Introduction
After gaining independence in 1947, India adopted a planned economic development strategy aimed at achieving self-reliance, reducing poverty, and promoting balanced growth. The government launched a series of Five Year Plans, inspired by the Soviet model, to guide resource allocation and economic priorities. The first three Five Year Plans (1951–66) were foundational in shaping India’s economic structure. This post analyzes the nature and outcomes of economic growth during these three plans.
First Five Year Plan (1951–1956)
Focus:
The First Plan prioritized agriculture, irrigation, and basic services. It was based on the Harrod-Domar growth model and aimed at rebuilding the economy after the partition and World War II disruptions.
Key Features:
- Major investment in irrigation projects like Bhakra Nangal and Damodar Valley.
- Land reforms initiated to redistribute land and regulate tenancy.
- Focus on community development and rural upliftment.
Economic Growth:
The plan achieved a 3.6% annual growth rate, exceeding the target of 2.1%. Agricultural output improved due to better irrigation and favorable monsoons. However, industrial growth remained modest.
Second Five Year Plan (1956–1961)
Focus:
This plan marked a shift toward industrialization and the development of heavy industries. It followed the Mahalanobis model, emphasizing the role of capital goods in long-term economic growth.
Key Features:
- Emphasis on public sector enterprises in steel, machine tools, and power.
- Expansion of transportation and communication infrastructure.
- Reduction of import dependency through indigenous production.
Economic Growth:
India achieved a growth rate of around 4.1%. While industrial output increased, agriculture experienced stagnation due to poor weather and limited investment. The public sector expanded rapidly, but inflation and foreign exchange shortages became challenges.
Third Five Year Plan (1961–1966)
Focus:
The third plan aimed to make India self-reliant in food grains and reduce reliance on foreign aid. It also intended to strengthen defense and build a diversified industrial base.
Key Features:
- Greater investment in agriculture and rural development through the Intensive Agricultural District Programme (IADP).
- Development of fertilizers, pesticides, and mechanized tools.
- Strengthening of the education and health sectors.
Economic Growth:
This plan was significantly disrupted by external and internal crises, including the Indo-China war (1962), Indo-Pak war (1965), severe droughts, and inflation. Economic growth slowed to about 2.4% annually, far below the target. Food production fell, and the country had to rely on food aid from the US under PL-480.
Overall Nature of Growth (1951–1966)
The first three Five Year Plans established a mixed economy model with a dominant public sector and state-directed planning. Key features of this period include:
- Moderate growth, averaging around 3.5% annually (later dubbed the “Hindu rate of growth”).
- Emphasis on self-sufficiency, especially in agriculture and heavy industry.
- Initial successes in rural infrastructure and industrial base creation.
- Persistent challenges in poverty reduction, unemployment, and food insecurity.
Conclusion
In conclusion, the economic growth during the first three Five Year Plans was mixed. While India made substantial progress in building infrastructure and industrial capacity, problems in agriculture, foreign exchange shortages, and population growth limited the impact. Nonetheless, this period laid the foundation for future development strategies and highlighted the need for balanced, inclusive growth.