five year plan

7/21/2019 Five Year Plan

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First plan(1951 to 56)

It was based on Harrod-Damor model

Community development programme was laun!ed in 195"

#mp!asised te!nial$ prie stability$ power and transport

It was more t!an a suess$ beause o% good are blessed in t!e

last two years

&eond plan(1956 to 61)

'lso alled a!alanobis plan a%ter its !ie% ar!itet

Its ob*etive was rapid industrialisation

'dvoated use imports w!i! led to emptying o% %unds leading to

%oreign loans It s!i%ted basi emp!asis %rom agriulture to industry

%ar too soon During t!is plan$ prie level inreased by +, against

a deline o% 1+ during t!e %irst plan

.!ird plan(1961 to 66)

't its oneption time$ it was %elt t!at Indian eonomy !as

entered it ta/eo%% stage .!ere%ore$ a was to ma/e India a sel%

reliant and sel% generating eonomy

'lso$ it was realised %rom t!e e0periene o% %irst two planes t!at

agriulture ould be given t!e top priority to su%%ie t!ereuirements o% e0port and industry

Complete %ailure due to un%oreseen mis%ortunes vi2 C!inese

aggression(196")$ Indo 3a/ war (196") $ Indo 3a/ war (1965 )$

&eve rest droug!t to 1,, years (1965 to 66)

.!ree annual plans(1966 to

69)

3lan !oliday %or t!ree years .!e prevailing risis in agriulture

and serious %ood s!ortage neessitated t!e emp!asis on agriulture

during t!e annual plans

During t!ese plans a w!ole new agriulture strategy involving

widespread o% distribution o% !ig!ly-yielding varieties o% seeds$ t!e

e0tensive use o% %ertilisers$ e0ploitation o% irrigation potential and

soil onservation was put into ation to tide over t!e risis inagriulture prodution

During t!e annual plans$ t!e eonomy basially absorbed t!e

s!o/s given during t!e t!ird plan$ ma/ing way %or a planned

growt!

Fourt! plan(1969 to 4)

ain emp!asis on agriultures growt! rate so t!at !ain

reation an start

Fared well in t!e %irst two years wit! reord prodution$ last

t!ree years %ailure ause o% poor monsoon

Had to ta/le t!e in%lu0 o% 7anglades!i re%ugees be%ore and a%ter

1941 Indo 3a/ war

Fi%t! plan (194 to 49 )

t!e %i%t! plan repaired and laun!ed by DD D!ar proposed to

a!ieve two main ob*etives vi2 removal of poverty (8aribi Hatao)

and attainment of self reliance$ t!roug! promotion o% !ig! rate$

better distribution o% inome and a very signi%iant growt! in t!e

domesti rate o% saving

t!e plan was terminated in 194 (instead o% 1949 ) w!en :anta

government ame to t!e power



;olling plan(194 to ,)

t!ere were two si0t! plans <ne by 8enta government(For 4 to

4+) w!i! was in operation %or two years only and t!e ot!er by

Congress government w!en it returned to power in 19,

t!e :anata government plan is also alled ;olling plan

&i0t! plan(19, to 5)

<b*etives= Inrease in national inome$ modernisation o%

te!nology$ ensuring ontinuous derease in poverty and

unemployment$ population ontrol t!roug! %amily planning et

&event! plan(195 to 9,)

t!e sevent! plan emp!asi2ed poliies and programmes w!i!

aimed at rapid growt! in %ood grains prodution$ inreased

employment opportunities and produtivity wit!in t!e %ramewor/ o%

basi tenants o% planning

It was a great suess$ t!e eonomy reorded 6 growt! rate

against t!e targeted 5

#ig!t! plan(199" to 94)

.!e eig!t! plan was postponed by two years beause o% politial

up!eavals at t!e Centre and it was laun!ed a%ter a worsening

balane o% payment position and in%lation during 199,-91

t!e plan undertoo/ various drasti poliy measures to ombat

t!e bad eonomi situation and to underta/e an annual average

growt! o% 56

some o% t!e main eonomi per%ormane during eig!t! plan

period were rapid eonomi growt!$ !ig! growt! in e0ports and

imports$ improvement in trade and urrent aount de%iit

>int! plan(1994 to ",,")

.t was developed in t!e onte0t o% %our important dimensions=

uality o% li%e$ generation o% produtive employment$ a regional

balane and sel%-reliane

.ent! plan (",," to ",,4)

