Economic planning in India began in 1950 with the setting up of the Planning Commission, inspired by the Soviet Union's state-planning model. India executed 12 Five-Year Plans before the system was restructured.

Visualizing the shifts in developmental focus across the historical Five-Year Plans of India.

Key Plans & Milestones

• First Five-Year Plan (1951-1956): Based on the Harrod-Domar Model. Focused primarily on agriculture, irrigation, and power projects. Major multipurpose dam projects (Bhakra-Nangal, Hirakud, Mettur) were started. It exceeded its growth target.
• Second Five-Year Plan (1956-1961): Based on the Nehru-Mahalanobis Model. Focused on rapid industrialization and heavy/basic industries. Three major state-owned steel plants were established: Bhilai (with USSR help), Durgapur (with UK help), and Rourkela (with West Germany help).
• Third Five-Year Plan (1961-1966): Directed towards self-reliant growth. It failed due to external shocks: Sino-Indian War (1962), Indo-Pak War (1965), and severe droughts. This led to Plan Holidays (1966-1969) during which annual plans were implemented.
• Fourth Five-Year Plan (1969-1974): Aimed at growth with stability. Major milestones: Nationalization of 14 commercial banks (1969) and the launch of the Green Revolution.
• Fifth Five-Year Plan (1974-1978): Focused on Garibi Hatao (removal of poverty) and self-reliance. It was terminated one year early in 1978 by the new Janata Party government, which implemented the Rolling Plan (1978-1980).
• Sixth Five-Year Plan (1980-1985): Focused on poverty alleviation and economic liberalization. Major development institutions like NABARD (1982) and EXIM Bank (1982) were established.
• Eighth Five-Year Plan (1992-1997): Launched after the economic crisis of 1991 and the introduction of LPG Reforms (Liberalization, Privatization, Globalization) under PM P.V. Narasimha Rao. Top priority was given to Human Resource Development (education, health, employment).
• Twelfth Five-Year Plan (2012-2017): The final plan in India's history. Its theme was "Faster, More Inclusive and Sustainable Growth".

On January 1, 2015, the Union Government replaced the 65-year-old Planning Commission with the newly formed NITI Aayog.

• Structure: Headed by the Prime Minister of India (ex-officio Chairperson). The Governing Council comprises Chief Ministers of all States and Lt. Governors of Union Territories.
• Ideology: Moves away from the centralized, top-down planning approach of the Planning Commission. NITI Aayog acts as a policy think-tank and promotes cooperative federalism, utilizing a bottom-up planning model.

Under Article 112, the President causes to be laid before Parliament the Annual Financial Statement (Budget) for each financial year. The budget is divided into:

• Revenue Budget: Consists of revenue receipts (tax revenues, non-tax revenues like interest, dividends) and revenue expenditures (interest payments, salaries, subsidies, defense maintenance - items that do not create assets or reduce liabilities).
• Capital Budget: Consists of capital receipts (borrowings, recovery of loans, disinvestment proceeds) and capital expenditures (investments in infrastructure, land acquisition, debt repayment - items that create assets or reduce liabilities).

Deficit Metrics

Deficits indicate gaps between government spending and receipts, crucial for CGL questions:

• Revenue Deficit: The excess of revenue expenditure over revenue receipts.
  Revenue Deficit = Revenue Expenditure - Revenue Receipts.
• Fiscal Deficit: The difference between the government's total expenditure and its total non-borrowed receipts. It reflects the total borrowing requirements of the government.
  Fiscal Deficit = Total Expenditure - (Revenue Receipts + Capital Receipts excluding Borrowings).
• Primary Deficit: Calculated by subtracting interest payments on past loans from the current fiscal deficit. It shows the government's borrowing needs excluding interest burdens.
  Primary Deficit = Fiscal Deficit - Interest Payments.