Five Year Plans

The essentials

At independence there was broad agreement that the state should play a major role in development. Even a group of leading industrialists had proposed a plan for state-supported industrialisation in 1944, known as the Bombay Plan. The Planning Commission was set up in March 1950 by a simple resolution of the Government of India; it was neither a constitutional nor a statutory body. The Prime Minister was its chairperson. In 2015 it was replaced by the NITI Aayog.

Key points

• First Five Year Plan (1951–56): it focused on agriculture, which had been badly affected by Partition, and on dams and irrigation. The young economist K.N. Raj was associated with it, and it argued that development should be paced carefully.
• Second Five Year Plan (1956–61): drafted under the leadership of the statistician P.C. Mahalanobis, it stressed rapid industrialisation, especially heavy industry. Tariffs were used to protect domestic industries.
• Debates: critics argued that the Second Plan neglected agriculture and rural India. Gandhian economists such as J.C. Kumarappa proposed an alternative based on rural industrialisation. Others argued that more emphasis on agriculture would help the poor.
• Public and private sector: the plans created a mixed economy in which the state controlled key heavy industries and the private sector worked under licences and controls.
• Kerala model: Kerala's approach stressed education, health, land reform, food distribution and decentralised planning; it is often cited for good human development outcomes.
• The Third Plan began in 1961; after droughts and war, regular planning was paused between 1966 and 1969, a period sometimes called a “plan holiday”.

Exam tips

• Remember: First Plan = agriculture (K.N. Raj); Second Plan = heavy industry (Mahalanobis).
• Note that the Planning Commission was created by a resolution, not by the Constitution.

Common mistakes

• Thinking the Bombay Plan was a government document; it was prepared by industrialists.
• Confusing the NITI Aayog (2015) with the National Development Council.