The Second Five-Year Plan, operative from 1 April 1956 to 31 March 1961, marked the decisive turn of independent India towards rapid, state-led industrialisation. It was framed within the National Development Council and the Planning Commission (established by Cabinet Resolution in March 1950, chaired by the Prime Minister), and its intellectual architecture rested on the Mahalanobis model devised by statistician Prasanta Chandra Mahalanobis at the Indian Statistical Institute. The Plan was launched against the backdrop of the Industrial Policy Resolution of 1956, which classified industries into three schedules (Schedule A reserved for the State, Schedule B for joint and progressively State enterprise, Schedule C left to private initiative) and established the "socialistic pattern of society" — a goal the Avadi session of the Congress had adopted in 1955 — as the operative ideology of planning.
The core logic of the Mahalanobis four-sector model was that long-run growth of consumer goods and employment required prior expansion of the capital-goods (machine-making) sector, since a nation that could build machines could thereafter expand any line of production. Accordingly the Plan allocated the largest share of investment to heavy industry, mining, power and transport, and presided over the foundation of the three great public-sector steel plants — Bhilai (with Soviet collaboration), Rourkela (West German) and Durgapur (British) — together with Hindustan Machine Tools, the heavy-electricals base and expanded Indian Railways capacity. The Plan's outlay was set at roughly ₹4,800 crore, far exceeding the First Plan, and it leaned heavily on deficit financing and import of capital goods, which precipitated a serious balance-of-payments crisis by 1957–58 and forced the imposition of stringent import and exchange controls.
The Plan over-fulfilled some industrial targets but undershot its growth ambition, achieving an annual growth of about 4.2 per cent against a target near 4.5 per cent, while agriculture stagnated and the foreign-exchange squeeze constrained the final years. Its emphasis on import-substituting industrialisation, the commanding heights of the public sector, and licensing under the framework that culminated in the Industries (Development and Regulation) Act, 1951 set the template for the so-called "Nehru–Mahalanobis strategy" that governed Indian economic policy until the liberalisation of 1991. Critics, including economists associated with the later Bombay Plan and gradualist schools, argued it neglected agriculture and small industry and entrenched the licence–permit system.
For the UPSC examination this topic recurs in both the General Studies Paper III (Indian Economy: planning, resource mobilisation, growth) and General Studies Paper I and the Post-Independence History segments. Typical question angles ask candidates to identify the model underlying a given plan, to match steel plants with their foreign collaborators, to explain why the Second Plan triggered a forex crisis, and to evaluate the Nehru–Mahalanobis strategy versus agriculture-first alternatives. Prelims frequently tests the 1956 Industrial Policy Resolution and the "socialistic pattern of society" phrase, while Mains essays on planning and self-reliance draw directly on this Plan's rationale and shortcomings.
Example
In 1959, under the Second Five-Year Plan, India commissioned the Soviet-aided Bhilai Steel Plant in Madhya Pradesh, a flagship of Nehru's public-sector industrialisation strategy.
Frequently asked questions
The Plan was based on the Mahalanobis model, devised by P. C. Mahalanobis, which prioritised the capital-goods and heavy-industry sector on the logic that machine-making capacity must precede expansion of consumer goods and employment.