FIVE YEAR PLANS IN INDIA

restriction on foreign capital

- FDI was controlled through Foreign exchange Regulation Act - loans from abroad were prioritised over FDI - to minimise foreign control

long period objectives

- GDP growth - full employment - equitable distribution or equity - modernisation - self sufficiency

what is economic planning

- a system under which a central authority sets a set of targets and specifies a set of programmes and policies to achieve those targets within specified period of time. focus- rational management of scarce resources motive- gdp growth with social welfare

merits of socialism

- achieves equality in distribution of income - growth is inclusive - leads to social justice

merits of mixed economy

- combines merit of both capitalist and socialist economy - profit maximisation is done by private entrepreneurs - social justice is done by public sector maximising social welfare

long period goals *

- common goals of five year plans - objectives of planning

equitable distribution

- differences in income are allowed but only to a certain limit - proportionate to the qualification nd skill - growth is converted into development

types of planning

- directive - comprehensive

need for planning

- economy was backward and stagnant - GDP was low - cannot be left to the market forces of demand and supply - needed government intervention/ support/ investment

development of heavy industry of strategic significance

- electricity generation - engineering goods - iron and steel industry

universal intermediaries

- essential ingredients - nobody can function without power, plant and machinery and iron and steel

equal distribution

- every individual gets the same share in the country national income - doctors and clerks are payed equally

full employment vs zero unemployment

- full employment is not equal to zero unemployment - there is always some natural rate of unemployment caused by structural changes in the system of production - structural changes are relate to change in technology - structural unemployment is consistent with full employment

comprehensive planning

- government participates in the process of growth and development - socialist and mixed economies - mixed economies both private and public sector co exist as agents of growth - individual gains are allowed to maximise but collective gains or social gains are fostered through direct participation

equitable distribution or equity

- growth becomes meaningless if it only favours the rich and the rich becomes richer and poor becomes poorer and struggle for the essentials of life - benefits of growth must spread across all sections of the society - equitable distribution of income implies social equality

features of economic policy pursued under planning till 1991

- heavy reliance on public sector - regulated development of private sector - protection of small scale industry and regulation of large scale industry - development of heavy industry of strategic significance - focus on saving and investment - protection from foreign competition - focus on import substitution - restriction of foreign capital - centralised planning

protection from foreign competition

- high import duties - quantitative restriction on imports

demerit of capitalistic economy

- ignores collective interest - only profit maximising goods are produced - satisfies the need of the rich - poor people are deprived - their is growth without social justice

socialist economy

- in which there is a social (collective/public) ownership of the means of production - economic decisions are taken by the central authority - focusing on maximising social welfare

GDP growth

- increase in level of output in the economy - implies increase in flow of goods and services in the economy - when the flow inconsistent, its called economic growth

factor of GDP growth

- increase in resource base - increase in productivity through innovative technology

regulated development of private sector

- industrial (development and regulation) act 1948 - no new private industry w/o license and registration - monopolies and restrictive trade practices act 1969 - restriction on expansion of existing industries - no ensure no economic power in private hands

directive planning

- just to direct the forces of demand and supply - to maintain equilibrium - no direct participation of the state - national interest is not suffered while individual gains are to be maximised - capitalist economies

focus on saving and investment

- key determinants of economic growth - high interest rates were offered to encourage saving - investment was induced through subsidies and grants

Self-sufficiency

- means dependence on domestically produced goods - high priority in the first 7 plans - to not expose indian economy to political pressures of the rest of the world - 1965 USA threatened india to stop the supply of woodgrains

features of socialism

- means of production are collectively owned by the society as a whole - mens of production are used so that social welfare is maximised - direct participation of the government is not merely confined to law and order and defence

Features of a mixed economy

- means of productions are owned by the private entrepreneurs as well as the government - production decision are governed by profit maximisation in private sector and social welfare in the public stare - both private and public plays significant role

short period goals *

- plan specific - objectives of plan - plan-to-plan strategies

features of capitalistic economy

- private ownership of means of production - means of production are used for profit maximisation - the role of government s merely the maintenance of law and order and defence of the country

centralised planning

- programmes for growth and development at the state were aligned to cent planning

merit of capitalistic economy

- promotes self interest - profits are maximised - GDP growth is accelerated

demerits of mixed economy

- public sector is inflicted with corruption - low level of efficiency productivity

protection of small scale industries and regulation of large scale industries

- regulation through MRTP - protection through reservation of certain areas of production - development of financial institutions to cater - handloom board and Silk Board were established to promote goods to global market

focus on import substitution

- save forex - become self sufficient

demerits of socialism

- slow process - Equity and justice leads to less profit maximisation

heavy reliance on public sector

- the industrial policy resolution of 1956 - 17 industry for public - 13 industries for private

why should plans have goals

- there is no planning without goals - strategy that defines how to allocate the country's resources to different uses with the view to achieving a given set of goals

mixed economy

- there is private as well as public ownership of means of production - production is governed by profit maximisation but involves checks and balances of social justice

modernisation

- updation and adoption of modern technology in the process of growth - green revolution is an example - redefined domestic production through Business outsourcing process - also includes social issues like empowerment of women

full employment

- when all the people who are able to work and willing to work at the market wage rate are getting work - social objective - focuses on inclusive growth - more and more people should participate in the process of growth - benefits of growth must be shared across wider sections of the society - growth with social justice

planning commission

1950

NITI Aayog 2015

National Institute of Transforming India

short period objectives

TABLE ON PAGE 38

capitalist economy

The means of production are owned and controlled by private individuals. - guided by profit maximisation

what is a plan

a plan spells out how the resource of the nation should be put to use . it should have general goals as well as specific objectives which are to be achieved with in a specified period of time

chairman of planning commission

professor Mahalanobis