Economic Planning in India PDF

# Chapter 5: Economic Planning in India ## 1. Introduction Among the underdeveloped democratic countries of the world, India was the first country that had chosen the path of planning for its development. Economic planning refers to that process wherein (i) a central planning authority (ii) keepin...

# Chapter 5: Economic Planning in India ## 1. Introduction Among the underdeveloped democratic countries of the world, India was the first country that had chosen the path of planning for its development. Economic planning refers to that process wherein (i) a central planning authority (ii) keeping in view the resources of the country (iii) makes an attempt to regulate economic factors (iv) with a view to achieve pre-determined objectives within a specified period of time. After independence, India had launched a programme of Five Year Plans to make the optimum use of country's available resources and to achieve rapid economic development. Since the year 1951, a continuous process of Five Year Plans has been going on. So far we have completed Eleven Five Year Plans. Twelfth Five Year Plan commenced on 1st April, 2012 and will be completed on 31st March, 2017. Planning Commission was set up in 1950. It was to formulate plans for the economic development of the country on the basis of the available physical, capital and human resources. Prime Minister of India is the chairman of the Planning Commission. ## 1.1 Planning Commission and Five Year Plans After independence, Planning Commission was set up under the chairmanship of Late Pt. Jawaharlal Nehru in 1950. It was to formulate plans for the economic development of the country on the basis of the available physical, capital and human resources. On 8th December, 1952, Late Nehru presented the Final Draft of First Five Year Plan to the Lok Sabha. Prime Minister of India is the ex-officio chairman of the Planning Commission. Duration, outlay and progress of various plans is shown in Table 1. | Plan | Duration | Total Outlay in Public Sector (crore) | Growth Rate of GDP (At 2004-05 Prices, in percentage per annum) | |---|---|---|---| | First Five Year Plan | 1951-56 | 1,960 | 3.7 | | Second Five Year Plan | 1956-61 | 4,672 | 4.1 | | Third Five Year Plan | 1961-66 | 8,577 | 2.5 | | Three One Year Plans | 1966-69 | 6,625 | 3.9 | | Fourth Five Year Plan | 1969-74 | 15,779 | 3.3 | | Fifth Five Year Plan | 1974-78 | 39,426 | 5.0 | | Sixth Five Year Plan | 1980-85 | 1,10,467 | 5.4 | | Seventh Five Year Plan | 1985-90 | 2,21,436 | 5.8 | | Two One Year Plans | 1990-92 | 1,23,120 | 3.3 | | Eighth Five Year Plan | 1992-97 | 4,85,457 | 6.7 | | Ninth Five Year Plan | 1997-2002 | 8,59,200 | 5.5 | | Tenth Five Year Plan | 2002-07 | 15,92,300 | 7.8 | | Eleventh Five Year Plan | 2007-12 | 36,44,718 | 7.9 | | Twelfth Five Year Plan | 2012-17 | 76,69,807 | 6.6 | ## 1.2 Features of Economic Planning Main features of the developmental plans initiated in India are as follows: 1. **Democratic:** In India economic planning has assumed a democratic pattern. In India plans are formulated by planning commission and are finally approved by National Development Council. All state chief ministers are members of NDC. The NDC is headed by Prime Minister of India. The opinion of various experts, organisations, state governments and general public is given due consideration while formulating five year plans. Thus, economic planning in India follows democratic pattern. 2. **Different Sectors:** Developmental plans in India are being executed by three sectors: (i) Public Sector, (ii) Private Sector, (iii) Joint Sector. Keeping in view the all-round development of the country, different tasks have been assigned to these sectors. Public Sector plays significant role in the development of basic and key industries. Private Sector has greater importance in the development of agriculture, small industries and industries producing mass consumption goods. In first six five year plans, public sector was given more importance than private sector. From the seventh plan onwards private sector has been given more important role to promote economic development of India. 3. **Existence of Central Plan and State Plans:** In India, there is co-existence of both central plan and state plans. In every Five Year Plan, separate outlay is made for both central plan and state plan. Central plan is under the control of Planning Commission, whereas state plan is under the control of State Planning Board and state government. 4. **Financial Planning:** Indian planning is a type of financial planning. It means that more emphasis has been given on allocating funds for a particular sector/ activity, while less emphasis has been given on achieving physical targets of the plan. Thus, spending has been given more importance rather than achieving physical targets. 5. **Unchanging Priorities:** It has been observed that Indian five year plans have been giving too much priority to the development of industry, power and agriculture with minor modifications. There has been no significant change in the priority pattern of Indian planning. But in recent years, poverty alleviation schemes and employment generation schemes have also been given increasing priorities. 