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Q70 (IAS/2019) Economy › Growth, Development, Poverty & Employment › Economic planning India Official Key

With reference to India's Five-Year Plans, which of the following statements is/are correct? 1. From the Second Five-Year Plan, there was a determined thrust towards substitution of basic and capital good industries. 2. The Fourth Five-Year Plan adopted the objective of correcting the earlier trend of increased concentration of wealth and economic power. 3. In the Fifth Five-Year Plan, for the first time, the financial sector was included as an integral part of the Plan. Select the correct answer using the code given below.

Result
Your answer: —  ·  Correct: A
Explanation

The correct answer is option A (statements 1 and 2 only).

**Statement 1 is correct:** The Second Five-Year Plan laid great emphasis on the establishment of heavy industries, with the main[1] thrust of industrial development on iron and steel, heavy engineering, lignite projects, and fertiliser industries.[1] The government developed basic heavy industries for the manufacture of producer goods (capital goods) to strengthen the foundation of economic independence.[2] This clearly indicates a determined thrust towards substitution of basic and capital goods industries.

**Statement 2 is correct:** From the Fourth Plan (1969–74) the emphasis was on poverty alleviation, so that social objectives were introduced into the planning exercise.[3] It laid especial emphasis on improving the condition of the less privileged and weaker sections of society through the provisions of employment and education.[4] This demonstrates the objective of correcting concentration of wealth and economic power.

**Statement 3 is incorrect:** The documents provided do not contain any information about the financial sector being included as an integral part of the Fifth Five-Year Plan for the first time, making this claim unsupported by the available sources.

Sources
  1. [1] Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 11: Industries > Second Five-Year Plan (1956–61) > p. 2
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 2nd Five Year Plan (1956 - 61) > p. 207
  3. [3] History , class XII (Tamilnadu state board 2024 ed.) > Chapter 9: Envisioning a New Socio-Economic Order > 9.4 Five Year Plans > p. 125
  4. [4] Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Fourth Five-Year Plan (1969–74) > p. 5
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Q. With reference to India's Five-Year Plans, which of the following statements is/are correct? 1. From the Second Five-Year Plan, there was…
At a glance
Origin: Mixed / unclear origin Fairness: Moderate fairness Books / CA: 6.7/10 · 0/10

