3rd Five Year Plan
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Introduction || Planning Commission
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Chapter 4:

In its scope and emphasis, each Five Year Plan embodies an assessment of the current economic and social situation and of the progress of the economy over a period of years and at the same time, it seeks to relate the next phase of development to the country's basic social objectives and the perspective of long-term economic growth. These latter have been set out in Chapters I and II. In drawing up the Third Plan the principal aims have been the following :

  1. to secure an increase in national income of over 5 per cent per annum, the pattern of investment being designed also to sustain this rate of growth during subsequent Plan periods ;
  2. to achieve self-sufficiency in foodgrains and increase agricultural production to meet the requirements of industry and exports;
  3. to expand basic industries like steel, chemicals industries, fuel and power and establish machine-building capacity, so that the requirements of further industrialisation can be met within a period of ten years or so mainly from the country's own resources;
  4. to utilise to the fullest possible extent the manpower resources of the country and to ensure a substantial expansion in employment opportunities; and
  5. to establish progressively greater equality of opportunity and to bring about reduction in disparities in income and wealth and a more even distribution of economic power.

2. The period of the Third Plan represents the first stage of a decade or more of intensive development leading to a self-reliant and self-generating economy. As a result of progress achieved during the First and the Second Plan, the foundations for rapid economic growth have been laid. India's economy is now much larger in size and in the range of its operations and has become both more dynamic and more complex. In all directions there are large and growing demands to be met. Considerable investments have also to be made in projects and programmes whose output will be available only in the course of the Fourth Plan. Thus, the Third Plan will call for the maximum rate of investment that can be achieved.

3. The general pattern of development followed in the Third Plan necessarily flows, in large part, from the basic approach and experience of the Second Plan. However, in some important respect it represents a wider view of the problems of development and calls both for more intensive effort and a greater sense of urgency. In particular, the Third Plan will be directed towards strengthening the agricultural economy, developing industry, power and transport and hastening the process of industrial and technological change, achieving marked progress towards equality of opportunity and the socialist pattern of society, and providing employment for the entire addition to the labour force. Inevitably, a plan of development with these aims will make far reaching demands on the nation. It is essential that the burdens of development during the Third Plan should be equitably distributed and, at each stage, the economic, fiscal and other policies adopted should bring about improvements in the welfare and living standards of the bulk of the people.

4. In the scheme of development during the Third Plan the first priority necessarily belongs to agriculture. Experience in the first two Plans, and especially in the Second, has shown that the rate of growth in agricultural production is one of the main limiting factors in the progress of the Indian economy. Agricultural production has, therefore, to be increased to the largest extent feasible, and adequate resources have to be provided under the Third Plan for realising the agricultural targets. The rural economy has to be diversified and the proportion of the population dependent on agriculture gradually diminished. These are essential aims if the incomes and levels of living of the rural population are to rise steadily and to keep pace with incomes in other sectors. Both in formulating and in implementing programmes for the development of agriculture and the rural economy during the Third Plan, the guiding consideration is that whatever is physically practicable should be made financially possible, and the potential of each area should be developed to the utmost extent possible.

With the establishment of democratic institutions at the district, block and village levels, responsibility and initiative in economic and social development in rural areas will rest increasingly with popular organisations—with Zila Parishads, Panchayat Samitis and Village Panchayats and with co-operatives. In the pattern of rural development, service cooperatives are to be organised on the basis of the village community as the primary unit. Cooperative farming, which is vital for rural progress, is in its essence a logical growth of cooperation and the approach of community development at the village level.

The Third Plan envisages concentrated effort in agriculture on a scale calling for the participation of millions of peasant families of agricultural workers in village production plans and in large scale programmes of irrigation, soil conservation, dry farming, afforestation and the development of local manurial resources. One of the main aims of the Plan, therefore, is to harness ihe manpower resources available in rural areas. This is to be achieved through the programmes of development for which the Plan provides, supplemented by extensive rural works programmes for utilising manpower resources in the villages, especially for increasing agricultural production.

5. In the Third Plan, as in the Second, the development of basic industries such as steel, fuel and power and machine-building and chemical industries is fundamental to rapid economic growth. These industries largely determine the pace at which the economy can become self-reliant and self-generating. Programmes for industrial development have been drawn up from the point of view of the needs and priorities of the economy as a whole, the public and the private sectors being considered together. However, while the private sector will have a large contribution to make, the role of the public sector in the development of the economy will become even more dominant. An expanding public sector, engaged specially in developing basic industries and producing large surpluses for development, will itself be one of the most important factors determining the rate at which the economy can grow. Moreover, the Third Plan will carry further the present efforts to build up small industries as a vital segment in ths industrial structure by promoting greater integration between large scale and small scale industries, spreading the benefits of industrialisation to small towns and rural areas and introducing improved techniques in the traditional rural industries.