6. **Prospective (Short-term) and Perspective (Long-term) Planning:** Indian planning is both prospective and perspective. In other words, both short-term and long-term programmes have been incorporated in five year plans. It is so because without making short-term plans a part of the long-term plans, real potentialities cannot be achieved. Thus, in the five year plans both short-term and long-term plans are prepared and targets are fixed both for short-term and for long-term. 7. **Central Planning Authority:** For economic planning, there is a Central Planning Authority appointed by government. All central economic decisions like, what to produce, how much to produce, for whom to produce and how to produce, etc. 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. 8. **Set Objectives:** Economic planning has some set objectives; like rapid industrialization, raising standard of living of people, full employment, reduction in inequalities of wealth and income, etc. Main objective of economic planning is to maximise national income and per capita income. 9. **Government Control:** Economic planning is done under the direction of the government, Planning Commission prepares the plan and presents the same to the government. The latter executes it. 10. **Comprehensive Development:** All sectors like agriculture, industry, trade, transport, mining, etc. are sought to be developed through economic planning. Since all sectors are interdependent, balanced growth is achieved by developing each sector. 11. **Definite Time Period:** Each plan is of a definite time period. For instance, each plan in India is of five year duration. Due to some exigencies, one year plans were also made in between, For example, after third and seventh five year plan, three and two annual plans were made respectively. 12. **Slogans:** In economic planning, various slogans have been used to highlight the main objective of the plan. The main slogans have been 'Self-sufficiency in Foodgrains', 'Growth with Stability', 'Self-reliance', 'Self-reliance and Removal of Poverty', 'Productive Employment', 'Growth with Equity', 'Faster and Inclusive Growth', 'Faster, Sustainable and More Inclusive Growth', etc. ## 2. Objectives of Economic/Developmental Planning 1. **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 income leads to increase in investment which will further help the production and income to increase. 2. **Reduction in Inequalities of Income:** Each welfare economy aims at reducing economic disparities. Economic inequalities give rise to class struggle. Economic growth with reduction in economic inequality is therefore an important objective of economic planning. 3. **Reduction in Regional Inequalities:** Regional imbalances are sought to be reduced through economic planning. 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. 4. **Price Stability:** Another objective of planning is to bring about price stability. Attempts are made to prevent violent changes in prices and protect the economy from inflation and deflation. 5. **Economic Development:** Main objective of economic planning in underdeveloped economies is to achieve all-round development of the economy by removing obstacles in the way of economic development. Economic development can be promoted by making balanced growth in all the sectors of economy. Higher level of economic development helps to promote standard of living in economy. 6. **Increase in Employment:** Another objective of economic planning is to increase the opportunities of employment. Every plan seeks to provide employment to maximum number of people. 7. **Full Utilisation of Available Resources:** One of the main objectives of economic planning is full utilisation of country's natural resources. Every country is endowed with large number of natural resources. To utilise these resources fully, large financial and human resources are required. Thus, proper use of available resources is possible by the government through the mechanism of economic planning. 8. **Self-sufficiency:** Almost all countries of the world are interdependent. But too much dependence on other countries can be detrimental. Hence, one of the objectives of economic planning is to attain self-sufficiency in economic sector. To that end, increase in production to meet the needs of the country is imperative. Economic planning also aims at achieving self-sufficiency. 9. **Reconstruction of Economy:** Another significant objective of economic planning is to reconstruct the war-ravaged economy or an economy disrupted by natural calamities. 10. **Social Security:** In capitalist countries poor people are lacking social security. They live under the perpetual fear of unemployment, poverty, 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 security and social assistance programmes are introduced. 11. **Increase in Capital Formation:** Economic planning aims at increasing rate of capital formation by promoting saving and investment in the economy. Increased capital formation helps in increasing rate of economic development. 12. **Development of Infrastructure:** Infrastructure is the basic requirement for promoting economic development. One of the objectives of economic planning is to develop infrastructure viz. power generation, oil exploration, development of roads, railways, air transport, ports, etc. 13. **Modernisation of Various Economic Sectors:** Modernisation of various sectors, specially modernisation of agriculture and industry has been an important objective of Five Year Plans. For modernisation of agriculture, programme of Green Revolution has been launched. Similarly, for industry sector use of modern and capital intensive technology has been emphasised in Indian Planning. 