The Planning Commission was set up in 1950 by a simple resolution of the Government of India. The Commission has an advisory role and its recommendations become effective only when the Union Cabinet approved them. The resolution defined the scope of work of the Planning Commission.
K.N. Raj played an important role in India’s planned development. He drafted sections of the First Five Year Plan while Pt. Nehru, the first Prime Minster of India, presented this to the Parliament of India. The Plan addressed, mainly the agrarian sector including investment in dams and irrigation.
One of the basic aims of the First Five Year Plan was to raise the level of national income, which could be possible only if the people saved more money than they spent. As the basic level of spending was very low in the 1950s, it could not be reduced any more. So the planners sought to push savings up. That too was difficult as the total capital stock in the country was rather low compared to the total number of employable people. Nevertheless, people’s savings did rise in the first phase of the planned process until the end of the Third Five Year Plan in 1966. But the rise was not as spectacular as was expected at the beginning of the First Plan. Later, from the early 1960s till the early 1970s, the proportion of savings in the country actually dropped consistently.