Economic Planning in India

economic planning in india, five year planning, features, objectives, importance

Economic Planning in India Started After the Independence in 1947

Economic Planning in India was a tough challenge for our national leaders, they were facing a big problem, how to construct the economy, 20% of people were controlling 80% of resources, so the point was how to make Independence meaningful to the masses because unless and until the financial empowerment, all  empowerment is meaningless or shallow.

Furthermore, the main challenge was how to reconstruct economy, how to equalize the distribution of resources among people, at the time of Independence all sectors were shattered, none of the sectors were in shape, the problem was with an adaptation of model for Economic Planning in India, then our National leaders look at various models, like there were so many countries earlier were colonies like USA under British, but earlier in 1947 these countries were developed, In the meanwhile our National leaders thought that if it is possible to implement a model which has implemented in these countries so that we can ensure better lifestyle and can eradicate poverty, unemployment from our country.

So then we started looking various models compared to and then we were agreed that no 2 models ever be the same, plans are designed to specific requirements of the country.

There were several models across the globe which can be divided into 2 categories such as

  • Capitalistic Plan Model

Capitalistic plan model is where economic decisions are taken by market forces like what to produce, where to produce, whom, when, etc., according to the demand and supply. This plan was also a success, as for example America, Australia was poor Nations, but this plan successfully contributed in bringing these Nations from poor to rich.

So the leaders in India were decided to implement same but the problem was with capital, we had landlords, but we had not disposable capital that we can invest, demand and supply cannot be created since 80% of people were poor and lack of technology and capital. However, this model was ignoring social considerations, and its only goal is to make profits, so again decided not to implement then we turn to another method Socialistic model.

  • Socialistic Plan Model

Under Socialistic plan model, the economic decisions are taken by the Government and it was successful in USSR and East European countries. This model was close to the heart of leaders because it was working towards down-up strategy and most of our people were poor. Then planned to adopt this model to implement because it was close to our Ideology, it works to eliminate poverty. But the problem was with landlords we cannot overrule them and princely states this was the only problem they had.

Because if we see the history we find that the reason behind the failure of 1857 revolt was because of landlords and capitalist they did not co-operate with our freedom fighters, they supported Britishers hence, that is why freedom struggle failed. In the mean, while India itself was a result of communal problems forcing separation from India, that’s why we gave special rules for princely states and right to property in our constitution to decrease the fear of landlords and building confidence to the princely states.

Moreover, there are problems to implement both the models that are why the economic planners decided to combine both Capitalistic and Socialistic model and finally adopted Mixed Economy to achieve better growth in all aspects and leaders contributed their knowledge to our Economic Planning in India.

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Features of Economic Planning in India 

Economic Planning in India was not so easy therefore we had no previous experience of politics because before British came to India kings and queens were ruling, but it was necessary to make an Economic plan in India.

* Definite Objective

The most important features of economic planning should possess definite objectives. Planning means conscious and purposeful undertaking for a definite objective. For instance, economic planning has the objective to increase the rate of growth, elimination of trade cycles, bringing the stability and a attain full employment in the economy.

* Central Planning Authority

The existence of central planning authority is another feature of economic planning. The central planning authority is responsible to prepare different central schemes of development and coordinating the various activities. In short, the central authority takes all decisions relating to production and consumption in an economy.

* Democratic Character

Another discover feature is its Democratic nature. No doubt, despite the various plans are prepared by experts but at the same time, adequate opportunities are provided to the people to actively participate at various levels. Being federal structure of Indian constitution, the Union Government only uses its fiscal monetary and physical controls to guide and give direction in relevance to the five -year plan subsequently.

* Only An Advisory Role of Planning Commission

In the decentralized set-up of the planning commission is the apex body. It provides the necessary perspective, guidance, and coordination. Furthermore, it serves as a close link between agencies so that functioning may be smooth in this regard, the planning commission is an advisory character.

* Feasible Policies and Targets

A good planning is based on the initial resources of the country to achieve the feasible goals and policies. In this way, domestic resources are planned for attaining economic stability.

* Planning for Consumption

In a centrally planned economy it should not be confined to production alone but the same time, it must cover the distribution and consumption also. In other words, the planning authority should not decide what and how to produce but it must keep in mind and decide accordingly among whom it is to be distributed.

