Hello aspirants,
Today’s revision capsule of PSIR optional preparation covers PLANNING AND ECONOMIC DEVELOPMENT. There are three 20-markers, nine 15-markers, and four 10-markers from this topic in last 12 years.
1. PLANNING AS A DEVELOPMENT STRATEGY
| Building-block | Core Idea | Voices & Texts |
| Definition | Planning = conscious choice of ends + means, weighing alternatives for fastest, cheapest attainment | Standard textbook line (Ghosh, Meier) |
| Why LDCs plan | Scarce resources, need for minimum social overhead capital, market failure, poverty targets | Amiya Bagchi, Prof. Sukhamoy Chakravarty |
| Soviet inspiration | 1928-37 Five-Year Plans convinced many nationalists (esp. Nehru) that “big push” works | Jawaharlal Nehru, P.C. Mahalanobis |
| Indigenous blueprints | – 1938 National Planning Committee (Nehru) - Bombay Plan (Tata-Birla et al., 1944) - People’s Plan (M. N. Roy, 1945) - Gandhian Plan (Shriman Narayan, 1944) | A. D. Shroff, J. C. Kumarappa, Mahatma Gandhi |
Constitutional hook: “Economic & Social Planning” placed in the Concurrent List during 1946 Cabinet-Mission talks—so both Union and States may legislate.
2. MIXED-ECONOMY COMPROMISE (1948 Industrial Policy Resolution)
- Public sector → “commanding heights” (basic & heavy industries, infrastructure, defence).
- Private sector → consumer goods & light industry, but under licences (Licence-Permit Raj).
- Regulatory tools → tariffs, import controls, MRTP Act 1969, tax incentives.
This three-way bargain matched Bagchi’s triad of (i) nationalist conservatives, (ii) technocrats, (iii) socialists—all agreeing on planning, if for different ends.
3. THE PLANNING COMMISSION (1950-2014): ORGANOGRAM & DEBATE
| Details | Applause | Brickbats | |
| Birth | Cabinet Resolution, March 1950—extra-constitutional staff agency. PM as ex-officio Chair. | Rapid mobilisation of scarce capital; Mahalanobis strategy for heavy industry | S. C. Dube: “super-cabinet”; ARC (1968) flagged overlap with ministries |
| Composition drift | From small “serious thinkers” → quasi-ministry with Ministers of State | “Economic Cabinet” (Asok Chanda) fostered inter-sectoral view | Nehru himself lamented its bloated bureaucracy |
| Centre–State frictions | Allocated Plan grants, sidelining Finance Commission | Backward states got assured funds | K. Santhanam: near-unitary working in a federation |
| Directive → Indicative | Post-1991 reforms: market pricing, fiscal deficit caps; Commission now think-tank + evaluator | Allowed PPPs, telecom boom, highways (Golden Quadrilateral) | Critics: neither had teeth nor autonomy; still micromanaged centrally |
2015 onward the body is replaced by NITI Aayog (policy think-tank with “co-operative & competitive federalism”), but the analytic DNA (five-year visioneering) remains.
4. LIBERALISATION & STRUCTURAL ADJUSTMENT (1991-on)
- Trigger: BoP crisis, Gulf-war oil shock, Soviet market collapse.
- IMF/World Bank SAP: devaluation, trade liberalisation, disinvestment, FDI caps raised.
- New Planning Modality:
- “Indicative targets, not physical allocations” (French model).
- Focus on infrastructure gaps, social sectors, poverty indices.
- World Bank study (1993) urged monitoring productivity & profitability, not merely expenditure.
5. RURAL TRANSFORMATION: LAND REFORMS TO GREEN REVOLUTION
5.1 Phase-I (1949-60) Abolition of Zamindari & Tenancy Reform
| Measure | Aim | Nationwide Outcome | Key Obstacles |
| Zamindari Abolition | Remove intermediaries, give tenants proprietary rights | ~20. million tenants became owners (per Planning Commission Eval. 1964) | Weak records, litigation, “personal cultivation” loophole |
| Tenancy Acts | Secure tenure, limit rent (1/4–1/6 of gross produce) | Success stories: Operation Barga (W. Bengal 1978) | Oral leases hard to prove |
| Land Ceilings | Redistribute surplus land | Effective only after 1972 National Guidelines; SC/ST priority | Benami transfers, high initial ceilings, state exemptions |
5.2 Phase-II (1951-70) Co-operative & Ethical Experiments
- Co-operative Farming Drive – Nagpur Resolution 1959; fizzled by Plan-III.
- Critique: Charan Singh, N. G. Ranga, Rajaji feared collectivism.
