Economics is an imporant subject for UPSC syllabu. To understand India's economics, its important to understand the governments measures which were taken right after the Independence, The five year plans, which were made to get India develop fastr. In this article we will see the significance of five year plan  and also what lead to niti aayog. To learn about the individual Five year planc - Click here


  • What is five year plan
  • Importance of FIve Year Plan
  • Failure of Five year plan
  • What is niti aayog
  • Difference between Niti Ayog and Five year plan


An economic plan allocates the resources of a nation to fulfil the general and specific goals as planned by the government for a specified period. In India, these plans are made for five years and hence are known as five year plans. These five year plans are ultimately a short-term plan for a perspective plan. A perspective plan outlines the long-term goals of a nation, spanning twenty years.

In India, after the independence, the government set up a Planning Commision in 1950. This commission would be responsible for framing and implementing the five year plans of the country. They began their efforts with the first five year plan in 1950.


A Higher Growth Rate:

Economic planning in India aims at bringing about a rapid economic development in all sectors.That is to say, it aims at a higher growth rate. India’s macroeconomic performance has been only moderately good in terms of GDP growth rates.

The overall rate of growth stands at 4.8 per cent for the whole planning period (1950-2007) Compared with India’s own past (1900- 1920) when she was caught in a low level equilibrium trap, growth acceleration during the last 60 years has been impressive indeed.

Growth of Economic Infrastructure:

India’s performance in building up the necessary economic infrastructure is really praiseworthy. At the inception of economic planning, road kilometer was 4 lakh kms. India has now more than 3 million km of road network, making it one of the largest in the world.

Railway route length increased from 53,596 kms in 1951 to nearly 63,500 kms in 2005- 06. Today, the Indian railway system is the largest in Asia and the fourth largest in the world. Similarly, other modes of transport like shipping, civil aviation, etc., have also expanded phenomenally.

Development of Basic and Capital Goods Industries:

Another major area of success of Indian planning is the growth of basic and capital goods industries. With the adoption of the Mahalanobis Strategy of development during the Second Plan period, some basic and capital goods industries like iron and steel witnessed spectacular growth.

Higher Growth of Agriculture:

The most significant aspect of India’s Five Year Plans is that the overall rate of growth of food production has now exceeded the rate of growth of population. Though in the early years of planning, agricultural performance was miserable resulting in the emergence of food crisis.

But now, due to the impact of bio-chemical revolution in Indian agriculture, food crisis seems to be a thing of the past. She has attained self-sufficiency in food grains.

Savings and Investment:

The rise in the domestic savings rate from 10 p.c. of GDP at the initial stages of planning to around 19 p.c. in 1980-81 is definitely impressive. However, this rate increased to 34.8 p.c. by the end of March 2007. Similarly, India’s record in gross domestic capital formation rose from 20.3 p.c. in 1980-81 to 22.8 p.c. of GDP in 2001- 02. But it rose to 36 p.c. in 2006-07.



 Inadequate Growth Rate:

In quantitative terms, the growth rate of the Indian economy may be good but not satisfactory by any standards. Except the First and Sixth Five Year Plans, the actual growth rate remained below the targeted growth rates of GNP and per capita income.

Only in recent plans (both Ninth and Tenth plan), actual growth rate has exceeded the plan targets. In terms of per capita income, India is one of the poorest nations of the world even after more than 58 years of democratic planning.

Whither India’s Socialistic Society:

Indian planning aims at building up a ‘socialistic pattern of society’, in an otherwise capitalistic framework, through various socialistic measures. We have not yet made any significant progress towards the goal of attaining a socialistic pattern of society even after nearly 58 years of planning.

The concept of socialistic pattern of building a society has been altogether discarded when we introduced new economic policy measures in mid-1991. Instead, Indian economy very much moves on the capitalistic path.

Economic Inequality and Social Injustice:

The twin aspects of social justice involves on the one hand, the reduction in economic inequalities, and, on the other, the reduction of poverty. A rise in national income with concentration of economic power in the hands of a few people is not desirable.

In an otherwise capitalist framework, inequality in the distribution of income and wealth is inevitable. In India’s socio-­political set-up, vast inequalities exist. Indian plans aim at reducing such inequalities, so that the benefits of economic development percolate down to the lower group of the society.

The objective of removal of poverty got its clear-cut enunciation only in the Fifth Plan for the first time. Due to the defective planning approach, income inequality widened and poverty became rampant. The incidence of poverty was on the rise. It is now nearly 28 p.c. (2004-05).


Removal of unemploy­ment is considered to be another important objective of India’s Five Year Plans. But, unfortunately, it never received the priority it deserved. In the Sixth Plan (1978-83) of the Janata Government, employment was accorded a pride of place for the first time.


  • Think tank for Government policy formulation.
  • Find best practices from other countries, partner with other desi-videsi bodies to help their adoption in India.
  • Cooperative Federalism: Involve state governments and even villages in planning process.
  • Sustainable development: + Modi’s Zero defect-zero effect (on environment) manufacturing mantra.
  • Urban Development: to ensure cities can remain habitable and provide economic venues to everyone.
  • Participatory Development: with help of private sector and citizens.
  • Inclusive Development or Antyodaya. Ensure SC, ST and Women too enjoy the fruits of Development. (because Din Dayal said so.)
  • Poverty elimination to ensure dignity and self-respect. (because Poet Tiruvalluvar said so)
  • Focus on 5 crore Small enterprises– to generate more employment for weaker sections.
  • Monitoring and feedback. Midway course correction, if needed.
  • Make policies to reap demographic dividend and social capital.
  • Regional Councils will address specific “issues” for a group of states. Example: Regional Council for drought, Left-wing extremism, Tribal welfare and so on.
  • Extract maximum benefit from NRI’s geo-economic and Geo-political strength for India’s Development.
  • Use Social media and ICT tools to ensure transparency, accountability and good governance.
  • Help sorting inter-departmental conflicts.
  • Lot of bol-bachachan giri and vague ideas about national self-interest, capacity-building, participating in ‘global-village’ etc.



Planning Commission

Niti Aayog

Design FYP-Five year plans Design national agenda, and cooperative federalism.
Decide two “money” matters:

  1. How much money to give to each state for centrally sponsored schemes (CSS)
  2. How much money to give for each state’s own state-five-year-plans.
  • Mostly work as a “policy-formulation-hub”. The Press release is ‘silent’ on money/funding. so, most probably it’ll be left to finance ministry.
  • Some experts believe Inter-state council will decide money allocation to states, then finance ministry will release the fund.
  • States/UT were represented in National Development Council.
  • PC framed FYP=>went to Cabinet=>NDC approved FYP=>Tabled in parliament
  • States/UT represented in Governing council. But no specific mention about whether they can approve/reject/amend Niti Aayog’s proposals?
  • One size fits all, top-down socialist planning by Armchair Nehruvian economists and IES cadre officers (Indian Economic Service).
  • Press release talks about participatory planning but how exactly will they do that? No specific details laid out.
  • IES officers are rarely invited in Modi’s meetings.
  • But given the entry of Free market economists and Technocrats, most probably it’ll be an ‘indicative planning + core planning’ i.e. after inputs of state governments, a broad outline with selected targets, limited subsidies and monitoring through ICT.

Planning commission play an important role in India's Initial development, It did have some draw backs, there fore Niti Aayog was formed. IAS aspirants should clearly understand how the planning was done earlier by the planning commission and what are the functions of Niti aayog. To read more articles on Indian Economy, Click here