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Unit-4 Planning, Governance and Institutions

This unit outlines the growth performance in each plan, the shifts in plan priorities and strategies, and the shifts in major economic policies leading to the present regime of economic reforms with a central place to market induced investment and growth.

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What was the nature of crisis faced by India in mid-1960s? And what was its impact on Planning?

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Written on Jun 26, 2019 3:35:02 PM

  1. By the end of the Second Plan, there were clear signs of agricultural growth lagging behind and food production falling short of demand.
  2. Therefore, the Third Five Year Plan assigned higher priority to agriculture, besides giving emphasis on self-reliance and basic industries.
  3. But the Plan priorities received a set back because of diversion of resources to meet the border conflicts with China in 1962 and later Pakistan in 1965.
  4. In fact, the entire planning process was disturbed not only by the wars, but also due to the nation-wide severe drought and stagflation (i.e. low growth with high inflation) for two years - 1965-67 and 1967-68.
  5. Food grain production suffered severely and food imports reached peak levels of about 12 million tones per annum.
  6. The economy faced severe foreign exchange crisis. The original draft outline of the Fourth Plan was abandoned in 1966 and a kind of ‘Plan Holiday’ was introduced.
  7. Amidst this, in 1966, rupee was devalued and there was a brief period of resort to deregulation and induction of market forces.
  8. However, by 1968, there was a return to the strategy of controls and subsidies with state interventions.
  9. During the period of ‘Plan Holiday’, three Annual Plans (1966-69) were implemented.
  10. The mid-1960s, thus, experienced not only the worst economic crisis but also political crisis.
  11. The political response was to bring about radical reforms like bank nationalisation and stricter regulation of monopolies and foreign exchange.
  12. With this background the Fourth Plan (1969-74) set itself, in principle, the objectives of growth with stability and social justice.
  13. The aim was the progressive achievement of self-reliance with emphasis on improving the conditions of weaker sections of the community.
  14. The programmes for the latter came to be known as ‘Garibi Hatao’ (Removal of Poverty).
  15. The Fourth Plan saw substantial emphasis on agriculture in which ‘Green Revolution’ technology started taking roots showing improvements in food production.