Objectives of Economic Planning

The Directive Principles of our Constitution laid down: “The State shall, in particular, direct its policy towards securing that, Citizens, men and women equally, have the right to an adequate means of livelihood. The ownership and control of the resources of the community are so distributed as best to subserve the common good; The operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. The Directive Principles are an expression of the will of the people for economic growth and consequently, the government adopted planning as a means for fostering economic development.

Keeping the above-mentioned factors in mind, four long-term objectives were set out by me planners in India. They were :

To increase production to the maximum possible extent (to achieve a higher level of national per capita income)
To achieve full employment.
To reduce inequalities of income and wealth;
To set up a socialist society based on equality and justice and absence of exploitation.

In an unplanned society, various types of retrogressive forces operate, such as inequalities of income, poverty, the absence of equal opportunities for progress, etc. India’s economic plans are a conscious effort to remove all these retrogressive forces and foster social as well as individual development. Reduction of inequalities of income and the establishment of a socialist society, creating conditions in which everyone will have equal opportunities in the matter of education and employment. Besides, there will be no concentration of economic power or exploitation of one individual by another.

The specific objectives of planning are :

Rapid Economic Growth

The basic aim of economic planning in India is to bring about rapid economic growth through the development of agriculture, industry, power, transport and communications, and all other sectors of the economy. One measure of economic growth of a country is the continuous expansion, year after year, of real national income and real per capita income. Economic growth should also include improvements in physical quality of life consisting of. life expectancy, infant mortality and literacy, etc. For a poor country such as India with a majority of people steeped in poverty and misery an increase in national income by itself is not significant; instead what is required is a consistent increase in per capita income over a period which will be the proper yardstick to judge the economic development of India. If economic development has to have some significance, it is necessary that the rate of increase in national income is more than the rate of growth of population so that per capita income also increases. The objective of planning from the Fourth Plan onwards was not simply on growth but raising the standard of living of those who have been living in abject poverty for generations. According to the Fourth Five-Year Plan, “the basic goal is a rapid increase in the standard of living of the people”, and “emphasis is placed on the common man, the weaker sections and the less privileged.”

Increase in Employment

Unemployment and under-employment are important factors for poverty in the country. Hence, from the very beginning removal of unemployment and underemployment has been an important objective of economic planning in the country. The Planning Commission has all along assumed that increase in investment would be accompanied by an increase in national income as well as an increase in employment in the country. The Commission argued explicitly in the Third Plan that as national income increased in response to investment and development outlay, the demand for labour would automatically rise and employment would expand.

Reduction of Inequality of Income

There is a very small group of persons in India who are better-off and who have not experienced poverty and misery. These are the rich landlords in the countryside, the merchants, industrialists, bankers, top officials of the Government, etc. The vast majority of people are very poor because their income is very low. Income and wealth inequalities seem to have their roots in the traditional social formation of our country. Another aspect of income inequalities in India is the large disparities between the rural and urban incomes which are bound to be accentuated over the years because of industrialisation and economic growth. The Planning Commission has suggested measures to raise agricultural productivity, development of agro-based industries, fair price to farmers for their products, etc.

Self Reliance

Self-reliance was defined merely as overcoming the need for external assistance. In the Fourth Plan, the objective of self-reliance was stated in a concrete form. The plan reiterated the government’s commitment to reduce its dependence on foreign aid. It is now generally agreed that in the field of self-reliance, India has two achievements to its credit. The country is now almost self-sufficient in food.

Broadly these are reasons why self-reliance has been adopted as a major objective of economic planning in this country. The emphasis on self-reliance was not much in the first two plans. In the Third Plan for the first time, it was stated that the country, would endeavour to become self-reliant over a decade or so. – The concept of self-reliance adopted in the plan was, however, narrow.

About four and a half decades ago on the eve of the First Plan, India was dependent on foreign countries at least in three respects. Despite the fact that the Indian economy is essentially agrarian, the output of foodgrains was not adequate and the country imported big quantities of foodgrains from the U.S.A. and some other countries.

On account of the virtual non-existence of basic industries, transport equipment, machine tools, heavy engineering goods, electrical plant and machines and many other capital goods had to be acquired from developed countries. D Saving rate being very low, foreign aid had to be obtained in order to step up the investment rate in the country.

Specific Objectives

To increase the national income by 25% during the plan period so as to raise the level of standard of living of the masses.
To achieve rapid industrialisation with special emphasis on basic and heavy industries. → To expand employment opportunities by promoting small scale industries and labour intensive projects.
To reduce inequalities in income and wealth.

Here are the notes for the Third, Fourth, Fifth Five Year Plans.