Economic Planning in India Notes for SSC Exams

Economic Planning in India is a regular topic in the Economy part of SSC General Awareness. Questions come on the pre-independence plans, the Planning Commission and NDC, the models of different plans, important events of each Five Year Plan and the shift to NITI Aayog. These notes give you a complete, point-wise summary with tables and practice questions, as an Economy teacher would revise it.

Meaning and Types of Planning

• Economic planning means deciding in advance what to produce, how to produce and for whom, with national goals and a time frame.
• Centralised planning (the former USSR) is fully controlled by the state. Market economy has no planning. India adopted democratic or indicative planning within a mixed economy, where the public and private sectors work together.
• Imperative planning is compulsory, while indicative planning gives direction but is not binding on the private sector.

Pre-Independence Efforts

Planning Commission and NDC

• Set up on 15 March 1950 by a Cabinet resolution. It was extra-constitutional and non-statutory. The Prime Minister was the ex-officio Chairman.
• First Deputy Chairman: Gulzarilal Nanda. The Deputy Chairman had the rank of a Cabinet Minister.
• Functions: assess resources, prepare plans, set priorities, allocate resources to Centre and states and review progress.
• National Development Council (NDC): formed on 6 August 1952, also extra-constitutional. It approved Five Year Plans. Members: the Prime Minister, Union Cabinet Ministers, Chief Ministers and Administrators of Union Territories.
• Finance Commission (Article 280, constitutional body, every five years) is different from the Planning Commission.

Five Year Plans at a Glance

Important Concepts and Events

• Harrod-Domar model links growth to savings and capital-output ratio. Mahalanobis model stressed heavy industries and capital goods.
• Green Revolution (from 1966-67): high-yield varieties of wheat and rice, led by M.S. Swaminathan in India and Norman Borlaug internationally.
• White Revolution (Operation Flood, 1970): increased milk production; Verghese Kurien is the Father of the White Revolution.
• Nationalisation of banks: 14 banks in 1969 and 6 more in 1980.
• Economic reforms of 1991: liberalisation, privatisation and globalisation under Prime Minister Narasimha Rao and Finance Minister Manmohan Singh.
• Land reforms: abolition of zamindari, tenancy reforms, ceiling on landholdings and consolidation of holdings.

NITI Aayog

• NITI Aayog (National Institution for Transforming India) replaced the Planning Commission on 1 January 2015. Its formation was announced on 15 August 2014.
• It is a policy think tank that gives directional and strategic input. It does not allocate funds. Its approach is cooperative federalism and a bottom-up method.
• Chairperson: the Prime Minister. First Vice Chairman: Arvind Panagariya. It has a Governing Council (Chief Ministers and Lieutenant Governors), regional councils, a CEO and full-time and part-time members.
• It prepares three-year action agendas, seven-year strategy papers and a fifteen-year vision. It releases indices such as the SDG India Index, India Innovation Index, School Education Quality Index and Multidimensional Poverty Index.

Comparison: Planning Commission vs NITI Aayog

Practice Questions With Answers

1. Who wrote "Planned Economy for India"? Answer: M. Visvesvaraya
2. The Planning Commission was set up in: Answer: 1950
3. Which model was used in the Second Five Year Plan? Answer: Mahalanobis model
4. Which plan was called the Gadgil Yojana? Answer: Third Five Year Plan
5. In which plan was the Garibi Hatao slogan the main theme? Answer: Fifth Five Year Plan
6. Which was the last Five Year Plan of India? Answer: Twelfth Plan (2012-17)
7. Who was the first Vice Chairman of NITI Aayog? Answer: Arvind Panagariya
8. Who is the Chairperson of NITI Aayog? Answer: The Prime Minister
9. The Bhilai, Rourkela and Durgapur steel plants were set up in which plan? Answer: Second Five Year Plan
10. The NDC was formed in: Answer: 1952

Next, read the National Income notes to complete the Economy basics, and solve questions from our previous year papers.

