shows the trends in the outlays of first eight plans of the country.
Table 11.1 shows that the plan outlays in respective plans increased significantly during this 46 years of planning. Moreover, a tendency that can be noticed there that proposed outlay of all these plans are almost double the amount of outlays of the previous plan. Accordingly, the size of outlays of these plans increased at a very rapid pace.
Thus in most of the cases the plan outlay increased by more than 100 per cent except in case of Third Plan where outlay recorded an increase of over 50 per cent. Moreover, the outlay of the Sixth Plan was even more than 200 per cent to that of Fifth Plan.
Outlay of the Eighth Plan was 150 per cent higher than Seventh Plan. Thus it reveals that Indian planners sincerely attempted to allocate more and more, resources for the development of the country.
Priority Pattern Followed in the First Eight Plans:
The priority pattern followed in allocating the plan outlay among various sectors varied significantly from one plan to another. In-spite of that there was a tendency on the part of the government to make a compromise among these priority patterns followed in these different plans of the country.
Although during the First Plan, agriculture received the top most priority (31 per cent) but in the subsequent plans priority on agriculture declined. But it was during Fourth and Eighth Plans that allocation for agriculture that was made between 21 to 24 per cent of outlay.
(ii) Transport and Communications:
High priority was given during the first three plans of the country in which 25 to 28 per cent of the outlay was allocated for the development of transportation and communication facilities as the country was suffering from infrastructural backwardness seriously. Later on, in the subsequent plans the priority allocation declined, i.e. to 21 per cent during the Eighth Plan.
Industrial sector started to receive high priority from Second Plan onwards. Thus the relative share of outlay on industries increased from 6 per cent during the First Plan to 24 per cent during the Second Plan and since then, the priority allocation on industry varied between 23 to 10 per cent till the Eighth Plan.
During first four plans, Indian planners gave lesser priority on the development of power where the allocation of outlay varied between 10 to 15 per cent. But considering the severe power shortage, more priority was given on the development of power during Fifth and Eighth Plan where the allocation varied between 28 to 27 per cent.
(v) Social Services:
Social services received all along a high priority during first four plans and the relative share of outlay varied between 22 to 18 per cent. During Fifth and Eighth Plan, social services received 17 and 22 per cent respectively of the plan outlay.
Achievements of Planning During the First Eight Plans:
In order to assess the effectiveness of planning in improving the lot of the economy, it is quite essential to study the achievements of first 46 years of planning of the country.
It would be better to study the achievements under the following heads:
1. National Income and Per Capita Income:
During last 46 years of planning, the national income (at 1993-94 prices) of the country increased by 19 and 20 per cent during the First and Second Plan respectively, 12 and 18 per cent during the Third and Fourth Plan and 29 and 31 per cent during the Fifth and Eighth Plan respectively.
The annual growth rate of NNP (at 1993-94 prices) which was 3.6 per cent and 4 per cent during First and Second Plan, sharply declined to 2.5 per cent during the Third Plan. Since then the annual growth rate again rose to more than 5 per cent during the Fifth Plan and then to 6.7 per cent during the Eighth Plan.
The per capita income of the country increased by nearly 146 per cent during the first 46 years of planning. Although the national income increased by about 543 per cent during this period but it is due to high rate of growth of population the per capita income could not grow at a satisfactory rate.
The annual growth rate in the per capita income varied between 1 to 2 per cent during the first four plans excepting the Third Plan where the growth rate was zero. During Fifth and Eighth Plans, the growth rate in the per capita income slightly rose from 2.6 per cent to 4.9 per cent.
2. Agricultural Development:
In-spite of huge investment in the agricultural sector the agricultural output could not achieve the targeted growth rate. During initial part of planning, increase in agricultural output was realised through extension of area under cultivation.
Since Third and Fourth Plan onwards increase in productivity (yield per hectare) was recorded as a result of the adoption of new agricultural strategy and intensive cultivation in some selected area of the country. Thus during last 46 years, production of food grains is almost trebled as it rose from 51 million tonnes in 1950-51 to 192.3 million tonnes in 1997-98.
But the shortfall in production was very much acute in respect of the production of pulses, oilseeds etc.
3. Industrial Development:
During first eight plans, industrial production increased considerably due to huge public sector investment on this sector. During first five plans about Rs 42,200 crore was invested by the government and another Rs 46,889 crore was again invested during Eighth Plan.
All these amount were invested on various industrial and infrastructural projects. Consequently industries like steel, engineering goods, fertilizer, aluminium, petroleum goods recorded a significant progress. Thus the annual growth rate of output of the large scale manufacturing sector increased by 6 to 8 per cent during the first three plans.
