Twelve Five Year Plans (1951-2017) and the neighbours' plans

Detail

What a Five Year Plan is

• Five Year Plan (FYP): a five-year cycle of centralised development planning. The government decides the targets, where money goes and which sectors come first. India copied the idea from the Soviet Union.
• Five-Year Plans are "centralized and integrated national economic programs". Joseph Stalin started the first one in the USSR in the late 1920s [3].
• Planned vs market vs mixed economy (Class 9):
• Planned economy: the government decides what to produce, how to produce it and for whom.
• Market economy: prices, demand and supply decide these things.

• Mixed economy: both work side by side. India chose this. The state planned and ran key sectors, while private firms ran the rest.

• How long it lasted: India had twelve plans, from 1951 to 31 March 2017. There were plan holidays in between.

• Plan holiday: a gap in which there was no Five Year Plan. The government made annual plans (plans for one year at a time) instead.

The institutions behind the plans

• Planning Commission: set up on 15 March 1950 by a Cabinet Resolution. It was not created by the Constitution or by an Act of Parliament [2].

• Its job was to assess all the country's resources, add to those in short supply, draw up plans for their best use and set priorities [3].

• Early ideas before the Plans (pre-1951) [3]:

• National Planning Committee of the Indian National Congress (1938)
• Bombay Plan and Gandhian Plan (1944)
• People's Plan (1945), made by trade unions

• Sarvodaya Plan (1950), by Jayaprakash Narayan

• NITI Aayog (National Institution for Transforming India): replaced the Planning Commission on 1 January 2015, through another Cabinet Resolution [2].

• It is a think tank, not a body that gives out money.
• Its focus is cooperative federalism: the Centre and the States work together, "recognizing that strong States make a strong nation" [2].

• It aims to build credible plans at the village level and add them up at higher levels [2].

• After the last plan: in April 2017, the NITI Aayog Governing Council approved a Three Year Action Agenda instead of a new Five Year Plan [4].

The key growth model: Harrod-Domar

• Harrod-Domar model: a simple model in which growth depends on how much a country saves and how well it turns capital into output.
• Formula: g = s / v
• g = growth rate of output
• s = savings rate (savings ÷ national income)

• v = capital-output ratio (ICOR), meaning how many rupees of capital are needed to make one extra rupee of output

• Worked example:

• If India saves 20% of its income (s = 0.20) and needs ₹4 of capital for ₹1 of extra output (v = 4), then g = 0.20 / 4 = 5% growth.

• To reach 8% growth with v = 4, the savings/investment rate must rise to 32%.

• The chain of cause and effect: higher savings → more investment → more capital → more output. This is why every plan chased higher savings and investment rates.

• Which plans used it:
• The 1st Plan used Harrod-Domar [3].

• The 2nd Plan also used it for overall projections. But it divided money between sectors using the two-sector and four-sector model of Prof. P.C. Mahalanobis [3].

• What growth was measured against [3]:

• Plans 1–3: National Income
• Plan 4: Net Domestic Product
• Plan 5 onwards: GDP

Plan-by-plan table (targets and actual growth)

Target and actual growth figures are from MoSPI [3]. The scaffold asks for these to be checked against official documents, and they match the NCERT figures for the 1st and 7th Plans.

Plan	Period	Theme / model	Target → Actual growth [3]	Landmark
1st	1951–56	Agriculture, irrigation, power; Harrod-Domar	2.1% → 3.6%	Beat its target. Good harvests in the last two years helped [3]
2nd	1956–61	Mahalanobis; heavy industry; socialist pattern of society	4.5% → 4.3%	Bhilai, Durgapur, Rourkela steel plants; IPR 1956
3rd	1961–66	"Self-reliant and self-generating economy"; India thought to be at the "take-off stage" [3]	5.6% → 2.8%	Derailed by the 1962 China war, the 1965 Pakistan war and the 1965–66 drought
Plan holiday	1966–69	Three annual plans	—	Rupee devaluation (June 1966); Green Revolution begins
4th	1969–74	Growth with stability; progressive self-reliance	5.7% → 3.3%	14 banks nationalised (July 1969)
5th	1974–78 (drafted for 1974–79 [3])	Garibi Hatao (poverty removal) and self-reliance	4.4% → 4.8%	Ended a year early by the Janata government
Rolling Plan	1978–80	Janata government's plan, focused on employment [3]	—	Revised every year
6th	1980–85	Poverty eradication	5.2% → 5.7%	IRDP extended nationwide (1980)
7th	1985–90	Food, work and productivity	5.0% → 6.0%	Growth reached about 5–6% (NCERT). Growth moved past the "Hindu rate of growth" [3]
Annual plans	1990–92	Political instability, BoP crisis	—	1991 reforms
8th	1992–97	First plan of the reform era; explicitly indicative	5.6% → 6.8%	Liberalisation begins
9th	1997–2002	Growth with social justice and equality	6.5% → 5.4%	—
10th	2002–07	8% growth target	8% → 7.6%	Monitorable targets
11th	2007–12	Faster and more inclusive growth	9% → 8%	—
12th	2012–17	Faster, more sustainable and more inclusive growth	8% target [3]	Last plan, ended 31 March 2017

