Explain the objectives of economic planning in India.

Discuss the achievements of

economic planning in our country in the light of these objectives.
Ans. Definition

(1) Economic planning is the making of major economic decisions what and how
much is to be produced and to whom it is to be allocated by the conscious decisions of
determining authority on the basis of a comprehensive survey of economic system as a
whole."
(2) "Economic planning is essentially a way of and uitlising resources to maximum
advantage in terms of defined social ends. The main constituents of the concept of
planning are: (i) A system of ends to be pursued, and (ii) knowledge as to the available
resources and their optimum allocations. "
(3) "Planning for economic development is undertaken presumably because the pace
or direction of development taking place in the absence of external intervention is not
considered to be satisfactory and because it is further held that appropriate external
intervention will result in increasing considerably the pace of development and directing
it properly planning seeks to bring about a rationalisation and, if possible and necessary,
some reduction of consumption to evolve and adopt a long-term plan of appropriate
investment of capital resources with progressively improved techniques, a programme
of training and education through which the competence of labour to make use of capital
resources is increased, and a better distribution of the national product so as to attain
social security and peace. Planning, therefore means, in a sense, no more than better
organisation, consistent and far-seeing organisation and comprehensive all-sided
organisation. Direction, regulation, controls on private activity and increasing the sphere
of public activity, are all parts of organisational effort

Main Features of Economic Planning

Main features of economic planning are as under:
(1) Central Planning Authority: Under economic planning, there is a
Central Planning Authority appointed by the State. All central economic decisions
like, what to produce, how much to produce, for whom to produce and how to
produce, are taken by it. This authority surveys physical and human resources of the
country and formulates a comprehensive plan to achieve set objectives. In India, this
function is performed by Planning Commission.
(2) Democratic: The first and the foremost feature of the Indian planning is
that it is socially based and democratic in nature. Indian planning is called as
democratic because the planning is done by the democratically elected Government.
In addition to this, opinions of various organisations, institutions, experts are being
given with due considerations while formulating a plan.
It may also be termed as socially oriented political planning because social
factor is given with more with consideration than economic factor in the Indian plans.
The impact of all those factors which affect political environment can also be seen in
the plans. Recently, left from join United Progressive Alliance (UPA) in the Centre.
After joining the Government, they are pressing hard for the inclusion of their social
demands (which were part of their election manifesto) in the common minimum
programme, which ultimately will affect the allocation of resources. Much was said
in Mahalanobis strategy regarding expansion of public sector, lower ceilings on land
holdings, role of industrialisation, etc. But all this was kept at bay because of the
political influence of dominant classes.
(3) Indicative Economic Planning: The Indian plans generally lay targets for
the sectors which are external to the government control, e,g., agriculture. Indian
agriculture is totally privatised and the Government has no control over it. But in
Five Year Plans, it lays targets for the Sector. Doubtlessly, the Government provides
some facilities and incentives, like, subsidy on fertilizers, seeds, support price, etc. to
boost the sector. Still the management of agriculture and allied activities rests in
private hands and therefore, the Government cannot be sure to achieve the laid
targets.
(4) Decentralised Planning: The need and importance of decentralised
planning was emphasized since the application of first five year plan. But the
planning remained centralized till the sixth five year plan. The seventh plan
witnessed the decentralised planning for the first time in India. Decentralised
planning is the delegation of planning activities to the sub-state levels, i.e., district,
sub-division, block and village level. In other words, decentralised planning starts
from the grass root level. It emphasizes on the grass root planning, e.g., district
planning, sub-division planning block-level planning and village level planning and
village level planning, so that the actual needs of the society can be included in the
plans.
(5) Regulatory Mechanism: The Planning Commission of India plays the role
of regulatory mechanism. It gives necessary direction and provides regulation over
the planning system. In addition to this, a co-ordination agency, namely, the National
Development Council (NDC) was set up in 1952 by the Government of India to co-
ordinate between Centre and States. Presently, planning decisions, originate from
Commission and are finally approved by the Council. The implementation of
planning comes under the purview of Planning Commission.
(6) Basic Objectives: Each and every plan has certain basic or fundamental
objectives These objectives are found to be common in most of our plans. These
objectives are already explained in detail in the beginning of the chapter. The basic
objective is the growth with social justice in the economic planning in India.
(7) Existence of Central Plan and State Plan: In our five year plan there is
co-existence of both the Central Plan and State Plans. Separate outlays are made for
both. Central plans are controlled and by Planning Commission and the Central
Government, whereas, the State Plan is under the exclusive control of State Planning
Boards and State Governments. But the State Government has to solve approval form
the Planning Commission.
(8) Public Sector and Private Sector Plans: Allocation of resources is made
separately both for public sector and private sector. It is because of the reason that
Indian economy is termed as mixed economy.
 (9) Balanced Regional Development: Balanced regional development is
emphasized in each five year plan. It is due to the reason that some regions are
economically backward and it is felt necessary to give more weight age to them.
These regions are given with 'special category' status, so that the additional resources
may be channelised for their developments.
(10)Definite Time: Each plan is of definite time period. For instance, each
plan in India is of five year period. One plan succeeds the other. Planning is a
process.
Objectives of Planning
Main objectives of economic planning may be divided into following parts:
Objectives of Planning

