Page 38 - DMGT401Business Environment

Unit 1: Indian Business Environment

3. Third Five-Year Plan (FY 1961-65) aimed at a substantial rise in national and per capita Notes
income while expanding the industrial base and rectifying the neglect of agriculture in the
previous plan. The third plan called for national income to grow at a rate of more than
5 % a year; self-sufficiency in food grains was anticipated in the mid-1960s.
Economic difficulties disrupted the planning process in the mid-1960s. In the 1960s, India
faced two wars – one with China in 1962 and then with Pakistan in 1965. This come as a
huge set back to the economy as defence expenditure increased sharply and there was
negative impact on industrial and agriculture growth. During the 1965 war, foreign aid
was also reduced. All this resulted in a hike in prices. Three annual plans guided
development between FY 1966 and FY 1968 while plan policies and strategies were
re-evaluated.

4. Fourth Five-Year Plan (FY 1969-73) called for a 24 % increase over the third plan in real
terms of public development expenditures. The public sector accounted for 60 % of plan
expenditures, and foreign aid contributed 13 % of plan financing. Agriculture, including
irrigation, received 23 % of public outlays; the rest was mostly spent on electric power,
industry, and transportation. Although the plan projected national income growth at
5.7 % a year, the realised rate was only 3.3 %.
5. Fifth Five-Year Plan (FY 1974-78) was drafted in late 1973 when crude oil prices were
rising rapidly; and rising prices quickly forced a series of revisions. The plan was
subsequently approved in late 1976 but was terminated at the end of
FY 1977 because the new government had different priorities and programs. The fifth plan
was in effect only one year, although it provided some guidance to investments throughout
the five-year period. The economy operated under annual plans in FY 1978 and FY 1979.
6. Sixth Five-Year Plan (FY 1980-84) was intended to be flexible and was based on the
principle of annual "rolling" plans. It called for development expenditures of nearly 1.9
trillion (in FY 1979 prices), of which 90 % would be financed from domestic sources, 57%
of which would come from the public sector. Public sector development spending would
be concentrated in energy (29%), agriculture and irrigation (24%), mining (16%),
transportation (16 % and social services (14 %). The plan called for a 5.1 % a year growth in
GDP, a target that was surpassed by 0.3 %. Only about 10 % of the poor rose above the
poverty level.
7. Seventh Five-Year Plan (FY 1985-89) envisioned a greater emphasis on the allocation of
resources to energy and social spending at the expense of industry and agriculture.
In reality, the main increase was in transportation and communications, which took up
17% of public-sector expenditure during this period. Total spending was targeted at nearly
3.9 trillion, of which 94% would be financed from domestic resources, including 48%
from the public sector.

8. Eighth Five-Year Plan was launched in April 1992 and emphasised market-based policy
reform rather than quantitative targets. Total spending was planned at 8.7 trillion, of
which 94 % would be financed from domestic resources, 45 % of which would come from
the public sector. Government documents issued in 1992 indicated that GDP growth was
expected to increase from around 5 % a year during the seventh plan to 5.6 % a year during
the Eighth Plan. However, in 1994 economists expected annual growth to be around 4 %
during the period of the Eighth Plan.
9. Ninth Five-Year Plan was launched during the 50th year of India's Independence. The
Ninth Five-Year Plan, adopted by the National Development Council, had given priority
to agriculture and rural development with a view to generating adequate productive
employment and eradication of poverty; accelerating the growth rate of the economy

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