6. Considerable emphasis, is being given in the Third Plan to the development of education and other social services. In a scheme of development which relies heavily on public understanding and response and on cooperation and voluntary effort, the significance of these programmes cannot be too greatly stressed. They are essential for ensuring a fair balance between economic and social development and, equally, for realising the economic aims of the Plan. Large technological changes and increases in productivity cannot be achieved without greatly strengthening the educational base of the community and improving living conditions. Some of the programmes included in the Plan for social services are directly linked with economic development, such as scientific research, technical education and the training of craftsmen, family planning, and the provision for housing and urban development. There are others which are indispensable on larger social considerations and, over a period, exert a powerful influence on the pace of economic progress, such as the expansion of facilities for education, control of diseases, development of health and medical services, award of scholarships, supply of drinking water in villages and towns, and the provision of welfare services for the less developed sections of the community. Within the limits of the resources available, these and other needs are being provided for in the Third Plan. However, it is obvious that in some directions, and more especially in education, in rural water supply and in family planning, as the Plan proceeds, every effort must be made to secure the largest measure of advance possible.

7. As has been explained earlier, until the economy has been strengthened considerably, it is difficult to provide work at an adequate level of remuneration to the entire labour force. A twofold approach has, therefore, to be adopted. In the first place, development programmes included in ths Plan have to be worked in such a way as to yield the maximum employment of which they are capable. They have to be implemented in an integrated manner and adapted to the actual requirements of each area. Secondly, in many fields, where manpower can be used more intensively, development programmes under the Plan can be speeded up and enlarged to the extent necessary in the later stages of the Plan. Action along these lines will be required specially in areas with heavy pressure of population and in which there is considerable under-employment. It is at present reckoned that development programmes in the Plan may provide additional employment to the extent of about 14 million as against the increase in the labour force during the Third Plan of about 17 million. The balance is proposed to be taken care of through large-scale rural works programmes, village and small industries and other means.

8. In preparing the Third Plan the requirements of the economy as a whole and in different sectors have been considered carefully. The Plan takes into account the results of development over the past ten years, the increased expectations of the people, the implications of growth in population and of large-scale industrialisation, and the need to mobilise the domestic resources of the country to the greatest extent possible. A plan of smaller dimensions than those envisaged would prove altogether inadequate. For achieving a cumulative rate of growth of over 5 per cent per annum, it will be necessary to undertake net investment to the extent of more than 14 per cent of the national income as compared to the present level of about 11.5 per cent. This involves raising the rate of domestic savings from about 8.5 per cent at present to about 11.5 per cent by the end of the Third Plan. Domestic resources will need to be supplemented in substantial measure by external assistance, primarily to finance the import of vital capital goods which cannot be immediately produced within the country and to provide a measure of support to the balance of payments. Dependence at this stage of development on external resources serves to emphasise the importance of policies and measures for import substitution and for increasing export earnings during the Third Plan.

9. In the scheme of production for the Third Plan care has been taken to provide for adequate supplies of foodgrains and other consumer goods. Nevertheless, it is inevitable that from time to time inflationary pressures may emerge. The Plan, therefore, postulates a price policy which will ensure that the movements of relative prices are in keeping with its priorities and targets and that the prices of essential goods which enter into the consumption of low income groups do not rise unduly. It will also be essential to restrain the consumption of relatively non-essential goods and services. Along with this, in planning the pattern of production, care must be taken to avoid the use of the limited resources available in the production of relatively non-essential goods and services. These measures are important not only for securing rapid development under conditions of economic stability but are also necessary for the mobilisation of the domestic resources and the foreign exchange needed for the successful implementation of the Third Plan. The extent to which the resources required for the Plan can be raised is in no small degree dependent on the manner in which it is implemented, especially the efficiency with which various projects are constructed and operated, the extent to which the available capacities in agriculture, industry, power, transport and elsewhere are utilised, and the intensive use of the country's manpower resources. The financial requirements of the Third Plan as described in the following Chapter are distinctly higher than the estimates of resources at present available. To be able to force the pace of development, there must be a continuing effort to mobilise financial resources on a large scale. Recent studies suggest that in several directions this larger effort is within the range of practical achievement.