Social Objectives Political Objectives

Economic Objectives

I. Economic Objectives
Planning is regarded as a panacea for all economic ills.
"Securing rapid economic growth and expansion of employment,
reduction of disparities in income and wealth, prevention of concentration
of economic power, and creation of the values and attitudes of a free and
equal society have among the objectives of all over plans. "5
It is, therefore, advocated for the achievement of the variety of
economic objectives. These are as follows:
(1) Economic Growth: It is one of the main objective of economic planning in
underdeveloped economies to achieve all round development of the economy by
removing obstacles in the way of economic development. In order to break the "vicious
circle of poverty" prevailing in these countries, it becomes necessary to have balanced
growth of the economy. In a developed economy, the objective of planning is to maintain
a high level of growth.
(2) Increase in National Income and Per Capita Income: In order to increase output
and national income, economic planning aims at developing different sectors of the
economy like agriculture, industry, etc. Simultaneously, it seeks to reduce the growth rate
of population so that per capita income is increased. Increase in per capita income leads to
increase in investment which will cause the increase in the production. This will set in
motion the spiral of rising national income. In either country, developed or under-
developed, growth is indexed in terms of per capita income and a decent standard of living
associated with it.
(3) Reduction of Inequalities: Each welfare economy aims at reducing economic
disparities. Economic inequalities give rise to class struggle. As a result, an unjust economic
system comes into being. Glaring inequalities of wealth, income and opportunities are
shocking to the democratic conscience. In under-developed countries, the masses of people
are unable to fulfill their basic needs, whereas a few rich people enjoy all luxuries. It is
therefore necessary to plan in such a way by which poor becomes less poor and richer
become a little less rich. It will help in narrowing down the gulf between the two.
Economic growth with social justice is therefore an important objective of economic
planning.
(4) Reduction in Regional Inequalities: Regional imbalances are sought to be reduced
through economic planning. Special attention is paid to the development of backward and
underdeveloped regions of the country. Each welfare economy aims at reducing economic
disparities. Special attention is paid to the development of backward and under-developed
regions of the country. Specific facilities are provided for the development of industry and
agriculture in these regions.
(5) Full Employment: Unemployment is the by-product of capitalism. In economically
advanced countries, the aim of the Government is to provide full employment.
Unemployment problem demand an immediate solution for the elimination of the poverty.
The state can redistribute labour and create work opportunities. For instance, India's Five
Year Plans have aimed at providing additional opportunities for millions of additional
hands. Thus, creating employment or reducing unemployment may well be a major
objective of planning.
(6) Rapid Industrialization: This is another important objective which the planners
should also keep in mind. This objective is important in those countries which have been
left behind in the race of industrialization. In India, it assumed importance in Second Plan. It
is realised that industrialisation makes more significant contribution to the raising of
national income and to the solution of the problem of unemployment. Economies relying
predominantly on agriculture are bound to remain backward. Rapid industrialization is.
therefore, a very desirable aim of planning.
(7) Self-Sufficiency: Almost all countries of the world are inter-dependent. But too much
dependence on other countries can be harmful for the economic development. Hence, one of
the objective of the economic planning is to attain self-sufficiency in economic sector. To