• Plan holidays: 1966–69 and 1990–92. The Rolling Plan ran 1978–80. It is not counted as a plan holiday.
• Worked example, gap between target and result:
• 3rd Plan: 5.6% target, 2.8% actual. Growth was 2.8 percentage points short, so only 50% of the target was reached.
• 7th Plan: 5.0% target, 6.0% actual. Growth was 1 percentage point above target, which is 20% more than planned.

Phase 1: Building the base (1951–66)

• 1st Plan (1951–56):
• Started amid a flow of refugees, severe food shortage and rising prices [3].

• Focus areas were agriculture, price stability, power and transport [3].

• 2nd Plan (1956–61), the "Mahalanobis Plan":

• It aimed at rapid industrialisation in heavy and basic industries. Agriculture was given lower priority [3].
• Heavy industry: industries that make capital goods such as steel and machines. Other factories use these goods to make their own products.
• IPR 1956 (Industrial Policy Resolution): set the socialist pattern of society as the goal. It kept key industries for the state.

• What went wrong:

  • The plan imported heavily using foreign loans.
  • That led to an acute foreign exchange (forex) shortage.
  • Targets were cut, and prices rose by about 30% [3].

• 3rd Plan (1961–66):

• Agriculture was given top priority to support exports and industry [3].

• The wars forced a shift from "development" to "defence and development" [3].

• Plan holiday (1966–69):

• Several problems came together: the 3rd Plan failed, two droughts in a row hit, the rupee was devalued and prices rose. So the 4th Plan was postponed [3].
• Devaluation: officially cutting the rupee's value against foreign currencies. The aim is to make exports cheaper abroad.
• The new farm strategy of the Green Revolution began in this period. It spread high-yielding variety (HYV) seeds, fertilisers and irrigation [3].

Phase 2: Self-reliance and poverty (1969–90)

• 4th Plan (1969–74):
• Allies refused to supply equipment during the Indo-Pak war. This led to its two goals: "growth with stability" and "progressive self-reliance" [3].
• It also took up family planning programmes [3].

• The 1971 war, refugees from Bangladesh and rising prices made it a "big failure" [3].

• 5th Plan (1974–78):

• Prepared by D.P. Dhar [3].
• Launched during runaway inflation caused by the oil price shock [3].

• After the Emergency (1975), the focus shifted to the 20 Point Programme [3].

• Rolling Plan (1978–80):

• Rolling plan: a plan whose targets are revised every year. The five-year window moves forward by one year each time.

• The Janata government criticised the Nehru model for concentrating power and widening inequality [3].

• 6th Plan (1980–85):

• Attacked poverty directly [3]. Its schemes were:

  • IRDP (Integrated Rural Development Programme): assets for the rural poor
  • TRYSEM: skills for rural youth
  • NREP: jobs in the slack farm season

• 7th Plan (1985–90):

• Its theme was "food, work and productivity".
• The Hindu rate of growth is the nickname for India's slow growth of about 3.5% a year from the 1950s to the 1970s.

Phase 3: Reform-era, indicative plans (1990–2017)

• Annual plans (1990–92):
• Political instability postponed the 8th Plan [3].

• The BoP (balance of payments) crisis came in these years. This means India was running out of foreign exchange to pay for imports and debt.

• 8th Plan (1992–97):

• Indicative planning: the state only sets broad goals and nudges the private sector. It does not command what must be produced.

• Growth reached 6.8%, the highest up to then, even though the public sector's share in total investment fell to about 34% [3].

• 9th Plan (1997–2002):

• Leaned mainly on the private sector and FDI, meaning Indian and foreign companies [3].
• The state was to act as a facilitator in social sectors and infrastructure [3].

• For the first eight plans, the focus had been a growing public sector. From the 9th Plan onwards, that focus became weaker [3].

• 10th Plan (2002–07):

• Monitorable targets: measurable goals beyond growth. There were targets for 11 key indicators, for example literacy, infant and maternal mortality, and drinking water [3].

• It gave State-wise targets and a bigger role to Panchayati Raj Institutions [3].

• 11th Plan (2007–12):

• Growth by year: 9.3% in the first year, 6.7% in 2008-09 (global financial crisis), then 8.6% (2009-10), 9.3% (2010-11) and 6.2% (2011-12). The plan average was 8% [3].
• Sector growth, actual vs target [3]:
  • Agriculture: 3.7% (target 4%)
  • Industry: 7.2% (target 10–11%)
  • Services: 9.7% (target 9–11%)

• Domestic savings and investment averaged 33.5% and 36.1% of GDP. The targets were 34.8% and 36.7% [3].