10. In the Third Plan stress is being placed on the careful phasing of projects in relation to one another. At each stage in development, there should be a series of projects under execution, ensuring continuity both in planning and in the flow of benefits. Some measure of balance must be preserved between projects with long gestation periods and those which can be completed over relatively short periods. In phasing projects, there has to be strict regard to the requirements of physical planning, especially planning of manpower and the provision of materials and ancillary services including power and transport. In the related sectors of industry, transport and power, during each phase of development, close coordination in planning and execution is essential not only for new projects, but equally, for achieving rising levels of production from the existing plants. The programme of industry, along with power, transport, scientific research and technical education, included in the Third Plan, is conceived of as a continuous and integrated whole. Every effort has, therefore, to be made to initiate and complete within the shortest possible time schemes which will help to raise the potential for growth within the economy. Large projects take considerable periods, but in the early stages the investments required for them are of relatively small magnitude. By speeding up preparatory work on them, invaluable tune can be gained.

11. In the Third Plan, as in the Second, the plans of States have great importance for the rapid development of the national economy. Important national objectives, as in agriculture, education and other social services, and in the utilisation of rural manpower, can be realised only in the measure in which the plans of States are carried out successfully. They bear closely on the welfare of the people as a whole and, to a large extent, it is through them that a rise in the levels of living for the weaker sections of the community and for the less developed areas can be secured. With the development of large scale industries, specially of basic and heavy industries, State plans have to provide on a large scale for the development of power and technical education, for schemes of housing and urban development, and for measures to achieve closer integration of the rural with the industrial economy. In formulating the plans of States under the Third Plan and determining their size and patterns, to the extent possible, these considerations have been kept in view.

12. To a greater extent than in the past, during the Third Plan, the direction and management of the Indian economy will call for improved methods and machinery for planning and execution, better statistical and economic intelligence, greater appreciation of technological and other developments occurring in different fields, fuller knowledge of the country's potential resources and, generally, for more systematic analysis and research. For every large programme and every major project or group of allied projects, there is need for careful evaluation of progress. This is being provided for under the Third Plan. Along with it, over a wide area, improvements in statistical data must be secured, notably in the estimation of national income and of capital formation, in the statistics of agricultural and industrial production, distribution and employment, in vital statistics, and in the collection and study of data relating to consumer expenditure, costs of living and the distribution of income.

13. The programme of economic and social studies undertaken during the first two Plans, the results of which are now becoming available, was devoted in the main to investigations of conditions of migration and employment in cities, studies of land reform and farm management, surveys of cottage and small scale industries and evaluation of irrigation benefits, and to selected problems of social welfare and administration. To a limited extent, analytical studies on the broader aspects of the economy were also taken in hand. In the programme of research for the Third Plan, to be undertaken through universities and leading research institutions as well as by the Planning Commission and other agencies, a great deal of attention will need to be given to problems such as efficiency of investment in different sectors of the economy, pricing policies and techniques, foreign trade and the balance of payments, problems of organisation and administration in relation to planned development, problems of social change and social conflict, studies bearing on regional and urban development, and investigations into the working of programmes for land reform, cooperation, community development, rural electrification, small scale industries and others. Many of these studies will be of considerable value in the preparation of plans for long-term development. They will also greatly facilitate the realisation of the specific aims of the Third Plan and provide useful criteria for evaluating performance and shifting the lessons to be drawn from experience in different parts of the country.



14. In the course of the Third Plan, the nation sets out to achieve as much in five years as has been realised in the ten years of the First and the Second Plan. The task is large in magnitude, urgent, and of great significance for the present and the future. Its administrative implications are vast and call for the highest standards of efficiency attainable in every field of activity. Effective implementation requires the maximum mobilisation of resources, adaptation to changing needs, co-ordination and concentration of resources at every vital point, ability to anticipate difficulties and problems, readiness to seize upon favourable opportunities for growth and, above all, men of skill and knowledge and organisations attuned to the objectives of the Plan. A plan of development, however elaborate or precise, is at best a framework which sets broad patterns for action, for participation in the national endeavour, on the part of millions of people living and working under conditions of marked diversity. Its success rests on a variety of factors—on widespread understanding of the challenge and the burdens of development, on the release of new productive forces and increasing application of modern science and technology, on changes in outlook and motivation and, finally, on a climate of confidence that rapid economic development is the means both to social justice and to wider economic opportunity. These are among the principal conditions for achieving fully the advance envisaged in the Third Five Year Plan.

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