that end, it may be considered necessary first to make the country self-sufficient in food and
essential raw-materials. That would provide a solid and sound base for the economy and
prepare it for further building up. Five Decades ago, on the eve of the First Plan, India was
dependent on foreign countries at least in three aspects. Firstly, the output of foodgrains
was not sufficient. Secondly, on account of basic industries, e.g., transport, equipment.
machine-tools, heavy engineering goods, electrical plant and machinery and many other
capital goods. Thirdly, the savings rate was very low. India, in the First Plan, concentrated
mainly on agriculture to reduce dependence on foreign countries. Therefore, this objective
may take precedence over other objectives when a plan is being made.
(8) Price Stability: One of the main objective of economic planning is the stability of
prices. In this regard. while making plan, it is essential to take steps to control the
causes of inflation and deflation.
(II) Social Objectives
In reality, the objectives of planning is the economic, social and
political development of men. Many objectives of planning are therefore
related to social welfare. Main social objectives of the planning are:
Social Security: In capitalist countries poor and resource less people are
haunted by the feeling of social insecurity. Th e y live under the perpetual fear
of unemployment, accident, disease. etc. They are exploited by the affluent class
of the society. One of the main objectives of economic planning is to provide
social security to the poor and exploited class of the society. To achieve this
 objective social insurance and social assistance programs are introduced.
Social Equality: Economic planning also aims at providing social equality to
every citizen who enjoys equal opportunities for his or her development and
progress.
Establishment of Socialistic Pattern of Society Economic planning seeks to
establish socialistic pattern of society in the country. This society refers to a
system based on equality wherein minimum needs of the people are fulfilled
and there is no exploitation of man by man.
(Ill) Political Objectives
Establishment of Peace: One of the main objectives of economic planning
is establishment of peace. It is now a common belief that poverty in any
part of the world constitutes a major threat to the prosperity in other parts
of the world. Developed countries are therefore offering large assistance to
under-developed countries to remove poverty, unemployment,
backwardness etc.
Defence: Another aim of economic planning is to strengthen the defence
and freedom of the country. Economic planning, development and defence
are treated as supplementary to one another. Economic planning helps in
making a country strong economically and self-sufficient in matters of
defence.
In short, objective of economic planning is to establish a just and developed
economy by proper utilization of country's r e s o u r c e s
Pre-Requisties of Successful Planning
Significant pre-requisties of successful planning are as follows:
Reliable Statistical Data: It is also very necessary for the formulation of the
plan that the necessary statistical data should be available. Success of the plan
is pre-conditioned by the availability of reliable statistical data pertaining to
the different sectors of the economy. Super structure of planning can be
erected on the foundations of dependable statistic. Preliminary investigations
of existing conditions is pre-requisite for every act of planning. Such an
investigation is necessary to collect statistics relating to physical, capital and
human resources of the economy. In fact, success of the plan depends to a
large extent on the availability of reliable statistical data.
Suitable Economic Organisation: Success of the plan necessitates an
economic organization having a significant public sector. It should not be
purely capitalistic economy and should also contain the characteristics of
socialism. "That for genuine economic planning, socialization of the means of
production is needed. Successful planning calls for nationalisation of
important means of p r o d u c t i o n

