Introduction to Economic Planning in India

Economic planning has been a cornerstone of India’s development strategy since independence. Understanding the evolution from centralized Five-Year Plans to the market-oriented approach of NITI Aayog is crucial for JAIIB aspirants as it directly impacts banking policies and financial sector development.

Historical Background of Economic Planning

Pre-Independence Planning Efforts

National Planning Committee (1938): Led by Pandit Jawaharlal Nehru
Bombay Plan (1944): Business leaders’ vision for industrialization
People’s Plan (1945): M.N. Roy’s socialist approach
Gandhian Plan (1946): Emphasis on village economy

Post-Independence Planning Framework

Planning Commission: Established March 15, 1950
First Chairman: Prime Minister Jawaharlal Nehru
Planning Model: Nehru-Mahalanobis strategy

Five-Year Plans: Comprehensive Overview

First Five-Year Plan (1951-1956)

Aspect	Details
Primary Focus	Agriculture and irrigation
Target GDP Growth	2.1% per annum
Actual Achievement	3.6% per annum
Total Outlay	₹2,069 crores
Key Projects	Bhakra Nangal, Damodar Valley
Philosophy	Harrod-Domar growth model

Second Five-Year Plan (1956-1961)

Aspect	Details
Primary Focus	Heavy industries and mining
Target GDP Growth	4.5% per annum
Actual Achievement	4.3% per annum
Total Outlay	₹4,800 crores
Key Features	Mahalanobis strategy, Industrial Policy Resolution 1956
Major Projects	Steel plants, heavy engineering

Third Five-Year Plan (1961-1966)

Aspect	Details
Primary Focus	Self-sufficiency and self-sustaining growth
Target GDP Growth	5.6% per annum
Actual Achievement	2.8% per annum (affected by wars)
Total Outlay	₹8,577 crores
Challenges	China war (1962), Indo-Pak war (1965), droughts

Plan Holidays and Subsequent Plans

Plan Holidays (1966-1969)

Duration: Three consecutive years
Reason: Economic crisis, wars, droughts
Focus: Short-term recovery measures
Annual Plans: Instead of Five-Year Plans

Fourth to Twelfth Five-Year Plans Summary

Plan	Period	Focus Area	Key Achievements
Fourth	1969-74	Growth with stability	Green Revolution
Fifth	1974-79	Garibi Hatao (Poverty removal)	20-Point Program
Sixth	1980-85	Economic liberalization	Liberalized industrial policy
Seventh	1985-90	Productivity and employment	Economic reforms initiation
Eighth	1992-97	Human development	Post-liberalization growth
Ninth	1997-02	Growth with social justice	IT revolution
Tenth	2002-07	Doubling per capita income	8.4% average growth
Eleventh	2007-12	Faster and inclusive growth	7.9% average growth
Twelfth	2012-17	Faster, sustainable, inclusive growth	6.8% average growth

Major Economic Reforms Through Plans

1991 Economic Reforms (Eighth Plan Era)

Liberalization Measures

Industrial Licensing: Abolished for most industries
MRTP Act: Relaxation of monopoly restrictions
Public Sector: Disinvestment policy
Foreign Investment: FDI liberalization

Privatization Initiatives

Disinvestment Program: PSU stake sales
Strategic Disinvestment: Complete privatization
Public-Private Partnership: Infrastructure development

Globalization Steps

Trade Liberalization: Tariff reductions
Convertibility: Rupee on current account
WTO Membership: Integration with global economy

Transition from Planning Commission to NITI Aayog

Challenges with Planning Commission

Top-down Approach: Limited state participation
One-size-fits-all: Uniform policies for diverse states
Resource Allocation: Centralized decision making
Implementation Gap: Poor monitoring mechanisms

NITI Aayog Formation

Established: January 1, 2015
Full Form: National Institution for Transforming India
Replacement: Planning Commission dissolved
Philosophy: Cooperative federalism

