Five year plans

Five Year Plans- Indian Economy

In India the planned economic development begin in 1951 with the inception of first five year plan. The main motive of first five year plan was to improve the condition of agriculture in the country, because Agriculture is the backbone of the whole country. Second five year plan (based on Mahalanobis model) was dedicated to the industrial development. During this period Indian economy grow by Hindu Rate of Growth (term given by professor Rajkrishna) around 3.5% upto 1980s.

First Five-Year Plan (1951–1956)

The first Indian Prime Minister, Jawaharlal Nehru presented the first five-year plan to the Parliament of India on December 8, 1951.This plan was based on the Harrod-Domar model. The plan addressed, mainly, the agrarian sector, including investments in dams and irrigation. The agricultural sector was hit hardest by the partition of India and needed urgent attention. The total planned budget of INR 2069 crore was allocated to seven broad areasirrigation and energy (27.2 percent), agriculture and community development (17.4 percent), transport and communications (24 percent), industry (8.4 percent), social services (16.64 percent), land rehabilitation (4.1 percent), and for other sectors and services (2.5 percent).

The target growth rate was 2.1% annual gross domestic product (GDP) growth; the achieved growth rate was 3.6%. The net domestic product went up by 15%. The monsoon was good and there were relatively high crop yields, boosting exchange reserves and the per capita income, which increased by 8%. National income increased more than the per capita income due to rapid population growth. Many irrigation projects were initiated during this period, including the Bhakra Dam and Hirakud Dam.

Second Five-Year Plan (1956–1961)

The second five-year plan focused on industry, especially heavy industry. Unlike the First plan, which focused mainly on agriculture, domestic production of industrial products was encouraged in the Second plan, particularly in the development of the public sector. The plan followed the Mahalanobis model, an economic development model developed by the Indian statistician Prasanta Chandra Mahalanobis in 1953. The plan attempted to determine the optimal allocation of investment between productive sectors in order to maximise long-run economic growth. It used the prevalent state of art techniques of operations research and optimization as well as the novel applications of statistical models developed at the Indian Statistical Institute. The plan assumed a closed economy in which the main trading activity would be centered on importing capital goods.

Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were established. Coal production was increased. More railway lines were added in the north east.

The Atomic Energy Commission was formed in 1958 with Homi J. Bhabha as the first chairman. The Tata Institute of Fundamental Research was established as a research institute. In 1957 a talent search and scholarship program was begun to find talented young students to train for work in nuclear power. Target Growth-4.5% Growth achieved:4.0%.

Third Five-Year Plan (1961–1966)

The third plan stressed on agriculture and improvement in the production of wheat, but the brief Sino-Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the Defence industry or Indian army. In 1965–1966, India fought a [Indo-Pak] War with Pakistan. Due to this there was a severe drought in 1965. The war led to inflation and the priority was shifted to price stabilisation. The construction of dams continued. Many cement and fertilizer plants were also built. Punjab began producing an abundance of wheat. Target Growth: 5.6% Actual Growth: 2.4%.

Fourth Five-Year Plan (1969–1974)

At this time Indira Gandhi was the Prime Minister. The Indira Gandhi government nationalised 14 major Indian banks and the Green Revolution in India advanced agriculture. In addition, the situation in East Pakistan (now Bangladesh) was becoming dire as the Indo-Pakistani War of 1971 and Bangladesh Liberation War took Funds earmarked for the industrial development had to be diverted for the war effort. India also performed the Smiling Buddha underground nuclear test in 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of Bengal. The fleet had been deployed to warn India against attacking West Pakistan and extending the war. Target Growth: 5.7% Actual Growth: 3.3%

Fifth Five-Year Plan (1974–1979)

Stress was by laid on employment, poverty alleviation, and justice. The plan also focused on self-reliance in agricultural production and defence. In 1978 the newly elected Morarji Desai government rejected the plan. Electricity Supply Act was enacted in 1975, which enabled the Central Government to enter into power generation and transmission.

Target Growth: 4.4% Actual Growth: 5.0

Sixth Five-Year Plan (1980–1985)

The sixth plan also marked the beginning of economic liberalisation. Prize controls were eliminated and ration shops were closed. This led to an increase in food prices and an increase in the cost of living. This was the end of Nehruvian Socialism and Indira Gandhi was prime minister during this period.

Family planning was also expanded in order to prevent overpopulation.

Target Growth: 5.2% Actual Growth: 5.4%

Seventh Five-Year Plan (1985–1990)

The Seventh Plan marked the comeback of the Congress Party to power. The plan laid stress on improving the productivity level of industries by upgrading of technology.

The main objectives of the 7th five-year plans were to establish growth in areas of increasing economic productivity, production of food grains, and generating employment.

As an outcome of the sixth five-year plan, there had been steady growth in agriculture, control on rate of Inflation, and favourable balance of payments which had provided a strong base for the seventh five Year plan to build on the need for further economic growth. The 7th Plan had strived towards socialism and energy production at large.

Target Growth: 5.0% Actual Growth: 5.7%


The Planning Commission was set up in March, 1950 by a Resolution of the Government of India. The economy of India is based on planning through its five-year plans. Five year plans are developed, executed and monitored by the Planning Commission (Prime Minister is  the ex-official Chairman). Now the planning commission is being replaced by the NITI Ayog (National Institution for Transforming India). Till date 12 five year plans have been launched by the planning Commission. The final approval to any five year plan is given by the National Development Council (NDC).