Assessment of Economic Planning in India

Economic planning in India remained successful in some fronts and
also failed on other fronts. Therefore, this section is divided into two parts:
• I. Achievements
During the last fifty five years of planning, Indian economy has mode considerable
progress in different sectors of the economy. D.T. Lakadawala in this regard observed,
"
There has been some satisfaction with the economic progress made by India on several
fronts — the rate and diversity of economic growth, the increase in savings and
investment, the almost entire self-reliance realised in food grains production, the big
transformation in the self-reliance realised savings and investment, the big
transformation in the structure of in food grains production, the big transformation in the
structure of industry, the capacity in training highly skilled manpower as to lead to an
exportable surplus in certain lines, the extension of normal and special banking facilities
hitherto unbacked areas and sectors, the unprecedented expansion of state, quasi-state
and co-operative institutions in marketing and technical aid and guidance etc. Some
indicators of the quality of life like expectation of life at birth death rate, infant mortality
rate have also recorded a welcome change. "14 Major achievements of Indian planning
are as follows:
Increase in National Income: National income is an indicator of development. If
the National income increases, it shows the economic development of the country.
Before independence, the growth rate was 0.5 per cent per annum. Taking the
1993-94 prices as base, the growth of National Income is 4.4 per cent per
annum. During the first 30 years of planning i.e, from 1950-51 to 1980-81 the
annual average growth rate was 3.4 per cent. During 1980-81 to 1990-91, the
economy registered the annual growth rate of 5.3 per cent per annum. During
1990-91 to 2001-02, the growth rate stood at 5.6 per cent per annum. This
statistics clearly depicts that the economy is developing but at a lower rate.
Increase in Per Capita Income : During the last 55 years of planning, the per
capital income of the country has increased but at a lower rate. It has increased
at the rate of 2.1 per cent per annum at 1993-94 prices. The per capita income
has increased in all plans except the 3rd plan. It was 1.8 per cent in first plan, 2
per cent in 2nd plan. But in the third plan, it came down to 0.2 per cent. Again
in 3 one-year plans, per capita income rate was 1.5 per cent per annum. It was
1.0 per cent in fourth plan, 2.7 per cent in fifth plant, 3.2 per cent in sixth plan
3.6 per cent in per annum in seventh plan. In eighth plan , it increased to 4.6 per
cent per annum. But in ninth plan, it decreased to 3.6 per cent per annum.
Increase in the Rate of Capital Formation: Rate of capital formation in the
country is the key factor which indicates the economic development of the
country. This rate depends on the rate of savings and investments. The rate of
gross domestic capital formation as per cent of GDP was 10.2 percent in 1950-
51. It increased to 14.3 per cent at the end of first plan, and to 19.1 per cent at
the end of fourth plan, 19.1 sixth plan and to 25.1 per cent at the end of seventh
plan. It stood at 24.6 per cent at the end of eight plan and finally 23.7 per cent
at the end of ninth plan. Thus, we can say that India has made considerable
progress in attaining higher rate of capital formation.
Development of Agriculture: A huge amount was allocated to agricultural
sector in the five year plans, but the agricultural output could not achieve the
targeted growth rate. Increase in agricultural output was realised through
extension of area under cultivation during the initial part of planning. Increase in
productivity can be seen since third plan onwards when higher yield per hectare
 was recorded. It was due to adoption of new agricultural strategy and intensive
cultivation in some areas of the country. In 1951-52. production of food grains
was 550 lakh tonnes which increased to 2120 lakh tonnes in 2001-02.
Production of sugar-cane was 69 lakh tonnes in 1956 which increased to 3001
lakh tonnes in 2001-02. Areas under irrigation has increased many times. It was
26 lakh hectares in 1950-51 which rose to 947 lakh hectares in 2001-02. It all
was due to Green Revolution. It is also noteworthy that impact of Green
Revolution remained limited to some states only, viz., Punjab, Haryana,
Maharashtra and Andhra Pradesh. The production of agricultural goods has
increased due to application of scientific methods of cultivation, use of I-WV
seeds, use of chemical fertilizers and expansion of irrigation facilities, etc.
Industrial Development: From the very first plan the industrial sector
development was the main objective for the government. The government has
succeeded considerable in achieving this objective as the industrial sector has
attained a considerable progress during the planning period Government made
huge investment in public sector. As on 31st March, 2003, the investment in
public sector stood at Rs. 3,03,400 crore (For detail see next chapter). As a
result, industries like steel, engineering goods, fertilizers, aluminium,
petroleum products, etc. have recorded a significant progress. The industrial
production index has increased from 7.9 in 1950-51 to 91.6 in 1990-91 as
100. The growth rate for industrial sector was about 8.0 per cent in first 15
years, i.e., 1950-65. After seeing many ups and downs the growth rate steadily
progressed from 8.6 per cent per annum in 1985-86 to 12.8 per cent per
annum in 1995-96. This progress slow down and was only 2.5 per cent per
annum in 2001-02.
Infrastructure Development: The country has made a significant progress
in the field of infrastructure development, like transport, communication,
irrigation and power generation, during the planning periods. Length of
metalled roads has increases to 33 lakh kilometers against 1.57 lakh kilometers
in 1950-51. Similarly, total length of railway route has increase to 63,028
kilometers in 1996-97 as against 53,600 kilometers in 1950-51.Freight
carrying capacity of railway has increased from 9.3 crore tonnes in1950-51 to
44.2 crore tonnes in 2001-02. During the same period, passenger carrying
capacity too has increased from 129 crore to 486 crore. Shipping capacity of
the country has increased to 35 times as it was 0.2 million GRT in 1950-51,
which increased to 7.02 million GRT in 2000-01. The installed plant capacity
of power projects in India has increased from 2.3 GW in 1950-51 to 121.0
GW in 2001-02. Power generation capacity in 1950-51 was 2500 MW which
increased to 1,21,000 MW in 2001-02.