A classic mix of static textbook knowledge (Statement 1 & 2) and logical elimination (Statement 3). Statement 1 is the definition of the Mahalanobis model found in every basic economy text. Statement 2 requires connecting the political slogan 'Garibi Hatao' and the socialist turn of the late 60s to the 4th Plan. Statement 3 is a 'chronology trap' designed to be eliminated.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Did India's Second Five-Year Plan emphasize a determined thrust toward substitution of basic and capital goods industries?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 2nd Five Year Plan (1956 - 61) > p. 207
Presence: 5/5
“The leading economists of India were supporting the Calcutta school of thought and ultimately this model got accepted for building the 2nd Five Year Plan document. This model was, among other things, an evocation of the old nationalist model of swadeshi, or self-reliance. The government shall develop the basic heavy industries for the manufacture of producer goods (capital goods) to strengthen the foundation of economic independence. And the household sector, village and cottage industries shall focus on the production of consumption goods.”
Why this source?
  • Directly prescribes development of basic heavy industries to manufacture producer (capital) goods as part of the Plan's model.
  • Frames the industrial strategy in terms of self-reliance (swadeshi) with household/village industries focused on consumption goods and heavy industries on capital goods.
Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 11: Industries > Second Five-Year Plan (1956–61) > p. 2
Presence: 5/5
“Great emphasis was laid on the establishment of heavy industries during the Second Five-Year Plan. The second industrial policy was announced in 1956. The main thrust of industrial development was on iron and steel, heavy engineering, lignite projects, and fertiliser industries. Moreover, there was an emphasis on the expansion of existing steel plants, like Jamshedpur, Kulti-Burnpur, and Bhadravati. Three new iron and steel plants were located at Bhilai, Durgapur, and Raurkela. The Chittranjan Locomotive Workshop, the Hindustan Ship-building Yard (Vishakhapatnam), the Sindri Fertiliser Factory, and Hindustan Machine Tools Ltd. (HMT) at Bangalore were expanded. Many of the targets, however, could not be achieved because of the war with China in 1962 and the failure of monsoon over greater parts of the country.”
Why this source?
  • States great emphasis on establishment and expansion of heavy industries (iron & steel, heavy engineering, fertilisers) as the main thrust.
  • Lists concrete public-sector projects and new steel plants (Bhilai, Durgapur, Raurkela) illustrating capital-goods focus.
Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Second Five-Year Plan (1955–56 to 1960–61) > p. 4
Presence: 5/5
“The main focus of the Second Five-Year Plan was on: • (i) rapid industrialisation and establishment of basic and heavy industries; to increase production of iron and steel, and chemical fertilisers,• (ii) an increase of 25 % in the national income,• (iii) to create more employment opportunities, and• (iv) to reduce inequalities in income and wealth.”
Why this source?
  • Identifies rapid industrialisation and establishment of basic and heavy industries as the Plan's main focus.
  • Specifies targets such as increasing production of iron, steel and chemical fertilisers consistent with capital-goods substitution.
Statement 2
Did India's Fourth Five-Year Plan adopt an objective of correcting the earlier trend of increased concentration of wealth and economic power?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Fourth Five-Year Plan > p. 691
Presence: 4/5
“So the private sector needed to be regulated. By the end of the 1960s, the liberalisation process had been reversed, and India's policies could be called as 'protectionist'. The government intended that India should be free of dependence on foreign aid and emphasise on increasing agricultural and industrial production. The objectives of the Fourth Plan included: increasing the income of the rural population and augmenting the supply of food; making efforts towards maximising production; attaining stability of prices; making policies to encourage mixed economy; bringing about human resource development, especially in rural areas. It was intended to provide for the minimum needs of the community through a rural works programme.”
Why this source?
  • Specifically calls for regulation of the private sector and promotion of a mixed economy—measures that counter unchecked private concentration of economic power.
  • Lists objectives such as increasing rural incomes and providing minimum needs, which target redistribution and reducing economic concentration.
Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Fourth Five-Year Plan (1969–74) > p. 5
Presence: 4/5
“The Fourth Plan was aimed at accelerating the tempo of development and reducing fluctuation in agricultural production as well as the impact of uncertainties of foreign aid. The main objectives of this plan were: • (i) growth with stability, and• (ii) progressive achievement of self reliance. It laid especial emphasis improving the condition of the less privileged and weaker sections of society through the provisions of employment and education. The average annual growth rate during the Fourth Plan was 3.4% against the target of 5.7%.”
Why this source?
  • Emphasises improving the condition of the less privileged and weaker sections through employment and education—directly addressing unequal distribution of income and power.
  • Frames plan goals as growth with stability and progressive self-reliance, showing an inclusive-development orientation rather than privileging concentrated interests.
History , class XII (Tamilnadu state board 2024 ed.) > Chapter 9: Envisioning a New Socio-Economic Order > 9.4 Five Year Plans > p. 125
Presence: 4/5
“The first two Plans had set fairly modest targets of growth at about 4%, which economists described as the "Hindu rate of growth". These growth rates were achieved so that the first two Plans were considered to have been successful. The targets in subsequent plans were not achieved due to a variety of factors. From the Fourth Plan (1969–74) the emphasis was on poverty alleviation, so that social objectives were introduced into the planning exercise. The economy was liberalised during the Eighth Five Year Plan (1992–97). Since then, the growth rates have been in excess of 7% (except for a slowdown in the Ninth Plan).”
Why this source?
  • States that from the Fourth Plan the emphasis was on poverty alleviation, introducing social objectives into planning—an explicit move to correct prior inequities.
  • Marks a shift in planning priorities toward redistribution and social welfare, implying intent to reduce concentration of wealth.
Statement 3
Did India's Fifth Five-Year Plan include the financial sector as an integral part of the Plan for the first time?
Origin: Weak / unclear Fairness: Borderline / guessy
Indirect textbook clues
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.5 Development Financial Institutions (DFIs) > p. 134
Strength: 5/5
“RBI was entrusted with the task of developing an appropriate financial architecture through institution building so as to mobilize and direct resources to preferred sectors as per the (Five Year) Plan priorities. While the reach of the banking system was expanded to mobilize resources and extend working capital finance on an ever-increasing scale, to different sectors of the economy, the DFIs were established mainly to cater to the demand for longterm finance by the industrial sector. The first DFI established in India in 1948 was Industrial Finance Corporation of India (IFCI) followed by setting up of State Financial Corporations (SFCs) at the State level after passing of the SFCs Act, 1951.”
Why relevant

