Under a series of five-year plans through 2000, the government
became a participant in many industrial fields and increased its
regulation of existing private commerce and industry. Long the
owner-operator of most railway facilities, all radio broadcasting,
post, and telegraph facilities, arms and ammunition factories, and
river development programs, the government reserved for itself
the right to nationalize any industries it deemed necessary. Yet the
government’s socialist approach was pragmatic, not doctrinaire;
agriculture and large segments of trade, finance, and industry
remained in private hands. Planning is supervised by an eightmember
planning commission, established in 1950 and chaired
by the prime minister.
India’s first four five-year plans entailed a total public sector
outlay of R314.1 billion. The first plan (1951–56) accorded top
priority to agriculture, especially irrigation and power projects.
The second plan (1956–61) was designed to implement the new
industrial policy and to achieve a “socialist pattern of society.”
The plan stressed rapid industrialization, a 25% increase in
national income (in fact, the achieved increase was only 20%),
and reduction of inequalities in wealth and income. The focus of
the third plan (1961–66) was industrialization, with 24.6% spent
on transportation and communications and 20.1% on industry
and minerals. Drought, inflation, and war with Pakistan made
this plan a major disappointment; although considerable
industrial diversification was achieved and national income rose,
per capita income did not increase (because of population
growth), and harvests were disastrously low. Because of the
unsettled domestic situation, the fourth five-year plan did not
take effect until 1969. The 1969–74 plan sought to control
fluctuations in agricultural output and to promote equality and
social justice. Agriculture and allied sectors received 16.9%, more
than in any previous plan, while industry and minerals received
18.5%, transportation and communications 18.4%, and power
development 17.8%, also more than in any previous plan.
The fifth plan (1974–79) aimed at the removal of poverty and
the attainment of self-reliance. A total outlay of R393.2 billion
was allocated (26% less than originally envisaged), and actual
expenditures totaled R394.2 billion. Once again, the emphasis
was on industry, with mining and manufacturing taking 22.5%,
electric power 18.7%, transportation and communications
17.2%, and agriculture 12.1%. The fifth plan was cut short a
year early, in 1978, and, with India enmeshed in recession and
political turmoil, work began on the sixth development plan
(1980–85). Its goal, like that of the fifth, was the removal of
poverty, although the planners recognized that this gigantic task
could not be accomplished within five years. The plan aimed to
strengthen the agricultural and industrial infrastructure in order
to accelerate the growth of investments and exports. Projected
outlays totaled R975 billion, of which electric power received
27.1%, industry and mining 15.4%, transportation and
communications 12.7%, and agriculture 12.2%. The main target
was a GDP growth rate of 5.2% annually. The seventh
development plan (1985–90) projected 5% overall GDP growth
(which was largely achieved and even exceeded) based on
increases of 4% and 8% in agricultural and industrial output,
respectively. Outlays were to total R1,800 billion.
The eighth development plan (for 1992–97), drafted in
response to the country’s looming debt crisis in 1990–91, laid the
groundwork for long-term structural adjustment. The plan’s
overall thrust was to stimulate industrial growth by the private
sector, and thereby free government resources for greater
investment in basic infrastructure and human resources
development. In addition to liberalized conditions for private and
foreign investment, the foreign exchange system was reformed,
the currency devalued, the maximum tariff reduced from 350%
to 85%, import barriers generally loosened, and those for key
intermediate goods removed altogether. Reform of the tax
system, reduction of subsidies, and restructuring of public
enterprises were also targeted. While the eighth plan generally
supported expansion of private enterprise, unlike structural
adjustment programs in other developing countries, it did not
stipulate a large-scale privatization of the public sector.
As the eighth plan came to an end in 1997 most analysts
proclaimed it a success; economic growth averaged 6% a year,
employment rose, poverty was reduced, exports increased, and
inflation declined.
The ninth development plan (1997–2002) focused on the
redistribution of wealth and alleviation of poverty, the further
privatization of the economy and attraction of foreign
investment, and the reduction of the deficit. Overall there were
improvements in the reform era including an increase in the GDP
growth rate from an average of about 5.7% to about 6.1% in the
Eighth and Ninth Plan periods, a reduction of the percent in
poverty from a third of the population to a fourth, increased
literacy from 52% in 1991 to 65% in 2001, and India’s
emergence as a competitor in state-of-the-art technologies of the
new information age economy. However, persistent
inefficiencies—unemployment and underemployment, and
welfare deficiencies—remained. Moreover, since 1998 a series of
domestic and international shocks have brought a disturbing
deceleration to India’s economic growth.
In the tenth five-year plan, 2002–2007, the government set the
ambitious target of achieving an average 8% growth, above the
level achieved during the ninth plan and well ahead of the 5% to
5.5% growth forecast for 2002/03. Other monitorable economic
targets include a reduction of the poverty rate by 5% by 2007,
and by 15% by 2012; providing gainful and high-quality
employment at least equal to the projected increases in the labor
force; increase in forest and tree cover to 25%, in 2007 and to
33% by 2012; all villages with sustained access to potable water
by 2007; and cleaning of all major polluted rivers by 2007.
Agricultural development is viewed as the core element of the
tenth plan with attention to sectors most likely to create
employment opportunities. These include agriculture in its
extended sense, construction, tourism, transport, small-scale
industries (SSI), retailing, IT, and communications enabling
services. Industrial policy includes continued emphasis on
privatization and deregulation. The ambitious 8% annual growth
of the tenth plan is considered achievable because of the
inefficiencies that have traditionally plagued Indian agriculture
and industry. Because the scope for improvement is so wide, both
in the public sector and it the private sector, strong growth can be
expected from efficiency enhancing policies.
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