- Reality: “Bogus cooperatives” by landlords vs. poorly irrigated gov’t farms.
- Bhoodan / Gramdan – Acharya Vinoba Bhave (1951→60s).
- Moral land gift (~4 million acres pledged; less cultivable).
- Success pockets in tribal Orissa, Andhra. Faded after 1965.
5.3 Phase-III (1966-90) Green Revolution
| Component | Launch & Champions | Technological Package | Political-economic Effects |
| IADP & HYV | Lal Bahadur Shastri, C. Subramaniam, Indira Gandhi | Mexico-Philippines dwarf wheat & rice, fertilisers, tube-wells, credit | Food-grain ↑35 % (1968-71); India net-exporter 1980s |
| Institutional Support | Agricultural Prices Commission 1965 → MSP; Nationalised Banks 1969 | ||
| Critiques | Daniel Thorner, Wolf Ladejinsky – rich-farmer bias; G. S. Bhalla – diffusion later |
“Bullock Capitalists” – Lloyd & Susanne Rudolph label for emergent kulaks (Jats, Yadavs, Marathas, Reddys, Vokkaligas). Politically expressed via BKD → BKU, Shetkari Sanghatana, Karnataka Ryat Sangha.
6. SOCIAL CONSEQUENCES & POLITICAL MOBILISATION
| Beneficiary Bloc | New Vehicles | Counter-Currents |
| Rich Peasants / Kulaks | State-level farmer parties; decisive in coalition era (post-1989) | Anti-price-rise agitations (BKU, 1988-89), MSP demands |
| Small & Marginal Farmers | Credit co-ops, Panchayat empowerment | Rising inequality; wage employment still seasonal |
| Landless / Dalits | Naxalbari (1967), Land-grab movements (1970s), BSP politics | Partial land distribution; MGNREGS later (2005) addressed wage security |
7. KEY CRITIQUES & REFORM SUGGESTIONS
- “Unitary Planning in a Federal Polity” – K. Santhanam; urges devolving plan-making to states.
- ARC & later committees – keep Commission to formulation; execution by line ministries & states.
- Chakravarty Committee (1985) – monetary-fiscal coordination; curb populist deficit financing.
- Post-2015 NITI Aayog – outcome-based monitoring, SDG localisation, cooperative-competitive ranking of states.
8. SCHOLAR/COMMITTEE
| Scholar / Body | Classic Line / Contribution |
| P. C. Mahalanobis | Heavy-industry growth model (Plan-II) |
| Amiya Kumar Bagchi | Tri-coalition support for planning; “satisfactory vs. maximal growth” |
| Asok Chanda | Planning Comm. = “Economic Cabinet” |
| J. C. Kumarappa Committee (1949) | Tight definition of personal cultivation; urged co-ops |
| N. G. Ranga | Opposed ceilings; family farms best |
| Charan Singh | Peasant-centric agrarian policy; sceptical of co-ops |
| L. I. & S. H. Rudolph | “Bullock capitalists” thesis |
| G. S. Bhalla | Temporal diffusion of Green Revolution gains |
| World Bank (1993) | Shift Commission to productivity/ROI focus |
Takeaways
- Planning in India = hybrid of Soviet inspiration, Bombay-Plan capitalism, and Gandhian moral strands—fused into a mixed economy with public-sector primacy.
- Planning Commission steered scarce capital for three decades, but its extra-constitutional clout and centralising bias drew sustained criticism—hence the hand-off to NITI Aayog.
- Land reforms cut out intermediaries but stalled on ceilings; still, they laid groundwork for a dynamic middle peasantry.
- Green Revolution solved the food-grain constraint, birthed region/class asymmetries, and reconfigured rural politics around kulak power.
- Current credo: “Indicative, cooperative, competitive” planning—state sets broad goals (SDGs, climate, social inclusion); markets and states together chase them, with think-tank guidance and citizen pressure.
