First Five Year Plan India, 1951-56

Report - FFYPI

1. FIRST FIVE YEAR PLAN, INDIA
(1951-56)

SUBMITTED BY: AMAN KUDESIA 12 MARCH, 2020
FACULTY OF ARCHITECTURE &
PLANNING, AKTU, LUCKNOW

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ABSTRACT

India launched a nationwide Family Planning Programmed in 1952.
India is the first country in the world to launch such a programme. A
separate department of family Planning was created in 1966 in the
ministry of health. In 1977, the Janata Government formulated a new
population policy ruling out compulsion. The acceptance of the
programme was made purely voluntary. Also the Janata government
named the FP dept. as department of family Welfare. The allocation for
these programmes was just 0.1 crore in First Five year plan. It has
increased to 6.3 crores merged with health in the eleventh five year
plan.

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TABLE OF CONTENTS

1. INTRODUCTION ....................................................................................... 03
2. HISTORY ..................................................................................................... 04
3. INDIAN ECONOMY AFTER INDEPENDANCE .................................. 05
4. THE PLAN HAD A THREE-FOLD OBJECTIVE ................................ 06
5. OUTLAY OF THE FIRST FIVE-YEAR PLAN ..................................... 14
6. CRITICAL APPRAISAL OF THE FIRST FIVE-YEAR PLAN .......... 17
7. CONCLUSION ............................................................................................ 22
8. REFERENCES ............................................................................................. 24

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1. Introduction
From 1947 to 2017, the Indian economy was premised on the concept
of planning. This was carried through the Five-Year Plans, developed, executed,
and monitored by the Planning Commission (1951-2014) and the NITI
Aayog (2015-2017). With the prime minister as the ex-officio chairman, the
commission has a nominated deputy chairman, who holds the rank of a cabinet
minister. Montek Singh Ahluwalia is the last deputy chairman of the commission
(resigned on 26 May 2014). The Twelfth Plan completed its term in March 2017.
Prior to the Fourth Plan, the allocation of state resources was based on schematic
patterns rather than a transparent and objective mechanism, which led to the
adoption of the Gadgil formula in 1969. Revised versions of the formula have
been used since then to determine the allocation of central assistance for state
plans. The new government led by Narendra Modi, elected in 2014, announced
the dissolution of the Planning Commission, and its replacement by a think tank
called the NITI Aayog (an acronym for National Institution for Transforming
India).

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2. History
Five-Year Plans (FYPs) are centralized and integrated national economic
programs. Joseph Stalin implemented the first Five-Year Plan in the Soviet
Union in 1928. Most communist states and several capitalist countries
subsequently have adopted them. China continues to use FYPs, although China
renamed its Eleventh FYP, from 2006 to 2010, a guideline (guihua), rather than
a plan (jihua), to signify the central government's more hands-off approach to
development. India launched its First FYP in 1951, immediately after
independence, under socialist influence of the first prime minister, Jawaharlal
Nehru.
The First Five-Year Plan was one of the most important, because it had a great
role in the launching of Indian development after Independence. Thus, it strongly
supported agriculture production and also launched the industrialization of the
country (but less than the Second Plan, which focused on heavy industries). It
built a particular system of mixed economy, with a great role for the public sector
(with an emerging welfare state), as well as a growing private sector (represented
by some personalities as those who published the Bombay Plan).

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3. Indian Economy after Independence
In the post-independence era, the leaders of the country had some precarious
decisions to take. One of them was which type of economic model
would India follow, in those times there were two models followed by most
countries in the world – capitalist economy and socialist economy.
Our first Prime Minister Jawaharlal Nehru preferred the socialist model. But in
a democracy like India, a pure socialist economy cannot flourish. Capitalism was
also not suited since the government had to build up an economy and look after the
common man and his needs. So as a solution our economy combined aspects of
both socialism and capitalism.
It was decided India would develop a strong socialist society, where the public
sector would take care of its citizens. But the government would also promote and
encourage a strong private sector for the future. There would be no prohibition on
private property or wealth keeping our democracy in mind.

