Planning in India Plan Holiday (1966-69)

By the Third Five Year Plan (1961-66), Indian policy makers were convinced that the Indian economy had entered the ‘take-off’ stage and that the earlier two Plans had created enough infrastructures to serve as the perfect launch pad. Thus the Third Plan aimed at creating a self-reliant and self-generating economy. The Third Plan in accordance with the dominant mood, accorded highest priority to agriculture along with emphasis on basic industries.
But the Indian Plans from 1951 to 1966 (from the commencement of the First Plan till the end of the Third Plan) proved to be over-ambitious and were visited by a number of problems and failures. The plans fell short of fulfilling the aspiration of the common masses. The Third Plan was mired by inflation, armed conflicts and droughts. The failure of this Plan led to an imbalance in the economy. Despite big investments during the three Plans the living standards of the poor could not be raised and poverty and inequity in distribution of state resources remained stark. Unemployment increased from 5.3 million in 1956 to about 9.6 million in 1966.
Consequently, the period between 1966 and 1969 marked the shift from a ‘growth approach’ to a ‘distribution from growth approach’. Looking at the failures and pitfalls the planners suspended the impending Fourth Plan, which was due in 1966, until 1969 for a revision of objectives and targets. This came to be called as the ‘Plan Holiday’ extending from 1 April 1966 to 31 March 1969.


Reasons for Plan Holiday

  •  Failure of the Third Five Year Plan.
  •  Crisis in agriculture.
  •  Serious food shortage.

Thus, the situation necessitated:

  •  Prioritisation of Agriculture during the three Annual Plans.
  •  Extension of ‘Green Revolution’

a. Widespread distribution of High-Yielding Varieties (HYV) of seeds
b. Extensive use of chemical fertilizers
c. Expansion of irrigation and soil conservation was put into action.

  •  The three Annual Plans tried to tide over the failure of the Third Five Year Plan. They were designed to absorb the shock dealt to the economy during the Third Plan and thus make way for further Planning.

Annual Plan Outlay

  •  1966-67: Rs. 2,081 crores; it was further increased to Rs. 2,221 crores.
  •  1967-68: RS. 2,246 crores.
  •  1968-69: Rs. 2,377 crores.
Industrial Growth Rate
  •  1966-67: 2.8 per cent
  •  1967-68: 2.2 per cent
  •  1968-69: 7 per cent

Growth Rate in GDP

  •  1966-67: 1.1 per cent
  •  1967-68: 9.9 per cent
  •  1968-69: 10.2 per cent

Main Objectives of the Annual Plans 

  •  To remove the strains on the economy put by the failure of the Third Plan owing to unforeseen events like wars.
  •  To register decent growth without inflationary pressure on the people.
  •  To use the already created infrastructure.

Minor  Irrigation  Programme

The three Annual Plans registered impressive growth in rural electrification. In the earlier Plans rural electrification was emphasised and it was assumed that rural electrification would lead to extensive use of electricity. A major shift in policy came with the end of the Third Five Year Plan owing to a slump in agricultural production. There emerged a necessity to focus on small scale irrigation for stabilising agricultural production. To promote this, the National Development Council (NDC) – the highest decision making body on development, decided to focus on pump set electrification from rural electrification. Consequently, the source of irrigation was established in the very fields of farmers. A positive change in crop output was registered. A Rural Credit Review Committee was established by the Reserve Bank of India (RBI) to review the scope of rural credit with special reference to agriculture. The Committee underscored the potential of small scale irrigation from ground and surface water and supported the mechanical drawing of water using electricity. The Rural Electrification Corporation Ltd. (REC) was instituted by the government in July 1969. During the three Annual Plans, the number of villages electrified went up from 45,144 to 73,732. The number of electrified pump sets jumped from 513,000 to 1,089,000, an addition of 576,000.


Nariman Committee (1969)

Lead Bank Scheme
‘Lead Bank Scheme’ was formulated by the Gadgil Study Group headed by Prof. D.R. Gadgil on the ‘Organisational Framework for the Implementation of the Social Objectives’, which submitted its report in October 1969. The group pointed out that commercial banks did not have adequate rural penetration and were in general not oriented towards rural India. Thus the credit needs of the rural society in general and agriculture in particular could not be adequately addressed. The Reserve Bank of India appointed a Committee (Nariman Committee) under the Chairmanship of Shri F.K.F. Nariman. The Committee endorsed the idea of area approach forwarded by the Study Group. It recommended that in order to enable the public sector banks to discharge their social responsibilities, each bank should concentrate on certain districts where it should act as a ‘Lead Bank’.


Planning Policies Re-evaluated

Three Annual Plans decided the growth trajectory of the country between 1966 and 1969. This was the period during which policies of planning were re-evaluated. Though the immediate goal was to be growth in agricultural output, exports too were encouraged. The major objectives of previous plans were involved and continued as goals and aims with a proper planning continuation. During these 3 years about Rs. 1,624 crores (24 per cent of the total outlay) were allocated for agriculture and community development. The monsoon was favorable during the last 2 years of the annual plans. The annual growth rate of agriculture reached 6.9 per cent per annum and the food grains production increased from 76 MT (Metric Tons) in 1966-67 to 95.1 MT in 1967-68 and 98 MT in 1968-69.


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