Goals of Five Year Plans

Growth, Modernisation, Self-reliance, and Equity.

Notes

The Four Goals Overview

The five year plans have been concerned with the removal of economic backwardness and making India a developed economy. They also ensure weaker sections benefit from economic progress. The first five year plan was launched by Pandit Jawaharlal Nehru, starting 1st April 1951. The 12th Five Year Plan (2012-17) was India's last.

Growth

Growth refers to an increase in the country's capacity to produce output of goods and services. Stagnation during British rule made Economic Growth the first and foremost objective.

Growth implies: a larger stock of productive capital, a larger size of supporting services like transport and banking, and an increase in the efficiency of productive capital and services.

GDP (Gross Domestic Product): Market value of all final goods and services produced in the country during one year. A good indicator of economic growth is a steady increase in GDP.

Sector Contribution to GDP

The contribution of each economic sector (Agricultural, Industrial, Service) to the GDP makes up the structural composition of the economy. By 1990, the share of the service sector was 40.59%, more than agriculture or industry.

Structural Composition — GDP by Sector (1990)

41.3%

18.1%

40.6%

Agriculture

Industry

Service

In some countries, agriculture contributes more to GDP growth; in others, the service sector contributes more. The contribution of each sector makes up the structural composition.

Think about it

India's GDP in 1990 was about ₹3.6 lakh crore. Today it's over ₹300 lakh crore — a 100x increase in 30 years. But this growth wasn't evenly distributed. The IT sector in Bengaluru grew at 15-20% annually, while agriculture in Bihar grew at 2-3%. Growth without equity creates two Indias.

Modernisation

Indian planners have always recognised the need for modernisation to raise the standard of living.

Adoption of New Technology

Increase production through new technology. Example: A farmer can increase output by using new seed varieties instead of old ones. A factory can increase output by using new machines.

Real example: Indian farmers using HYV seeds during the Green Revolution increased wheat production from 6 million tonnes (1947) to 73 million tonnes (1990).

Change in Social Outlook

Modernisation also requires change in social outlook, such as gender empowerment or providing equal rights to women. A society will be more civilised and prosperous if it makes use of the talents of women in the workplace.

Real example:India's women labour force participation is ~25% (one of the lowest globally). If increased to 40%, India's GDP could grow by 1.5% annually — that's modernisation through social change.

Modernisation in the words of Draft Outline of 6th Plan

“The term modernisation connotes (indicates) a variety of structural and institutional changes in the framework of economic activity.” It implies: the shift in sectoral composition of production and diversification of activities; advancement of technology and institutional innovations — so as to transform a feudal and colonial economy into a modern and independent economy.

Self-reliance

Self-reliance under Indian conditions means overcoming the need for external assistance — developing through domestic resources. To promote economic growth and modernisation, the five year plans stressed use of own resources to reduce dependence on foreign countries.

Reduce Foreign Dependence

As India was recently freed from foreign control, it was necessary to reduce dependence on foreign countries, especially for food. Stress should be given to attain self-reliance.

Negative example: In 1966, India imported 10 million tonnes of wheat from the US under PL-480. This food dependency was a national security risk — the US could use food as political leverage.

Avoid Foreign Interference

It was feared that dependence on imported food supplies, foreign technology and foreign capital may increase foreign interference in the policies of our country.

Parallel example: Today, India imports 80% of its electronics chips from Taiwan and South Korea. The semiconductor shortage in 2021-22 halted car production in India — proving that self-reliance in critical technology remains essential.

Exam point: Self-reliance = developing through domestic resources, reducing foreign dependence, avoiding foreign interference.

Equity

The objectives of growth, modernisation and self-reliance, by themselves, may not improve the kind of life that people live. It is important to ensure that benefits of economic prosperity are availed by all sections (rich as well as poor) of the economy.

According to Equity, every Indian should be able to meet his or her basic needs (food, house, education and health care) and inequality in the distribution of wealth should be reduced. In short, Equity aims to raise the standard of living of all people and promote social justice.

Why Equity Matters Beyond Growth

Growth, modernisation, and self-reliance alone do not guarantee that the benefits reach everyone. Without equity, economic prosperity could concentrate in the hands of a few while the majority remains in poverty. Equity ensures the fruits of development are shared.

The Reality Check

65%

Population in agriculture (1990)

~2%

Population above poverty line

36%

Population below poverty line (1990)

Despite decades of growth, over a third of India's population lived below the poverty line in 1990. Growth without equity meant the benefits bypassed the most vulnerable.