Let us make an in-depth study of the major achievements and failures of economic planning in India.
Major Accomplishments of Planning:
(a) Higher Rate of Growth:
Economic planning in India aims at bringing about rapid economic development in all sectors. In other words, it aims at a higher growth rate.
India’s macroeconomic performance has been only moderately good in terms of GDP growth rates. The compound annual rate of growth stands at 4.4% at 1993-94 prices for the whole planning period (1950-51 to 1999-00). Compared to the pre-plan period when she was caught in a low level equilibrium trap, growth acceleration during the last 50 years has been impressive indeed. However that it is not yet clear as to how much of this acceleration has been due to the change in the world economic boom since World War II and how much due to India’s own planning efforts.
(b) Growth of Economic Infrastructure:
India’s performance in building up the necessary economic infrastructure is really praiseworthy. It is to be noted that the process of industrialisation of any country largely depends on the development of economic infrastructure in the form of transport and communications, energy, irrigation facilities, and so on.
At the inception of economic planning road length was 4 lakh kms, but by 1996- 97 it rose to approximately 24.66 lakh kms, railway route length increased from 53,596 kms in 1951 to about 62,800 kms in 1999-00. Today, the Indian railway system is the largest in Asia and the fourth largest in the world. Similarly, other modes of transport (such as shipping and civil aviation) have also expanded phenomenally.
The electric power generated jumped from a meager 61.26 million kw in 1970-71 to 526.7 billion kw in 1999- 00. However, as per the needs of the economy, it is still inadequate. The gross irrigated area as a percentage of gross cropped area increased from 17.4% in 1950-51 to 38.7% in 1996-97.
(c) Development of Basic and Capital Goods Industries:
Another major area of success of Indian planning is the growth of basic and capital goods industries. With the adoption of the Mahalanobis strategy of development during the Second Plan period, some basic and capital goods industries like iron and steel witnessed spectacular growth.
It is said that the present level of development in infrastructure as well as basic and capital goods industries is considered enough to put the Indian economy on the path of self-sustaining growth. Yet more is to be done for achieving rapid industrialisation. But whatever growth has been achieved in infrastructure and basic industrialise been due to planning.
(d) Faster Growth of Agriculture:
The most significant aspect of India’s five year plans is that the overall rate of growth of food production has now exceeded the rate of growth of population. No doubt, in the early years of planning, agricultural performance was miserable. As a result there had emerged food crisis. But due to the impact of biochemical revolution from the late 1960s, food crisis has become almost a thing of the past. She has attained self-sufficiency in food-grains.
That is why the Indian economy is now stronger and better equipped to tackle any eventuality (mainly food crisis) than ever before. Despite the worst- ever droughts of 1986 and- 1987, India was required to import a very small quantity of food. This is, no doubt, a notable achievement.
(e) Savings and Investment:
The rise in the domestic savings rate from 8.9% of GDP in 1950- 51 to 22.3% in 1999-00 is definitely impressive. Similarly, India’s gross domestic capital formation increased from 8.7% in 1950-51 to 23.3% of GDP in 1999-00. However, this higher growth rate of capital formation failed to accelerate the rate of economic growth. Hence, a paradox has been encountered high saving rate and slow growth of per capita income.
(f) Economic Self-Reliance:
Self-reliance refers to the lack of dependence on external assistance. In other words, it means zero foreign aid. India all along used to importing huge food-grains, fertilisers, raw materials and industrial machinery and equipment. This resulted in draining of India’s precious .foreign exchange reserves. Hence, the need for achieving economic self-reliance.
No doubt India has achieved quite some progress in certain important directions. Firstly, because of the increase in output of food-grains, India has achieved near self-sufficiency in food. India is now capable of handling food crises in spite of failures due to the building up of buffer stock of food-grains. Secondly, with the establishment of basic industries as well as imports substitute industries, India’s dependence on imports for heavy chemicals, transport and communications machinery, plant and other capital equipment has diminished a great deal.
