Chapter 3

Politics of Planned Development

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Indian Economy at the Time of Independence.

 Dependency on agriculture.
Poor growth of industries.
Lack of infrastructure (Like: Electricity, Roads, Markets etc.).
Poverty.
Lack of basic facilities.

There were two models of development available to India.

Socialist model:
This system was prevalent in the Soviet Union. Everything inside it is produced by the
government. There is no private sector in the country and all the companies are
operating under the government.

Capitalist system:

Under this system, all the goods are produced by the private sector and the

interference of the government is negligible. This system was prevalent in America

at that time.
But there were two different views on the issue of development in India.

Left-wing:

The people who wanted that the system of development should be made keeping
in mind the poor and backward classes in the country are called left wing. These
people were concerned for the poor.

They wanted that such a system should be made so that the welfare of the poor
people can be maximized in the country.

Right-wing:

These were the people who were in support of capitalism. They wanted that the
policies of trade in the country should be simplified and the rules of business should be
simplified by the government.

Private sector should be encouraged.

 Following the views of both the classes, India adopted the way of mixed economy.
Some features in the Indian economy were taken from the capitalist

system and some features were taken from the socialist system. In this way India
created a mixed economy
. Mixed economy:

The mixed economy incorporated the characteristics of both socialism and

capitalism. The development of small industries in the country was done in the private
sector and the government took the responsibility of the development of big industries
on its shoulders.
What was the Bombay Plan?

 The Planning Commission was not a sudden or an overnight invention. It is commonly assumed
that private investors, such as industrialists and big business entrepreneurs, are averse to ideas of
planning: they seek an open economy without any state control in the flow of capital.
 In 1944, a section of the big industrialists got together to draft a joint proposal for setting up a
planned economy in the country which eventually became known as Bombay Plan.
 The Bombay Plan wanted the state to take major initiatives in industrial and other economic
investments.

The Plan Holiday:

 The draft of the First Five Year Plan and then the actual Plan Document, released in December
1951, generated a lot of excitement in the Country. People from all walks of life-academics,
journalists, government and private sector employees, industrialists, farmers, politicians etc.-
discussed and debated the document extensively.
 The excitement with planning reached its peak with the launching of the Second Five Year Plan in
1956 and continued somewhat till the Third Five Year Plan in 1961.
 The Fourth Plan was due to start in 1966, but due to the miserable failure of the 'third five year
plan' the Indian government was forced to declare a 'Plan Holiday'. There were three different
yearly plans that were during this period.

Planning

Impressed by the system of planned development of the Soviet Union, India

also adopted planning.
Keeping in mind the resources of the present, setting some goals for the
future and planning to achieve them is called planning.
The First Five Year Plan (1951 to 1956)
 The first five year plan in India was implemented in 1951 and this plan lasted till 1956.
 K.N. Raj economist involved in drafting the plan.
 He argued that India should hasten slowly for the first two decades as fast rate of development
might endanger democracy.
Objectives/ Purpose:
 Focused on agriculture.
 To lift the country out of poverty.
 Land reform.
 Communication and transport
 To reform the country's economy
 To solve the food problem
 To raise the standard of living.
 To provide Social and economic justice

Achievements:
 Gowth of 3.6 % GDP per year
 Increase in national income
 Agricultural development
 Industrial production
 Irrigation and railway development
 Improvement in roads , transport, telegraphs, posts, civil aviation
 Manufacturing fertilizers and electrical equipment

The Second five year Plan (1956 to 1961)

 The Second Five Year Plan was implemented in April 1 ,1956 and lasted till May 31 ,1961.
 Purpose of the plan was to establish ' socialist pattern of society".
 It was drafted by a team of economist and winners under the leadership of PC Mahalanobis.

Objectives/ Purpose:

 Developing large industries. Promotion of

indigenous industries.
 Reducing imports and promoting exports.
 Developing infrastructure (electricity, transport,
steel, communication etc.).
 Large of expansion of employment opportunities.
 Sustainable increase in the national income to raise the level of living.
 Rapid industrialization with special emphasis on the development on basic and heavy industries.
 Reduction of inequalities in income and wealth and a more even distribution of economic power.
 Increase National Income by 25%.

Achievements:
 Foreign exchange
 Agricultural development
 Power Programmes
 Industrial development
  General development
 Hydro Electric Power projects
 5 steel plants
 Expansion of Railways
 Better living standards
 17 industries got nationalizes
 Land reforms
Planning Commission

 To prepare and assess the plan, the government constituted the Planning Commission. Planning
Commission was established on 15 March 1950. Its chairman is the Prime Minister of the
country. Jawaharlal Nehru became the first ever chairperson of the planning commission.
Its main objective was to make plans for the future keeping in mind the resources of the
country so that the country can develop rapidly.
Under the process of planning, five year plans were prepared.
Five year plans refers to the development plan in the country for five years.
The Planning Commission was formed to prepare these five year plans.

