Introduction || Planning Commission
Chapter-1 || 2 || 3 || 4 || 5 || 6 || 7 || 8 || 9 || 10 || 11 || 12 || 13 || 14 || 15 || 16 || 17 || 18 || 19 || 20 || 21 || 22 || 23 || 24 || 25 || 26 || 27 || 28 || 29 || 30 || 31 || 32 || 33 || 34 || 35 || Conclusion || Appendix A || Appendix B || Appendix C || Glossary

Chapter 5:
THE THIRD PLAN IN OUTLINE

PHYSICAL TARGETS

the principal aims of the Third Five Year Plan have been set out in the preceding Chapter. If these aims are to be achieved, it is essential that a certain minimum development should take place in different sectors of the economy during the next five-year period. The physical targets of the Third Plan have been formulated keeping these minimum needs in view. A detailed list of these targets is given in Annexure I to this Chapter. It is estimated that national income should go up by about 30 per cent and per capita income by about 17 per cent over the next five years. A few selected targets are included in the Table below with the object of giving a synoptic view of the Pian :

Table 1 Selected targets

PHYSICAL PROGRAMMES

2. The increase in population, the growing expectations of the people and the urgent need for attaining the stage of self-sustained growth over the next two or three Plan periods make it essential that there should be every possible effort to achieve these targets during the next five years. In addition, certain measures must be taken during the Third Plan period itself in preparation for the Fourth Plan. The physical programmes included in the Third Plan have been formulated with both these objectives in view. The total cost of completing all these programmes exceeds Rs. 8000 crores for the public sector, and is estimated at Rs. 4100 crores* for the private sector.

3. It is important that programmes for industrial development, including power, transport, techn''cal education and scientific research, should proceed in a connected manner in accordance with an approved scheme of priorities so that. as the requisite foreign exchange and personnel become available, corresponding internal resources are also found and raoid progress is assured. In fields like agrcu^ure, small industries and social services, where there is scope for attracting a great deal of local community effort and public participation and where imported supplies are not a limiting factor, the effort has to be related to the maximum physical capacity for implementation and should not fall below the minimum needs of the country. In fact, as the productive prefects in the industrial and agricultural sectors are implemented and additional output becomes available, it should be possible to raise additional resources for expanding the scope of some of the protects which have large employment potential but do not require much foreign exchange outlay.

4. These considerations suggest that the phvsi'cal programmes to be accepted for implementation over the five vear period should not be altogether limited by the financial resources immediately in s^ht at the stage of drawing up the Plan, although the outlays have necessarily to be regulated with reference to the resources actually mobilised from year to year. Past experience has shown that if a Plan for a five-year period is prepared only in terms of the financial resources in s^ht at the time of the preparation of the Plan, the fullest use cannot be made of all the opportunities which present themselves in the course of the implementation of the Plan.

FINANCIAL PROVISIONS

5. The estimate of financial resources has been placed for the present at Rs. 7500 crores. Recent studies, however, indicate that there are possib'lities of raising additional resources if certain measures are taken for mobilising the savings of the country. In fact, to the extent that the physical targets included in the Plan are achieved, the prospects of raising additional financial resources will correspondingly improve. As a result of the support which India's development p'ans are receiving from friendly countries and from the International Bank of Reconstruction and Development and other international agencies, there is reason to hope that the shortage of fore^ exchange may not be a major impediment in the realisation of the goals of the Third Plan. On the other hand, as the Plan proceeds, it may be found that some of the projects approved for implementation may not be completed within the Third Plan period, and a part of the investment may in fact be deferred to the early phase of the Fourth Plan. A cons-'derable proportion of the projects, especially in industry and mining, have relatively long gestation periods and frequently involve difficult technical problems. Delays in designing and setting up industrial plants or undertaking complementary development or in securing equipment and components may well extend the priod of completion of some of these projects bevond the Third Plan. Whatever the consequential adiust-menfs, special care would, however, be taken to ensure that projects which are essential for achieving the key targets included in the Third Plan are completed in time.

6. The following Table gives the distribution of the financial outlay of Rs. 7500 crores under major heads :

Table 2 Financial provisions
(Rs. crores)

(@ This is subiect to the observation made in the following paragraph and paragraph 27 of Chapter VI.
* This excludes the estimated transfer of Rs. 200 crores from the public to the private sector.

