INDIAN ECONOMY NOTES 12TH CLASS BY SHREY SETH

CHAPTER-2

FIVE YEARS PLAN IN INDIA

 Economic Planning:-
It means utilization of countries resources in different development
activities in accordance with national priorities.
In India the idea of economic planning was buildup under the chairmanship
of professor 'Mahalnobis' economic planning is done by planning
commission of India. Now it is known as 'Niti aayog'.
 Prime Minister of country is the head of Niti aayog.

 Types of Economy:-
1. Capitalist Economy:-
It is an economy in which three main decisions of economy.
 What to produce?
 How to produce?
 For whom to produce?
Capitalist Economy is market forces of demand and supply. it is authorized in
the end of the private sector and their tries to maximize their profits. In the
economy government. Only maintains law and order and defense of the
country. For example- America, USA.
 Merits of the capitalist Economy:-
 It promotes self-interest, hence profits are maximized and GDP growth is
promoted.
 Demerits:-
It ignores collective interest of society as only those goods will be
produced which yields high profits production is only to satisfy the needs
of the rich. Hence, poor people suffers, in this there is growth without
social justice.

2. Socialist economy/Socialism:-
It is an economy in which major economic decisions like what to
produce, how to produce and for whom to produce are taken by central
authority of the government with the view to maximize social welfare.
For example- Germany, Cuba etc.

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 INDIAN ECONOMY NOTES 12TH CLASS BY SHREY SETH

 Merit
Socialist economy achieves equality in distribution of income. Growth
process becomes inclusive and it is based upon the principle of social
justice. Eg:- Germany.

 Demerit
The principle demerit of socialist economy is slow growth rate of GDP.
This is because production is not concerned with principle of profit
maximization instead it is concerned with equality and justice.

3. Mixed economy:-
It is an economy in which major economic decisions of what, how and
for whom to produce taken by private sector Enterprise and
government collectively. Both private and government sector play a
significant role in the process of production. It ensures profit
maximization and social welfare at the same time. Eg:- India.

 Merit
As it is a combination of capitalist economy and socialist economy,
growth rate of GDP is encouraged as private entrepreneurs can focus on
profit maximization and government can focus on social justice and
equality

 Demerit
The principle demerit is that the government sector is often involved in
corruption due to which the level of efficiency and productivity is low
because of this India is shifting towards privatization of public
enterprises.

 Long period and short period goals of planning in India.

1. Long Period Goals:-
a. GDP Growth:-
Increases in GDP implies increases in the level of output in the
economy. It leads to increases the flow of goods and services in the
economy. Economic growth will be achieved when there is consistent
increase in the flow of goods and services.

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 INDIAN ECONOMY NOTES 12TH CLASS BY SHREY SETH

b. Full employment: -
Full employment refers to a situation in which all those people who are
able to work, willing to work at current market wage rate, get work. This
is social objective of planning.

c. Equitable Distribution or Equity: -

Economic growth would become meaningless if the benefits of growth
is available by only the rich section of society. To maintain equity
benefits of growth must be spread to all sections of the society.

d. Modernization: -
It refers to upgradation and adaptation of modern technology in the
process of growth. Output can be increased by increasing pool of
resources or by using innovative technology. Hence, through science
and innovation we would try to achieve the goals of social and
economic growth.

e. Self-sufficiency: -
It means dependence upon the domestically produced goods.
(Particularly food grains). India wanted to be self-sufficient food grains
production to avoid uncertainties office supplies rest of the world.

2. Short period goods: -

a. Higher agriculture production.
b. Increase in industrial production.
c. Focus on price stability and full and utilization of manpower.
d. Greater employment opportunities.
e. Universalization of education.
f. Environment sustainability.
g. Battery quality of life.

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 INDIAN ECONOMY NOTES 12TH CLASS BY SHREY SETH

 5 YEARS PLANS
INDUSTRIAL POLICY
1951-1956 (1
1956-1961 (2
1961-1966 (3
1969-1974 (4
1974-1979 (5
1980-1985 (6
1985-1990 (7
LPG POLICY
1992-1997 (8
1997-2002 (9
2002-2007 (10
2007-2012 (11
2012-2017 (12
2017-2022 (13

 Features of economic policy persuade under planning till 1991:-

1. Heavy reliance concentration on public sector: -
Economic policy prior to 1991 indicated heavy reliance on public sector
under industrial policy resolution 1956, 17 industries were reserved for
public sector while only 12 industries were reserved for private sector. It is
done with the objective of socialist pattern of society.

