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Original filename: ECONOMICS.pdf
Author: Shiva Snehi

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Ec onomi c
Pl anni ng

i n

Indi a

Planning in India

Economic Planning in India Started After the
Independence in 1947
Economic Planning in India was a tough challenge for
our national leaders, they were facing a big problem, how
to construct the economy, 20% of people were controlling
80% of resources, so the point was how to make
Independence meaningful to the masses because unless
and until the financial empowerment, all empowerment is
meaningless or shallow.

Furthermore, the main challenge was how to reconstruct
economy, how to equalize the distribution of resources
among people, at the time of Independence all sectors
were shattered, none of the sectors were in shape, the
problem was with an adaptation of model for Economic
Planning in India, then our National leaders look at
various models, like there were so many countries earlier
were colonies like USA under British, but earlier in 1947
these countries were developed, In the meanwhile our
National leaders thought that if it is possible to implement
a model which has implemented in these countries so that
we can ensure better lifestyle and can eradicate poverty,
unemployment from our country.
So then we started looking various models compared to
and then we were agreed that no 2 models ever be the
same, plans are designed to specific requirements of the
There were several models across the globe which can
be divided into 2 categories such as
Capitalistic Plan Model
Capitalistic plan model is where economic decisions are
taken by market forces like what to produce, where to
produce, whom, when, etc., according to the demand and
supply. This plan was also a success, as for example
America, Australia was poor Nations, but this plan
successfully contributed in bringing these Nations from
poor to rich.

So the leaders in India were decided to implement same
but the problem was with capital, we had landlords, but
we had not disposable capital that we can invest, demand
and supply cannot be created since 80% of people were
poor and lack of technology and capital. However, this
model was ignoring social considerations, and its only
goal is to make profits, so again decided not to implement
then we turn to another method Socialistic model.
Socialistic Plan Model
Under Socialistic plan model, the economic decisions are
taken by the Government and it was successful in USSR
and East European countries. This model was close to
the heart of leaders because it was working towards
down-up strategy and most of our people were poor.
Then planned to adopt this model to implement because
it was close to our Ideology, it works to eliminate poverty.
But the problem was with landlords we cannot overrule
them and princely states this was the only problem they
Because if we see the history we find that the reason
behind the failure of 1857 revolt was because of landlords
and capitalist they did not co-operate with our freedom
fighters, they supported Britishers hence, that is why
freedom struggle failed. In the mean, while India itself
was a result of communal problems forcing separation
from India, that’s why we gave special rules for princely
states and right to property in our constitution to decrease
the fear of landlords and building confidence to the
princely states.

Moreover, there are problems to implement both the
models that are why the economic planners decided to
combine both Capitalistic and Socialistic model and
finally adopted Mixed Economy to achieve better growth
in all aspects and leaders contributed their knowledge to
our Economic Planning in India.
Features of Economic Planning in India
Economic Planning in India was not so easy therefore
we had no previous experience of politics because
before British came to India kings and queens were
ruling, but it was necessary to make an Economic plan in
* Definite Objective
The most important features of economic planning
should possess definite objectives. Planning means
conscious and purposeful undertaking for a definite
objective. For instance, economic planning has the
objective to increase the rate of growth, elimination of
trade cycles, bringing the stability and a attain full
employment in the economy.
* Central Planning Authority
The existence of central planning authority is another
feature of economic planning. The central planning
authority is responsible to prepare different central

activities. In short, the central authority takes all decisions
relating to production and consumption in an economy.
* Democratic Character
Another discover feature is its Democratic nature. No
doubt, despite the various plans are prepared by experts
but at the same time, adequate opportunities are provided
to the people to actively participate at various levels.
Being federal structure of Indian constitution, the Union
Government only uses its fiscal monetary and physical
controls to guide and give direction in relevance to the five
-year plan subsequently.
* Only An Advisory Role of Planning Commission
In the decentralized set-up of the planning commission is
the apex body. It provides the necessary perspective,
guidance, and coordination. Furthermore, it serves as a
close link between agencies so that functioning may be
smooth in this regard, the planning commission is an
advisory character.
* Feasible Policies and Targets
A good planning is based on the initial resources of the
country to achieve the feasible goals and policies. In this
way, domestic resources are planned for attaining
economic stability.

* Planning for Consumption
In a centrally planned economy it should not be
confined to production alone but the same time, it
must cover the distribution and consumption also.
In other words, the planning authority should not
decide what and how to produce but it must keep in
mind and decide accordingly among whom it is to
be distributed.
Importance of Economic Planning In India
Economic Planning is a resource allocation
planning that is compared with the market
mechanism. As a coordinating mechanism for
socialism, economic planning substitutes factor
markets and is defined as a direct allocation of
resources, contrasted with the indirect allocation
mechanism of the market.
* Rapid Economic Development
Before Independence, the long period of British
rule and exploitation had made India one of the
poorest nations in the world. The main task before
the National Government was to undertake some

measures to initiate a process of development, which can
be done effectively only through the instrument of
* Quick Improvement in the Standard of Living
In an Unplanned economy, the country’s resources and
materials cannot be employed for increasing the people’s
welfare as the private capitalists in such an economy
direct their activities in increasing their own profits. The
path of planning has been chosen to promote a rapid rise
in the standard of living of the people by efficient
exploitation of resources.
* Removal of Poverty
Economic Planning In India is necessary for the early
removal of abject poverty of the people, This can be done
a) Planned for an increase in the employment
opportunities of the people.
b) Planned for production of mass consumption goods and
their planned distribution among the people.
c) Fulfillment of minimum needs program by providing
essential facilities like roads, water, etc.
d) Planned to increase the consumption of the poorest
section of the people.

* Rational Allocation and Efficient Utilization of
India is rich in natural resources but these resources are
not fully exploited to get maximum benefits. The
resources tend to engage in the production of goods and
services which make more profits only this will be
concentrated in an unplanned economy, as a result,
rational allocation of resources is not possible, so India
planned for the pattern of Investment of resources and
* Increasing the Rate of Capital Formation
Planning can also raise the rate of capital formation in the
low-level countries like India. The surplus of public
enterprises as found in the planned economy can be
utilized for Investment and capital formation. In India, the
Government has been increasing, the rate of capital
formation through planned Investment like roads,
manufacturing machines, etc.
* Reduction in Unequal Distribution of Income and
In absence of Economic Planning In India, inequality
tends to increase due to growing concentration of Ecoresources at the hands of few capitalists. planning can
change this trend with proper guidance and control of

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