Out of the total financial outlay of Rs. 7500 crores in the public sector, investment* is estimated at Rs. 6300 crores and current outlay,'"* representing expenditure on staff, subsidies, etc. at Rs. 1200 crores. These figures include only that part of the expenditure on development programmes of local bodies like municipalities panchayats, etc. as is financed by Central and State Governments as part of their Plan expenditure. They do not include the contributions which these local bodies make out of their own resources. Similarly they do not include the contributions in cash or in kind which are made by the local people in projects of a local character involving local participation. Expenditure on development services and institutions established upto the end of the Second Plan, estimated at about Rs. 3000 crores for the five year period, falls outside the Third Plan outlays shown in Table 2.

7. In the Table above, the financial provision for the States is shown as Rs. 3725 crores. As against this the total cost of the physical programmes included in State plans amounts to Rs. 3847 crores. The revenues of States have, however, recently shown marked improvement. It is considered that given the necessary additional taxation, States should find it possible to finance fully the physical programmes included in their plans. Thus the gap between physical programmes and financial resources such as it may be, relates mainly to the centre. In the programmes of the Central Government those dependent on external resources constitute a large proportion, for instance, industries, minerals. transport and communications- As foreign exchange becomes available, necessary steps will have to be taken to raise the requisite rupee resources.

8. As has been mentioned earlier, the Plan includes outlays not only by the public sector but also by the private sector. Investment by the private sector is estimated at Rs. 4100 crores. The break-up of the public and the private sector investment under major Plan heads is given below :

Table 3 Investment in Second and Third Plans
(Rs. crores)

9. The foreign exchange requirement for an investment of 10,400 crores is estimated to be over Rs. 2030 crores. The level of investment, public and private, is expected to rise from about Rs. 1600 crores in the last year of the Second Plan to about Rs. 2600 crores at the end of the Third. Corresponding figures for the public sector alone are Rs. 800 crores and Rs. 1700 crores.

10. It will be seen from Table 3 that the Third Plan provides for an increase of about 54 per cent in total investment-70 per cent in public sector investment and 32 per cent in private sector investment. The proportion of the public sector will be, however, higher to the extent that the public sector outlay is raised above the financial provision of Rs. 7500 crores, near to the physical Plan of over Rs. 8000 crores.

STATE PLANS

11. Out of the programmes included in the public sector of the Third Plan the plans of States account for Rs. 3847 crores and of Union Territories for Rs. 175 crores. The remaining programmes fall within the plans of the Central Ministries. Details have been given in Annexure II to this Chapter. Provisions in the States and at the Centre have been made on the principle that generally development schemes to be implemented by State Governments should form part of the State plans and only certain limited categories of schemes should be shown in the plans of Central Ministries as being 'sponsored' by the Central Government. In this way, an attempt has been made to broaden further the scope of the plans of States and facilitate the integrated working of their development programmes.

'"Investment is expenditure on the creation of physical assets (e.g. buildings, plant and equipment), including expenditure on personnel required for putting up these assets. The expression corresponds broadly to expenditure on capital accouni

**Current outlay corresponds broadly to expenditrure on revenue account on Plan schemes: it is expenditure othe' than that. classified as 'investment'.

•{•Included under agriculture and community development. ^Excludes transfers from public to private sector.

12. In determining the plan of each State consideration was given to its needs, problems, past progress and lags in development, likely contribution to the achievement of the majoi national targets, potential for growth and the contribution in resources which the State could make towards its development programmes. In assessing needs and problems, such factors as population, area, levels of income and expenditure, availability of certain services, e.g. roads, schools, hospitals, extent of commitments carried over from tne Second Plan, commitments on account of large projects or special programmes and the state of technical and administrative services available were taken into account. Care was also taken to see that States whose resources were unavoidably small did not have to limit development to a scale which was altogether insufficient, merely because of paucity of resources. At the same time States which were able to make a larger effort in mobilising then-own resources could undertake development on an appropriate scale. The break-up of Rs. 4022 crores, which is the total of all programmes included in the plans of States and Union Territories, together with comparable figures for the First and Second Plans is given Statewise in Annexure III to this Chapter. A detailed break-up by States and by heads of developments is given in Appendix B at the end of the Report.

13. The broad indications of the physical programmes and the financial provisions as indicated above give a measure of the overall effort and the relative emphasis on different sectors envisaged in the Plan. Within this general framework the Plan comprises a number of concrete programmes, of development, details of which have been given in the subsequent Chapters of this Report. A brief account of these programmes is, however, given in the following paragraphs.

