TEN YEARS OF PLANNING
FIRST AND SECOND PLANS THE completion of the Second Five Year Plan in March, 1961, marked also the end of the first decade of India's planned development. During this decade there has been rapid expansion of the Indian economy, the outlines of the country's future social and economic structure have been established, and foundations have been laid for the achievement of the basic objectives and the long-term economic goals set out in the preceding Chapters.
2. The First Five Year Plan took over several projects which had been worked out earlier and integrated them into a well-knit scheme of economic and social development embracing every part of the country. Through its emphasis on agriculture, irrigation, power and transport the Plan aimed at creating the base for more rapid economic and industrial advance in the future. In stressing the place of social change and institutional reforms in the economic development of the country, the Plan initiated some of the basic policies which were further developed under the Second Plan.
The reform of an antiquated land system which was inhibiting agricultural production, setting up a nation-wide agricultural extension service as part of a comprehensive community development programme, revitalisation of the cooperative movement, expansion of irrigation and power facilities on a large scale, strengthening and improving the administrative structure of the country, and establishing a number of specialised institutions for providing credit to agriculture and industry, for developing small scald industries and for giving special assistance to backward sections of the population were some of the notable features of the First Plan. The Plan focus- sed the nation's attention on the vital need for planned effort for achieving rapid economic growth as well as social justice. It offered to the people not only the objectives for which to work, but also the means with which to realise them through mutual self-help and cooperation and the mobilisation of local resources.
3. While the Second Plan carried the basic policies initiated under the First Plan a step further and aimed at a larger increase in investment, production and employment, its main contribution was to direct the economy towards the next important stage which followed logically from the policy of planned development which the country had already accepted. It placed special emphasis on the development of basic and - heavy industries for, with the advantages in natural resources which India already possessed, this was an essential element in the strategy for speeding up the development of the national economy over the next 15 or 20 years. The Plan also defined more clearly the key role that the public sector was to play in the economic development of the country. Along with the emphasis that it put on accelerating the rate of growth of the national economy and creating conditions for more rapid development in future, the Second Plan placed before the nation the goal of the socialist pattern of society. It also set the objectives of increasing employment opportunities and reducing disparities in income and wealth and bringing about a more even distribution of economic power.
4. As a result of economic planning, there was a substantial increase in the rate of investment, especially in directions calculated to accelerate the economic development of the country. The total investment, public and private, in the economy increased from over Rs. 500 crores per annum at the beginning of the First Plan to Rs. 850 crores at its end and reached an annual level of about Rs. 1600 crores at the end of the Second Plan. Corresponding figures for investment by public authorities are about Rs. 200 crores, Rs. 450 crores and Rs. 800 crores. Reckoned at current prices, the total investment during the two Plans was Rs. 10, 110 crores, Rs. 5210 crores in the public sector and Rs. 4900 crores in the private sector. Details for the two Plans are given below :
Table 1 : Outlay and investment in First and Second Plans*
(Rs. crores)
Sector First Second Total
Plan Plan 1951-61
1951-56 1956-61
Public sector outlay 1960 4600 6560
Public sector investment 1560 3650 5210
Private sector investment** 1800 3100 4900
total investment 3360 6750 10110
5. The distribution of outlay in the public sector as between different heads of development is shown in the following Table :
*At current prices.
**Private sector investment was shown earlier at Rs. 1600 crores for the First Plan and at Rs. 2400 crores for the Second Plan. These estimates have been revised in the light of fuller information. They exclude transfers from the public sector.
17
18 THIRD FIVE YEAR PLAN
Table 2 : Distribution of outlay
(Rs. crores)
Head First Plan Second Plan
expen- percen- expen- percen-
diture tage diture tage
agriculture and comm-
unity development. 291 15 530 11
major and medium
irrigation 310+ 16 420 9
power 260 13 445 10
village and small
industries 43 2 175 4
industries and minerals 74 4 900 20
transport and com-
munications. 523 27 1300 28
social services and
miscellaneous 459 23 830 18
total 1960 110 4600 100
The changes in distribution of outlay reflect the changes in emphasis in the two Plans. In the First Plan relatively greater stress was placed on programmes designed to build up the agricultural potential of the country. Consequently, programmes for agriculture and irrigation comprised 31 per cent of the Plan outlay. In the Second Plan, greater emphasis was given to industrial development and the relative share of industries and minerals increased from 4 per cent to 20 per cent, Transport and communications were given high priority in both the Plans. Social services and miscellaneous heads comprised 23 per cent of the First Plan outlay and 18 per cent of the Second Plan outlay.