• 12th Plan (2012–17), the last plan:

• It began during the Eurozone sovereign debt crisis. Growth was about 5% in its first year [2].
• Subtitle: 'Faster, Sustainable, and More Inclusive Growth' [2].
• 25 monitorable targets [3], including:
  • 8% real GDP growth, 4% agriculture growth and 10% manufacturing growth
  • 50 million new non-farm work opportunities
  • 30,000 MW of added renewable energy capacity
  • Banking access for 90% of households
  • Subsidies moved to direct cash transfer using Aadhaar
• Harrod-Domar in practice: getting back to 9% growth by the end of the plan needed the fixed investment rate to rise to 35% of GDP [3].

Comparative chronology: India and its neighbours (Class 11)

Country	Planning began	Later path
USSR	First Five Year Plan 1928 (Gosplan, the state planning agency)	Pioneer of national planning
India	First Plan 1951–56	Reforms 1991; plans ended 2017
China	First Five Year Plan 1953	Reforms 1978; still plans
Pakistan	First plan 1956, now called the "Medium Term Development Plan"	Reforms 1988

• India and Pakistan followed similar strategies:
• Both built a large public sector.

• Both raised public spending on social development.

• Until the 1980s, all three countries (India, China, Pakistan) had similar growth rates and per capita incomes.

• China still plans. India stopped in 2017.
• China renamed its 11th FYP (2006–10) a "guideline" (guihua) instead of a "plan" (jihua). This showed a more hands-off central government [3].
• China's 15th Five-Year Plan covers 2026–30. Its main aim is to make higher consumption a driver of growth [5].

• NDRC (National Development and Reform Commission), China's planning body, held a seminar with the UN on the 15th Plan's priorities. These include social development, the green and low-carbon transition, and balanced regional growth [6].

• NCERT figures that are now out of date:

• China: the current plan is the 15th Five Year Plan (2026–30) [5][6] (NCERT: 14th Five Year Plan 2021–25).

• Pakistan: a newer plan has replaced the one NCERT names. Its exact current name and period could not be confirmed from whitelisted sources, so check this. (NCERT: 12th Five Year Plan 2018–23.)

• China's and Pakistan's wider development paths are covered in india-china-pakistan.

Prelims Hooks

• Planning Commission: set up 15 March 1950 by a Cabinet Resolution. It was neither constitutional nor statutory. NITI Aayog replaced it on 1 January 2015, also by a Cabinet Resolution [2].
• 1st Plan used the Harrod-Domar model (g = s/v). 2nd Plan is the Mahalanobis plan (heavy industry, IPR 1956).
• Growth targets vs results: the 1st Plan beat its target (2.1% → 3.6%). The 3rd Plan failed worst (5.6% → 2.8%) [3].
• Plan holidays: 1966–69 and 1990–92. The Rolling Plan (1978–80) is not a plan holiday. This is a common trap.
• "Self-reliant and self-generating economy" → 3rd Plan. "Growth with stability" → 4th Plan. "Garibi Hatao" → 5th Plan. "Food, work and productivity" → 7th Plan.
• Monitorable targets were first used in the 10th Plan (11 indicators). The 12th Plan had 25 [3].
• First explicitly indicative plan: the 8th (1992–97). It grew 6.8%, the highest up to then [3].
• Last plan: the 12th, "Faster, Sustainable and More Inclusive Growth". It ended 31 March 2017 [2].
• Growth measured against: Plans 1–3 used National Income, Plan 4 used NDP, and Plan 5 onwards used GDP [3].
• Planning began: USSR 1928, India 1951, China 1953, Pakistan 1956. Reforms: China 1978, Pakistan 1988, India 1991.

Mains Points

• From command to indicative planning:
• For the first eight plans, the public sector led the plans through heavy industry.
• From the 8th and 9th Plans, the state became a facilitator. The public sector's share of investment fell to about 34%, yet growth rose to 6.8% [3].

• Use this to argue that market-led growth can do better than state-led growth, while the state still needs to invest in social sectors.

• Why targets were missed:

• Plans 3, 4 and 5 were hit by wars, droughts and oil shocks. Rigid five-year targets could not adjust to these shocks.

• This is the reason for rolling plans and, later, NITI Aayog's flexible Three Year Action Agenda (2017) [4].

• From the Planning Commission to NITI Aayog:

• The move from top-down money allocation to cooperative federalism and village-level planning [2] links to GS-II topics: Centre–State relations and the Finance Commission's role in transfers.

• Critics say this weakened long-term public investment planning.

• India vs China:

• Both started planning around the same time (1951 and 1953).
• China still makes five-year plans (15th FYP, 2026–30, focused on consumption [5]). India dropped them after 2017.
• Useful for a debate on whether long-term state planning still matters for infrastructure and the green transition.