9. WHY POLICIES CHANGE: BoP SHOCKS + INTELLECTUAL SHIFTS
| BoP Crisis | Immediate Fix | Enduring Lesson | Key Voices |
| 1957-58 | Aid-India Consortium, export incentives (Plan III) | First proof that ISI must earn forex somewhere | B. R. Shenoy warned then of over-extended Plans |
| 1965-66 | 35 % rupee devaluation, Green Revolution kickoff | Food security beats aid‐dependence | C. Subramaniam, John P. Lewis (World Bank) |
| 1973-74 | IMF Oil Facility, push for ONGC exploration | Import diversification, energy self-reliance | K. N. Raj on “controlled openness” |
| 1980-81 | IMF EFF loan, NRI deposits | External commercial borrowing may backfire | Montek S. Ahluwalia—“borrowed growth” critique |
| 1990-91 | New Industrial Policy 1991, macro-stabilisation & structural reform (Narasimha Rao–Manmohan Singh duo) | Launch pad for tariff-QR dismantling & capital inflows | I. G. Patel, C. Rangarajan, Suresh Tendulkar |
10. THREE PHILOSOPHIES ABOUT THE STATE vs. THE MARKET
| 10ore Belief | Lightning-rod Texts / Scholars | |
| (A) Market-optimists | Perfect competition ⇒ Pareto Optimum (PO); government only sets initial endowments | F. A. Hayek, Milton Friedman |
| (B) “Yes, but…” skeptics | Imperfections exist; interventions usually mis-fire | Deepak Lal The Poverty of Development Economics (1983) |
| (C) Pro-intervention | State can resolve market failure—infrastructure, coordination, equity | Amartya Sen, Joseph Stiglitz, Ha-Joon Chang |
Two Welfare Theorems: (1) competitive markets → PO; (2) any PO reachable via lump-sum redistribution then markets. Planning advocates (Lange-Lerner-Taylor) said the state could imitate markets; Hayek countered with the “knowledge problem.”
11. INDIA’S INITIAL STRATEGY: IMPORT-SUBSTITUTING INDUSTRIALISATION (ISI)
- Intellectual spine: P. C. Mahalanobis, Sukhamoy Chakravarty, Jagdish Bhagwati (1966)—heavy-industry bias raises savings & self-reliance.
- Political economy: tiny domestic savings (<10 %), weak export prices ( Ragnar Nurkse on “vent for surplus” limits ), adverse land-man ratio ⇒ industry must lead.
- Policy kit:
- Licence-Permit-Quota Raj (IDRA 1951, MRTP 1969, FERA 1973)
- High tariffs (>400 %), quantitative restrictions (QRs), import licensing
- Public sector in “commanding heights”—steel, heavy machinery, petrochemicals
- Contrast with Latin America: they used TNCs in consumer durables; India used state capital for heavy goods (Bhagwati–Chakravarty 1969).
12. FROM AD‐HOC ADJUSTMENT TO SYSTEMIC LIBERALISATION (1966 → 1991)
| Trade / Industrial Tweaks | Running Critiques | |
| 1966-79 | Devaluation + export subsidies; Green-Rev success frees forex; yet ISI stays | Anne Krueger on rent-seeking; Little, Scitovsky & Scott (1970) on “biased protection” |
| 1980s | “Incremental liberalisation” — input import easing, 1985 Long-Term Fiscal Policy, 1988 Narasimham Committee on finance | Bhagwati & Srinivasan (1978, 1993)—high protection breeds inefficiency; Robert Wade holds NICs succeeded via disciplined export push, not laissez-faire |
| 1991 Big Bang | New Industrial Policy: industrial licensing scrapped (except 18 lines), MRTP asset limit gone; → Tariffs max ≈45 %, avg ≈20 %; QRs phased out; FDI & FII doors open | Rodrik & Rodríguez (2001): trade-growth link is conditional; Arvind Subramanian, Arvind Panagariya defend reforms; Jayati Ghosh warns of jobless growth |
13. POST-REFORM SCORECARD
| Sector | Pre-’91 Trend | Post-’91 Reality | Scholarly Reads |
| Manufacturing | 6–7 % avg growth; capacity under-use | Similar trend; TFP jump disputed | Virmani, Goldar vs. Nagaraj |
| Agriculture | 2.9 % “Green Rev” phase | Slowed to ~2 % in 1990s; later recovery uneven | Ashok Gulati, Mahendra Dev |
| Poverty | Head-count fell from 55 % (1973) → 36 % (1993) | Down to ~22 % by 2011 (Tendulkar line); pace slower in ’90s than ’80s | S. D. Tendulkar, Himanshu |
| Inequality (Gini) | Relatively stable till 1990 | Edges up (urban > rural); top 1 % share spikes | Thomas Piketty–Lucas Chancel India inequality study |
| Fiscal Health | Populist subsidies, PSUs over-manned | FRBM Act 2003 caps deficits; subsidy rationalisation debated | Bimal Jalan, Rathin Roy |
Regulatory turn: SEBI (1992), TRAI (1997), CERC, Competition Commission (2003) —new “referee state,” yet vulnerable to capture (Pranab Bardhan on “political economy of reforms”).
14. DEMOCRACY × DISTRIBUTION × GLOBALISATION
- Garibi Hatao (1971) pivoted policy discourse to poverty first.