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4. The Plan had a Three-fold Objective:
It aimed at correcting the disequilibrium in the economy caused by the war
and the partition of the country.
It proposed to initiate simultaneously a process of all round balanced
development so as to ensure a rising national income and a steady
improvement in living standards over a period of time.
Another aim was not merely to initiate development within the existing
socio-economic framework but
“To change it progressively and by democratic methods in keeping
with the larger ends of policy enunciated in the constitution.”

4.1. Objectives of the Plan:
To reform the country’s economy.
To solve the food problem.
To raise the standard of living.
To provide social and economic justice.
Every five year plan is developed with a specific goal in mind. But there is
never one solitary objective of the plan. The plan is supposed to work towards
the perspective plan and must cover a few important objectives. However, it

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is not possible or practical to give equal importance to all aspects of a plan.
There are basically five generalized goals of a five year plan, wherein a
particular plan one or two are given the most importance. In fact, some of the
goals are actually conflicting. So let us now look at these five types of goals
we cover in the five year plans.
4.1.1. Growth:
This is the first and the most basic goal of an economic plan. Growth in terms
of an economy focuses on the increase of the Gross Domestic Product (GDP)
of the country. GDP is a way to measure the growth of an economy. Higher
the GDP more the common public can benefit from the economic policies of
the country.
This economic growth actually happens due to an increase in
the production capacity of a nation for either its goods or its services. This
can be due to an influx of capital into the economy as well. The sector in
which the growth is happening is also important. There are three basic sectors
– agricultural, industrial and service. Their respective contributions make up
the structural composition of the GDP.

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For very many years India’s primary focus was the agricultural sector. It was
the main contributor to our GDP. And it also saw the highest growth rate in
the few initial five year plans.
4.1.2. Modernisation:
Modernisation refers to the integration of technology in the economy.
Innovation, inventions, and advancement in technology play a huge part in
upgrading our economy and increasing its output. One example would be the
introduction of modern agricultural techniques which increased output. Over
the years, the Indian economy also saw a major boom in the IT industry due
to modernization.
Another aspect of modernization would be our advancement as a society.
Leaving behind discriminatory practices and pushing towards an equal, fair
and modern society.
4.1.3. Self-Reliance:
A new economy like India’s post-independence can become too reliant on
imports. So for seven editions of the five year plan, the government promoted
self-reliance. This basically meant that anything we were capable of
producing domestically we did not import.

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Especially food and agricultural products were never imported as long as
possible. This was to ensure we not only became self-reliant but also to
protect our sovereignty. Because importing basic essentials from other
nations would make us dependent on them. Then after 1991, the government
finally opened up our economy to the global markets once we had already
established a domestic base.
4.1.4. Equity:
Now the previous three goals mainly relate to the economy. But the
development of the economy only is not sufficient. The five year plans must
also focus on the development of our society. It is essential to ensure that
these benefits from the economy are enjoyed by all members of the society.
This is where equity comes in.
Equity focuses on ensuring that all citizens of our country have their basic
needs for food, housing, clothing etc. fulfilled. It also looks to reduce the
wealth gap and the inequality in our society.

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4.2. Achievements of the Plan:
4.2.1. Increase in National Income:
4.2.2. The First Five Year sustained the hope of the planners by making
headway in achieving its targets and ambitious objectives to a larger
extent. The national income rose from Rs. 9110 crores to Rs. 10800
crores from 1950- 51 to 1956-57 at the price level of 1953-54.
The per capita income increased by 11 per cent and per capita consumption
by 8 per cent over the same period. The net domestic saving was Rs. 756
crore in 1955-56 against Rs. 455 crore in 1950-51.
4.2.3. Agricultural Development:
In the field of agriculture, total food-grains was 69.3 million tonnes against
the target of 62.6 million tonnes. The index number of agricultural
production for all crops increased from 26 to 117 during the period of 1950-
51 to 1955-56 (1949-50 = 100). During this period, the import of foodstuffs
led to a drastic reduction.
In 1954, only 0.8 million tons of food-grains valued at Rs. 47.02 crore was
imported as compared to 4.7 million tonnes at a total value of Rs. 216 crore
in 1951. The production of some major crops like rice, wheat and cotton
was recorded to be 28.7 million tonnes, 8.9 million tonnes and 4.2 million

