Objectives of Economic Planning in India


The Indian National Congress, under the motivation of Jawaharlal Nehru, established the National Planning Committee (NPC) towards the end of 1938. The Committee constructed a series of studies on different subjects associated with economic development. The Committee laid down that the State should own or manage all key industries and services, waterways, mineral resources and railways, shipping and other public utilities and, in fact, all those large-scale industries which were possible to become monopolistic in character.

In addition to the National Planning Committee (NPC), eight leading industrialists of India conceived “A Plan of Economic Development” which was commonly known as the Bombay Plan. There was also a Gandhian Plan which was organised by Shriman Narayan. The world-popular revolutionary M. N. Roy developed the People’s Plan. All these plans were only of historical significance because they were just paper plans which were never executed. But they stimulated thinking about the several aspects of planning in India.

Just after the attainment of Independence the Prime Minister Nehru established the Planning Notes Commission in 1950 to assess the nation’s needs of material capital and human resources and to develop economic plans for their more balanced and effective utilisation. The First Five-year Plan commenced in 1950-51 and it was followed by a sequence of Five-Year Plans.

Objectives of Economic Planning in India

Now, let us begin the lesson with the objectives of economic planning in India. The Directive Principles of our Constitution laid down:

“The State shall, in particular, direct its policy towards securing —

(a)     that citizens, men and women equally, have the right to an adequate means of livelihood;

(b)     that the ownership and control of the resources of the community are so distributed as best to sub serve the common good and

(c)that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.”

The Directive Principles of the Indian Constitution are, therefore, an expression of the will of the people of India for rapid economic growth. Accordingly, the Government of India accepted planning as a means of adopting economic development. The Planning Commission set out the following four long term goals of Planning:

(i)to increase production to the maximum possible extent so as to achieve higher level of national and per capita income;

(ii)     to attain full employment;

(iii)   to reduce inequalities of income and wealth; and

(iv)    to establish a socialist society based on equality and justice and absence of exploitation.

You must be aware that the First Five-Year Plan presented clearly the long-term objectives or goals of economic planning in India as follows:

“Maximum production and full employment, the attainment of economic equality or social justice which constitute the accepted objectives of planning under present day conditions are not really so many different ideas but a series of related aims which the country must work for. None of these objectives can be pursued to the exclusion of others, a plan of development must place balanced emphasis on all of these.”

In his book “Planning and the Poor”, B.S. Minhas a former member of the Indian Planning Com-mission states:

“Securing rapid economic growth and expansion of employment, reduction of disparities in income and wealth, prevention of concentration of economic power and creation of the values and attitudes of a free and equal society have been among the objectives of all our plans.”

Now, you will learn about the above socio-economic goals under the headings of 

(a) Economic planning and removal of poverty, and 

(b) Economic planning and social change.

Economic Planning and Removal of Poverty

You must be aware that the basic objective of economic planning in India is to bring about rapid economic growth through development of agriculture, power, industry, transport and communications, and all other sectors of the economy. The basic standard of economic growth of a nation is the continuous expansion, year after year, of real national income and real per capita income. It is the need of the hour that economic growth, should also involve improvements Notes in quality of life comprising of life expectancy, literacy, infant mortality, etc. A little consideration will show that all these displays of development are inter-related in the sense that expansion of real national income is the foundation for increase in per capita income and also improvement in the quality of life.

You must understand that Indian planners intended at increasing national and per capita incomes on the assumption that the constant increase in these incomes would decrease and finally remove poverty and misery and raise the standard of living of the masses. However, when our planners found that increase in national income was not supplemented by reduction of poverty in the nation, the goal of planning from the Fourth Plan onwards was not just economic growth but raising the standard of living of those who have been living in abject poverty for generations, nay, for centuries. As per the Fourth Five-year Plan, “the basic goal is a rapid increase in the standard of living of the people”, and again “emphasis is placed on the common man, the weaker sections and the less privileged.” In fact, the slogans of “Garibi Hatao” (Removal of poverty) and “growth with justice” were created during the early 1970’s to signify clearly that the focus would be on removal of poverty and not merely on increase in national income.