Frequently Asked Questions

What is economic planning?

Economic planning is the process by which a government sets economic goals for a fixed period and decides how to use the resources of the country to achieve them. In India, planning was carried out through Five Year Plans prepared by the Planning Commission from 1951 to 2017.

Who first proposed the idea of planning in India?

M. Visvesvaraya gave the first formal idea of planning in his book "Planned Economy for India" in 1934. In 1938, the Indian National Congress set up the National Planning Committee under Jawaharlal Nehru.

What was the Bombay Plan?

The Bombay Plan (1944) was a plan for the economic development of India prepared by eight leading industrialists, including J.R.D. Tata, G.D. Birla and Purshotamdas Thakurdas. It supported state-led industrialisation with a strong role for the public sector.

What are the Gandhian Plan, People's Plan and Sarvodaya Plan?

The Gandhian Plan (1944) was by Shriman Narayan Agarwal and focused on village industries. The People's Plan (1945) was by M.N. Roy and was based on radical humanism. The Sarvodaya Plan (1950) was by Jayaprakash Narayan, inspired by Gandhi and Vinoba Bhave.

When was the Planning Commission set up and who was its first Deputy Chairman?

The Planning Commission was set up on 15 March 1950 by a resolution of the Government of India. It was an extra-constitutional and non-statutory body. The Prime Minister was its Chairman, and Gulzarilal Nanda was the first Deputy Chairman.

What was the role of the National Development Council (NDC)?

The NDC, formed on 6 August 1952, was the highest decision-making body for development planning. It approved the Five Year Plans prepared by the Planning Commission. The Prime Minister was its chairman and Chief Ministers of all states were its members.

Which model was used in the First Five Year Plan?

The First Plan (1951-56) was based on the Harrod-Domar model. It stressed agriculture, irrigation and power, and the target growth of 2.1 percent was exceeded as about 3.6 percent growth was achieved.

What was the Mahalanobis model?

The Second Plan (1956-61) followed the P.C. Mahalanobis model, a two-sector (later four-sector) model that gave top priority to capital goods and heavy industry. The steel plants at Bhilai, Rourkela and Durgapur were set up in this plan.

Which plan is called the Gadgil Yojana?

The Third Five Year Plan (1961-66) is also called the Gadgil Yojana after the Deputy Chairman D.R. Gadgil. It aimed at self-reliance and a self-generating economy but suffered because of the wars of 1962 and 1965 and drought.

What is a plan holiday?

The period from 1966 to 1969 is called the plan holiday, when three Annual Plans were followed instead of the Fourth Five Year Plan because of wars, drought and economic problems.

Which plan gave the slogan "Garibi Hatao"?

The Fifth Plan (1974-79) had the main objectives of removal of poverty (Garibi Hatao) and self-reliance. It was ended in 1978 by the Janata Party government and followed by a Rolling Plan.

What is a Rolling Plan?

A rolling plan is a flexible plan in which targets are revised every year and extended by one more year. Gunnar Myrdal supported the idea and the Janata government introduced it for 1978-80.

When did the planning era end and what replaced it?

The Twelfth Five Year Plan (2012-17) was the last. The Planning Commission was replaced by NITI Aayog (National Institution for Transforming India) on 1 January 2015.

What is NITI Aayog and who heads it?

NITI Aayog is the policy think tank of the Government of India. The Prime Minister is its Chairperson, and it has a Vice Chairperson, a CEO and Governing Council of Chief Ministers and Lieutenant Governors. It promotes cooperative federalism and a bottom-up approach.

How is NITI Aayog different from the Planning Commission?

The Planning Commission was a top-down body that allocated funds and made five-year plans. NITI Aayog is an advisory think tank that gives strategic advice, prepares long-term visions, and does not allocate funds. States have a bigger role in it.

What are the main objectives of planning in India?

Growth, modernisation, self-reliance and equity (social justice) were the four traditional objectives. Later plans added poverty removal, employment, human development and sustainable growth.