14. **Alleviation of Poverty:** In India, a large section of population is living below poverty line. One of the objectives of economic planning is to remove the poverty. ## 3. Progress under Plans or Achievements under Economic Planning Progress made by the Indian economy during the period of planning is discussed as under: 1. **Economic Development or Increase in National Income:** Increase in national income is an index of economic development. During the period prior to economic planning, national income in India was growing at the rate of just 0.5 per cent per annum. Indian economy was, therefore, a stagnant economy. During the period of Five Year Plans, national income has increased at an average rate of 5.1 per cent per annum at constant prices from the period 1950-51 to 2016-17. In year 2007-08, growth rate of national income was 9.1 per cent. Due to global economic slowdown in year 2008-09, this growth rate was reduced to 6.7 per cent. In 2014-15, growth rate in national income was 7.2 per cent. In 2015-16, growth Pate in national income was 7.9 per cent. In 2016-17, growth rate of national income was 6.6 per cent. In 2017-18, expected growth rate in national income was 6.4 per cent. The plan wise growth rate of national income is shown in Table 2: | Plans | Percentage Growth of National Income | Plans | Percentage Growth of National Income | |---|---|---|---| | First Plan | 3.6 | Tenth Plan | 7.8 | | Second Plan | 4.1 | Eleventh Plan | 7.9 | | Third Plan | 2.5 | Twelfth Plan | 6.6 | | Fourth Plan | 3.3 | (2012–13) | 4.8 | | Fifth Plan | 5.0 | (2013–14) | 6.6 | | Sixth Plan | 5.4 | (2014–15) | 7.2 | | Seventh Plan | 5.8 | (2015–16) | 7.9 | | Eighth Plan | 6.7 | (2016–17) | 6.6 | | Ninth Plan | 5.5 | | | In eleventh plan, growth rate of national income was 7.9 per cent per annum. In twelfth plan, growth rate of national income was 6.6 per cent per annum. It reflects that now national income has started increasing at a much faster rate. 2. **Increase in Per Capita Income:** Before independence, increase in per capita income was almost negligible; but during the period of planning it increased at the rate of around 3 per cent per annum at 2004-05 prices. In the Tenth Plan, growth rate of per capita income was 6.1 per cent per annum. In eleventh plan, growth rate of per capita income was 6.5 per cent. Growth rate in per capita income in years 2015-16 and 2016-17, was 6.7 per cent and 5.4 per cent respectively. 3. **Increase in Rate of Capital Formation:** Capital formation plays a significant role in the economic development of a country. During the period of Five Year Plans, rate of capital formation has increased appreciably. Rate of capital formation depends on the rate of saving and investment. During the period of planning, rate of saving and investment has increased very much. In the year 1950-51, rate of capital formation was 8.7 per cent of GDP. In 2015-16, this rate increased to 33.3 per cent of GDP. 4. **Institutional Reforms in Agriculture and Green Revolution:** Contribution of plans in the development of agriculture has been of two kinds: (a) land reforms and (b) technological development. Although land reforms could not be implemented fully, yet limited land reforms have created a congenial atmosphere for scientific cultivation. In 1966, great stress was laid on the technological development of agriculture. It culminated in Green Revolution. During the period of Plans, production of foodgrains has increased more than four-fold. In 1951-52, production of foodgrains was 550 lakh tonnes. In 2016-17, it increased to 2,751 lakh tonnes. In 1950-51, the area under irrigation was 17 per cent; it increased to 47.7 per cent in 2013-14. During the period of planning, growth rate of agricultural production was 2.7 per cent per annum on the average. During the period of planning, agricultural production has increased very much. Per hectare production has increased on account of the application of scientific methods of cultivation, improved variety of seeds and chemical fertilizers. 5. **Development of Industries:** Plans have succeeded a lot in industrial sector. Basic and capital goods industries like iron and steel, machinery, chemical fertilizers, etc. have been developed considerably in the country. Public sector has expanded. Country has become almost self-sufficient in the matter of consumer goods industries. There has been diversification and modernisation of industries. Industrial production capacity has increased tremendously. As a result of planning, industrial production has witnessed considerable rise. In eleventh plan, industrial production growth rate was 7.2 per cent. In 2012-13, industrial production growth rate came down to 2.3 per cent, due to global slowdown. In year 2015-16 and 2016-17, industrial production growth rate increased to 8.8 per cent and 5.6 per cent respectively. 