Explains that RBI and Development Financial Institutions (DFIs) were tasked with building financial architecture and that DFIs (IFCI, SFCs) were established in 1948–1951 to mobilize long‑term finance as per Five-Year Plan priorities.

How to extend

A student could note that financial-sector institution building predates the Fifth Plan, so they should check earlier Plans (First/Second) for explicit inclusion of finance as a Plan priority.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > Planning in India > p. 203
Strength: 4/5
“India's five-year plans did not spell out how much of each and every good and service is to be produced. This is neither possible nor necessary (the former Soviet Union tried to do this and failed). It is enough if the plan is specific about the sectors where it plays a commanding role, for instance, power generation and irrigation, while leaving the rest to the market. Planning Commission used to recommend funds for various developmental expenditures including schemes in every Five-Year Plan.”
Why relevant

States that Five-Year Plans specify sectors where the Plan plays a 'commanding role' (e.g., power, irrigation) and that Planning Commission recommends funds for various developmental expenditures across Plans.

How to extend

A student can apply this rule to check whether the Fifth Plan explicitly lists the financial sector among 'commanding role' sectors compared with earlier Plans.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > Types of Planning > p. 204
Strength: 3/5
“This long-term plan is called 'perspective plan'. For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but since the launch of the Ninth Plan in 1997, the emphasis on the public sector became less pronounced and the planning shifted to more of indicative in nature. After the 12th Five-Year Plan in 2012-17, Govt. did not bring any new plan and finally Planning Commission was abolished and NITI Aayog was established in January 2015.”
Why relevant

Notes that the first eight Plans emphasised a growing public sector and massive investments in basic/heavy industries—indicating a consistent early-planning focus on public investment rather than a late addition of financial-sector emphasis.

How to extend

A student could compare the Fifth Plan's stated priorities with those of earlier Plans to see if the financial sector was newly emphasised or part of an ongoing public‑sector strategy.

Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Fifth Five-Year Plan > p. 692
Strength: 3/5
“The Fifth Five-year Plan (1974-1979) did not last its full term, but its programmes mostly coincided with the Emergency period. The plan was targeted at reducing poverty through addressing the consumption needs of the poor and by enacting a range of socio-economic reforms. This was more or less an aspect of the Twenty Point Programme. With the Emergency in place, the economic programmes could be implemented forcefully. Indeed, with the economy growing at the rate of 9 per cent in 1975–76 alone, the Fifth Plan was the first plan during which the per capita income grew by over 5 per cent.”
Why relevant

Describes the Fifth Plan's specific objectives (poverty removal, higher savings, self‑reliance) and socio‑economic reform context (Twenty Point Programme), which imply policy measures that could involve financial‑sector interventions.

How to extend

A student might investigate whether measures to raise domestic savings or implement socio‑economic reforms in the Fifth Plan included explicit financial‑sector components, distinguishing reform measures from formal inclusion of the sector in Plan structure.

Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Fifth Five-Year Plan (1974–78) > p. 6
Strength: 2/5
“The Fifth Five-Year Plan was formulated against the backdrop of severe inflationary pressure. The plan proposed to achieve two main objectives: (i) removal of poverty, and (ii) attainment of self reliance through promotion of higher rate of growth, better distribution of income and very significant step-up in the domestic rate of saving. The plan targeted an annual growth rate of 5.5% in national income while the actual achievement was only 5%.”
Why relevant

Sets the Fifth Plan's macro goals (poverty reduction, higher savings, growth targets), linking Plan objectives to outcomes that often require financial mobilisation and policy instruments.

How to extend

A student could inspect whether the Fifth Plan paired these macrogoals with institutional or financial‑sector policy prescriptions, or whether such prescriptions appeared earlier in other Plans.

Pattern takeaway: UPSC loves 'First Time' statements in history/economy questions—they are usually false. The exam tests your grasp of the *sequence* of economic evolution (Nationalization -> Poverty Alleviation -> Liberalization) rather than obscure document clauses.
How you should have studied
  1. [THE VERDICT]: Manageable. Statements 1 and 2 are standard static GK covered in Vivek Singh/Ramesh Singh. Statement 3 is a logical trap. Source: Standard Indian Economy Textbooks.
  2. [THE CONCEPTUAL TRIGGER]: Evolution of Five-Year Plans (FYPs) and their specific 'Theme/Slogan' vs 'Actual Outcome'.
  3. [THE HORIZONTAL EXPANSION]: 1st Plan (Harrod-Domar, Agri) -> 2nd Plan (Mahalanobis, Heavy Ind) -> 3rd Plan (Self-reliance, failed due to wars) -> Plan Holiday (1966-69, Green Rev) -> 4th Plan (Growth with Stability, MRTP Act) -> 5th Plan (Garibi Hatao, 20-Point Prog) -> Rolling Plan (1978-80, Janta Govt).
  4. [THE STRATEGIC METACOGNITION]: Do not memorize Plan documents. Instead, map the 'Political Era' to the 'Economic Goal'. Nehru (1950s) = Industry/Science. Indira (late 60s/70s) = Redistribution/Nationalization. This timeline logic solves Statement 2 and 3 without rote learning.
Concept hooks from this question
📌 Adjacent topic to master
S1
👉 Mahalanobis model (capital-goods strategy)
💡 The insight

The Mahalanobis planning model prioritized capital-goods industries and guided the Second Plan's emphasis on heavy/basic industry for self-reliant growth.

High-yield for UPSC: explains the theoretical rationale behind policy choices in the 1950s and connects to questions on planning models, industrial strategy and public-sector priorities. Mastery helps answer 'why' the state prioritized capital goods and evaluate outcomes.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 2nd Five Year Plan (1956 - 61) > p. 207
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > There were certain flaws with our socialism. > p. 209
🔗 Anchor: "Did India's Second Five-Year Plan emphasize a determined thrust toward substitut..."
📌 Adjacent topic to master
S1
👉 Import Substitution Industrialization (ISI)
💡 The insight

ISI was the broader strategy that encouraged protection and domestic development of basic and capital goods industries under early Five-Year Plans.

Essential for UPSC: links trade policy to industrialisation outcomes; useful for comparative questions on inward vs outward strategies, and for assessing long-term effects like inefficiency and technological stagnation.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > 4. Import Substitution Industrialization (ISI) > p. 213
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 6: Economic Planning in India > Achievements > p. 142
🔗 Anchor: "Did India's Second Five-Year Plan emphasize a determined thrust toward substitut..."
📌 Adjacent topic to master
S1
👉 Public-sector-led heavy industrialisation
💡 The insight

The Second Plan operationalized capital-goods substitution through large public-sector projects (steel plants, HMT, shipbuilding) and expansion of existing heavy industries.

Valuable for UPSC: ties to topics on role of state, infrastructure, regional development and achievements/limitations of planning. Enables answers on project-level examples and policy implications.