Fourth plan recorded merely 3.9 per cent annual growth rate in this manufacturing sector. But the annual growth rates of output of the manufacturing sector during the Fifth and Eighth Plan were 6.1 and 8.0 per cent respectively. But the achievements in this respect were all along below the targeted growth rates envisaged in these plans.
Again the compound growth rate (annual) of industrial output rose 5.7 per cent, 7.2 per cent and 9.0 per cent during the first three plans. Since then the compound growth rate of industrial output remained below 8 per cent till 1996-97.
Moreover, the infrastructural sector achieved a significant progress during this period leading to expansion of various infrastructural facilities like power, transport and communication, banking etc.
4. Employment Generation:
During first eight plans much stress was laid on the creation of larger employment opportunities, creation of larger industries, establishment and expansion of small scale and village industries along with improvement of agriculture and service.
During first two plans employment opportunities were generated for about 16.0 million people. Again during 1961-71 about 20.0 million people got fresh job opportunities. Again during 1971-81, about 25.0 million people were given employment opportunities.
During 1992-97, i.e., during the Eighth Plan 42.5 million additional employment was generated. But with the huge growth of number of working population, the backlog of unemployment at the end of each plan has been increasing at a rapid rate. Total backlog of unemployment which was 5.3 million at the end of the First Plan, gradually rose to 36.8 million in 1996, i.e., nearly 14 per cent of the total labour force.
5. Generation of Savings and Investment:
Introduction of economic planning has been raising the rate of savings and investment in the country gradually. Accordingly, the rate of gross domestic savings and gross domestic capital formulation (as per cent of GDP) has been steadily rising from 10.4 per cent and 10.2 per cent respectively in 1950-51 to 18.9 per cent and 21.3 per cent respectively in 1985-86 and then to 23.2 per cent and 24.5 per cent respectively in 1996-97.
6. Self Reliance:
Five year plans in India set an objective to attain self-reliance in the economy and also to eliminate phase out dependence on foreign aid gradually. During the last four decades of planning, the country has achieved a good rate of progress in achieving self-reliance. The country is gradually being emerged out as a self-reliant economy in various fields such as, agricultural production, electronics, sophisticated technology etc.
Even then, the country has failed to run the economy without depending on foreign assistance. In recent years, a huge amount of loan of $ 5.0 billion SDRs taken by the Government on hard terms from IMF reflects its position in respect of self-reliance. However, total foreign exchange reserve of India stood at US $ 26.4 billion in 1996-97 and attained import cover of 6.5 months.
7. Diversification of Exports and Import Substitutions:
With the gradual diversification of Indian industries during the long four decades of planning, the composition of exports of the country has also broadly diversified.
The composition of exports of the country has been changed from primary commodities to manufactures, handicrafts, mineral ores, jewelleries, engineering goods, leather goods as well as producer’s goods imported earlier are now being produced indigenously.
In this way diversification of export and containment of imports through import substitution have reduced the ugly pressure on the balance of payments position of the country.
8. Development of Human Resources:
The implementation of various schemes under planning has been developing the human resources of the country in a successful manner. The planning has developed a huge educational system which is considered as the third largest in the world. Accordingly, total enrolment of students at various levels has increased from 239 lakh in 1950-51 to 1,831 lakh in 2000, showing a eight-fold increase.
Total enrolments of students both at the primary, secondary and higher education level have increased from 192 lakh, 12 lakh and 3.6 lakh respectively in 1950-51 to 1,131 lakh, 185 lakh and 90.0 lakh respectively in 2000. This has become possible with the vast expansion of the education system of the country.
Moreover, the country has also developed a number of universities, engineering colleges, medical colleges, technical institutes, management institutes etc. during this plan period.
Further, in order to improve the health condition of the people in general, the country has developed a sound health system by developing a good number of hospitals and dispensaries. Moreover, steps have also been taken to contain and eliminate epidemics and infectious mortality, rise has resulted fall in infant mortality, rise in life expectancy and improvement of health condition of the people, in general.
Besides, considerable progress was achieved in respect of public health, drinking water facilities, rural electrification and other minimum needs of the weaker sections of the society.
9. Development of Science and Technology:
Five-Year Plans have also attained a considerable growth of science and technology. This has led to development of a good-number of technical and managerial manpower in order to meet the requirement of modern industrial structure.
In this way, India has not only attained self reliance in many technical spheres but has earned a place in exporting technical expertise to some South-East Asian, Middle-East and African countries. This is, no doubt, a matter of pride for the country.
10. Price Stability:
Attaining economic stability has been considered as one of the important objectives of economic planning throughout the entire plan period. But unfortunately, the country has been subjected to a series of economic fluctuation and this is more pronounced in respect of instability in the price level. Inability to contain rising prices has been considered as the biggest failure of economic planning of the country.
