The term 'economy' is used to refer to a region's economic structure. The creation, distribution, and consumption of goods and services between two representatives make up the economic system. There are some issues related to the planning of the Indian economy but before discussing the issues of panning let’s understand what is the economy, Indian economy, and planning which is important for the UPSC examination.

Indian Economy in Pre-independence Period

• The history of India began in the prehistoric period, from 3500 BC to 1800 BC, with the emergence of the Indus Valley civilization, which flourished between 3500 BC and 1800 BC.
• The Indus civilization's economy appears to have been heavily dependent on trade, which was facilitated by technological advancements in transportation.
• Its people practiced agriculture, kept domesticated animals, produced sharp tools and weapons out of copper, bronze, and tin, and sold terracotta pots, beads, gold, and silver, colored gemstones like turquoise and lapis lazuli, metals, flints, seashells, and pearls.
• They used to travel by ship to Mesopotamia to conduct the gold, copper, and jewelry trade.
• The Mahajanapadas imprinted punch-marked silver coins around 600 BC. Trade activity was brisk, and cities grew rapidly during this time.
• When the Greek Seleucid and Ptolemaic empires ruled the Middle East around 300 B.C., the Maurya Empire (c. 321 -185 BC) united most of the Indian subcontinent.
• The political stability and military security allowed for the development of a single economic system, as well as enhanced trade and commerce and agricultural efficiency.
• In another 1500 years, India developed its classical peoples, who acquired tremendous amounts of wealth. Between the 1st and 17th centuries AD, India was estimated to have been the world's largest economy, controlling between one-third and one-fourth of global prosperity.
• India witnessed unprecedented prosperity in history during the Mughal Empire (1526–1858 AD). In the 16th century, India's gross domestic product was projected to be over 25.1 percent of the global economy.
• According to a study of India's pre-colonial economy, Emperor Akbar's treasury brought in £17.5 million a year in 1600 AD (compared to £16 million for the entire treasury of Great Britain two centuries later in 1800 AD). In 1600 AD, Mughal India's gross domestic product (GDP) was estimated to be around 24.3 percent of the world's second-largest economy. During this time, the Mughal Empire had expanded to encompass about 90% of South Asia and had instituted a standardized customs and taxation system.

Indian Economy – During British Rule

• From 1757, the British East India Company gradually established and increased its political authority in India. They spent the vast sums of money created by the provinces under their control on Indian raw materials, spices, and products.
• As a result, the continual inflow of bullion into India as a result of foreign trade came to an end. The Colonial government spent land revenue on wars in India and Europe, leaving less money for India's growth.
• India's economy shifted from being an exporter of processed goods for which it was paid in bullion to being an exporter of raw resources and a buyer of manufactured goods over the course of 80 years under colonial rule (1780-1860 AD).
• More specifically, in the 1750s, India exported fine cotton and silk to markets in Europe, Asia, and Africa; by the 1850s, raw materials, particularly raw cotton, opium, and indigo, accounted for the majority of India's exports.
• Under British colonial authority, India's economy was completely destroyed by cruel exploitation. At the time, India's population had become impoverished, suffering from food scarcity, widespread malnutrition, and a lack of education.

Indian Economy after Independence

• When India became independent from the colonial authority in 1950, the process of economic development began. India adopted a centralized planning system.
• The Five-Year Plans, which were changed in effect. In 1952, the first five-year plan for the development of the Indian economy was put in place.
• As an agricultural economy, India has made investments in irrigation, dam construction, and infrastructure development.
• The building of new enterprises, modern scientific and technological institutes, and the advancement of space and nuclear programs are all priorities for policymakers.
• The rate of economic growth accelerated from 1980 to 1990. The economy grew at a 5.5 percent yearly rate, or 3.3 percent per capita, from 1980 and 1989.
• Agriculture increased at a 3.6 percent annual rate while the industry grew at a 6.6 percent annual rate.
• High investment rates were a major role in the economy's growth. In the early 1970s, investment was around 19 percent of GDP, but by the early 1980s, it had risen to nearly 25%.
• Over the years, India has experienced a tremendous expansion in the services sector and contributed to spectacular progress in numerous fields of science and technology, and it now has a strong network of S&T institutions, a trained workforce, and an innovative knowledge base.
• India has already established itself as a manufacturing hub for small automobiles and engineering equipment.
• India is one of the world's most potential markets for food and agricultural products. India is the third-largest food producer in the world. Agriculture makes for around 16.1% of India's GDP. India has grown to become the world's largest milk producer, with annual milk production exceeding 100 million tonnes.

