The Second Five-Year Plan, launched in 1956, built upon the successes of the first plan and aimed for even more ambitious goals.
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Growth: The plan achieved a 4.21% growth rate, slightly falling short of the target of 4.5%. Despite this, it was still a significant improvement compared to pre-independence levels and demonstrated continued economic progress.
Nehruvian Vision and the Mahalanobis Model:
Nehru's priorities: The plan reflected Prime Minister Nehru's vision for India's industrialization. He prioritized heavy industries, public sector undertakings (PSUs), foreign aid, long-term planning, and a top-down approach.
P.C. Mahalanobis Model: This model, formulated by economist P.C. Mahalanobis, emphasized heavy industry development as the engine for economic growth. The plan aimed to increase labor productivity, substitute imports of heavy goods, and shift labor from agriculture to industry.
Key Initiatives:
Industrial and Transport Plan: This ambitious plan aimed to establish a strong industrial base and develop a robust transportation network to support economic activity.
Other Initiatives: The plan also focused on education, healthcare, and social welfare, aiming for holistic development alongside economic growth.
Challenges Faced:
Foreign exchange shortage: The plan relied heavily on foreign aid, but obtaining sufficient forex became a major constraint.
Balance of payments (BOP) crisis: The trade deficit widened, putting pressure on the country's external finances.
Long gestation projects: Heavy industries often took years to become profitable, creating a long wait for returns on investment.
Deficit financing: The government resorted to deficit financing to fund the plan, leading to inflationary pressures.
Food shortage: Agricultural production couldn't keep pace with the growing population, leading to food shortages.
Inequality: The focus on heavy industries and urban development led to concerns about widening inequality between rural and urban populations.
The Second Five-Year Plan was a mixed bag. While it achieved significant progress in industrialization and infrastructure development, it also faced several challenges. The foreign exchange shortage, BOP crisis, and long gestation projects hampered the plan's full potential. Additionally, concerns about inflation, food security, and inequality emerged. Despite these challenges, the plan laid the foundation for India's continued industrial growth and laid the groundwork for future plans.