Although the general price level in the country rose at an annual average of 5 to 6 per cent during 1950-70 but it rose alarmingly at the average rate of 20 per cent during 1972-75. During 1979-81, there was again an inflationary spiral in price level at an average rate of 18 per cent. During 1983-84 and 1984-85, wholesale price index gradually increased by 9.4 per cent and 7.0 per cent respectively.
During 1985-90, i.e., during the Seventh Plan, the price level on an average rose by 6.8 per cent. But since the beginning of 1990, the country had to face a serious double-digit inflation of 11 to 12 per cent and then to 16.7 per cent in August, 1991.
In order to face this serious inflation and to restore price stability, the government took several initiatives during 1991-92 and in 1992-93. As a result of all these measures, inflation rate began to recede from what it was in September 1991, and stabilized between 12 to 14 per cent until the middle of July 1992.
Thereafter, the rate of inflation declined steadily and it has come down to 6.8 per cent in January, 1993. The same rate further rose to 10.2 per cent in March, 1994 and then declined to 4.6 per cent in 1995-96. Thus, this type of fluctuation in the price behaviour has been affecting the flow of income, savings and investment, thereby retarding the growth of the economy considerably.
11. Distributive Justice:
Economic planning has been raising the volume of agricultural and industrial production of the country to a considerable proportion. But in spite of that the economy of the country could not attain a favourable change in the distributive pattern of income and wealth in favour of the rural poor.
The growth of monopoly houses in the industrial sector has widened the disparities of income and wealth between the rich and poor. Besides, the poverty eradication programmes under planning of the country on many occasions have failed to reach the poorest among them.
Moreover, the economic planning of the country has failed to achieve much the direction of balanced regional development due to its faulty strategy and improper allocation of resources thereby accentuating the regional imbalances in the country.
In conclusion, it can be observed that the achievements of planning in India is far short of its targets, The country has been experiencing great deviation between the ideology of the Government and actual economic realisation. Thus to fulfil the various objectives of planning, Indian planners should set realistic targets and introduce new strategies for achieving these targets. Shortfall in respect of realisation of targets must be minimised.
While formulating these plans, Indian planners were too ambitious and failed to consider the real state of the economy and its technological and socio-economic constraints. Objective of rapid economic growth with social justice is in conflict with each other.
Moreover, the country has been experiencing a conflict between production and employment. The development of basic and heavy industries under planning has enlarged the scope of raising the rate of economic growth of the country but adversely affected the scope of employment generation at a rapid rate.
The country has also experienced a serious crisis in respect of theory and practice of socialism. The introduction of land reform measures, panchayati raj, public distribution system and rapid expansion of public sector enterprises failed to yield satisfactory result as the very objectives of these initiatives suffered by moral crisis.
Late Sukhamoy Chakroborty, the then Chief Economic Advisor to Government of India, after making a critical revise of Indian economic planning made following conclusions:
(a) The macro-economic performance of the economy remained moderately satisfactory in respect of GDP growth rates;
(b) The average rate of inflation experienced in India has remained a modest one in comparison to international standard which has become possible due to 3 per cent increase in annual production of food-grains on an average and around 23 per cent increase in domestic savings rate;
(c) In respect of human capital formation a considerable rate of progress has been achieved in India during the plan period.
Accordingly, S. Chakroborty concluded that Indian development planning is not an ‘essay in failure’ rather on the whole it is a matter of ‘great success’.
In-spite of that Mr. Chakroborty listed some major weaknesses of planning in the country in the following manner:
1. Indian planning has failed to lift a large number of population above the poverty line. As per 38th National Sample Survey (1983-84), about 40.4 per cent of the rural population and 28.1 per cent of the urban population were lying below the poverty line. “Even if these figures were accurate and comparable, they would still indicate that gross poverty exists in the country, as the norm used for these purposes is based principally on Calorie intake.”
2. Inefficiency is widespread in many areas of production which includes steel, fertilizers, transport, generation of power etc.
3. Occupational structures of the country remained almost unchanged. The country has failed to employ proportionately larger in industry.
4. The Mahalanobis strategy adopted in planning in India has failed in respect of logical implications of accelerated growth in the mixed economy of the country.
Thus, in conclusion, it can be observed that although the economic planning in the country has become successful to build social and economic infrastructure, to develop basic and heavy industries as well to enhance educational, health and public health facilities but it failed to eradicate poverty, to eliminate involuntary unemployment as well as to reduce the degree of inequality in the distribution of income and wealth.
Thus in-spite of all these efforts and achievements, the country had to face a high degree of poverty, unemployment and inequality as a consequence of failure to contain high rate of growth of population in the country.