- Reservations & targeted transfers (PDS, MGNREGA 2005, NFSA 2013) show state remains crucial for equity.
- Globalisation Dilemma:
- labour-intensive export scope, remittances, technology spill-overs.
- skill-biased demand raises wage inequality; capital mobility pressures labour standards.
- Dani Rodrik, Jeffrey Sachs, Raghuram Rajan frame the “trilemma” of deep integration, national sovereignty, and democracy.
15. SCHOLAR SNAPSHOT—WHO SAID WHAT?
| Scholar / Group | Memorable Finding / Proposition |
| Bhagwati & Chakravarty (1969) | Heavy-industry ISI can raise growth & self-reliance |
| F. A. Hayek | Central planner lacks dispersed information; markets signal it |
| Oskar Lange & Abba Lerner | “Trial-and-error pricing” lets socialist planner mimic market |
| Deepak Lal (1983) | Dirigisme hurts welfare; price mechanism should steer resources |
| Anne Krueger (1974) | Import licensing breeds rent-seeking (“Krueger rents”) |
| Bhagwati & Srinivasan (1978, 2002) | Outward orientation generally beats IS-only strategies |
| Rodrik & Rodríguez (2001) | Trade openness ≠ automatic growth; institutions matter |
| Tendulkar Committee (2009) | New poverty line capturing broader consumption basket |
| Piketty & Chancel (2017) | Post-1991 income gains concentrated at the top 1 % |
16. LESSONS & FORWARD AGENDA
- Efficiency vs. Equity is not automatic – Reforms must be paired with public goods: quality schools, primary health, and modern infrastructure.
- State’s role pivots – from producer/owner → facilitator, regulator, social-sector investor.
- Institutions need insulation – independent regulators, credible fiscal councils, and data-rich evaluation (echoing Stiglitz on transparency).
- “Just Growth” remains goal – high growth with poverty reduction, reduced regional disparity, and democratic voice.
India moved from a state-led ISI regime to a market-opening, rules-based architecture, yet true success now hinges on building capable public institutions that can spread opportunities widely—turning liberalisation into inclusive prosperity.
Scholars Index
Montek S. Ahluwalia | Amiya Kumar Bagchi | Pranab Bardhan | Jagdish Bhagwati | G. S. Bhalla | Acharya Vinoba Bhave | Ha-Joon Chang | Sukhamoy Chakravarty | Asok Chanda | Mahendra Dev | S. C. Dube | Milton Friedman | Indira Gandhi | Mahatma Gandhi | Ghosh | Ashok Gulati | F. A. Hayek | Himanshu | Bimal Jalan | J. C. Kumarappa | Anne Krueger | Wolf Ladejinsky | Deepak Lal | Oskar Lange | Abba Lerner | John P. Lewis | Little | P. C. Mahalanobis | Meier | Shriman Narayan | Jawaharlal Nehru | Ragnar Nurkse | K. N. Raj | Rajaji (C. Rajagopalachari) | N. G. Ranga | M. N. Roy | Rathin Roy | Ricardo Rodríguez | Dani Rodrik | Lloyd Rudolph | Susanne Rudolph | Scott | Scitovsky | Lal Bahadur Shastri | B. R. Shenoy | A. D. Shroff | Charan Singh | T. N. Srinivasan | Joseph Stiglitz | S. D. Tendulkar | Taylor | Daniel Thorner | Virmani | Robert Wade
Practice Questions
Question 1. How does NITI Aayog as a ‘policy think tank with a shared vision’ visualize the reorganization of planning in India? Justify your answer. [2023/15 m]
Question 2. The legacy of the Planning Commission still has a bearing on India’s development policies. Discuss. [2024/15 m]
Question 3. Examine the various causes of agrarian crisis in India. [2018/20m]
📌 Model answers drop this evening on the Telegram channel: https://t.me/psirbyamitpratap – keep notifications on.
See you tomorrow on Day 24. Keep practicing!
—Amit Pratap Singh & Team
A quick note on submissions of copies and mentorship
- 2025 Mains writers: Cohort 1 of O-AWFG started on 12 June and ATS on 15 June. The above practice set will serve as your revision tool, just do not miss booking your mentorship sessions for personalised feedback especially for starting tests. Come with your evaluated test copies.
- 2026 Mains writers – keep uploading through your usual dashboard. Act on the feedback and improve consistently.
- Alternate between mini-tests (O-AWFG) and full mocks (ATS) has been designed to tackle speed, content depth, and structured revision—line-by-line evaluation pinpoints your weaknesses and errors. Follow your PSIR O-AWFG & ATS schedule and use the model answers to enrich your content, as rankers recommended based on their own success.