📚 Reading List :
  • Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 11: Industries > Second Five-Year Plan (1956–61) > p. 2
  • Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Achievements of Five-Year Plans > p. 11
🔗 Anchor: "Did India's Second Five-Year Plan emphasize a determined thrust toward substitut..."
📌 Adjacent topic to master
S2
👉 Poverty alleviation as an explicit Five-Year Plan objective
💡 The insight

The Fourth Plan shifted planning priorities to poverty alleviation and social objectives, making redistribution a central goal.

High-yield for UPSC because questions often ask how planning priorities evolved; links planning history to social policy and welfare measures. Mastering this helps answer comparative questions on plan objectives and shifts from growth-only to inclusive development.

📚 Reading List :
  • History , class XII (Tamilnadu state board 2024 ed.) > Chapter 9: Envisioning a New Socio-Economic Order > 9.4 Five Year Plans > p. 125
  • Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Fourth Five-Year Plan (1969–74) > p. 5
🔗 Anchor: "Did India's Fourth Five-Year Plan adopt an objective of correcting the earlier t..."
📌 Adjacent topic to master
S2
👉 State regulation of private sector and mixed-economy orientation
💡 The insight

The Plan called for private-sector regulation and promotion of a mixed economy, tools used to check concentration of economic power.

Important for questions on economic policy and role of the state; connects to public vs private sector debates, industrial policy, and measures to curb monopoly/inequality. Helps tackle questions on policy instruments used by planners.

📚 Reading List :
  • Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Fourth Five-Year Plan > p. 691
🔗 Anchor: "Did India's Fourth Five-Year Plan adopt an objective of correcting the earlier t..."
📌 Adjacent topic to master
S2
👉 Targeting weaker sections via employment and education
💡 The insight

The Plan emphasised improving conditions of less privileged groups through employment and education to reduce inequality.

Useful for answering questions on social justice and inclusive growth frameworks; links planning to human-development interventions and poverty alleviation strategies, enabling analysis of policy impact and program design.

📚 Reading List :
  • Geography of India ,Majid Husain, (McGrawHill 9th ed.) > Chapter 15: Regional Development and Planning > Fourth Five-Year Plan (1969–74) > p. 5
  • Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Fourth Five-Year Plan > p. 691
🔗 Anchor: "Did India's Fourth Five-Year Plan adopt an objective of correcting the earlier t..."
📌 Adjacent topic to master
S3
👉 Development Financial Institutions (DFIs) and early banking role
💡 The insight

DFIs were established from 1948 and the RBI was assigned building a financial architecture to channel resources for Plan priorities, showing the financial sector was an active planning concern in the 1950s.

High-yield for questions about planning-era institutional architecture: explains how industrial finance and long-term credit were organised, links to industrial policy and public sector expansion, and helps answer chronology questions about when financial institutions became part of planning. Useful for questions on institutional roles, sequencing of reforms, and sectoral resource mobilisation.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.5 Development Financial Institutions (DFIs) > p. 134
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 6: Indian Economy [1947 – 2014] > Planning in India > p. 203
🔗 Anchor: "Did India's Fifth Five-Year Plan include the financial sector as an integral par..."
🌑 The Hidden Trap

The 'Rolling Plan' (1978-80). UPSC often asks about the 5th Plan's abrupt end. The Janta Government terminated the 5th Plan a year early and introduced the Rolling Plan concept (Gunnar Myrdal), which was later rejected by the Congress in 1980.

⚡ Elimination Cheat Code

Apply the 'Chronology Check'. Statement 3 claims the financial sector was included for the *first time* in the 5th Plan (1974-79). Recall that Bank Nationalization happened in 1969 (during the 4th Plan era) specifically to align credit with planning goals. If banks were already nationalized to serve the Plan, the sector was integral *before* the 5th Plan. Thus, S3 is false.

🔗 Mains Connection

Connect the 2nd Plan (Heavy Industries) to GS1 Geography (Location of Industries). The establishment of Bhilai, Rourkela, and Durgapur steel plants wasn't just economics; it was a deliberate 'Regional Development' strategy to industrialize tribal belts, linking to GS2 Social Justice.

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SIMILAR QUESTIONS

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