The Planning Commission was renamed as NITI (National Institute for

Transforming India) Aayog on 1 January 2015.

Drawbacks of Planning Commission:

The planning commission was mainly influenced by the central government and all the
plans were made by the central government and imposed on the states.
Due to lack of representation of the states, it was difficult for the states to implement
those schemes.
Due to the politics between different parties, there were problems in making and
implementing plans.
There was a problem in allocating resources to the states.

NITI AAYOG
Introduction:

 In the Era of globalization, specially in the 21st century planning commission became ineffective
and irrelevant.
 Hence, during independence day speech on 15 August, 2014 PM Modi did abolition of the
planning commission.
 NITI Aayog is a successor of Planning Commission constituted on 1st January 2015.
 Like the Planning Commission in NITI Aayog, the allocation of resources is not done
by the Commission, but now this responsibility has been entrusted to the Finance
Ministry of the country, due to which the problem of resource allocation has ended.
 The Chief Ministers of all the states and the Lieutenant Governors of the Union
Territories were given place in the Governing Council, which ended the problem
of representation of the states.
 Structure/ composition :
Chief of the commission is the prime minister.
 The PM Of India Is The Ex Officio Chairman Of NITI Aayog And The Vice Chairperson Of NITI
Aayog Appointed By Him.
 Chairman of NITI Aayog – Narendra Modi
 The Vice President is appointed by the Prime Minister
 First Vice President – Arvind Panagariya
 Current Vice Chairperson- Dr Rajiv Kumar (September 2017 – present).
 First Chief Executive Officer CEO – Sindhushree Khullar
 Governing Council included the Chief Ministers of all States and Lieutenant Governors of Union Territories

Objectives/ Functions:

The objectives of NITI Aayog (National Institution for Transforming India) are as follows:

 Foster Cooperative Federalism: NITI Aayog aims to promote cooperative federalism by

facilitating collaboration and constructive engagement between the central government and state
governments.

 Policy Formulation and Implementation: NITI Aayog is responsible for formulating policies and
strategic plans to address key developmental challenges and opportunities in various sectors.

 Strengthen Monitoring and Evaluation: NITI Aayog focuses on monitoring and evaluating the
implementation of programs and policies, assessing their impact and effectiveness.

 Knowledge and Innovation Hub: NITI Aayog serves as a knowledge and innovation hub,
engaging with experts, think tanks, and research institutions to gather insights, expertise, and best
practices.

 International Engagement: NITI Aayog plays a vital role in fostering international cooperation
and engagement. It represents India in international forums, promotes dialogue and collaboration
with other countries.

 Promoting Reforms: NITI Aayog acts as a catalyst for reforms across sectors. It identifies policy
bottlenecks, recommends policy changes, and promotes initiatives to foster efficiency,
competitiveness, and productivity.

 Capacity Building: NITI Aayog focuses on capacity building by providing guidance, technical
assistance, and training to stakeholders at various levels.

 Technical Advice: To Provide The Necessary And Technical Advice to The Union Government
Regarding Policy Making At The Centre And State Levels.

 Think Tank: NITI AAYOG acts as think tank of the union government. It works to harmonies the
interest of national security and economic policy and to work to prepare strategic and long-term
framework of policy and program.
 Bottom-Up Approach : NITI Aayog adopted "bottom-up approach" to ensure equal participation
of all states in the country.
SL.NO NITI Aayog Planning commission
1. It is an advisory body. The powers to 1. It enjoyed powers to allocate funds to
allocate funds may be with the finance ministeries and state governments.
ministry.

2. It has more experts and less full time 2. It had full time eight members.
members.

3. State governments are expected to play 3. States, role was limited to NDC and
a greater role than they did in the annual interaction during plan meetings.
planning commission.

4. It has a CEO to be appointed by the 4. It has secretaries or member

PM. secretaries appointed by normal
policies.

5. Governing Council has all CM and Lt. 5. It reported to NDC which had CM and
Governors. Lt. governors.

6. Final policy to be made after consulting 7. Policy was made by the commission
all states which includes consultation and then states were consulted about
even on fund allocation. the allocation.

7. It is a think-tank and cannot impose 8. It imposed policies on states and tied

policies on states. allocation of funds with projects it
approved.

Differences between NITI Aayog and Planning commission :

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