General Studies II

Planning Commission

The Planning Commission was set up on the 15th of March, 1950 through a Cabinet Resolution. Planning Commission had evolved over time from developing a highly centralised planning system towards indicative planning where Planning Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities for the nation. It works out sectoral targets and provides promotional stimulus to the economy (through its ” plan fund allocations”) to grow in the desired direction. Planning Commission attempted to play a systems change role and provided consultancy within the Government for developing better systems. In order to spread the gains of experience more widely, Planning Commission also played an information dissemination role.

Thus, historically, Planning Commission’s work was three dimensional.

  • design policy direction and suggest required schemes/ programmes;
  • (b) influence the resource allocation from budget; and
  • (c) oversee the performance and record the same on a standard framework for comparative assessment of all the states from time to time.

In short, Planning Commission was doing the job both that of a think thank and the function of allocation of plan resources among the Central Ministries and States in as judicious a manner as possible, given the limitations of resources.

The announcement on setting of Planning Commission and its expected role in the economic management was first made in the Parliament by the President, and the details were disclosed by the Finance Minister (Shri John Mathai) through his budget speech in the first year of the Republic (1950-51). Rightly, Planning Commission was anchored to India’s political history of immediate past and the Directive Principles of State Policy as enunciated in the Constitution of India.

The background and context in which Planning Commission was set up had been outlined in the Cabinet Resolution of 15th March 1950.

Functions of Planning Commission

The 1950 resolution setting up the Planning Commission outlined its functions as to:

  1. Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nation’s requirement;
  2. Formulate a Plan for the most effective and balanced utilisation of country’s resources;
  3. On a determination of priorities, define the stages in which the Plan should be carried out and propose the allocation of resources for the due completion of each stage;
  4. Indicate the factors which are tending to retard economic development, and determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the Plan;
  5. Determine the nature of the machinery which will be necessary for securing the successful implementation of each stage of the Plan in all its aspects;
  6. Appraise from time to time the progress achieved in the execution of each stage of the Plan and recommend the adjustments of policy and measures that such appraisal may show to be necessary; and
  7. Make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it, or on a consideration of prevailing economic conditions, current policies, measures and development programmes or on an examination of such specific problems as may be referred to it for advice by Central or State Governments.

Planning Commission was replaced with NITI Aayog on 1 January 2015. However, the financial powers like setting sectoral priorities, designing the schemes and programmes, estimating the entitlements to State development programmes (other than devolution), and influencing the annual allocations as per the priorities etc. now come under direct influence of the Ministry of Finance, Budget Division.

Composition of Planning Commission

The Prime Minister is the Chairman of the Planning Commission, which works under the overall guidance of the National Development Council. The Deputy Chairman and the full-time members of the Commission, as a composite body, provide advice and guidance to the subject Divisions for the formulation of Five Year Plans, Annual Plans, State Plans, Monitoring Plan Programmes, Projects and Schemes.

Members of the Planning Commission
  • Chairman – Prime Minister; presided over the meetings of the Commission
  • Deputy Chairman – de facto executive head (full-time functional head);
  • Was responsible for the formulation and submission of the draft Five-Year Plan to the Central cabinet.
  • Was appointed by the Central cabinet for a fixed tenure and enjoyed the rank of a cabinet minister.
  • Could attend cabinet meetings without the right to vote.
  • Part-time members – Some central ministers
  • Ex-officio members – Finance Minister and Planning Minister
List of Five Year Plans in India

Long term objectives of Five Year Plans in India are:

  • High Growth rate to improve the living standard of the residents of India.
  • Economic stability for prosperity.
  • Self-reliant economy.
  • Social justice and reducing the inequalities.
  • Modernization of the economy.

The idea of economic planning for five years was taken from the Soviet Union under the socialist influence of first Prime Minister Pt. Jawahar Lal Nehru.

The first eight five year plans in India emphasised on growing the public sector with huge investments in heavy and basic industries, but since the launch of Ninth five year plan in 1997, attention has shifted towards making government a growth facilitator.

