Five Year Plans, LPG and Industrial
Economics - Economics is the social science that
analyzes the production, distribution and consumption
of goods & services.
An economic system is a mechanism (also defined as
system or social institution) which deals with the
production, distribution and consumption of goods and
services in a particular society.
The economic system is composed of people, institutions
and their relationships. It addresses the problems of
economics like the allocation of the resources.
Types of Economic Systems
(Capitalism + Socialism)
Characteristics of Market
Entrepreneurship and risk taking are rewarded.
Results in many poor people and few very wealthy
Producers decide what to produce based on
consumer tastes and demands.
Productivity results in more personal wealth.
Government’s role in the economy is limited.
The economy is based on almost entirely on supply
Private individuals and companies own businesses
Criticism of Market
Result in unequal societies.
Large private companies exploit the laborers or
the resources of less-developed nations.
Market economies often result in economic
monopolies (when one company controls a
business sector) that stop competition and
result in higher prices.
Market economies is “class warfare” and resultes in a
few people ruling over the masses.
In order to end capitalism/ market economies critics
claimed that a revolution was needed to redistribute
This revolution came to be known as communism
and its economy was known as a command
In a command economy the government controls all
aspects of the economy.
Characteristics of a Command
The government controls all aspects of the
Private property is illegal
Supply and demand are determined by the
government, not by consumers and producers.
Everyone is paid equally no matter what job
Industry and businesses are owned and
controlled by the government, not private
Criticism of Command
Command economies are inefficient and reward
unproductive workers. Critics claim that since workers are
awarded the same amount of money for doing every job
workers aren’t productive.
Command economies result in shadow/ illegal markets.
Because the government controls the distribution of
goods, rather than consumers and producers individuals
begin to sell things illegally.
Command economies cease to stay competitive in the
world because competition and entrepreneurship is
E.g. Soviet Union and Cuba.
Mixed economies exist somewhere between
command and market economies.
In a mixed economy the government tends
to own major industries like utilities, health
care and major manufacturing industries;
however, individuals own most small
Mixed economies tend to tax their citizens
more than market economies, but less than
Characteristics of a Mixed
The government controls large industries, while private
individuals control small businesses.
Citizens are taxed heavily to provide all citizens a
social safety net such as welfare, free university tuition
and free health care.
Property is controlled by both the government and
Workers tend to be somewhat less productive than
those in market economies, but less product then those
in command economies.
Consumers generally have a wide variety choices.
competition brings out the best in cooperation is the best way people
for people to coexist
Earning of wealth
everyone works for his own
everyone works for wealth
which is distributed equally
Level playing field
Protection to PSUs, Private
enterprises are permitted in
few businesses only
Only in situations where laws
have been broken
Highly motivated on account of
Rarely motivated as
performance is not
Perception of better economic
growth because of competition
Equal distribution of income
results in welfare of all
Few individuals/groups attain
powers, rest are exploited
Hard work is not rewarded,
lazy employees also enjoy
equal level of benefits
WHAT IS A PLAN ?
A plan spells out how the resources of a nation should
be put to use.
Some general goals as well as some specific
To be achieved within a specified period of time
In india plans are of five years duration
Our plan documents specify the objectives to be
attained in the five years of a plan
Plan documents also specify what is to be achieved
over a period of twenty years. This long-term plan is
called ‘perspective plan’.
The five year plans are supposed to provide the basis
for the perspective plan.
Planning in India
After independence, India was in dire conditions and needed
to start acting soon
Some of the problems necessitated need for an immediate
Vicious circle of poverty
Need for Rapid indus...