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bales against its targets of 27.7 million tonnes, 3.4 million tonnes and 4.8
million bales respectively.
4.2.4. Industrial Production:
Industrial production has recorded the increase to the extent of 38 per cent.
Total gross investment in fixed capital in the private sector was about Rs.
340 crore. The progress of production and expansion of capacity was
satisfactory in the case of Sindri Fertilizer Factory, Chittaranjan
Locomotive Factory, Indian Telephone Industries, Integral Coach Factory,
Cable Factory and Penicillin Factory. A new plant of iron and steel was set
with a capacity of 35000 tons of pig iron.
4.2.5. Irrigation and Railway Development:
Irrigation facilities were extended to 16 million acres of land. Out of it, 10
million acres through small works and 6 million through major works. The
work on a number of multipurpose river projects like Bhakra Nangal,
Damodar Valley and Hirakund was accelerated and many more new
projects were started on Kosi Koyna, Rihand and Chambal.
In rail transport, the traffic carried in a span of time in 1951-52 to 1955-56
in terms of tones originating increased by about 8 per cent. All the
commencement of the plan, Indian Railways has 8209 locomotives, 19225

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coaches and 222441 wagons on the line which increased to 9262
locomotives 23779 coaches and 266049 wagons by ending 1955-56.
4.2.6. Education:
The percentage of facilities of schooling for children in the age group of 6-
11 was 42.0 per cent which rose to 51.0 per cent from 1950-51 to 1955-56.
There were 209671 primary and 7288 high/higher secondary schools in
1950-51 which increased to 274038 and 106000 in 1955-56 respectively.
The number of training institutions for basic education was recorded 449
in 1955-56 against its number 114 in 1950-51. There were 8600 medical
institutions with 113000 beds in 1950-51. There were 8600 medical
institutions with 113000 beds in 1950-51 which increased to 10000 with
125000 beds during 1955-56.
4.2.7. Miscellaneous Achievements:
A significant achievement during the plan period was of launching
Community Development and National Extension Services programme on
2nd October, 1952. This programme covered 78 million persons in 143000
villages situated in 1075 development blocks ending 1955- 56.
The number of co-operative societies rose from 180000 to 240000 and the
number of members from 13.72 to 17.62 million, 53000 new agricultural

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credit societies were registered with total number of members 1.60 lakhs,
44 extension training centres were established.
4.2.8. Balance of Payment:
The balance of payment position was quite satisfactory. In the original plan
estimates, an average annual deficit of Rs. 180 to 220 crore was visualised
but the actual expenditure was of amounting Rs. 96 crore. So far as sterling
balance was concerned the withdrawal was of only Rs. 138 crore against
Rs. 290 crore.

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5. Outlay of the First Five-Year Plan:
Originally, the plan period for an outlay of Rs. 2069 crores in the public sector
which was later raised to Rs. 2378 crores with a view to meeting the growing
unemployment in the country. The expenditure actually incurred amounted to Rs.
1960 crores of which the investment component was of the order of Rs. 1560
crores.
In addition, the private sector investments amounted to Rs. 1800 crores. Thus, the
total investment in the private and public sectors together amounted to Rs. 3360
crores-the annual average rising from Rs. 500 crores at the beginning of the plan
to Rs. 850 crores at its end.

5.1. Priorities of the First Five-Year Plan:
In order of priority, the First Plan placed agriculture and irrigation first,
transport and communications second, social services third, then power and
finally industry. Of the actual expenditure of Rs. 1960 crores in the public
sector, Rs. 601 crores (31%) went to agriculture including community projects
and irrigation; Rs. 523 crores (27%) to transport and communications; Rs. 459
crores (23%) to social services; Rs. 260 crores or (13%) to power and only Rs.
117 crores i.e. (6%) to industry including village and small industries.