6. **Development of Infrastructure:** Economic infrastructure mainly includes means of transport and communication, irrigation facilities and power generation capacity. During the planning period, infrastructure has developed considerably. Power generation capacity has increased significantly. There has been a lot of improvement in roads, railways, sea-ports, airports, airways, telecommunication, banking, insurance, etc. All this has helped in achieving faster economic growth rate. 7. **Social Services:** During the period of planning, social services like education, health, medical, family planning, etc. have also developed appreciably. (i) Death rate in 2016 came down to 6.4 per thousand as against 40.8 per thousand in 1951. (ii) Average expectancy of life has gone up to 67.5 years in 2013 as against 32 years in 1960. (iii) Research: A chain of national laboratories and research centres has been established. (iv) Education: Number of school-going students has increased manifold. Number of colleges, universities, professional colleges, management institutes has increased significantly. (v) Health: There has been good deal of increase in the number of hospitals, beds, doctors, nurses and medical facilities like family planning clinics, etc. Many dangerous diseases like malaria, leprosy, polio have nearly been eradicated. 8. **Increase in Employment:** Several measures have been taken to increase employment opportunities during the period of economic planning. Government has launched various employment generation schemes in urban and rural areas. Micro and small industries and other labour-intensive industries have been given emphasis so as to promote employment. In the Twelfth Five Year Plan, government has fixed the target of creating 50 million employment avenues. 9. **Modernisation:** Technological upgradation has been achieved in almost all the areas in the period of economic planning. During five year plans, efforts have been made for promoting research and development activities in all economic sectors viz., agriculture, industries, service sector, infrastructure, etc. This has led to reduction in capital-output ratio in the economy, i.e. now more production has become possible with the same amount or lesser amount of capital. Modernisation of Indian industries has helped our economy to export its industrial products to many nations of the world. Modernisation in agriculture has led to increase in agricultural productivity. 10. **Export Promotion, Diversification and Import Substitution:** During planning period exports have not only significantly increased, but there has also been diversification of exports items. The composition of exports has also got diversified. Now in addition to primary products, manufactured goods, engineering goods, jewellery, information technology services, etc. are also exported. Import substitution is also a great achievement of planning. Large-scale import substitutes of iron and steel, machinery, fertilizers have reduced the import bill of the country. It has also improved balance of payments position. 11. **Development of Science and Technology:** During planning period, significant growth in science and technology has been achieved. In the field of information technology, significant progress has been made. Now India supplies manpower to foreign countries for the information technology sector. Today, India controls more than half of the global market in services. 12. **Structural and Institutional Changes:** Many positive structural and institutional changes have been introduced during planning period. It includes expansion of public sector, introduction of price support system, public distribution system, development of financial institutions, etc. Adoption of liberalisation, globalisation and privatisation is also a positive institutional and structural change. 13. **Less Cyclical Fluctuations:** There are less economic fluctuations in the economy because of economic planning. Economy is less confronted with situations like boom, depression, unemployment, overproduction, etc. Economic planning is instrumental in bringing about and maintaining economic stability. All economic activities are properly coordinated. 14. **Production According to Needs:** Economic planning leads to need-oriented production of goods and services. In economic planning, the planning authority formulates the plan, coordinates the natural, human and physical resources in such a manner that resources are properly utilised and production is done according to requirements of the economy. 15. **Balanced Economic Growth:** Economic growth is sought to be achieved in a balanced manner by the planning authority. It aims at securing balanced regional and sectoral growth. 16. **Right Use and Conservation of Natural Resources:** Government ensures proper use and conservation of natural resources under economic planning. While making use of these scarce resources, it is ascertained that there is least possible wastage. Use of minerals such as coal, oil, etc., is made keeping in view not only the present generation but also future generation. ## 4. Failures of Economic Planning Economic planning has failed to achieve its certain objectives. Even after the completion of 67 years of economic planning, our country is facing some serious problems like poverty, unemployment, backward agriculture, inequality of income, concentration of economic power, inflation, etc. Following are the major failures of economic planning in India: 1. **No Substantial Increase in Standard of Living:** All plans aim at raising the standard of living of the people. What to say of increase in the standard of living, even the bare necessities of life of the people are not being satisfied. In India, according to the Planning Commission, 21.9 per cent population is absolute poor based on Tendulkar methodology for measuring poverty. Even 67 years of planning have not made any significant improvement in the removal of poverty. 