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2nd Five Year Plan Of India

By: EconomyWatch Date: 30 June 2010

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With India's five year plans the country has attained a more or less stable economic setup down the years. The 1st five year plan ended in the year 1956. The 2nd five year plan was effective from 1956 to 1961.

Objectives of the 2nd five year plan (1956 to 1961):Industries got more importance in the 2nd five year plan. The focus was mainly on heavy industries. The Indian government boosted manufacturing of industrial goods in the country. This was done primarily to develop the public sector.

Mahalanobis Model:

The 2nd year five year plan, functioned on the basis of Mahalanobis model. The Mahalanobis model was propounded by the famous Prasanta Chandra Mahalanobis in the year 1953. His model addresses different issues pertaining to economic development.

Assumptions made by the Mahalanobis model:

According to this model, it is assumed that the economy is closed and has two segments.
1. Segment of consumption goods
2. Segment of capital goods.
Capital goods cannot be moved or are “non shiftable”.
Production is at its peak.
Depending on the availability of capital goods, investments are decided upon.
Capital is the scarce factor.
Capital goods production is not influenced by consumer goods production.By following the Mahalanobis model, the then government wanted that there should be optimum assignment of the fund among the various productive segments. This was aimed with a view to achieve maximum returns on a long term basis.
As many as five steel plants including the ones in Durgapur, Jamshedpur as well as Bhilai were set up as per the 2nd five year plan. Hydroelectric power plants were formed during the tenure of the 2nd five year plan. There was considerable increase in production of coal. The North eastern part of the country, witnessed increase in the number of railway tracks.

During the term of the 2nd five year plan, Atomic Energy Commission came into being. The Commission was established in the year 1957. During the same period, Tata Institute of Fundamental Research was born. The institute conducted several programs to search for talented individuals. These individuals would eventually be absorbed into programs related to nuclear power.