NITI Aayog: Structure and Functions

Organizational Structure

Position	Current Holder	Role
Chairperson	Prime Minister	Overall guidance
Vice-Chairperson	Appointed by PM	Day-to-day operations
Governing Council	All State CMs + Lt. Governors	Federal participation
Regional Councils	CMs of specific regions	Regional issues
Full-time Members	Appointed experts	Specialized knowledge
Part-time Members	Domain experts	Advisory role
Ex-officio Members	Union Ministers	Policy coordination
CEO	Secretary-level officer	Administrative head

Key Functions of NITI Aayog

1. Policy Think Tank

Strategic and technical advice
Long-term vision and strategy
Sectoral cooperation

2. Cooperative Federalism

Foster partnerships between Centre and States
Continuous dialogue platform
Best practices sharing

3. Monitoring and Evaluation

Real-time data and progress tracking
Performance indicators
Course corrections

4. Innovation Hub

Technology adoption
Research and development
Startup ecosystem development

Major Initiatives of NITI Aayog

Three-Year Action Agenda (2017-20)

GDP Growth Target: 8% by 2019-20
Key Focus Areas: Job creation, agriculture, education, health
Implementation Strategy: Outcome-based monitoring

Strategy for New India @75 (2018-2022)

Vision: India by 2022-23
Aspirational Goals: $5 trillion economy
Focus Sectors: Manufacturing, services, agriculture

Sustainable Development Goals (SDGs)

SDG India Index: State-wise progress tracking
Localization: Adapting global goals to Indian context
Monitoring Framework: Regular assessment and reporting

Key Flagship Programs

Aspirational Districts Programme

Objective: Transform 117 most backward districts
Strategy: Competitive and mass movement approach
Focus Areas: Health, education, agriculture, infrastructure

Atal Innovation Mission (AIM)

Objective: Promote innovation and entrepreneurship
Components: Atal Tinkering Labs, Incubation Centers
Target: Create innovation ecosystem

Impact on Banking and Financial Sector

Financial Inclusion

Jan Dhan Accounts: Banking access expansion
Digital Payments: UPI ecosystem development
Credit Access: MUDRA, Stand-up India schemes

Infrastructure Development

National Infrastructure Pipeline: ₹111 lakh crore investment
Development Financial Institution: Creation of NIIF
Green Finance: Environmental sustainability funding

Current Economic Planning Framework

Vision 2047: Viksit Bharat

Target: Developed nation by 2047
Per Capita Income: $12,000-15,000
GDP Size: $30+ trillion economy

Key Pillars

Manufacturing Excellence: Make in India 2.0
Digital Transformation: Digital India expansion
Green Transition: Net-zero by 2070
Human Capital: Skill India and education reforms

JAIIB Examination Focus Points

Important for Banking Professionals

✅ Understanding policy framework evolution
✅ Impact of planning on financial sector
✅ Role of banks in plan implementation
✅ Financial inclusion initiatives
✅ Infrastructure financing mechanisms

Key Numbers to Remember

Planning Commission: Established 1950, dissolved 2014
NITI Aayog: Established January 1, 2015
Total Five-Year Plans: 12 completed
Plan Holidays: 1966-1969 (3 years)
Economic Reforms: 1991 (Eighth Plan period)

Future of Economic Planning

Emerging Challenges

Climate Change: Adaptation and mitigation strategies
Technology Disruption: AI and automation impact
Demographic Transition: Aging population concerns
Global Integration: Trade and investment dynamics

New Planning Approaches

Evidence-based Policy: Data-driven decisions
Citizen Participation: Bottom-up planning
Real-time Monitoring: Technology-enabled tracking
Adaptive Management: Flexible implementation

Conclusion

The evolution from Five-Year Plans to NITI Aayog represents India’s journey from a centrally planned economy to a market-oriented approach with strategic government intervention. For banking professionals, understanding this framework is crucial as it shapes financial sector policies, credit allocation priorities, and developmental finance mechanisms.

Next Topic: Sectors of Indian Economy – Primary, Secondary, and Tertiary

This comprehensive guide covers all essential aspects of Economic Planning in India for JAIIB Paper 1, Module A. Regular updates and practice questions are available on our platform.