2. **Rise in Prices:** Stability in prices has been the objective of each plan. But in almost each plan prices have risen considerably. Our planning has failed to check price rise in India. In the year 2013-14, rate of price rise was 9.50 per cent. In 2016-17, inflation rate was 4.50 per cent. Rise in prices has badly affected the poor and low-income group. 3. **Increase in Unemployment:** During the period of Five Year Plans, instead of diminishing, unemployment has been rising. At the end of First Five Year Plan, 53 lakh persons were unemployed. In December 2014, number of registered unemployed increased to 4.83 crore. In economic plans, use of capital-intensive technology has been promoted. Use of labour-intensive technology has not been emphasised upon. It has worsened the unemployment situation. 4. **Less Growth in Agricultural Sector:** Agricultural development should have been given top-priority in the Plans, but it has not been done. Green Revolution has restricted itself to wheat and rice crop only. Only a few states have benefited from green revolution. Sufficient irrigation facilities have not been promoted. Agriculture is still a gamble of monsoon. Agriculture productivity is still very low in India. Many farmers are landless even now. 5. **Inequality in Distribution of Income and Wealth:** Main objective of Five Year Plans has been equality in the distribution of wealth and income. However, during the period of planning inequality has further aggravated. Rich have become richer and poor have become poorer in all these years. Inequalities in distribution of income and wealth are found not only in industrial sector but in agricultural sector as well. According to World Development Report 2017, top 10 per cent of India's population is controlling 29.8 per cent of its national income, whereas bottom 10 per cent of its population is controlling just 3.6 per cent of national income. 6. **Inefficient Administration:** The main shortcoming of Indian plans lays in its implementation. Plans are well thought out but their implementation is poor because of defective administration, dishonesty, corruption, vested interest, red-tapism, etc. 7. **Shortfall in Target Realisation:** It has been observed that most of the time, the targets fixed have not been realised. In every plan, the target rates for growth of national income, employment, industry, agriculture, etc. are fixed. But most of the time, these targets are not achieved. It has been because of paucity of resources and faulty implementation of plans. 8. **Slow Capital Formation:** Economic planning has failed to give a big push to capital formation in India. Capital formation has remained low because of slow economic growth, less facilities of investment, lack of able entrepreneurs, lack of infrastructure, etc. 9. **Unbalanced Growth of Different Regions:** Despite 67 years of planning, there has been unbalanced growth of different regions of the country. Resources of some states like Goa, Haryana, Maharashtra, Punjab, Kerala and Gujarat have been properly exploited and so their economic condition has improved significantly but resources of many other states like Bihar, Odisha, Chattisgarh, MP, Rajasthan, UP, Jharkhand, Assam remain under-exploited. So economic planning has failed to achieve balanced regional development in the economy. 10. **Poor Development of Infrastructure:** Economic planning has failed to develop infrastructure in the country. Still, India is lacking in power generation, transportation, quality roads, fast railway tracks, airways, etc. 11. **Imbalanced Industrial Growth:** Economic planning has failed to regulate private sector to produce goods according to plan priorities. India is still lacking in basic and heavy industries, capital goods industry, whereas production of luxury goods is on rise. ## 5. Causes of Slow Growth Rate during Economic Planning 1. **Economic Causes:** Success of planning largely depends on the growth rate of economic factors. The growth rate of agricultural production has remained low. There are several factors accounting for the slow progress of agricultural production viz., dependence on monsoon, old methods of cultivation, shortage of good quality seeds and fertilizers, etc. Growth rate of industrial production in India between 1951 and 2017 was 5 per cent per annum. Several factors account for the slow progress of industrial production viz., poor infrastructure, poor technology, industrial unrest, slow rate of capital formation, high capital-output ratio, etc. Poor performance of public sector units is also accountable for failure of economic planning in India. 2. **Administrative Causes:** Enforcement and formulation of Five Year Plans in India has been defective. Acute shortage of able, competent and honest administrators to implement the plans has been felt. Office bearers of Community Development Projects, viz., village level workers, block development officers, etc. are appointed not on merit but on the basis of political pulls and pressures. Because of lack of honest administrators, people succeed in evading taxes by concealing wealth and income. 3. **Political Causes:** India is a democratic country. Government is elected after every five years. The main concern of ministers is to please voters so as to win elections. Hence, many a time those policies are not implemented which are of great advantage to the plans. For example, states should impose agricultural income tax and other new taxes to enhance their resources. But state governments would never do so. They do not want to displease their rural voters. Further, political instability leads to uncertainty and frequent changes in economic policies and strategy of planning. 