Planning Commission & Five-Year Plans (1947-1991)

Overview

India adopted centralized economic planning immediately after independence, establishing the Planning Commission in 1950 to formulate Five-Year Plans modeled on Soviet-style directed development. This era (1947-1991) represents India's "command economy" phase, where the state took primary responsibility for resource allocation, industrialization, and poverty alleviation. For UPSSSC PET, you must know the key objectives of each plan, the Mahalanobis model's role in shaping industrial policy, and major achievements like the Green Revolution and establishment of public sector enterprises. Questions typically ask about plan periods, objectives, model architects, and specific plan outcomes. This topic connects directly to post-1991 reforms, as understanding the planning era clarifies why liberalization became necessary.

The Planning Commission functioned as the apex policy body, with the Prime Minister as chairperson. It set targets for agriculture, industry, education, and infrastructure. While achievements included building foundational industries and research institutions, the system also created inefficiencies, licensing bottlenecks (License Raj), and slow GDP growth (the "Hindu rate of growth" of 3.5%). The 1991 crisis eventually dismantled this framework, but exam questions still test your grasp of plan-era economics.

Key Concepts

• **Planning Commission (1950)**: Extra-constitutional advisory body created to assess resources, formulate plans, and monitor progress. Dissolved in 2015, replaced by NITI Aayog. Comprised ministers, economists, and state representatives.

• **Five-Year Plans**: Rolling plans with specific targets for growth, employment, and sectoral development. First Plan began in 1951; Eighth Plan ended in 1997. The 1947-1991 span covers First through Seventh Plans.

• **Mahalanobis Model (Second Plan)**: Proposed by statistician P.C. Mahalanobis, emphasizing capital goods and heavy industries over consumer goods. Based on two-sector growth theory—dividing economy into capital goods and consumer goods sectors. This model shaped India's industrial policy for decades.

• **Public Sector Dominance**: Plans prioritized public sector enterprises (PSUs) in core sectors like steel, coal, power. Industrial Policy Resolution 1956 reserved 17 industries exclusively for the state, creating giants like SAIL, BHEL, HAL.

• **Import Substitution Industrialization (ISI)**: Strategy to reduce dependence on imports by producing goods domestically. High tariff walls protected nascent industries but also reduced competitiveness and quality.

• **License Raj**: Complex system of licenses, permits, and quotas required to start or expand business. Created bureaucratic delays and rent-seeking but aimed to prevent monopolies and ensure balanced regional growth.