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It is here that the Planners exposed themselves to criticism. The amount
allocated to industry was, by common consent, most inadequate. Even this
partly amount was wholly allocated to consumer industries. The capital goods
or even intermediate products industry was conspicuous by its absence.
The Planning Commission, however, justified this order of priority on grounds
of the serious agricultural crisis then facing the country, exceptionally low
average food ration, and the high cost of importing foodstuffs from abroad.
The Commission was also convinced that “without a substantial increase in
the production of food and raw-materials needed for industry, it would
be impossible to sustain a higher tempo of industrial development.”

The importance given to transport and communications was partly explained
by an effort to make rural areas less isolated and partly by the need to replace
the stock and equipment worn out during the war.
Spending on health services and education was quoted as the essential point
of the social services programme. These ‘technical reasons’ apart, as there was
no major agrarian reform, the increase of agricultural production and revenue
had to depend mainly on public outlay. Hence the precedence of agricultural
development, irrigation, and transport in the priority list.

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5.2. Financing the Plan:


The First Plan was essentially a financial plan and not a physical plan. The
emphasis, therefore, was on the fulfilment of the financial targets rather than the
physical ones. The pattern of finance in the public sector shows that about 73%
of the financial resources came from budgetary sources and 17% through deficit-
financing.
The balance of 10% came from external sources which were mainly used for the
purchase of commodities like wheat, steel and equipment required for various
development projects.
As regards public borrowing, the plan target for market loans was exceeded.
However, the progress in the matter of additional taxation in the states was ‘not’
commensurate with the requirements of the plans’! Their contribution fell short

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of the target by 34% —the actual contribution being only Rs. 269 crores as against
the target of Rs. 410 crores.
6. Critical Appraisal of the First Five-Year Plan:
On the basis of these results, the Planning Commission found the overall
achievements of the Plan as ‘satisfactory’. In reality, the progress was neither
adequate nor substantial.
With all the publicity that went with the irrigation and power projects, the
proportion of irrigated area to net sown area in 1955-56 worked out to no
more than 22% as compared with 19% in 1948-49; only about 0.9%
villages were electrified as against 0.5% before the Plan.
In other words, even after the completion of all the projects in hand, nearly
3/4 of the cultivated area and the bulk of the villages were at the mercy of
the monsoons and ‘flickering’ lamps’. It is not surprising, therefore, that
the per capita food grains production was still 7% below the 1936-1938
level and the per capita availability of cotton cloth was 10% lower than in
1945.
The railways, although reached their revised financial provision, yet ‘could
not keep pace with the increase in traffic’ while road transport in the states
suffered severely from the government’s greater preference for

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nationalisation than improvement of existing facilities. In shipping,
communications, and broadcasting also, there were shortfalls.
Much more serious, from the stand point of long term development, was
the shortfall in education. The % age of school going children in the age-
group 6-11 years went up by 9.9% only as against the target of 18.8%.
Achievement in the field of Secondary education, was smaller still. There
was ‘much leeway’ to be made up as regards the supply of teachers.
Land Reforms progressed from state to state at variable rates but there was
little evidence to suggest that it had done much to achieve its proclaimed
objective of bringing about suitable changes in the structure of the rural
economy, capable of promoting rapid agricultural development.
Community development was more an act of faith since no one could
“Reconcile none too reliable figures of achievement from the project
areas with the overall progress in different fields made in a state or in
the country as a whole.”
Despite the marked increase in developmental expenditure and industrial
output, the economy gave no sign of having undergone any appreciable
diversification. Even within the agricultural sector, subsistence-farming of
food crops continued as before. There was no perceptible shift in the crop
pattern nor any significant expansion in the direction of mixed farming.