Economic Planning in India

• The process of thinking about and organizing the steps required to achieve the desired objective is known as planning. The formulation and management of a plan are what planning involves.
• Economic planning entails making decisions about resource allocation. Economic planning is a term that refers to the government's long-term strategies to coordinate and develop the economy.
• In India, economic planning began in 1950. It is necessary for the country's economic prosperity.

Need for Planning in an Economy

• An economic plan is important since a country's resources, whether natural or human, are limited.
• Due to a scarcity of resources, proper management at the production, distribution, and consumption levels is required.

Objectives of Economic Planning

• Economic growth: The goal of generating economic growth necessitates that real national income and per capita income grow at a set rate each year.
  • The measure of national income at a specific year's price or at a constant price is known as real national income.
  • The average income of persons in the economy is known as real per capita income.
• Increase in employment: Employment is defined as the participation of workers in a gainful economic activity such as the production of products and services.
  • Income is generated through the production process, which employs household-provided factors of production.
• Reduction in inequality of income: India is a country with a wide range of economic standards among its citizens. This suggests that India lacks consistency in terms of economic levels.
  • A major portion of India's population is classified as impoverished and belongs to the lower-income category, whereas a small percentage of the population is extremely wealthy.
• Reduction in poverty: Many people in the country do not even receive a single square meal every day. Poverty is exacerbated by a lack of jobs. Unequal distribution of national wealth and income exacerbates it.
  • Poverty is referred to as a stain on human dignity, and it has severely degraded India's international image.
  • India is not taken seriously by developed countries because of its inability to eradicate poverty.
  • To entirely eradicate poverty from the country, effective planning is required.
• Modernization of the economy: Because of India's weak industrial and service sectors, it was the largest contributor to the country's GDP at the time of independence and for many years afterward.
  • The occupational structure has remained tilted towards agriculture due to a lack of greater education and skill development among the populace.
  • To reverse this tendency, India's GDP structure must be changed by boosting the quality of its human resources and developing its industries and service sector.
  • This can be accomplished through economic modernization.
• Ensuring social justice and equality: Indian planning aspired to achieve a socialistic society as well. It can be accomplished by ensuring social fairness and equity for its citizens.

Issues relating to Planning

• The need for planning is essential. Decentralized planning is still in its early stages of development.
• The Planning Commission is not a legal entity. It has taken over the function of the Finance Commission.
• Frequently, the planning commission is unable to appreciate the reality on the ground. Unrealistic data about the poverty line, for example.
• The reach of centralized planning may be limited on the peripheral.
• Alliance politics have an impact on planning.
• It's not easy to plan for a population of 125 million people who are all different.
• There are a limited number of resources and funding accessible.
• There is a scarcity of visionary leadership and technological know-how.
• There is no suitable monetary mechanism in place to monitor the plan's implementation.
• India has not been able to entirely eradicate poverty despite more than sixty years of planning.
• Despite increased wealth and output, India's employment situation has remained stagnant.
• In India, widespread corruption in many government offices is a major source of concern. The average person has a difficult time getting things done without paying bribes.

Conclusion

Economic planning is thought to help in mobilizing and allocating resources in the most efficient way possible. The reduction of disparities, economic development, balanced regional growth, and reconstruction are all major goals of planning. Each five-year strategy is designed to achieve a certain goal. The steps toward achieving economic planning objectives are outlined in the five-year plan which was existing till 2017.