Syllabus: General Studies Paper 3 (Indian Economy)
Analyze the impact of Planning on economic development of India. Should it continue to play a key role in economic decision making in the country?(250 words)
Economic Planning is a term used to describe the long term plans of government to co-ordinate and develop the economy with efficient use of resources. Economic planning in India was started in 1950 after independence, it was deemed necessary for economic development and growth of the nation.
The idea of Five year planning was taken from the erstwhile Soviet Union under socialist influence of first Prime Minister Jawahar lal Nehru.
Long term objectives of Five Year Plans are:
- A high rate of growth to improve the standard of living of residents.
- Economic self-reliance.
- Social justice and reduction of inequalities.
- Modernization of the economy.
- Economic stability for prosperity.
Impact of planning on India
- India under Nehru’s leadership inaugurated a strategy for industrialisation of the country in the early 1950s. This involved the setting up of public sector units (PSUs) in diverse areas of manufacturing; research institutions in cutting-edge technologies of the time such as space and atomic energy; and centres of higher learning, including the Five Indian Institutes of Technology (IITs) were started as major technical institutions.
- Nehru-Mahalanobis model was adopted. ‘Rapid industrialisation with particular emphasis on the development of basic and heavy industries ‘Industrial Policy of 1956 accepted the establishment of a socialistic pattern of society as the goal of economic policy.
- Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were established.
- Rehabilitation of refugees, rapid agricultural development to achieve food self-sufficiency in the shortest possible time and control of inflation.
- A new agricultural strategy was implemented. It involved distribution of high-yielding varieties of seeds, extensive use of fertilizers, exploitation of irrigation potential and soil conservation measures.
- Family planning was also expanded in order to prevent overpopulation.
- Emphasis on policies and programmes that would accelerate the growth in food grains production, increase employment opportunities and raise productivity
- With growth rate of 6 pc, this plan was proved successful in spite of severe drought conditions for first three years consecutively. This plan introduced programs like Jawahar Rozgar Yojana.
- In eleventh five year plan,India has recorded an average annual economic growth rate of 8%, farm sector grew at an average rate of 3.7% as against 4% targeted. Industry grew with annual average growth of 7.2% against 10% targeted.
- The programmes launched in India from the 1950s onwards to build indigenous capabilities in capital- and technology-intensive sectors, despite the general poverty of the country, became a model for other developing and Third World nations.
- Successes that India enjoys today in the information technology and knowledge-intensive sectors owe much to the research and educational institutions that were built during the early decades.
- Planning did very little to remove the hurdles to the growth of agriculture and small-scale industries.
- India’s record during the post-Independence period in implementing land reforms and ensuring primary education for all has been rather unimpressive.
- As a result, the benefits from state-led development have so far reached only a minority of Indians.
Why it should be given importance for playing a key role in the economic development of India
- The planning body lost its relevance after LPG reforms of 1990s. With an end of the licence raj, it functioned only as an advisory body without any effective power.
- India’s commitment towards development through planning had begun to diminish from the early 1990s itself much before the Planning Commission was formally dismantled in 2014. After the introduction of economic reforms in 1991, public investment, especially on agriculture and industry, has been on a decline in the country.
- PSUs have begun to be valued only for the returns they bring as commercial entities.There has been little recognition of the important role that PSUs can play as creators of new technologies and knowledge, particularly in fields in which the private sector may have little interest or capabilities.
- The disregard for planning and the general withdrawal of the state from economic decision-making have had important consequences on Indian industry.
- Despite the emergence of such a large domestic market, the record of Indian manufacturing in absorbing the large labour reserves in the country remains abysmal.
- The imports of machinery, transport equipment, electronic goods and all their components have been rising continuously in India from the 2000s onwards.
- This trend has not been reversed after the introduction of the ‘Make in India’ initiative.
Planning is not incompatible with markets and globalization
- On the contrary, a developing country trying hard to stay afloat amidst the turbulence of a global economy requires more guidance thorough industrial policies.
- The successes achieved by East Asian countries such as South Korea in manufacturing are the result of strategic planning over several decades by their governments.
- China is gradually shifting its economic base from low-wage industries, and is now emerging as a global leader, even ahead of the U.S., in several new technologies, including artificial intelligence and renewable energy. These Chinese achievements owe much to the careful planning and investments made by its government, particularly in the area of science and technology.
- Employment cannot be resolved with the technologies that foreign companies bring into India, which tend to be labour saving. What India requires are technological advances that create new economic opportunities and absorb not displace labour.
India will be thriving in economy owing to privatization, natural resources allocation, ppp models etc. Planning should be brought back to the centre of economic discussions. India’s research institutions and our PSUs should engage in the creation and dissemination of such technologies. The country’s industrial policies should be able to enthuse young and educated entrepreneurs from rural areas to make use of these technologies to create new jobs. However, it must be ensured that the long term planning is realistic and thus it needs to integrate plans from regional and local level in order to be inclusive.
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