Major Failures of Planning:
(a) Inadequate Growth Rate:
In quantitative terms, the growth rate of the Indian economy may be good but not satisfactory by any standards. Since the actual growth rate was less than the planned or targeted rate of growth it was not possible to meet other goals of planning such as poverty alleviation and improvement of living standards.
Except in the First and the Sixth Five Year Plans, the actual growth rate remained below the targeted growth rates of GNP and per capita income. India remains one of the poorest nations of the world even after 50 years of economic planning. It has been estimated that at least 7 to 7 ½ years are required to attain the five-yearly targeted growth rates of various plans.
Let us now turn to the desired rate of growth which involves several non-economic (mainly socio-psychological) variables such as people’s hopes and aspirations, desires and rising expectations. An ordinary man evaluates planning in terms of availability of essential goods and services at affordable prices.
The per capita availability of cotton cloth has, in fact, increased marginally from 12.9 metres per annum in 1980-81 to 14.2 metres p.a. in 1999-00. Per capita availability of food-grains has increased from 394.9 grams per day in 1950-51 to 470.4 grams per day in 1999-00. The falling or slow growth of per capita supplies of necessary wage goods (such as food-grains, textiles, tea, etc.) is a matter of grave concern and is an indication of tragic failure-of planning.
(b) Move Toward Socialistic Pattern of Society:
Indian planning aims at building up a ‘socialistic pattern of society’, in a mixed economy, through various egalitarian measures. These are (i) land reform measures with the purpose of redistribution of land among poorer peasants, (ii) reduction of concentration of economic power in the hands of a few big bourgeoisie and (iii) expansion of the public sector and nationalisation of certain important industries.
Most land reform measures have failed a achieved partial success. Security of tenure, conferment of ownership rights on actual tillers, ceiling on landholdings, etc. are all on paper.
The concentration of economic power in a few hands has to be reduced. But mainly due to India’s tax system and industrial licensing policy the big firm have become bigger over the plan period. In recent years, the Government has encouraged privatisation in a large measure by de-licensing industries. This has led to further inequality.
The development of public sectors has been viewed by the Government as a “countervailing power” to private monopoly. But the contribution of the public sector and nationalised institutions towards the national exchequer is highly insignificant. Barring a few public sector industries, all Central and State Government public sector units are running at a loss.
(c) Economic Inequality and Social Injustice:
Two aspects of social justice involves, on one hand, the reduction of poverty and on the other, the reduction of inequality. Indian plans aim at reducing such inequalities, so that the benefits of economic development can be enjoyed by poor people and the weaker sections of the society.
It was estimated that more than 50% of the total population was below the poverty line in 1950-51. The poverty ratio come down to 37% in 2000-01. In spite of some success achieved in alleviating poverty, the incidence of poverty is still high in India. And the incidence of poverty is higher in rural areas than in cities and towns.
The removal of unemployment is considered to be another important objective of India’s five-year plans. But the employment generation programmes did not achieve much success and the problem of unemployment has become more and more serious plan after plan. The number of applicants on the live register of employment exchanges increased from 17.83 lakhs in 1981 to 40.37 lakhs in 1999.
(e) Regional Imbalance:
The entire planning exercise has created a vast regional imbalance. Over the years, inequalities among the States have widened. This is mainly because the backward areas did not receive fair treatment, so far as resource transfer is concerned.
Finally, the benefits of economic planning have largely offset by price inflation. The prices of essential goods have been increasing much faster than other prices. This has resulted in great hardships to the vast majority of the people mainly the poor and the weak. Growth without stability has become an essential characteristic of Indian planning.
On the social side, poverty remains pervasive, the infant mortality rate has stagnated at 72 per 1000 for a number of years, the literacy rate is still low (65.38% in 2001) though improving, and 60% of rural and 20% of urban households have no power connections. So the quality of life of Indian people remains very low even after 50 years of planning.
In view of these failures, Prof. Sukhamoy Chakraborty remarked that “Indian plans may be good on paper but are rarely good in implementation”. So the need of the hour is to formulate a correct economic policy and implement it properly.