Economic Planning and Development (1950–2017)

Economic Planning and Development (1950–2017)

Introduction

Economic Planning is the process by which the limited natural resources are used skillfully to achieve the desired goals. The concept of Economic Planning in India is derived from Russia (the then USSR).

Planning in India derives its objectives and social premises from the Directive Principles of State Policy enshrined in the Constitution.

Early Proposals and Plans

In the year 1934, the proposal relating to economic planning came for the first time in the book of Vishveshwaraiya titled 'Planned Economy for India'. Thereafter, in 1938, the All India Congress Committee demanded the same.

In 1944, efforts were made by 8 industrialists under the 'Bombay Plan'. Thereafter, in the same year, 'Gandhian Plan' by Sriman Narayan, in April 1944, the 'People's Plan' by labour leader M.N. Roy, and on January 30, 19,50, the 'Sarvodaya Plan' by Mr. Jai Prakash Narayan were presented.

Post-Independence Developments

After independence, in 1947, the Committee on Economic Planning was constituted under the chairmanship of Jawaharlal Nehru. Thereafter, on the recommendation of this committee, the Planning Commission was constituted in March 1950, and the format of the first Five-Year Plan was prepared in 1951.

• The Planning Commission was constituted in India in 1950 as a non-constitutional and advisory corporation.

• The Indian Constitution did not provide for the formation of the Planning Commission. 

• On 1 January 2015, the newly formed N1T1 Aayog replaced the Planning Commission.

Objective of Planning

• The basic aim of economic planning in India is to bring about rapid economic growth through the development of agriculture, industry, power, transport, and communications, and all other sectors of the economy.

Five-Year Plans

In India, the 12th Five-Year Plan has been implemented so far. The target and achievements of these plans are given below:

Types of Planning

Imperative Planning

• In this type of planning, the Central Planning authority decides upon every aspect of the economy, and the targets set and the processes delineated to achieve them are to be strictly followed.

• This type of planning is mainly practiced in socialist economies.

Indicative Planning

• In this type of planning, the State sets broad parameters and goals for the economy.

• It is different from centralised planning; unlike in the latter, the State does not see the Plan targets to the minutest details, but only broadly indicates the targets to be achieved.

• It was adopted in our country since the 8th Five-Year Plan, as practised in many developed countries.

Perspective Planning

• It's a type of planning for a long period, usually 15-20 years.

• As a highly specialised task, it is operationalised through the Five-Year and Annual Plans.

• In such a form of planning, the planners formulate a perspective Plan that broadly defines the direction desired to be taken by the economy.

Rolling Plan

Under the scheme of rolling Plans, there are three different steps.

• First, a plan for the current year, which includes the annual budget.

• Second, a plan for a fixed number of years, say three, four, or five. It is revised every year as per the requirements of the economy.

• Third, a perspective plan for 10,15, or 20 years.

Core Plan

• According to this concept, the Planning Commission requests that states submit their projected revenue estimates.

• Based on these estimates, the Planning Commission determines the expenditure heads for the State Annual Plans.

• This helps keep the Plan target within realistic limits and prevents diversion of funds from priority items to non-plan accounts.

• The concept of 'Core Plan' has emerged recently.

Models of Economic Development

Nehru-Mahalanobis Model

• Nehru-Mahalanobis model of development emerged as the driving force of the strategy of development adopted at the time of formulation of the Second Five-Year Plan and has continued right up to the eighties.

Objectives

• It aimed at the enlargement of opportunities for the less privileged sections of society.

Goal

• Growth with social justice was the goal of the Nehru-Mahalanobis model since it intended to foster a self-generating path of development with an assurance to the common man that poverty, unemployment, disease, and ignorance would be removed so that individuals could realise their potential with the extension of social and economic opportunities.

Role of the State

• In the Nehru-Mahalanobis model, the State controlled the commanding heights of the economy through the public sector.

The Gandhian Model of Growth

Origin

• 'Gandhian Plan' was brought out by Acharya S.N. Agarwala in 1944 and was reaffirmed in 1948, forming the basis of the Gandhian model of growth.

Objective

• The basic objective of this model is to raise the material as well as the cultural level of the Indian masses so as to provide a basic standard of life.

Focus

• It aims primarily at improving the economic conditions of the villages of India and hence, it lays the greatest emphasis on the scientific development of agriculture and the rapid growth of cottage and village industries.

Importance of Agriculture

• The Gandhian model aims at the reform of agriculture as the most important sector in economic planning in India.

• The Gandhian model's primary aim is the attainment of maximum self-sufficiency in village communities.

Emphasis on Cottage Industries

• Hence, the plan emphasises the rehabilitation, development, and expansion of cottage industries side by side with agriculture. Spinning and weaving are given the first place.

Comparison with Nehru’s Vision

• While Nehru wanted to give prime importance to heavy industries, the Gandhian model attempts to give primacy to agriculture, supported by handicrafts and cottage industries.

LPG Model of Development

The LPG Model of development was introduced in 1991 by the then Finance Minister Dr. Manmohan Singh.

Strategy

• This model was intended to charter a new strategy with emphasis on Liberalisation, Privatisation, and Globalisation (LPG).

Role of the Private Sector

• LPG Model of development emphasises a bigger role for the private sector.

Foreign Investment

• It envisages a much larger quantum of foreign direct investment to supplement our growth process.

Export-Led Growth

• It aims at a strategy of export-led growth as against the import substitution practised earlier.

Reduction in the Role of the State

• It also aims at reducing the role of the State significantly and thus abandons planning fundamentalism in favour of a more liberal and market-driven pattern of development.

PURA Model of Development

Approval and Objective

• The Union Cabinet on 20th January, 2004, accorded in principle approval for the execution of PURA within the gross budgetary support for bridging the rural-urban divide and achieving balanced socioeconomic development.

Concept by A.P.J. Abdul Kalam

• Dr. A.P.J. Abdul Kalam, to eradicate poverty from India, emphasised the adoption of PURA (Providing Urban Amenities in Rural Areas). Earlier, it was Mahatma Gandhi who underlined the exploitation of rural society by its urban counterpart.

Aim

• The objective of PURA is to propel economic development without population transfers.

Infrastructure Development

• The PURA concept is the response to the need for creating social and economic infrastructure that can create a conducive climate for investment by the private sector to invest in rural areas.

Relation with the Gandhian Model

• Although PURA draws its inspiration from the Gandhian model of development, which emphasises rural development as a fundamental postulate, in the prescription, it is neo-Gandhian in the sense that it intends to bring rural regeneration with the avowed objective of taking modern technology and modern amenities to the rural areas.

Employment Focus

• It does emphasize the enlargement of employment as the sole objective to make use of rural manpower in various development activities.

Balancing Employment and Growth

• The PURA model, however, attempts a reconciliation between employment and GDP growth objectives.

Implementation

• The 11th Plan (2007-12) has provided Rs. 248 crores for implementing the PURA scheme in compact rural areas in Public-Private Partnership (PPP) mode.

Final Thoughts

Economic planning in India has been a dynamic journey, beginning with early proposals like the Bombay Plan and moving through structured efforts such as the Five-Year Plans. Different models – the Nehru-Mahalanobis Model, the Gandhian Model, the LPG reforms of 1991, and the PURA initiative – reflect the country’s evolving priorities across decades.

Each approach aimed at balancing growth, social justice, employment, and rural development in its own way. While the Planning Commission once shaped the national agenda, today NITI Aayog continues this role with a focus on innovation, inclusivity, and sustainable development.

Together, these models highlight India’s persistent effort to align economic growth with social progress, ensuring that planning remains both relevant and adaptive to changing times.