PATTERN OF FINANCING 6. The financing of the public sector outlay in the two Plans was as follows :
Table 3 : Financial resources in the public sector
(Rs. crores)
First Plan Second Plan
actual percen- estimat- percen
tage ed tage
outlay on the Plan 1960 100 4600 100
internal resources 1772 90 3510@ 76
external assistance 188 10 1090* 24
During the Second Plan in particular, there was a substantial step-up in the tax effort. A number of new direct and indirect taxes were introduced. The gap in resources was made up partly through deficit financing and partly through external assistance. During the earlier years of the Second Plan, budgetary deficits were rather high. An attempt was, however, made in the later years to reduce them. Actual deficit financing during the Second Plan was roughly of the order of Rs. 948 crores.
7. The balance of payments did not present a problem during the First Plan period. The actual deficit amounted to Rs. 318 crores over the Plan period. It was met to the extent of Rs. 196 crores by external assistance and Rs. 122 crores by withdrawals from the country's foreign exchange reserves. The Second Plan which put great- er stress on industrialisation naturally required heavier expenditure of foreign exchange. The Second Plan Report estimated the aggregate deficit in the balance of payments over the five year period at about Rs. 1100 crores and assumed that about Rs. 800 crores out of this would be met by external assistance. The Plan ran, however, into unexpected balance of payments difficulties from the very start and had to be reappraised in 1958. Stringent restrictions had to be imposed on less essential imports. Foreign exchange reserves had to be drawn down by Rs. 600 crores in the Second Plan period. In addi- tion, external assistance of the order of Rs. 872 crores was utilised in the public as well as private sectors, besides commodity imports of Rs. 534 crores under the P.L. 480 assistance and net drawals from the International Monetary Fund of the order of Rs. 55 crores.
8. The record of growth over the last ten years has not been uniform. There have been significant ups and downs-occasionally due to natural causes or international developments and sometimes due to deficiencies in implementation. During the First Plan, owing largely to the progress recorded by agricultural production, the national income increased by IS per cent as against a target of 12 per cent. During the Second Plan, on the other hand, the increase in national income was 20 per cent as against a target of 25 per cent.
9. Taking the decade as a whole, however, the picture is one of overall progress. Basic facilities like irrigation, power and trans- port which are essential for agricultural and industrial development have been greatly expanded. Valuable mineral deposits have been opened up to feed industries, small and large. A number of projects have been completed in spite of delays caused chiefly by the foreign exchange crisis and have either already come into production or will do so in the immediate years ahead. Agricultural production has expanded by about 41 per cent and output of foodgrains by 46 per cent. The net output of organised manufacturing industries has nearly dou- bled. The share of the public sector industries in it has gone up from 1.5 per cent to 8.4 per cent and much of this increase has been in key industries like steel, coal mining and heavy chemicals. This has been accompanied by a large expansion of electric power generating capacity and considerable improvement in the expansion of the country's transport and communications system, mainly in the public sector. There has been a general expansion of organised industries and the paid up capital of companies at work has more than doubled. At the same time, there has been also substantial development in village and small
+ Includes flood countrol.
@ Includes subscriptions to Government loans by (i) Reserve Bank and by (ii) State Bank out of P.L. 480 deposits,.
*Includes investment of P.L. 480 funds in 1960-61 by Reserve Bank in special securities.
TEN YEARS OF PLANNING 19
industries. Facilities for education and technical training have become much more widespread than before. The number of hospitals and dispensaries has significantly increased, special measures have been taken to eradicate malaria, and there has been a general improvement in health conditions, resulting in substantial increase in the surviv- al rate. The increase in national income has been 42 per cent over the last decade ; but, owing to the increase in population, the in- crease in income per capita has been 16 per cent.
10. A general view of the growth of the economy over the last decade may be obtained from the selected indicators given in the Table below and the data set out more fully in Annexure I to Chapter V.
Table 4 : Selected indicators of growth
*Estimate of production adjusted for changes in statistical and meth- ods of estimation upto 1956-57.
+ Figures relate to calendar years, 1950 and 1955
20 THIRD FIVE YEAR PLAN
The progress achieved in different sectors of the economy is briefly reviewed below:
AGRICULTURE 11. The trend of agricultural production since 1949-50 is shown in the following Table :
Table 5 : Index number of agricultural production.