AGRICULTURE

14. Programmes for agriculture, irrigation and community development included in the Third Plan entail a total outlay of Rs. 1718 crores as compared to estimated expenditure of Rs. 950 crores in the S ->nd Plan. These programmes aim ft near; doubling the rate of growth of agr? -iural production over the next five years. PrftUction'-of foc;,|~ains is expected to rise by 30 -^er cent and of other crops by 31 per cent as sl own in the following table :

Table 4 Index number of agricultural production (1949-50=100)

15. To achieve this high rate of growth, intensive efforts are to be made in several directions. First, a large programme of irrigation, comprising major, medium and minor irrigation schemes, is to be undertaken. This will extend irrigation to about 20 million acres, raising the net irrigated area to about 90 million acres. Scco.id, dry farming techniques are to be introduced on about 22 million acres and soil conservation measures over an area of about 11 million acres. Third, the consumption of fertilisers is to be stepped up—a fivefold increase being aimed at in nitrogenous fertilisers from 230,000 tons (in terms pt N) to one million tons, and a sixfold increase in phosphatic fertilisers from 70,000 tons (in terms of Ps Oa) to 400,000 tons. The area under green manures is to be increased from 11.8 million acres to 41 million acres. Plant protection measures are to be undertaken over an additional area of 50 million acres. Fourth, special efforts will be made to introduce modern technology in rural areas through a large-scale programme for improved agricultural implements and machines. A comprehensive programme for agricultural implements has been prepared which includes establishment-in every State of one centre for testing, designing, technical guidance and manufacturing implements of improved type; adequate arrangements for the supply of iron and steel to manufacturers; credit for supply, purchase and production of improved implements; and strengthening of agricultural engineering personnel in the States. Fifth, the community development programme will be extended to the entire rural area by October, 1963, thus bringing technical assistance and supplies within the reach of all the farmers in the country. All villages will be served by pancha-yats and cooperatives. Through the introduction of democratic institutions at the district and block levels, responsibility and initiative for development are being transferred to the people of each area. Membership in service cooperatives is expected to increase to about 37 millions, that is about two-thirds of all agricultural families. Considerable expansion of cooperative credit is aimed at, the targets being about Rs. 530 crores of short and medium-term advances and Rs. 150 crores (loans outstanding) of long-term credit. The number of cooperative marketing societies will be increased trom 1869 to 2470. Nearly 980 new storage godowns at mandi centres will be set up and 9200 smaller godowns will be established in the rural areas on a cooperative basis. Twenty five new co-operative sugar factories will be set up and greater attention will be paid to the establishment of cooperative processing units for rice, cotton, jute, groundnut, fruits, etc. There is also a programme for setting up 2200 primary consumers' stores and 50 wholesale stores on a cooperative basis. Efforts will be continued to popularise cooperative farming and 3200 cooperative farms will be organised as pilot experiments throughout the country. Sixth, selected districts wh'ch have particularly favourable irrigation facilities and assured rainfall will be put under an intensive agricultural development programme for stepping up agricultural production. To begin with, one such district has been selected in every State. This important new programme will bring to these areas a concentration of technical help, fertilisers, improved credit and other supplies to reach all farmers through village panchayats and cooperatives and help increase both production and marketable surplus of food-grains substantially.

16. It is expected that as a result of these various measures the production of the major crops will go up as shown in the following Table :

Table 5 Production of major crops

* In terms of raw sugar or gur.
@ Excludes mcsta which may provide 1 -3 million bales in 1965-66.

A substantial part of this increase is expected to be achieved through an improvement in the yield per acre. It is expected, for example, that the average yield of rice during the Third Plan period will be 1030 Ib per acre as compared to 8i)7 Ib in the Second Plan period.

17. With the achievement of these targets, the economy will become self-sufficient in the supply of foodgrains and per capita availability will go up from 16 oz per day in 1960-61 to 17.5 oz per day in 1965-66. The per capita consumption of cloth per annum will go up from 15.5 yards in 1960-61 to 17.2 yards in 1965-66. Production of subsidiary foods like fruits and vegetables, for which there is a growing demand in the country, will be given special emphasis and an attempt will be made to provide a more balanced diet than at present. Special measures will be taken to step up the production of commodities like tea, coffee, rubber, coconut, areca-nut, tobacco, pepper, cardamom and lac, which are important for either earning or saving foreign exchange.