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The unemployment problem, far from improving, actually worsened
during the course of the Plan when the outlay had to be stepped up. As
against the addition of 10 million people to the labour force, the Plan
claimed to have found employment for only 4.5 million persons. It clearly
points to the fact that the pace of investment and development activity was
not sufficient enough to make a decisive impact on the economy.
The secondary and tertiary sectors evidently did not grow so rapidly as to
have any significant effect on the primary sector nor did the primary sector
throw up surpluses which could stimulate expansion in other sectors of the
economy.
The overall implementation of the plan was far from satisfactory. There
were serious shortfalls in scheduled expenditure, the shortfall being
particularly marked in agriculture and social services. On schemes for
agriculture and Community Development, the Plan’s principal base,
expenditure lagged by no less than 18%; for small scale industry by over
40%; for communication services, by as much as 45%.
The short fall in the case of education, housing and social services was
about 11%. These short falls were primarily caused by organisational
handicaps and physical bottlenecks.
Moreover, as Vakil and Brahmanand have pointed out,

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“The organisational mechanism of the government was so rigid as to
be incapable of effectively and adequately utilizing the ‘windfall
factors’ with which nature favoured the Indian economy. The food
surpluses of 1953 and 1954, instead of being utilised for investment,
were either frittered away in the form of a rise in the consumption
standards or simply wasted”.
Unsatisfactory implementation and modest achievements apart, much of
what the plan achieved was more of a ‘change gain’, than the result of any
planned effort. It is generally accepted that increase in agricultural
production, especially food, was “largely due to a remarkable succession
of favourable agricultural seasons.”
Credit should also be given to programmes and activities of seven or eight
years previous to the launching of the plan.
The emphasis on bringing more land under irrigation, the incentive of
higher prices, the special efforts at improvement of techniques and input-
supplies as a part of the ‘Grow More Food Campaign’ and other activities
were perhaps more responsible for increasing the readiness of the cultivator
to bring more land under the plough and put in his full effort.
Similarly, industrial production was encouraged due to the existence of an
economic climate, itself the result of good monsoons, which encouraged

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industrialists to bring into production their unused capacity. A notable
feature of the Plan was a general decline in the price level.
This may be attributed both to wise financial and fiscal policy internally
and to subdued inflationary pressures abroad. The Government deserves
full credit for this achievement but it can hardly be linked to anything that
was specifically in the Plan.
The improvement in the balance of payments was also helped by a
favourable international situation. The terms of trade did not turn
substantially against India and the demand for export-products from India
kept up well in-spite of the post- Korean War slump.
A cautious monetary and credit policy, taking full advantage of the
situation, was able to keep bank rate low, government security market
stable, and conserve or sparingly use foreign exchange reserves.

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7. Conclusion
In short, the increase in agricultural production or improvement in the balance of
payments or a decline in prices, was made possible by factors outside the plan.
This led Professor, Gadgil to remark that
“The major achievements of the First Five Year Plan period may perhaps be
said not to have been planned at all.”
It is not to pour cold water on the Plan or imply that the plan had nothing to its
credit. There is no doubt that the First Plan did lay certain foundations which,
while having no immediate effect on out-put, could be of immense significance
for the future. Mention may be made of the major irrigation works, the power
projects, railway rehabilitation, and community development.
Besides, interesting beginnings had been made in industrial and agricultural
finance in cooperative organisation, taxation policy, education, public health, and
in the management and organisation of public enterprises.
Scientific and industrial research made significant progress and statistical and
other data relating to Indian economy improved. These were not of much
immediate significance but were in the nature of “foundations” on which the
future progress could be based.
The value of planning was thus not proved by the results of the First Five-Year
Plan. Many in the country, however, felt that it had been proved and the Planning

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Commission itself acquired status and authority in their eyes. The danger
obviously was over confidence and both Government and the Commission began
to display it.
The success of the First Plan suggested that a much bigger plan was possible; the
comparative ease with which the economy had been activated seemed to prove
that a little extra effort could achieve miracles; the degree of enthusiasm which
had been generated raised hopes that such efforts could be readily stimulated. The
result was an under-estimation of the tasks that lay ahead.

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8. References
 Government of India. Planning Commission.
o The first five –year plan a Draft outline. New Delhi 1951.
o The first five-year plan. New Delhi 1953.
o 10 five Year Plan, New Delhi: 2002-07
 Ministry of Health and Family Welfare.
o Family Welfare Programme in India Year book, 2011.
 S.C. Gulati Demography India Vol. 35 (2006).