An overview of all Five Year Plans implemented in India is highlighted below:

List of Five Year Plans in India [1951-2017]

Five Year PlansYearsAssessmentObjectivePrime minister
First Five year Plan 1951- 1956Targets and objectives more or less achieved. With an active role of the state in all economic sectors. Five Indian Institutes of Technology (IITs) were started as major technical institutions.Rehabilitation of refugees, rapid agricultural development to achieve food self-sufficiency in the shortest possible time and control of inflation.The first Indian prime minister, Jawaharlal Nehru,
Second Five year Plan 1956-1961It could not be implemented fully due to the shortage of foreign exchange. Targets had to be pruned. Yet, Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were established.The Nehru-Mahalanobis model was adopted.‘Rapid industrialisation with particular emphasis on the development of basic and heavy industries Industrial Policy of 1956 accepted the establishment of a socialistic pattern of society as the goal of economic policy.Jawaharlal Nehru
Third Five year Plan 1961-1966Failure. Wars and droughts. Yet, Panchayat elections were started.• State electricity boards and state secondary education boards were formed.‘establishment of a self-reliant and self-generating economy’Jawaharlal Nehru
Plan Holidays – Annual Plans1966-1969A new agricultural strategy was implemented. It involved the distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation measures.crisis in agriculture and serious food shortage required attention 
Fourth Five year Plan 1969-1974Was ambitious. Failure. Achieved growth of 3.5 percent but was marred by Inflation. The Indira Gandhi government nationalized 14 major Indian banks and the Green Revolution in India advanced agriculture.‘growth with stability’ and progressive achievement of self-reliance Garibi HataoTarget: 5.5 pcIndira Gandhi.
Fifth Five year Plan 1974-1979High inflation. Was terminated by the Janta govt. Yet, the Indian national highway system was introduced for the first time.‘removal of poverty and attainment of self-reliance’Indira Gandhi. (This plan was terminated in 1978 by the newly elected Moraji Desai government.)
Sixth Five year Plan1980-1985Most targets achieved. Growth: 5.5 pc.Family planning was also expanded in order to prevent overpopulation.‘direct attack on the problem of poverty by creating conditions of an expanding economy’Indira Gandhi.
Seventh Five year Plan 1985-1990With a growth rate of 6 pc, this plan was proved successful in spite of severe drought conditions for the first three years consecutively. This plan introduced programs like Jawahar Rozgar Yojana.Emphasis on policies and programs that would accelerate the growth in foodgrains production, increase employment opportunities and raise productivityRajiv Gandhi.
Annual Plans 1989-1991It was the beginning of privatization and liberalization in India.No plan due to political uncertainties 
Eighth Five year Plan 1992-1997Partly success. An average annual growth rate of 6.78% against the target 5.6% was achieved.Rapid economic growth, high growth of agriculture and allied sector, and the manufacturing sector, growth in exports and imports, improvement in trade and current account deficit. to undertake an annual average growth of 5.6%P.V. Narasimha Rao.
Ninth Five year Plan 1997-2002It achieved a GDP growth rate of 5.4%, lower than the target. Yet, industrial growth was 4.5% which was higher than targeted 3%.  The service industry had a growth rate of 7.8%. An average annual growth rate of 6.7% was reached.Quality of life, generation of productive employment, regional balance and self-reliance.Growth with social justice and equality. growth target 6.5%Atal Bihari Vajpayee.
Tenth Five year Plan 2002 –2007It was successful in reducing the poverty ratio by 5%, increasing forest cover to 25%, increasing literacy rates to 75 % and the economic growth of the country over 8%.To achieve 8% GDP growth rate,Reduce poverty by 5 points and increase the literacy rate in the country.Atal Bihari Vajpayee and Manmohan Singh.
Eleventh Five year Plan2007-2012India has recorded an average annual economic growth rate of 8%, farm sector grew at an average rate of 3.7% as against 4% targeted. The industry grew with an annual average growth of 7.2% against 10% targeted.Rapid and inclusive growth.Empowerment through education and skill development. Reduction of gender inequality.Environmental sustainability. To increase the growth rate in agriculture, industry, and services to 4%,10% and 9% resp. Provide clean drinking water for all by 2009.Manmohan Singh.  
Twelfth Five year Plan2012-2017Its growth rate target was 8%.“faster, sustainable and more inclusive growth”. Raising agriculture output to 4 percent. Manufacturing sector growth to 10 % The target of adding over 88,000 MW of power generation capacity.Manmohan Singh. (the NDA government has dissolved the Planning Commission which was replaced by the NITI Aayog.)

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