Second Five Year Plan (1956-1961)
The success of the First Five year plan boosted the confidence of the leaders. The agriculture growth target in the first plan was achieved, so government quickly started looking beyond agriculture. The second five-year plan focused on industry, especially heavy industry. The target of 25% Increase in the national income was set through rapid industrialization.
The second five year plan is based on so called Mahalanobis model. This was the USSR model indianized by PC Mahalanobis, the founder of Indian Statistical Institute and a close aide of Nehru. This model is known to have set the statistical foundations for state-directed investments and created the intellectual underpinnings of the license-raj through an elaborate input-output model. This Model suggested that there should be an emphasis on the heavy industries, which can lead the Indian Economy to a long term higher growth path. India’s second five year plan and Industrial policy Resolution 1956, which paved the way for development of Public Sector and license raj; were based upon this model.
- Steel mills at Bhilai, Durgapur, and Rourkela were established in second five year plan.
- Enhanced coal production and more railway lines were introduced in this plan.
- Atomic Energy Commission was formed in 1957 with Homi J. Bhabha as the first chairman.
- Tata Institute of Fundamental Research was established as a research institute.
- In 1957 a talent search and scholarship program was begun to find talented young students to train for work in nuclear power.
The second five year plan, based on socialistic pattern, had targeted increase of 25% in National Income by Rapid industrialization, however, achieved target was of only 20%. Further, per capita income grew by 8% only. Domestic production of industrial products was encouraged, particularly in the development of the public sector.
Critical Assessment of Second Five Year Plan
The second five year plan was a big leap forward and it laid a heavy emphasis on the heavy industries. During this plan period the Industry policy resolution was amended and the primary responsibility for development was left to the Public Sector. The private sector was more or less confined to the consumer industries only. The small and cottage industries remained sluggish during this plan. The imports increased and lot and this uncovered India’s Sterling Balances. The results were seen in the third plan when India was forced to devalue its currency twice.
Topics: Economic history • Economy • First five-year plan • Five-year plans • Five-year plans of China • Five-Year Plans of India • Grigory Feldman • Indian Statistical Institute • Mahalanobis model. • Planning • Public Sector • Second Five Year Plan
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