4. **Natural Causes:** Natural factors like droughts, floods, etc., have also accounted for the slow progress of planning. Natural factors influence agriculture and industries depending on agriculture. It can be said that if timely rainfall has contributed to the success of some plans then failure of monsoon is accountable for the unsuccessful completion of some other plans. Warm climate of India also has its adverse effect on the efficiency of the workers. 5. **Social Causes:** Economic development of a country is very much influenced by its social organisations, traditions and customs. Unfortunately, social institutions in India are not favourable to its economic growth. Casteism, joint family system, dowry system, gender discrimination, purdah system, wasteful expenditure and social customs and rituals, etc. are some social institutions that have badly affected our economic progress. Indian people are orthodox. They are more inclined towards spiritualism than materialism. Rising population is another main cause of slow economic growth. 6. **International Causes:** Slow rate of economic growth is also due to international causes. India had to face Chinese aggression in 1962, Pakistani aggression in 1965 and in 1971. Thus, the funds meant for economic development had to be spent on the import of arms and ammunition from other countries and on other defence requirements. Price hike of petroleum products has also adversely affected our plans. Even Gulf War in 1991, terrorist attacks in USA in 2001 had badly affected our economy. In 2011-12, the slowdown of world economy due to global financial crisis and Eurozone public debt crisis adversely affected Indian economy. 7. **Moral Causes:** Besides economic causes there are also moral causes accounting for the slow rate of growth during planning. National spirit is lacking and self-interest is the motive that guides people. Socialism, equality and liberty have no meaning except high-sounding catchy slogans. That is why the Plans have not been properly implemented. Corruption has become a common practice, as a result, allocated funds do not reach the targeted groups. This has made our plans always short of their targets. In short, objectives of the plans are praiseworthy but the measures taken to implement them have been faulty. According to Barbara Ward, "Indian planning has been stronger on formulation than on implementation." ## 6. Suggestions for the Success of Plans in India 1. **Specific Objectives:** While framing the plans, objectives like removal of poverty, proper utilisation of manpower, raising of standard of living, etc. should be made more specific. In every plan, it should be clearly specified as to when and to what extent poverty will be removed and when and to what extent equality in the distribution of wealth and income will be affected. Success or failure of the plan can be measured on the basis of achievement or failure of these specific objectives. 2. **Physical Planning:** Success of plans lies in the importance attached to the achievement of physical targets rather than financial targets. It is essential to prepare the blue-prints of the plan in detail with meticulous care before it is put to practice and efforts should be made to attain the targets within the specified time limit. Success of a plan should not be measured by the achievement of financial targets alone. Plans should be evaluated on the basis of achieving physical targets of the plan. 3. **Emphasis on Local Needs:** Success of planning depends on proper emphasis on local needs. Problems of the entire country are not uniform. Some regions are backward due to lack of irrigation facilities whereas other regions lack in good quality transportation, health and education facilities. The entire country, therefore, does not require the same treatment. Problems of different regions should be carefully studied and plans should be formulated to answer the local needs, i.e., plans should be decentralised. 4. **Less Gestation Period:** The time involved between the commencement of a project and its completion is called gestation period. Efforts should be made to reduce gestation period of different projects/industries undertaken in the plans. This will help to reduce the cost of projects and to increase the rate of economic development in the economy. 5. **Balanced Growth of Capital Goods and Consumer Goods Industries:** Success of plans implies that proper balance be struck between capital goods and consumption goods industries. If supply of consumption goods industries lags behind its demand, it will lead to price rise in the economy. If production of capital goods lags behind, it will slow down the future growth prospects of the economy. 6. **Rapid Development of Agriculture:** Success of Indian planning necessitates rapid development of agriculture. Land reforms programmes should be implemented vigorously and thus wastelands and cultivable wastelands be brought under cultivation. Efforts should be made to increase the production of chemical fertilizers and high yielding varieties of seeds. Besides major irrigation projects, emphasis should also be placed on minor irrigation. Proper arrangements should be made for agricultural credit. 