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Failures of Economic Plans in India (14 Causes)

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The following points highlight the fourteen major failures of economic plans in India. They are: 1. Stagnant Economy 2. Poverty 3. Unequal Distribution of Income and Assets 4. Increasing Unemployment 5. Abnormal Growth of Population 6. Inflationary Pressure 7. Adverse Balance of Payment and Others.

Cause # 1. Stagnant Economy:

When India was freed, it has deep marks of stagnation. During the phase of fifty years of economic planning, its growth rate is zero or near.

According to one estimate, growth of national income was about 1.15 per cent during 1860 to 1950 per year and growth of per capita was at less than 0.5 per cent.

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Similar trend has been noticed after the adaptation of plans. This fact is also reflected from the national income by industrial origin.

Cause # 2. Poverty:

These five year plans have miserably failed to make a dent on poverty as 40 per cent of population is in tight grip of poverty. The poverty is greatly responsible for poor diets, low health and poor standard of living. A large proportion of the population has to go even without the most essential needs of daily life.

Cause # 3. Unequal Distribution of Income and Assets:

Another failure of the planning is that the distribution of income and other assets in rural and urban areas continued to be skewed. The bulk of increased income has been pocketed only by the rich few while weaker section of the society live hand to mouth and lead very miserable life.

Cause # 4. Increasing Unemployment:

Increasing unemployment in our country is the burning problem of the day. At the beginning of the first five year plan the number of unemployed was hardly 33 lakh but at the end of eighth plan it reached 350 lakh. At the end of ninth plan, it is likely to exceed 400 lakh.

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The pitiful position is found in rural areas where disguised unemployment and white collar unemployment (educated unemployment) in urban areas are in a deplorable position. The rapid increase in unemployment situation is due torpid increase in labour force due to rapid increase in population, use of capital intensive techniques instead of labour-intensive techniques, defective education system, inefficient government administration, corrupt political environment and instable governments-both central and states.

Cause # 5. Abnormal Growth of Population:

In all plans, main objective was to check over-population but it has miserably failed to bridge the galloping population. The rapid growth of population has aggravated the situation to the worst. This problem gives birth to twin problems of poverty and unemployment.

Cause # 6. Inflationary Pressure:

Inflation had been started with the onset of the heavy doses of investment programmes during different five year plan periods. Now, it turned to the gravity of the problem as it has created serious imbalances in the socio- politico-economic relations. The people with fixed income group find it extremely difficult to maintain the standard of living.

Cause # 7. Adverse Balance of Payment:

Truly, the production of agricultural and industrial sector has increased manifold but still we are dependent on imports. In our plans, we have stressed on export promotion and import substitution to correct the adverse balance of payment but no headway has been seen in this direction. It has continuously been unfavourable.

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The situation has further been deteriorated since, the penultimate year of Sixth Five Year Plan. The situation in Seventh Plan has not been improved but it is still dismal. In 2001, total external debt was of Rs. 471724 crores against Rs. 163001 crore in 1991.

Cause # 8. Unproductive Expenditure:

India is deficient in capital due to rising expenditure on unproductive channels. Moreover, huge investments are made on the construction of five star hotels and other wasteful consumption. Its benefits go in the hand of few affluent people who generally concentrate wealth. Consequently, rich becomes rich and poors lag behind.

Cause # 9. Huge Amount of Deficit Financing:

To mobilise the resources for different plans, government has absolutely failed to manage from internal resources. The government at this time, left with no alternative of deficit financial. From 1950-51 to 1984-85 total amount of deficit financing in the country was Rs. 24440 crores. During Eighth Plan, it was proposed to be Rs. 207000 (8.6% Eighth of total outlay) crores.

Cause # 10. Biased Growth Profile:

At large, Indian plans have given many evils like growth of monopolistic practices, large inequalities, poverty but still it has delivered biased growth profile in favour of more well-to-do section of the society. It has widened the gap between man and man, region to region. The result is that a large many are below poverty line.

Cause # 11. Vicious Circle of Poverty:

Another major objective of planning in India is the eradication of poverty. However, we have badly failed on this front also as more than 30% of India’s population is still-living below poverty line. We are encircled by vicious circle of poverty. A large proportion of India’s population does not get even bare necessities of life satisfied.

Cause # 12. Inadequate Social Development:

Despite the 55 years of economic planning in India, we have miserably failed on the social development front. Economic planning in India has not been able to make any social change, particularly in the living standards of the common people and curbing poverty. The national income and per capita income both are extremely low as compared to developed countries. We are ill-fed and ill-nourished.

Cause # 13. Defective Process of Planning:

The defective process of planning which came into force since the beginning of the planning in India, is also responsible for the failure of our economic planning. We have followed a fragmented approach rather than integrative approach towards planning, with the result that the development activities have not been commensurate with the investments made in the Plans.

The other important reasons are:

(i) Unrealistic plans;

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(ii) Over-ambitious plans;

(iii) Faulty implementation;

(iv) Lack of programmatic approach;

(v) Corrupt administration;

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(vi) Non-coordination etc.

Cause # 14. Slow Economic Growth:

Another major reason of failure of economic planning in India is the slow growth rate of Indian economy. The achievement of different sectors during the plan period has been much below the scheduled targets.

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