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P LANNING P ARADIGM
achieving “more even distribution of
power”. These, without doubt, were desir-
able goals but these depended very heavily
on role and effi ciency of public sector
enterprises. (PSEs) which were expected
to generate adequate surpluses consistently
and plough it back through fresh
investments in desired sectors. The system
of industrial licenses was to be a
means to prevent concentration of income
and wealth. Subsequent studies, however,
revealed that the very system helped large
industrial houses to corner licenses and
help retain their monopoly status.
After successful First Five Year Plan,
the Second Five Year Plan unveiled a
strategy of accelerated development
through development of heavy & capital
intensive industries. This disturbed the
initial consensus about the planning process.
Brahmananda & Vakil, inter alia,
argued the need to accord priority for
agriculture, instead of heavy & capital
goods industries, so that supply of wage
goods could be enlarged. The underachievement
of the planning process was
refl ected in slower than targeted growth
during the third fi ve year plan period
(Table 1). This coupled with two wars and
a severe draught necessitated a plan holiday
for three years. Planning resumed in
1969 when Fourth Five Year Plan was
launched. But there were two other occasions
(in 1979-80 and 1990-91) when Five
Year Plans were replaced by Annual
Plans. (Table 1).
Centralized planning process in a diverse
country like India with a federal
constitution should be considered little bit
anachronistic. In 1972 Planning Commission
advised state governments to set up
state planning boards as apex planning
bodies with chief Minister as the chairmen
and the fi nance minister, Planning
76 THE IIPM THINK TANK
Table 1 : Indian Economy Planned vs. Actual Growth
Target ( % p. a. ) Actual (% p. a. )
First ( 1951-56) 2.1 3.5
Second (1956-61) 4.5 4.2
Third ( 1961-66) 5.6 2.8
Annual Plans (66-69) - 3.9
Fourth ( 1969-74) 5.7 3.2
Fifth ( 74-79) 4.4 4.7
Annual Plan (1979-80) - -5.2
Sixth (1980-85) 5.2 5.5
Seventh (1985-90) 5 5.6
Annual Plan (90-91) - 3.4
Eighth (1992-97) 5.6 6.5
Ninth 6.5 5.5
Tenth (2002-07) 7.9 7.7
Eleventh Plan (2007-12) 9 ?
Source: Eleventh Five Year Plan Vol. 1
Minister and technical experts representing
various departments and disciplines
as members. This scheme envisaged decentralization
of planning process to the
district and ultimately block level. While
decentralization has taken some roots at
the state level, further decentralization to
lower levels of governments, notwithstanding
constitutional amendments to
strengthen Panchayat Raj institutions,
remains an unachieved goal.
Persistent lackluster growth performance
of the Indian Economy during 1960s
and 1970s drew critical attention to shortfalls
in planning process & development
policies pursued by Government of India.
Spectacular growth performance by
other countries, the so called Asian tigers
in particular, led to demands for shift
from closed economy approach and its
substitution by an export oriented outward
looking approach giving more lee
way to private initiatives and competitive
markets. A variety of critiques of planning
experiences in India, in particular, and
prescriptions for future improvements in
it are refl ected in Ahluwalia, Bardhan,
Chakravarty and Patnaik.
Over the years, economic policies have
become more open, market oriented and
private sector friendly particularly since
mid 1980s. There have been signifi cant
shifts in the thinking about the role of
public sector. The actual performance of
PSEs has not been as expected. As a result,
desired higher share of public sector
investment was not achieved. Moreover,
the need to maintain the fi scal balance
has reduced the ability of the government
to commit additional resources at the
disposal of PSEs. This became another
reason to encourage private and foreign
investments in several sectors hitherto
reserved for PSEs.
As refl ected in Table 2 relative contribution
of Public sector investment has
reduced signifi cantly over the years. This
has eroded numerical primacy of public
sector investment. Plan exercises were
primarily for public sector component of
plan investment. Less than satisfactory
performance of Public sector units has
not only adversely affected target growth
rate and investment pattern but also
dented the Planning Commission’s ability
to prepare an effective plan. Notwith-