The Planning Commission and the Five-Year Plans

The Planning Commission (1950–2014)

The Planning Commission of India was set up on 15 March 1950 by a resolution of the Union Cabinet — it was, notably, a non-constitutional and non-statutory body: it does not appear anywhere in the Constitution and was not created by an Act of Parliament, but purely by an executive decision of the government of the day. Its chairman, ex officio, was the Prime Minister, with a Deputy Chairman who served as the Commission's de facto executive head, along with a number of full-time Members and Member-Secretaries.

Main functions of the Planning Commission:

1. Make an assessment of the material, capital, and human resources of the country, including technical personnel, and investigate the possibilities of augmenting resources found deficient.
2. Formulate a plan for the most effective and balanced utilisation of the country's resources.
3. Determine priorities and define the stages in which the plan should be carried out.
4. Indicate the factors that tend to retard economic development.
5. Appraise, from time to time, the progress achieved in the execution of each stage of the plan and recommend adjustments needed to meet the plan's objectives.

The Five-Year Plan system. Guided by the Planning Commission, India ran twelve successive Five-Year Plans between 1951 and 2017 (with two periods of "Plan Holidays" — years of Annual Plans rather than a fresh Five-Year Plan — around 1966–69, following the failures of the Third Plan, two wars, and severe drought, and again around 1990–92, during a period of political and economic instability before economic reforms and the Eighth Plan began in 1992). The broad emphasis shifted plan by plan: the First Plan (1951–56) prioritised agriculture and irrigation; the Second Plan (1956–61), built around the Mahalanobis strategy, shifted the emphasis firmly toward rapid industrialisation and heavy, capital-goods industry; later plans progressively widened the focus to include poverty alleviation, employment, and — from the Eighth Plan (1992–97) onward — planning adapted to a more liberalised, market-oriented economy. The Twelfth Plan (2012–17) was the last Five-Year Plan under the Planning Commission system.

Achievements and Limitations of Planning in India

Achievements:

1. A much larger and more diversified economy. National income and per-capita income grew substantially over the plan era compared with the near-stagnant colonial-era economy.
2. A modern industrial base built almost from scratch. Heavy and capital-goods industries — steel, machine tools, power equipment — that barely existed in 1947 were built up deliberately during the plan period, giving India a diversified industrial structure it previously lacked.
3. Infrastructure development. Substantial expansion in irrigation capacity, power generation, roads, railways, and communication networks, much of it directly plan-financed.
4. The Green Revolution. Planned investment in high-yielding seed varieties, irrigation, and fertiliser use moved India from a food-deficit country reliant on imports to broad self-sufficiency in foodgrains.
5. Expansion of education, health, and scientific manpower. Planning financed a large expansion of schools, colleges, and health infrastructure, and built specialised institutions (such as the IITs and national research laboratories) that created a skilled scientific and technical workforce.
6. A public-sector base for further industrialisation, which in its early decades supplied capital goods and infrastructure services that jump-started private industrial growth as well.

Limitations / Failures:

1. Slow overall growth for long stretches of the plan era relative to the ambitious targets set, a pace popularly (if informally) referred to as the "Hindu rate of growth."
2. Persistence of poverty and unemployment despite decades of planning explicitly aimed at reducing both.
3. Continuing, and in some periods widening, regional disparities between more- and less-industrialised states.
4. Growing inequality of income and wealth in several plan periods, even as aggregate output grew.
5. Inefficiency and financial losses in a significant number of public-sector undertakings, reflecting weak accountability and, at times, over-staffing and outdated technology. …