It is important for you to note that unemployment and under-employment are essential causes of poverty in India. Therefore, from the very beginning, removal of unemployment and underemployment has been a significant objective of economic planning in the nation. The Planning Commission has all along expected that increase in investment would be accompanied by increase in employment as well as increase in national income of the nation. The Commission argued explicitly in the Third Plan that as national income increased in response to investment and development expenditure, the demand for labour would mechanically rise and more employment would the generated.

Simultaneously, the removal of unemployment would lead to increase in gross national product and standard of living of people on the other. Accordingly all the Five Year Plans had programmes of economic growth, with increase in employment as integral in the development programmes.

Although employment has been mentioned as one of the goals of economic planning in all our Five-Year Plans, it has never been rendered a high priority. In the absence of any plan, do we find distinct employment plans framed for each one of the sectors and areas, so as to elevate employment on the one side and national income on the other. This describes why unemployment has increased over the years. For the first time, the Planning Commission admitted in the Janata Party Sixth Plan (1978–83) the possibilities of real conflict between employment and economic growth and accorded employment a pride of place in the Plan. Nevertheless, in the Sixth Plan (1980–85) which was ultimately accepted and executed by the Congress Party, the main emphasis reverted to the traditional growth approach, with the usual assumption that employment would increase with rise in investment, regardless of choice of techniques. Therefore, not a single plan has been framed keeping employment generation as a primary goal and only tip service was paid to the attainment of full employment goal.

Economic Planning and Social Justice

You must understand that in an unplanned society, several kinds of retrogressive forces function, such as inequalities of poverty, income, absence of equal opportunities for progress, etc. India’s economic plans made conscious effort to remove all these retrogressive forces and foster social as well as individual development. Decrease of inequalities of income and the formation of a socialist society create conditions in which everyone will have equal opportunities in the matter of education and employment. Additionally, there will be no strength of economic power and exploitation of one individual by another.

A very small group of persons in India are better-off and have not experienced poverty and misery. These are rich landlords in the merchants, countryside, bankers, industrialists, top officials of the Government, etc. The vast majority of people are, nevertheless, very poor because their income is very low. Extreme inequalities of income and wealth in India have their roots in the traditional social development and essentially, thus, the reduction of inequalities of income and wealth would be possible only through abolishing the semi-feudal relations of production in our villages. The Planning Commission sketched such measures as the removal of all intermediaries and the ceiling on landholding for decrease of inequalities of wealth and income in rural areas.

It is essential to note that another aspect of inequalities of income in India is the large differences between rural and urban incomes which are bound to be highlighted over the years with industrialisation and economic growth. The Planning Commission has suggested measures to raise fair price to farmers for their products, development of agro-based industries, agricultural productivity, etc.

However, reduction of income inequalities has always been stated as one of the goals in all the plans, in terms of priority this objective consistently got a very low position. This could possibly be so because Nehru, the architect of Indian planning, did not consider that the problem of economic inequalities of income and wealth could ever be solved just by redistribution. The Fourth Plan stated clearly:

“In a rich country, greater equality could be achieved in part by transfer of income through fiscal, pricing and other policies. No significant results can be achieved through such measures in a poor country.”

Ultimately, you must note that the Indian planners visualised the establishment of a socialist society in which everyone would have equal opportunities in the matter of occupation, education, etc. Wealth would be disseminated equally and there would be no absorption of economic power in the hands of a few individuals or families. Above all, there would be no scope for mistreatment of man by man. The first three plans talked of the establishing of a “socialist pattern of society” or “development along socialist lines”. The Fourth Plan talked about the “establishment of a social and economic democracy”. It specified:

“The broad objectives of planning could thus be defined as rapid economic development accompanied by continuous progress towards equality and social justice and the establishment of a social and economic democracy.”

However, it is also important to consider that the definition of economic democracy as given by the Indian planners is distinct from what is commonly understood elsewhere. In prosperous economies where abysmal poverty has been eliminated, economic democracy is almost the same as a free market economy. In India, nevertheless, the broad definition of economic democracy is the availability of opportunities for drinking water supply, public health and sanitation, education, etc., for large masses of people, irrespective of whether they are rich or poor.

After the starting of the Liberalisation, Privatisation and Globalisation model of growth in 1991, these goals have been entirely abandoned at the altar of market forces.

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