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Indian Economic Policy

Notes We may discuss the above socio-economic objectives under the headings of (a) Economic planing
and removal of poverty, and (b) Economic planning and social change.
A. Economic Planning and Removal of Poverty
Rapid economic growth : The basic aim of economic planning in India is to bring about rapid
economic growth through development of agriculture, industry, power transport and
communications, and all other sectors of the economy. The basic measure of economic growth of a
country is the continuous expansion, year after year, of real national income and real per capita income.
Economic growth, should also include improvements in quality of life consisting of life expectancy, infant
mortality, literacy, etc. A little consideration will show that all these indicators of development
are inter-related in the sense that expansion of real national income is the basis for increase in
per capita income and also improvement in the quality of life. For a poor country such as India
with a large mass of people steeped in poverty and misery, increase in national income by itself
is not enough-instead. consistent increase in per capita income over a period, alongwith
improvement in quality of life is the yardstick to judge the economic development of India.
Indian planners aimed at increasing national and per capita incomes on the assumption that
the continuous increase in these incomes would reduce and eventually remove poverty and
misery and raise the standard of living of the masses. But when our planners found that increase
in national income was not accompanied by reduction of poverty in the country, the objective
of planning from the Fourth Plan onwards was not simply economic growth but raising the
standard of living of those who have been living in abject poverty for generations, nay, for
centuries. According to the Fourth Five-Year Plan, “the basic goal is a rapid increase in the
standard of living of the people”, and again” emphasis is placed on the common man, the
weaker sections and the less privileged.” In fact, the slogans of “garibi hatao” (Removal of
poverty) and “growth with justice” were coined during the early 1970’s to indicate clearly that
the emphasis would be on removal of poverty and not simply on increase in national income.
Increase in employment : Unemployment and under-employment are important causes of
poverty in India. Hence, from the very beginning, removal of unemployment and
underemployment has been an important objective of economic planning in the country. The
Planning Commission has all along assumed that increase in investment would be accompanied
by increase in employment as well as increase in national income of the country. The Commission
argued explicitly in the Third Plan that as national income increased in response to investment
and development outlay, the demand for labour would automatically rise and more employment
would the created.
At the same time, the removal of unemployment would result in increase in gross national product
and standard of living of people on the other. Accordingly all the Five Year Plans had programmes
of economic growth, with increase in employment as inherent in the development programmes.
Even though employment has been mentioned as one of the objectives of economic planning in
all our Five-Year Plans, it has never been accorded a high priority. In no plan, do we find
separate employment plans framed for each one of the sectors and regions, so as to boost
employment on the one side and national income on the other. This explains why unemployment
has increased over the years. For the first time, the Planning Commission admitted in the Janata
Party Sixth Plan (1978-83) the possibilities of real conflict between employment and economic
growth and accorded employment a pride of place in the Plan. However, in the Sixth Plan
(1980-85) which was finally accepted and implemented by the Congress Party, the main focus
reverted to the traditional growth approach, with the usual assumption that employment would
increase with rise in investment, irrespective of choice of techniques. Thus, not a single plan
has been framed keeping employment generation as a primary objective and only lip service
was paid to the achievement of full employment goal.
B. Economic Planning and Social Justice
In an unplanned society, various types of retrogressive forces operate, such as inequalities of
income, poverty, absence of equal opportunities for progress, etc. India’s economic plans made

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