18. Large programmes for the improvement of animal husbandry, dairying, fisheries and forestry have also been included in the third Plan. Of the key village blocks already established under the programme for intensive development of cattle, 55 will be expanded and 38 new blocks will be set up in important breeding tracts. The number of veterinary hospitals and dispensaries will be raised from 4000 to 8000 and the programme for eradication of rinderpest already initiated will be completed. The production of wool will be stepped up from 72 million Ib to 90 million Ib. The production of milk will be increased from 22 million tons to 25 million tons. New milk supply schemes will be taken up in 55 cities with a population exceeding one lakh each, 8 rural creameries, 4 milk product factories and 2 cheese factories will be set up. The production of fish will be stepped up from 1.4 million tons to 1.8 million tons; 4000 fishing boats will be mechanised and 35 large vessels will be added to the country's fishing fleet. Special emphasis will be given to the development of forestry—700,000 acres afforested with economic species, 600,000 acres of degraded forests rehabilitated and 1,200,000 acres developed as village forests. A countrywide pre-investment survey will be initiated with a view to assessing the potential for the development of large-scale timber and pulp-based industries.

INDUSTRIES

19. Of basic importance in the Third Plan is the programme for the expansion of industries, especially capital and producer goods industries with special emphasis on machine-building and development of managerial skill, technical know-how and designing capacity. In this programme the public sector has been assigned a key role, but the private sector is also expected to have an important part to play within the framework of the plan. The share of the public sector in the net output of organised manufacturing industries is expected to increase from less than one-tenth in 1960-61 to about one-fourth in 1965-66, and the bulk of this will comprise capital and producer goods. For the development of industries and minerals, the Plan includes a programme costing Rs. 1882 crores but makes for the present a financial provision of Rs. 1520 crores in the public sector. In addition, the private sector is expected to provide about Rs. 1050 crores. The private sector is also expected to provide about Rs. 150 crores to meet the arrears of replacement and modernisation in certain pre-war industries.

20. The emphasis throughout the Third Plan is on the development of those industries which will help to make the economy self-sustaining, such as steel, machine-building and the manufacture of producer goods, and reduce as rapidly as possible the need for external assistance to purchase these goods and also permit a broadening of the export base. The production of consumer goods will also be expanded substantially, mainly in the private sector. It is expected that as a result of all these developments, industrial production will rise by nearly 70 per cent, but even more significant than this increase will be the development in the fields of iron and steel, machinery and chemicals, some idea of which may be obtained from the following Table :

Table 6 Index number of industrial production* (1950-51=100)

* *This index is the same as the official index except that the comparison base has been changed from the calendar year 1951 to the financial year 1950-51 so as to facilitate measurement of growth over the Plan periods.
@Relates to crop year, November-October.

As has been mentioned earlier this index docs not include a large number of new industries and is being revised.

21. The major industrial projects in the public sector included in the Third Plan are in the fields of metallurgy, industrial machinery, machine tools, fertilisers, basic chemicals and intermediates, essential drugs and petroleum refining. Overall capacity targets proposed under the iron and steel industry comprise 10.2 million tons of steel ingots and 1.5 million tons of pig iron. These will be achieved by expanding tfle public sector steel plants at Rourkela, Bhilai and Durgapur to a target capacity of 5.9 million tons and also by setting up a fourth steel plant at Bokaro. There will be some expansion of capacity for steel in the private sector mainly through the installation of scrap-based electric furnaces which will augment the supplies of billets to re-rollers. About 200,000 tons of pig iron is also expected to be produced from low shaft furnaces proposed to be established on a decentralised basis in the private sector. The manufacture of tool, alloy and stainless steels has been given a high priority in the Third Plan and it is expected that a total production of 200,000 tons will be achieved by 1965-66. In the field of non-ferrous metals, the Plan aims at achieving a production target of 80,000 tons of aluminium and setting up the first zinc smelting plant in the country with a capacity of 15,000 tons. The production of copper is expected to increase from 8900 tons to 20,000 tons.

22. The most significant development during the Third Plan period will, however, be the rapid growth of machine-building and engineering industries. Foundry/forge capacity, which is crucial for machine-building purposes, will be established on a large scale in the public sector during the Third Plan. The heavy machinery plant being set up near Ranchi, on its expansion to a capacity of 80,000 tons of output per year, will be able to supply a large part of the equipment required for setting up a million-ton steel-making capacity every year. Three heavy electrical equipment projects are designed to ensure, from domestic resources, a wide range of electrical equipment sufficient to enable power generation to be increased at an annual rate of two million kW per year from 1971 onwards. In the field of machine tools, provision has been made for the expansion of the existing machine tool plants and the establishment of two new plants in the public sector. Substantial expansion in the production of machine tools in the private sector is also expected and the target for machine tools production has been put at Rs. 30 crorcs-The target for the automobile industry has been placed at 30,000 passenger cars and 60,000 commercial vehicles.

