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Mahalanobis Plan

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  • Last Updated : 22 Aug, 2022
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India, in 1947, adopted the mixed economy system and followed the philosophy of planned development. This gave rise to the first five-year plan for India in 1951. After the success of the first five-year plan, the second five-year plan was introduced — the Mahalanobis plan. Statistician Prashant Chandra Mahalanobis was the key person to develop the Mahalanobis plan and allocate resources in the productivity and investment sector to optimize these sectors in the long run. 

G.A. Feldman 1928 was the economist in the Soviet era and was the man responsible for the idea behind the Mahalanobis Plan, from which Indian Statistician Prasanta Chandra Mahalanobis took inspiration. The Neo Marxist model was the initial idea developed by Feldman in 1928.

What is the Five-Year Plan?

  • In the year 1928, Joseph Stalin, a Soviet political leader, and a Georgian Revolutionary introduced the first five-year plan in the Soviet Union that focused on developing heavy industry and agriculture.
  • A five-year plan is an integrated and centralized national economic program. On 9th July 1951, the first Prime Minister of India, Jawaharlal Nehru, presented to the Indian Parliament the first five-year plan. The government of India adopted this planning model to assist them in effectively utilizing resources in a balanced manner.
  • The first five-year plan targeted the GDP at 2.1% for the year, but India was already on a roll and recorded a growth of 3.6% that year.
  • The second five-year plan targeted the Industrial growth of the country and was implemented in the period from April 1956 to March 1961. This plan was also known as the Mahalanobis Plan as it was the brainchild of Statistician Prashant Chandra Mahalanobis.
  • The Planning Commission, from 1951 to 2014, developed, executed, and monitored the five-year plan of India. In 2015, Prime Minister Narendra Modi laid the five-year plan system to rest.

Mahalanobis Plan:

India saw some rays of sunshine through its first five-year plan, which focused on the primary sector. The plan was designed around the Harrod-Domar Model with a motto to develop the country’s agricultural sector and resolve the issues faced during partition and the second world war. The plan envisioned rebuilding the economy of the country post-independence. By the end of 1956, major educational institutes like the Indian Institute of Technology (IIT) were built, and a few steel plant contracts were signed.

The introduction of technology and education related to technology built the core of the second five-year plan. Development of the public sector and assisting the rapid Industrialisation was the main objective of the second five-year plan.

The Mahalanobis plan was used for resource allocation for investment and productivity to maximize the long-running economy. Rs. Forty-eight billion was allocated for implementing the second five-year plan. India during this time had economic stability, and even foreign loans were brought in to implement the Mahalanobis plan (the second five-year plan). The projected growth rate for the second five-year plan was 4.5%, but the target was unable to be achieved, and India recorded a growth rate of 4.3%.

The Major Focus Area of the Second Five-Year Plan:

A. Rapid Industrialization:

To achieve this, the Mahalanobis plan focused on developing heavy and basic industries. Hydroelectric power projects were introduced, coal production was increased, and more rail routes were added. Tata Institute of Fundamental Research and Atomic Energy Commission of India emerged as a research institute in 1957.

B. Development of a Strong Public Sector:

For long-run economic growth, the Mahalanobis plan introduced a public sector that aided employment, increased National income, and established socialistic patterns of society.

Conclusion:

The second five-year plan aimed to develop the public sector and aid India’s rapidly growing Industrialisation. The Mahalanobis plan successfully achieved the plan set for Industrialization by introducing major rail routes for transport, institutions for industrial education, hydroelectric power projects, and research institutes to educate young talent on nuclear power and social service. The foreign exchange crisis, growing population, and rising prices led to the Mahalanobis plan not achieving its goal and landing at a GDP of 4.3%.

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