(1949-50=100)
Group 1950-51 1955-56 1960-61
all crops 96 117 135
food crops 91 115 132
other crops 106 120 142
In spite of fluctuations from year to year, there was unmistakable evidence of expansion. The cumulative rate of growth was about 3.5 per cent per annum and was much higher than in any previous decade. The average level of foodgrains production of about 50 million tons in the preceding decade was exceeded early in the First Plan and amounted to over 76* million tons in 1960-61 as against 57.6 million tons in 1949-50 and 52.2 million tons in 1950-51. The yield per acre also rose significantly over the decade. The average yield of rice per acre, for example, increased from 694 lb in the quinquennium 1946-47 to 1950-51 to 727 lb during the First Plan period and 807 lb in the Second Plan period. The increase in production of major agricultural commodities has been as follows :
Table 6: Production of major crops
crop unit 1950-51 1955-56 1960-61
foodgrains million tones
(cereals and pulses) 52.2 65.8 76.0
oil seeds million tons 5.1 5.6 7.1
sugercane (gur) million tons 5.6 6.0 8.0
cotton million bales 2.9 4.0 5.1
jute million bales 3.3 4.2 4.0
12. The total outlay on agriculture, community development and irrigation amounted to Rs. 1551 crores during the decade. The princi- pal agricultural production programmes undertaken related to extension of irrigation, supply of chemical fertilisers, development of local manurial resources, multiplication and distribution of improved seeds, adoption of improved agricultural practices and land reclamation and development.
13. The net area irrigated is estimated to have increased from 51.5 million acres in 1950-51 to about 70 million acres in 1960-61. The major and medium irrigation projects started in the First and Second Plans, are expected to create potential for irrigation of about 38 million acres on full development. About 4 million acres were reclaimed by the end of 1960-61. Mechanical cultivation was extended to 0.5 million acres and land improvement to about 1.5 million acres. About 4000 seed farms were established under a scheme to cover the entire cultivated area of the country with improved seeds. The con- sumption of nitrogenous fertilisers (in terms of N) increased from 55,000 tons to 230,000 tons and of phosphatic fertilisers (in terms of P205) from 7000 tons to 70,000 tons between 1950-51 and 1960-61. Attention was also given to the development of urban compost and local manurial resources. By the end of the Second Plan 11.8 million acres were estimated to have been brought under green manuring. About 2.7 million acres were covered by soil conservation measures. Measures were also taken for the development of livestock and fisheries, milk supply, vegetable and fruit cultivation and afforestation. For exam- ple, production of milk went up from 17 million tons to 22 million tons and of fish from 0.7 million tons to 1.4 million tons. Affores- tation programmes covered about 0.5 million acres.
14. Besides the formulation and implementation of programmes for development, the First and Second Plans also envisaged a reorganisa- tion of the agrarian structure. Measures in this direction consisted of the abolition of intermediaries (such as zamindars and jagirdars), protection and improvement of tenancy rights and the imposition of ceilings on land holdings. Efforts were also made in several States to encourage consolidation of holdings. The programme for ameliorat- ing the economic condition of agricultural labourers included settle- ment on fallow and reclaimed lands and fixation of statutory minimum wages.
15. Among the most significant developments in the agrarian economy during the past decade, mention may be made of the introduc- tion of the extension services throughout the country as an integral part of the community development movement and democratic decentrali- sation of rural development work. At the end of the Second Plan the community development movement covered about 370,000 villages and well over half of the country's rural population. About 60,000 village level workers and technical officers were given special training in extension work. To carry this programme further and make it more effective, responsibility for development is being transferred to people's institutions at and below the district level, so as to secure complete involvement of the people both in the formulation and imple- mentation of development programmes. The village would constitute the primary unit and the responsibility and initiative for social and economic development at the village level would be placed fully on the village panchayat and the village cooperative. The cooperative move- ment has made considerable progress during the last decade. By the end of the Second Plan, there were 210,000 primary agricultural socie- ties-almost double the number in 1950-51. About 187 cooperative marketing societies and 41 cooperative sugar factories were set up. A number of useful experiments were
TEN YEARS OF PLANNING 21
initiated in cooperative farming and a National Cooperative Farming Advisory Board was established to promote the growth of cooperative farming.
INDUSTRY 16. The past decade has witnessed striking development in indus- try-in terms of the rate as well as the pattern of industrial growth. Some idea of the trend may be obtained from the following indices of industrial production:
Table 7 : Index number of industrial production*
(1950-51=100)
group 1955-56 1960-61
general index 139 194
cotton textiles 128 133
iron and steel 122 238
machinery (all types) 192 503
chemicals 179 288