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P LANNING P ARADIGM
Table 3: Growth Rate Performance in the Five Year Plans
SL Plan Target Actual
1 First Plan (1951-56) 2.1 3.60
2 Second Plan (1956-61) 4.5 4.21
3 Third Plan (1961-69) 5.6 2.72
4 Fourth Plan (1969-74) 5.7 2.05
5 Fifth Plan (1974-79) 4.4 4.83
6 Sixth Plan (1980-85) 5.2 5.54
7 Seventh Plan (1985-89) 5.0 6.02
8 Eighth Plan (1992-97) 5.6 6.68
9 Ninth Plan (1997-2002) 6.5 5.5
Note: The growth targets for the fi rst three plans were set wit respect to National Income. In the Fourth Plan it was the Net Domestic Product. In all
Plans thereafter is has been the Gross Product at factor cost.
problems by Gadgil Formula of 1969, was
subsequently modifi ed in 1991 with
weightage of 7.5% each for performance
and special problems, with the performance
weightage objectives.
Similarly Finance Commission have
also been changing the criteria of fi xed
transfers to the states. While the Tenth
Finance Commission give a weightage of
10% to tax effort calculated as per formula
evolved by it, the Eleventh Finance
Commission not only reduced the weightage
to fi ve percent but also changed the
manner of computing the states share on
the basis of tax effort and further introduced
fi scal discipline as criteria with
7.5% weightage. There is some degree of
confusion in the State Governments resulting
from these frequent changes in
the choice of criteria, assignment of
weightage and method of computation of
share of individual states. There is a felt
64 THE IIPM THINK TANK
need for not only care in the choice of
criteria and for balance in the assignment
of weights, but also a measure of stability
and continuity regarding this.
The role that the Planning Commission
plays in the examination and approval of
state plans will call for close consideration
as, on the political fi rmament there
have been signifi cant changes with different
political parties and their combinations
coming to power at the Centre and
in the States. Demurring voices about non
clearance of schemes and projects by the
centre are now more common and strident
than they were in early decades of
planning. Unless the Planning Commission
is so re-constituted as to bring in
expertise and local knowledge regarding
the various regions and states, the planning
process may continue to suffer from
the unwillingness of states to accept the
Yojana Bhavan dictates and advices.
Between 1950-51 & 1980-81 the share of
Agriculture went down to 41.8%, while
that of Industry increased to 21.5%
What is urgently needed is a substitution
of the well meant but rarifi ed academic
wisdom of of Yojana Bhavan by statesspecifi
c development strategies with adequate
appreciation of the local needs
and persisting differences in the resource
endowments and levels of development of
the various States.
Change in Structure
An important aspect of the economy in
the fi rst three decades of plan development
was the change in its structure, slow
in the fi fties and quite noticeable in the
sixties and seventies. Between 1950-51 and
1980-81 the share of Agriculture went
down from 59.2% to 41.8% while that of
Industry increased from 13.3% to 21.5%
even as the share of Services rose from
27.5% to 36.9%. The next 25 years between
1980-81 and 2005-06 saw sharp
decline in the share of agriculture in GDP
from 41.8% to 21.7%, slow rise in share of
Industry from 21.5% to 24.1% and signifi -
cant increase in the share of services from
36.7% to 54.2%. The structural change
needs to be more clearly considered in
setting priorities for plan investments.
Growth Performances of the Past
The FYP set out growth targets for
achievements and indicated plan outlays
with investment quantum, budgetary support
and extra budgetary resources. The
growth targets for the fi rst three FYP
were set out with respect to national income.
The fourth FYP set out growth
with target interest of net domestic product
and all subsequent FYPs have set
targets for growth of GDP at factor cost.
Looking back, we notice that while the
plan outlays increased from Rs. 1960
crores in I FYP to Rs. 1,525,639 crores in
X FYP the average growth rate of Gross