(7) Generation of Employment: The Government has taken several measures fro
employment generation under various five year plans. Stress was laid on
employment generation through creation and expansion of larger industries,
boosting small-scale sector along with improvement of agriculture and service. Job
opportunities for 16.0 million people were generated during the first two plans.
During fifth, sixth, seventh and eighth plan, employment was provided to 19.0
 crore, 24.9 crore, 28.3 crore and 36.7 crore people respectively. In the ninth plan,
41.64 crore people were provided employment. In 2001-02, the total labour force
backlog of unemployment which was 5.3 million at the end of first plan gradually
rose to 58 million at the end of eighth plan and 94 million (expected) at the end of
2002. It means plans have not succeeded in removing unemployment as the back-
log of unemployment is increasing year-by-year.
(8) Development of Social Services: It can be studied under the
following sub-heads:
(i) Life Expectancy: It was 32.1 years in 1950-51 and it increased to 64 years by
the end of 2001.
(ii) Death Rate: It is declined significantly from 26 per thousand in 1950-51 to 8
per thousand in 2001 as a result of near control over dangerous epidemics and
diseases.
(iii)Education: Number of colligates has increased five-fold and number of school-
going students has increased six-fold as compared to 1951. Number of Universities has
gone up from 27 to 244. Number of professional colleges has reached to 2124.
(iv)Health: Total number of hospitals and dispensaries has increased to around
45,000. Number of per 10,000 population has increased from 3.2 in 1950-51 to 9.3 in
1994-95. Total number of registered medical practitioner (RMP) has increased from
61.8 thousand in 1950-51 to 503.9 thousand in 1997-98.
All the above constituents of social services indicate towards the tremendous
growth we have achieved during plans.
(9) Self-Reliance: Self-reliance was the target laid down in five year plans to
phase to phase out dependence on foreign aid gradually. it is evident from the fact
that foreign aid declined from 14.0 per cent in 7 the sixth to around 7.0 per cent in
eight plan. The imports have also declined from 27 per cent in the second plant to 17
per cent in the eighth plan. Exports have increased from 2.2 per cent in the second
plant to 27.6 per cent in the ninth plan. Foreign exchange reserves of the country have
increased from US $ 26.4 billion at the end of March 1997 to US $ 73.58 billion at
the end to January, 2003.
(10) Structural and Institutional Changes: The country has also witnessed the
structural and institutional changes in the economy. The major structural changes
which took place in the planning period are: changes in the sectoral contribution or
composition of national income with increasing contribution of industries and services
sector, shift in economic activities from agricultural to non-agricultural occupations,
adaptions of modern technology and changes in occupational structure, etc.
Institutional changes which took place are : expansion of small and medium scale
industries, developing source of institutional finanace introduction of price support
system and public distribution system, restrictions of monopoly practices, etc.
In short, India, undoubtedly has made remarkable progress during the planning
periods. The country become self reliant on many fronts, like basic and heavy
industries, etc