23. Production of inorganic fertilisers in terms of nitrogen will be stepped up from about 110,000 tons to 800,000 tons. A substantial increase in the production of phosphatic fertilisers is also proposed. A production target of 1.5 million tons has been set for sulphuric acid and of 340,000 tons for caustic soda. Provision has also been made for increasing the production of organic chemicals, plastics, dyestuffs and drugs. The target of production for cement has been fixed at 13 million tons and that of capacity for refining crude oil at about 11 million tons. Other important projects included in the Third Plan are the synthetic drugs project at Sanatnagar, antibiotics plant near Rishikesh and phytoche-mical project in Kerala. In the sphere of consumer goods industries, it is proposed to expand substantially the production capacity for cloth, paper, sugar, edible oils, watches, etc.

24. A short list of the important industrial targets included in the Third Plan is given below:

Table 7 Selected targets of industrial production

MINERALS

25. The greater emphasis laid on the expansion of industry during the Third Plan calls for an intensified programme of mineral development. Some minerals have also a good export market and are important foreign exchange earners. Having regard to the programmes for power, railways, steel, cement and other industries which are important consumers of coal, the target for coal for the Third Plan has been fixed at 97 million tons. This target will require production capacity to be stepped up by 37 million tons over the target of 60 million tons set for the last year of the Second Plan. Of the additional production of 37 million tons, 20 million tons will come from the public sector and 17 million tons from the private sector. The amount of iron ore necessary to meet proposed steel and pig iron targets is estimated at about 20 million tons. The iron ore required for export will amount to 10 million tons. To meet this requirement, a capacity target of 32 million tons has been fixed for iron ore in the Third Plan. Provision has also been made for exploration and exploitation of new copper deposits for an annual production of 11,500 tons of electrolytic copper, exploitation of pyrites deposits in Bihar, development of diamond deposits in Madiiya Pradesh, extraction and processing of uranium and intensive exploitation of manganese, bauxite, gypsum and limestone deposits.

26. A high priority has been given to exploration and exploitation of the mineral oil resources in the country. The Oil and Natural Gas Commission will operate on a larger scale with a view to proving new reserves and establishing additional production. The programme of exploration will cover most of the promising sedimentary areas in the country. In addition, foreign firms have been invited by Government to join the search for oil subject to mutually acceptable terms. Oil India, a joint venture of the Assam Oil Company and the Government of India, is expected to achieve an annual production of 2.75 million tons of crude oil. Government will be entering upon petroleum refining as a producer for the first time in 1962. With the completion of the Nunmati and Barauni refineries and the projected refinery in Gujarat, the share of the Government in the domestic refining capacity will be 47 per cent of the total.

VILLAGE AND SMALL INDUSTRIES

27. Along with large industries, village and small industries will be developed to provide employment and to increase production of consumer goods and some producer goods. Considerable progress has been already achieved in small scale industries, which combine the advantages of modern technology and the use of power with those of increased employment and greater opportunity for small entrepreneurs as well as for cooperatives. In the Third Plan they are expected to make still more rapid progress and to extend in larger measure to small towns and rural areas. A total provision of Rs. 264 crorcs is being made in the public sector for the programmes for village and small industries, as against about Rs. 175 crores spent in the Second Plan period. Additional funds will be available from other programmes community development, rehabilitation of displaced persons, social welfare and welfare of backward classes. Investment in the private sector is estimated at about Rs. 275 crores. It is also proposed to offer Government guarantees for bank loans to small industrialists. three hundred new industrial estates will be set up as against about 120 sanctioned during the Second Plan period. 'Rural industrial estates' will be set up in selected rural areas, where power, water supply and other essential facilities are available or can be readily provided. The Khadi and Village Industries Commission wilt give special attention to secure integrated rural development of selected compact areas or gram ekais, 3000 of which will be started during the Third Plan period. The production of cloth by the handloom, powerloom and khadi industries is expected to increase from about 2350 million yards in 1960-61 to 3500 million yards in 1965-66 and of raw silk from 3-6 million Ib to 5 million Ib. Programmes for .coir and handicrafts will be consolidated and enlarged.

POWER

28. Power being the basis for the development of industries, both large and small, a high priority has been given to production of power in the Third Plan. The programmes for power development both for public and private sectors total Rs. 1089 crores. By the end of the Third Plan, generating capacity, including plants already commissioned and those under erection and testing, is expected to be of the order of 13.4 million kW, of which 12.7 million kW is expected to be in commercial operation as against 5.7 million 1