Planning in India Fourth Five Year Plan (1969-74)

Political Backdrop & Developments

The bank nationalisation drive of Indira Gandhi was, ostensibly, aimed at facilitating the flow of credit to the poorer sections of society and at democratising the banking sector. It was to be turned into a public sector enterprise regulated by the government. But it led to high-voltage political drama and Indira’s final fallout with the old and conservative guard of the Congress party led by Morarji Desai. The differences spilled over in the 1969 Annual Session of the Congresswhich Indira refused to attend. She sent her emissary with a note instead. The conflict ultimately ended in a split in the Congress with the formation of the Congress (R) under Indira Gandhi – where ‘R’ stood for ‘requisition’ – and Congress (O) or the Congress organisation. The broader reason for the split was the neo-liberal agenda of the Congress faction led by Morarji even as Indira wanted to continue with Jawaharlal Nehru’s Socialism. In the end Indira too proved that she had deliberately used Socialism only as rhetoric. Nehru could not bring his Socialistic agenda into effect owing to the more conservative elements within the Congress who prevailed over him through their numerical strength. There were other electoral compulsions too. But Indira turned Socialism into pure rhetoric and her bank nationalisation programme was meticulously crafted to defeat the numerically strong right wing within the Congress who had become strong with the demise of Nehru and the ascendance of Lal Bahadur Shastri, though for a brief period. Indira was locked in a conflict with the old guard to reclaim her superiority within the organisation. Bank nationalisation did prove to be a boon for India in the long run, but it cannot be denied that it was the result of, not some pious and ideologically inspired intentions, but acute politicking within the Congress party and proved to be a potent ploy in the hands of Indira to once again throw the Congress in the ‘command mode’ after the death of Nehru.

  •  During Fourth Five Year Plan Indira Gandhi was the Prime Minister.
  •  The Indira Gandhi Government nationalised 14 major Indian banks.
  •  The Green Revolution in India advanced agriculture.
  •  In addition, the situation in East Pakistan (now Bangladesh) was becoming dire as the Indo-Pakistan War of 1971 and Bangladesh Liberation War took place.
  •  India had to cope with the huge influx of Bangladeshi immigrants.
  •  Funds earmarked for industrial development had to be diverted for the war effort.
  •  India also performed the ‘Smiling Buddha’ underground nuclear test in 1974, partially in response to the United States deployment of the Seventh Fleet in the Bay of Bengal. The fleet had been deployed to warn India against attacking West Pakistan and extending the war.


  Agriculture as the Main Focus of the Plan

  •  The Fourth Five Year Plan aimed at an annual growth rate of 5 per cent in agriculture, but the achieved rate fell short and stood at 3.1 per cent per annum.
  •  The total investment in agricultural sector was Rs. 3,814 crores (24 per cent of the total Plan outlay).
  •  Development of agricultural inputs like fertilisers, farm machineries too was aimed at.
  •  A National Agricultural Commission was set up in 1970.
  • The target for food grains output was set at 129 million tons for 1973-74 but the actual production of food grains fell short at merely 103.6 million tons.
  •  During the Plan about 15.6 million hectares of additional cropped area was brought under irrigation.
  •  The production of wheat went up sharply owing to the Green Revolution but the growth in production of rice was nominal.
  •  Since 1972-73, the under-performance of the agricultural sector was the primary cause of stagnation and inflationary pressure.
  •  Target Growth: 5.7 per cent. Actual Growth: 3.30 per cent.


Strategy for Agricultural Growth

It gave emphasis on

  •  Coordinated research of important crops.
  •  Expansion of irrigation.
  •  Increase in the supply of fertilisers.
  •  Plant protection material.
  •  Farm machinery.
  •  Credit.
  • Measures to increase the intensity of cropping.
  •  Improvement in agricultural marketing.
  •  A minimum price for some of the major agricultural produce.
  •  Farmers education and training with emphasis on technology-based production.
  •  As regards intensive agriculture, expansion of the high-yielding variety (HYV) seeds programme was a major emphasis area.
  •  More attention was paid to wider distribution of quality seeds.
  •  The system of seeds production and distribution was overseen by the Seed Review Team.
  •  Suitable seed godowns were proposed to avoid sprouting of seeds when the wet season set in.


Performance of the Fourth Plan

The performance of the Fourth Five Year Plan must be assessed against the backdrop of the failure of the Third Five Year Plan. The failure of the previous plan put the Fourth Plan under duress and the continuation of poor performance of agriculture in the Fourth Plan period pulled down the growth of the country.
During the Third Plan period the balance of payment (BoP) situation of India had became unfavourable on account of huge food imports, insufficient increase in exports and because India sought large amounts of foreign assistance. This situation was further aggravated due to wars with Pakistan and China followed by droughts. Moreover, all this led to larger deficit financing which further created debts. The situation was further worsened by the temporary suspension of foreign aid in 1965. The Rupee was devalued in 1966 but this did not lead to immediate amelioration of the condition. The situation improved only in 1967-68. Despite increased outlays, actual development fell short of targets and many key sectors saw a decline delays in construction and escalation of costs. Consequently, the Fourth Plan inherited a lot of difficulties. The foremost problem during this Plan period was inflationary pressure. The first signs of inflation appeared around 1972-73 but turned into a full-blown crisis in 1973-74 and continued unabated till September 1974. During this period inflation rose by 31.8 per cent. The worst part was that food grains and industrial raw materials accounted for about two-thirds of the price rise. The inflationary pressure appeared in the wake of drought in 1972-73 which was then followed by severe shortages in essential items and industrial inputs. During this period industrial production nearly came to a grinding halt. The inflation was added to by increased money supply in the market partly due to large deficit financing and partly due to increased liquidity because of expansion of bank credit to the commercial sector which encouraged speculation. The BoP situation worsened even more as food and other essential commodities and industrial inputs had to be imported when there was a fourfold increase in the international oil prices.


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