Its ob*etives inluded a!ieving t!e growt! rate o% $

redution o% poverty ratio to ", by ",,4 and "1, by ",1"$

universal aess to primary eduation by ",,4$ inrease in literay

rate to 4" wit!in t!e plan period and to , by ",1"

#levent! plan(",,4 to ",1") 'elerate growt! rate o% 8D3 %rom to 1, and t!en

maintain at 1, in t!e 1"t! plan in order to double per apita

inome by ",16-14

Inrease agriultural 8D3 growt! rate o% per year to ensure

a broader spread o% bene%its

;edue drop out rates o% !ildren %rom elementary s!ool %rom

5"" in ",,+-, to ", by ",11-1"

Inrease t!e literay rate %or persons o% %ait! seven years or

more to 5

redue in%ant mortality rate(;) " and maternal mortality

ratio(;) to 1 part 1,,, live birt!s

raise t!e se0 ratio %or age group ,-6 to 9+5 by ",11-1" and to

95, by ",16-14

#nsure eletriity onnetion to all village and 73? !ouse!olds by



",,9 and t!e round-t!e-lo/ power by t!e end o% t!e plan

inrease %orest and %ree over by t!e %ive perentage points

Plan Target Actual

First 3lan(1951-56) "9 +6

&eond 3lan(1956-61) 5 +

.!ird 3lan(1961-66) 56 "

Fourt! 3lan(1969-4) 54 ++

Fi%t! 3lan(194-49)

&i0t! 3lan(19,-5) 5" 6,

&event! 3lan(195-9,) 5, 6,

#ig!t! 3lan(199"-94) 56 6

>int! 3lan(1994-",,") 65 5

.ent! 3lan(",,"-",,4) ,

#levent! 3lan(",,4-",1") 9,

The Harod Domar Model suggests that economic growth rates depend on two things:

1. Level of Savings (higher savings enable higher investment)

2. Capital Output Ratio (efficiency of investment)

Formula for Harod Domar

g=s/c (1)

where– g is the economic growth rate

– s=S/Y is the ratio of saving S to income,Y,

– c is marginal capital-output ratio

It is argued that in developing countries saving rates are often low, if left to the free

market. Therefore, there is a need for governments to increase the savings rate in an



economy. Alternatively, developed countries could step in and transfer capital stock to

the developing countries, which would increase the productive capacity.

Warranted Growth Rate

Roy Harrod introduced a concept known as the warranted growth rate.

• This is the growth rate at which all saving is absorbed into investment. (e.g.

£80bn of saving = £80bn of investment.

• Let us assume, the saving rate is 10%. the Capital output ratio is 4. In other

words £10bn of investment, increases output by £2.5bn

• In this case the economy’s warranted growth rate is 2.5 percent (ten divided by

four).

• This is the growth rate at which the ratio of capital to output would stay constant

at four.

The Natural Growth Rate

• The natural growth rate is the rate of economic growth required to maintain full

employment.

• If the labor force grows at 3 percent per year, then to maintain full employment,

the economy’s annual growth rate must be 3 percent.

• This assumes no change in labour productivity which is unrealistic.

Criticisms of Harod Domar Model

• Developing countries find it difficult to increase saving. Increasing savings ratios

may be inappropriate when you are struggling to get enough food to eat.

• Harod based his model on looking at industrialised countries post depression

years. He later came to repudiate his model because he felt it did not provide a model

for long term growth rates.



• The model ignores factors such as labour productivity, technological innovation

and levels of corruption. The Harod Domar is at best an oversimplification of complex

factors which go into economic growth.

•There are examples of countries who have experience rapid growth rates despite

a lack of savings, such as Thailand.

• It assumes the existences of a reliable finance and transport system. Often the

problem for developing countries is a lack of investment in these areas.

• Increasing capital stock can lead to diminishing returns. Domar was writing

during the aftermath of the Great Depression where he could assume there would

always be surplus labour willing to use the machines, but, in practice this is not the

case.

• The Model explains boom and bust cycles through the importance of capital,

(seeaccelerator theory) However, in practice businesses are influenced by many things

other than capital such as expectations.

• He assumed there was no reason for the actual growth to equal natural growth

and that an economy had no tendency to full employment. However, this was based on

assumption of wages being fixed.

http://www.economicshelp.org/dictionary/a/accelerator-effect.html

http://www.economicshelp.org/dictionary/a/accelerator-effect.html

five year plan

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