Last reviewed 30 Sept 2026 · Facts as of 30 Sept 2026 · 8 min read
Economic planning
Economic planning is the deliberate use of the nation's resources through a central authority to achieve defined economic and social goals within a fixed period. India chose planning after independence because of poverty, an agriculture-dominated economy, a lack of capital and industry, and the model of the Soviet Union (with a mixed economy).
Types
- Imperative (centralised) planning — as in the former USSR: the state decides everything.
- Indicative planning — as in France and India after the reforms: the state indicates targets and guides the private sector.
- Physical planning (targets in physical units) and financial planning (money terms); short-term, medium-term and long-term (perspective) plans.
Early ideas
| Plan / idea | Year | Notes |
|---|---|---|
| M. Visvesvaraya's "Planned Economy for India" | 1934 | an early call for planning; a 10-year plan to double national income |
| National Planning Committee (Congress) | 1938 | headed by Jawaharlal Nehru; K. T. Shah was the secretary |
| Bombay Plan (Tata–Birla Plan) | 1944 | by eight industrialists (J. R. D. Tata, G. D. Birla etc.); a 15-year plan to double per capita income; supported the public sector in key industries |
| Gandhian Plan | 1944 | by S. N. Agarwal; village-centred, small industries |
| People's Plan | 1945 | by M. N. Roy; agriculture-first, socialist |
| Sarvodaya Plan | 1950 | by Jayaprakash Narayan |
The Planning Commission and the NDC
- The Planning Commission was set up on 15 March 1950 by a Cabinet Resolution (a non-constitutional, extra-legal advisory body) — Chairman: the Prime Minister; Deputy Chairman was the full-time functional head (the first Deputy Chairman Gulzarilal Nanda; the last Montek Singh Ahluwalia).
- The National Development Council (NDC) was formed on 6 August 1952 — comprising the PM, Union Cabinet ministers, chief ministers of states and members of the Planning Commission — to secure the cooperation of the states; the final approval of the Five-Year Plans was given by the NDC.
- NITI Aayog replaced the Planning Commission on 1 January 2015.
Five-Year Plans
The Five-Year Plans were modelled on the Soviet system; Nehru and P. C. Mahalanobis shaped them.
| Plan | Period | Model / focus |
|---|---|---|
| First | 1951–56 | Harrod–Domar model; agriculture, irrigation and power (the Bhakra-Nangal, Hirakud, Damodar Valley dams); a target growth of 2.1 % (achieved 3.6 %); Community Development Programme (1952); the plan was drafted by K. N. Raj |
| Second | 1956–61 | Mahalanobis (Nehru–Mahalanobis) model — rapid industrialisation, heavy and basic industries, the public sector; the steel plants at Bhilai, Rourkela, Durgapur; Industrial Policy Resolution 1956; a two-sector model |
| Third | 1961–66 | self-reliant and self-generating economy; agriculture and industry; hit by the China war (1962), the Pakistan war (1965) and droughts; the plan failed |
| Plan holidays | 1966–69 (three annual plans) | after the failure of the Third Plan, the devaluation of the rupee (1966), drought; the Green Revolution began (HYV seeds) |
| Fourth | 1969–74 | Growth with stability and self-reliance; nationalisation of 14 banks (1969); the Gadgil strategy |
| Fifth | 1974–78 (terminated in 1978 by the Janata government) | "Garibi Hatao" (Removal of poverty) and self-reliance; the Minimum Needs Programme, the 20-Point Programme (1975); the plan was ended a year early |
| Rolling Plan | 1978–80 | by the Janata government (D. D. Dhar) — a plan updated every year |
| Sixth | 1980–85 | poverty alleviation; IRDP, NREP, TRYSEM, NABARD (1982); a shift towards liberalisation; the growth target achieved (5.7 %) |
| Seventh | 1985–90 | Food, work and productivity; modernisation; Jawahar Rozgar Yojana; technology mission |
| Annual Plans | 1990–92 | political instability and the 1991 balance-of-payments crisis |
| Eighth | 1992–97 | Human development; the first plan of the reform era; P. V. Narasimha Rao; Manmohan Singh; Indicative planning was adopted; a growth of 6.8 %; the emphasis on employment, population control, literacy |
| Ninth | 1997–2002 | Growth with social justice and equity; growth achieved 5.4 % (below the target of 6.5 %) |
| Tenth | 2002–07 | 8 % target (achieved about 7.7 %); the target of the doubling of per capita income in 10 years; monitorable targets; Sarva Shiksha Abhiyan |
| Eleventh | 2007–12 | "Towards faster and more inclusive growth"; a target of 9 % (achieved about 8 %); NREGA, NRHM (2005) |
| Twelfth | 2012–17 | "Faster, more inclusive and sustainable growth"; a target of 8 % (revised to 8.0 %; achieved about 7 %); the last Five-Year Plan; NITI Aayog replaced the Planning Commission before its end |
Plan models in brief: the Harrod–Domar growth model underlay the First Plan; the Feldman–Mahalanobis two-sector model (capital goods vs consumer goods) underlay the Second Plan, which made the public sector the "commanding heights"; the Fourth Plan followed the Gadgil strategy (and the Gadgil formula for central assistance to states).
- P. C. Mahalanobis is known as the "Architect of Indian planning" and the founder of the Indian Statistical Institute (1931).