7. **Balance between Private and Public Sectors:** There should be balanced development of public and private sectors. Too much importance has been given to public sector under the earlier five year plans. However, because of its inefficiency, public sector has become an obstacle in the way of economic development. On the other hand, private sector has been put under severe controls and subjected to several taxes. As a result, private sector has not developed to the desired extent. A balanced and more pragmatic approach should be adopted towards public and private sectors. 8. **Price Stability:** With a view to implementing the plans properly, it is imperative to keep the price level stable. Constant rise in prices adds to the cost of planning. Prices of foodgrains, raw materials and consumer goods should remain stable. In order to keep the prices stable, government should promote the production of foodgrains and consumer goods. 9. **Development of Rural Industries:** In rural areas besides agriculture, development of cottage industries should also receive priority treatment. Whatever has been done in this respect is inadequate. Arrangements should also be made for marketing of goods produced by these industries. 10. **Cooperation between States and the Centre:** Successful planning implies close cooperation between the centre and the states. In modern times, when governments at the centre and in the states belong to different political parties, this cooperation has acquired added significance. Plans should be formulated with the cooperation of the states. 11. **Proper Development of Public Sector:** There should be proper organisation for regulation and control of public sector enterprises. Their executives should be honest and competent. There should be no political interference in their day-to-day administration. Public sector must largely contribute towards the financing of the plans. Efforts should be made to increase efficiency of public sector. 12. **Effective Administration:** Success of the plan mainly depends on the officers who are to execute it. Hence, able and efficient officers should be selected to implement the plans. They should be trained for the job and also provided with proper facilities. 13. **Development of Science and Technology:** With a view to promoting productivity, import substitution and domestic production, it is imperative to encourage and develop science and technology in the country. Proper incentives should be given to the scientists. They should be provided all kinds of research facilities within the country. This would enable them to stay in the home nation and offer their valuable services to the motherland. Developed technology can be imported, if necessary. 14. **Human Capital Formation:** Success of the plan needs a check on population growth and development of human capital. For human capital formation, proper arrangements should be made for the development of health, education and medical facilities. In short, the success of planned economic development programmes depends largely on the competent administrators, proper implementation, honest politicians and the mutual cooperation of hard-working and dedicated people. ## 7. Strategy of Economic Planning Strategy refers to the detailed actions and policies which are to be adopted to achieve definite objectives. Each plan is formulated to achieve set objectives. In order to achieve these objectives certain activities are undertaken. For instance, the first five year plan aimed to overcome food shortage in the country. To achieve this objective, it laid special emphasis on the development of agriculture. It is called the strategy of the first plan. ### 7.1 Main Elements of Strategy of Indian Economic Planning 1. **Wide Scope:** Indian planning is wide in scope. It not only takes into account industry, agriculture, power, means of transport but also education, health, family welfare, housing and other development programmes concerning social welfare and upliftment of backward classes. The strategy of planning is simultaneous development of primary, secondary and tertiary sectors of the economy. 2. **Mixed Economy:** Indian planning has adopted mixed economy. In such an economy both public and private sectors co-exist. Private sector functions in accordance with the priorities determined by the plans. It also follows the directions issued by the government. 3. **More Importance to Public Sector:** More importance is attached to the development of public sector than the private sector. There are three reasons for it: (i) Private sector does not possess enough resources needed for development. (ii) Private sector is not interested in the development of transport, irrigation, power and backward areas. (iii) Public sector's control over core sector like banking, insurance, defence, industries etc. is very essential for planned development. But in recent plans private sector has been given greater importance. 4. **Growth of Saving and Investment:** It has been the strategy of the five year plans that to increase the growth rate of economy, it is essential to step up the rate of saving and investment. It will raise the rate of capital formation. At the commencement of the First Plan, rate of investment was 8.7 per cent of GDP. In the year 2015-16, this rate increased to 33.3 per cent. 5. **Employment Oriented:** Attempts are made in each plan to increase employment opportunities. For promoting employment, efforts are made in different directions, namely (i) More investment; (ii) Full utilisation of production capacity; (iii) More use of labour-intensive technology; (iv) Development of labour-intensive activities like agriculture,