Harrod Domar model was the main idea behind the __________ Five Year Plan.

Correct — A. The First Five Year Plan (1951-56) was built on the Harrod-Domar model, which ties the growth rate to how much a country saves and invests and how productively that capital works.

The plan's prescription follows straight from it: lift the savings and investment rate, and put the capital where output responds fastest — irrigation, power and agriculture, in a country still short of food after Partition.

Its growth target was deliberately modest, and the outcome exceeded it.

Why the others are wrong

• (b)
  Third — The Third Plan (1961-66) continued the industrial line of the plan before it and was derailed by war and drought. Its framework was not the Harrod-Domar model.
• (c)
  Fourth — The Fourth Plan (1969-74) came after the plan holiday of 1966-69 and aimed at growth with stability and self-reliance. It belongs to a later phase of Indian planning altogether.
• (d)
  Second — The Second Plan (1956-61) is indeed tied to a named economist's model, but that model is P. C. Mahalanobis's, with its priority to heavy industry. Harrod-Domar belongs to the plan before it.

Indian planning is remembered plan by plan, through its model and its priority.

The First Plan (1951-56) used the Harrod-Domar framework — growth equal to the savings rate divided by the capital-output ratio — and spent heavily on irrigation, power and agriculture. It was drawn up under the Planning Commission, chaired by the Prime Minister.

The Second Plan (1956-61) switched to the Mahalanobis model and to heavy industry, and gave India its public sector steel plants.

Harrod and Domar were two economists working separately whose results are taught as a single model.

Key facts

• The First Five Year Plan ran from 1951 to 1956 and was based on the Harrod-Domar model.
• The Harrod-Domar model makes growth depend on the savings rate and the capital-output ratio.
• The First Plan gave priority to agriculture, irrigation and power.
• The Second Five Year Plan (1956-61) was based on the Mahalanobis model and favoured heavy industry.

Common traps

• Both the First and Second Plans are tied to named models, and Mahalanobis is the more famous name of the two.
• The First Plan is remembered for agriculture, which makes a model-based stem feel as though it must point to an industrial plan.

No directly related past PYQ was found.