Importance of Economic Planning In India

Economic Planning is a resource allocation planning that is compared with the market mechanism. As a coordinating mechanism for socialism, economic planning substitutes factor markets and is defined as a direct allocation of resources, contrasted with the indirect allocation mechanism of the market.

* Rapid Economic Development

Before Independence, the long period of British rule and exploitation had made India one of the poorest nations in the world. The main task before the National Government was to undertake some positive development measures to initiate a process of development, which can be done effectively only through the instrument of planning.

* Quick Improvement in the Standard of Living

In an Unplanned economy, the country’s resources and materials cannot be employed for increasing the people’s welfare as the private capitalists in such an economy direct their activities in increasing their own profits. The path of planning has been chosen to promote a rapid rise in the standard of living of the people by efficient exploitation of resources.

* Removal of Poverty

Economic Planning In India is necessary for the early removal of abject poverty of the people, This can be done through.

a) Planned for an increase in the employment opportunities of the people.

b) Planned for production of mass consumption goods and their planned distribution among the people.

c) Fulfillment of minimum needs program by providing essential facilities like roads, water, etc.

d) Planned to increase the consumption of the poorest section of the people.

* Rational Allocation and Efficient Utilization of Resources

India is rich in natural resources but these resources are not fully exploited to get maximum benefits. The resources tend to engage in the production of goods and services which make more profits only this will be concentrated in an unplanned economy, as a result, rational allocation of resources is not possible, so India planned for the pattern of Investment of resources and allocation.

* Increasing the Rate of Capital Formation

Planning can also raise the rate of capital formation in the low-level countries like India. The surplus of public enterprises as found in the planned economy can be utilized for Investment and capital formation. In India, the Government has been increasing, the rate of capital formation through planned Investment like roads, manufacturing machines, etc.

* Reduction in Unequal Distribution of Income and Wealth

In absence of Economic Planning In India, inequality tends to increase due to growing concentration of Eco-resources at the hands of few capitalists. planning can change this trend with proper guidance and control of production, distribution, investment, etc. The development works established an increase in Income and employment.

* Reorganization of Foreign Trade

The Foreign trade structure may be the direction of the primary producing economy to the Industrialized economy. Through proper controls of import and effective promotion of export of Industrial goods, the development plans can reorganize the foreign trade structure. Thus owing to such development the trade structure is not like colonial as it was before.

* Regional Balanced Development

Proper development programs may be taken for the all-round development of background areas, as a result, that all the regions are sufficiently developed. More Industries are to be set up in the less developed regions and plan should provide dispersal of Industries.

For the most part, these are the few reasons for thinking towards Economic Planning In India.

Objectives of Economic Planning In India 

* High Rate of Growth

All the Indian Five-year plans have given primary importance to the higher growth of real National income. During the British rule, Indian economy is was stagnant and the people were living in a state of abject poverty. The pervasive poverty and misery were the most important problem that has to be tackled through a Five-year plan.

* Economic Independence

Economic Independence means to stand on one’s own legs. In the Indian context, it implies that dependence on foreign aid should be as minimum as possible. At the beginning of planning, we had to import food grains from the USA to meet domestic demand, so planning helped to achieve the self-reliance.

* Social Justice

Social Justice means to equitably distribute the wealth and income of the country among different sections of the society. In India, we find that a large number of people are poor; while few lead a luxurious life. Therefore we have concentrated on social justice of poor people.

* Modernization of the Economy

Before Independence, our economy was backward and feudal in character but then after attainment of Independence, the planners and policymakers tried to modernize the economy by changing the structural and institutional set up of the country.

* Economic Stability

Economic Stability means to control inflation and unemployment. After the second plan, the price level started increasing for a long period of time, However, the progress in rising direction has been far from satisfactory.

In conclusion, they have adopted mixed economy considering various models and came up with 5-year economic planning in India.

Five Year Economic Planning in India

economic planning in india; five year planning; features; objectives; importance;

Steps Involved in Economic Planning in India

a) Determination of the objectives of economic planning, taking into account the socio-economic situation in the country.

b) Estimation of the natural and human resources available in the country.

c) Evolving a suitable developmental strategy for the realization of the objectives.

d) Formulation of specific programmes for the achievement of the objectives.

e) Determination of the plan outlay and investments.

f) Allocation of resources among different sectors in accordance with the priorities of objectives.

g) Establishment of an institution, authority or body for the formulation, organization, and review of the plans.


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