2. Regulated Development of Private Sector:-

Prior to 1991, a new industry in the private sector could not be established
without a license and registration. This was done to ensure that there was
concentration of economic power in the private hands.

3. Production of small scale industries and regulation large scale industries:-

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 INDIAN ECONOMY NOTES 12TH CLASS BY SHREY SETH

Large scale industries for regulated through MRTP (monopolistic and

restrictive trade practices act).
While, SSI on other hand were offered protection from competition by
reserving a certain areas of production for them.

4. Development of heavy industries of strategic significance:-

Industries like electricity generation, engineering goods, iron and steel
industries were given strategic significance and they were developed on
priorities basis.

5. Focus on savings and investments:-

Savings and investments are the key determinants of economic growth, so
the government promoted them by offering high interest rate on savings
and investment by offering subsidies and capital gains on investment.

6. Protection from foreign competition:-

Domestic industries were protected from foreign competition by imposing
heavy duties on imports and applying qualitative restriction on imports.

7. Focus on import substitution:-

It means domestic products of those goods which were imported from
abroad this was done to save the foreign exchange and become self-
sufficient.

 Success/ Achievements of planning:-

1. Increase in national income:-
It indicates economic growth prior to planning, the national income of India
increased at just 0.5 per annum. Hence, Indian economy was a stagnant
economy.
During the last 5 years plan national income increases at the rate 6.7 % per
annum.

2. Increase in per capita income:-

During the period of planning the per capita income, as recorded significant
rise. Prior to planning, rate of increase in capita income was notational.
During the last 5 years plan the per capita income have been increased at
the rate 5.7 % per annum.

3. Rise in savings and investments:-

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During the five years plan there has been considerable increase in the rate
of savings and investment. During the first 5 years plans of saving was 9.5 %
of national income.
During the last five years plans it is increased 31.3%.
From the first 5 years plans investment has risen from 9.3 % of GDP to
33.3% of GDP during last 5 years plans.

4. Economic infrastructure:-
It means the elements of transportation, communication, irrigation and
power generation etc. During the period of planning economic
infrastructure has been recorded a significant growth, this had helps India
to acquire a good position among global players in the international market.

5. Social infrastructure:-
Health and education facilities are the key perimeter of social
infrastructure, 20 have recorded a significant rise overtime. Average life
expectancy as rice from 32 years in first years plan to 68 years in last 5 years
plans.
Eg:- school going student has increased since 1951.

6. Employment:-
Serious efforts have been made during five years plans to increases
employment opportunities. The rate of unemployment started decreasing
owning to several employee’s schemes launched by the government.

7. Growth and diversification of industries:-

The last five years plans gives a big push to basic and capital goods
industries (iron, steel and fertilizers etc.) India have achieved self-sufficiency
in consumer goods also and now ranking as fifth largest economy in the
world.

 Failures of planning in India:-

1. Abject poverty:-
Elevation of poverty was the central theme of plan. But even now 21.9% of
India's population lives below the poverty line. These are those people who
are unable to fulfill the minimum requirements of life like food, clothing,
shelter etc.

2. High rate of inflation:-

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We have failed to tackle inflationary spiral. Because of high rate of inflation

during five years’ plan, real income of people as tended to erode. Because
of this the country is divided into category of haves and have not.

3. Unemployment crisis:-
Mobile more and more employment opportunities generated, the challenge
of unemployment is not yet being over. The number of unemployed people
at a last 5 years over 4 crores. This is a serious threat on the process of
growth.

4. Inadequate infrastructure:-
Development of infrastructures includes in roads, dams, bridges, schools
etc. Despite of 67 years of planning, we are not able to provide them
inadequate proportion because of this are actual growth rate failed to
match target growth rate.

5. Skewed distribution:-
Economic and social equality was considered as principal goals of planning.
Unfortunately, this has become principle failure of planning in India. due to
this a gap between sections of society as wider. As a result, government
news to offer reservation n jobs to economically and socially weaker section
of the society.

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