Eighth Five-Year Plan (1992–1997)

Time of 1989–91 was of political chaos that leads to economic instability in India and hence no five-year plan was implemented. Between 1990 and 1992, there were only Annual Plans. In 1991, India faced a crisis in Foreign Exchange (Forex) reserves, left with reserves of only about US$1 billion. Thus, under pressure, the country took the risk of reforming the socialist economy.

P.V. Narasimha Rao was the twelfth Prime Minister of the Republic of India and head of Congress Party, and led one of the most important administrations in India’s modern history overseeing a major economic transformation and several incidents affecting national security. At that time Dr. Manmohan Singh (currently, Prime Minister of India) launched India’s free market reforms that brought the nearly bankrupt nation back from the edge. It was the beginning of privatisation and liberalisation in India.

Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the gradual opening of the Indian economy was undertaken to correct the burgeoning deficit and foreign debt. Meanwhile India became a member of the World Trade Organization on 1 January 1995.This plan can be termed as Rao and Manmohan model of Economic development.

An average annual growth rate of 6.78% against the target 5.6% was achieved.

Ninth Five-Year Plan (1997–2002)

Ninth Five Year Plan India runs through the period from 1997 to 2002 with the main aim of attaining objectives like speedy industrialization, human development, full-scale employment, poverty reduction, and self-reliance on domestic resources.

During the Ninth Plan period, the growth rate was 5.35 per cent, a percentage point lower than the target GDP growth of 6.5 per cent.

Tenth Five-Year Plan (2002–2007)

  • Attain 8% GDP growth per year.
  • Reduction of poverty ratio by 5 percentage points by 2007.
  • Providing gainful and high-quality employment at least to the addition to the labour force.
  • Reduction in gender gaps in literacy and wage rates by at least 50% by 2007.
  • 20 point program was introduced.

Target growth: 8% Growth achieved: 7.8%

Eleventh Five-Year Plan (2007–2012)

The eleventh plan has the following objectives:

    Income & Poverty

  • Accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in order to double per capita income by 2016–17
  • Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of benefits
  • Create 70 million new work opportunities.
  • Reduce educated unemployment to below 5%.
  • Raise real wage rate of unskilled workers by 20 percent.
  • Reduce the headcount ratio of consumption poverty by 10 percentage points.


  • Reduce dropout rates of children from elementary school from 52.2% in 2003–04 to 20% by 2011–12
  • Develop minimum standards of educational attainment in elementary school, and by regular testing monitor effectiveness of education to ensure quality
  • Increase literacy rate for persons of age 7 years or above to 85%
  • Lower gender gap in literacy to 10 percentage point
  • Increase the percentage of each cohort going to higher education from the present 10% to 15% by the end of the plan


  • Reduce infant mortality rate to 28 and maternal mortality ratio to 1 per 1000 live births
  • Reduce Total Fertility Rate to 2.1
  • Provide clean drinking water for all by 2009 and ensure that there are no slip-backs
  • Reduce malnutrition among children of age group 0–3 to half its present level
  • Reduce anaemia among women and girls by 50% by the end of the plan

    Women and Children

  • Raise the sex ratio for age group 0–6 to 935 by 2011–12 and to 950 by 2016–17
  • Ensure that at least 33 percent of the direct and indirect beneficiaries of all government schemes are women and girl children
  • Ensure that all children enjoy a safe childhood, without any compulsion to work
  • Infrastructure
  • Ensure electricity connection to all villages and BPL households by 2009 and round-the-clock power.
  • Ensure all-weather road connection to all habitation with population 1000 and above (500 in hilly and tribal areas) by 2009, and ensure coverage of all significant habitation by 2015
  • Connect every village by telephone by November 2007 and provide broadband connectivity to all villages by 2012
  • Provide homestead sites to all by 2012 and step up the pace of house construction for rural poor to cover all the poor by 2016–17


  • Increase forest and tree cover by 5 percentage points.
  • Attain WHO standards of air quality in all major cities by 2011–12.
  • Treat all urban waste water by 2011–12 to clean river waters.
  • Increase energy efficiency by 20%

Target growth: 8.4% Growth achieved: 7.9%.

Twelfth Five-Year Plan (2012-2017)

The 12th five year plan (2012-17) document that seeks to achieve annual average economic growth rate of 8.2 per cent, down from 9 per cent envisaged earlier, in view of fragile global recovery. 12th five-year plan is guided by the policy guidelines and principles to revive the following Indian economy, which registered a growth rate of meagre 5.5 percent in the first quarter of the financial year 2012-13.

The plan aims towards the betterment of the infrastructural projects of the nation avoiding all types of bottlenecks.  The document presented by the planning commission is aimed to attract private investments of up to US$1 trillion in the infrastructural growth in the 12th five-year plan, which will also ensure a reduction in subsidy burden of the government to 1.5 percent from 2 percent of the GDP (gross domestic product). The UID (Unique Identification Number) will act as a platform for cash transfer of the subsidies in the plan.

The plan aims towards achieving a growth of 4 percent in agriculture and to reduce poverty by 10 percentage points by 2017. The main aim of this plan is to achieve Faster, More Inclusive and Sustainable Growth.

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