The inward looking industrialisation strategy during the first three Plans resulted in higher rate of industrial growth. However, the signs of strain in the balance of payments were clearly visible in the Second Plan (see Table 1 attached for trends in India's current account).
As the import demand surged on account of development of heavy industries, current account deficit (CAD) in the Second Plan surged to 2.3 per cent of GDP. The difficulties in financing fast growing imports with stagnant exports put considerable strain on reserves as import cover of reserves (or foreign currency assets) plunged to barely two months’ by the terminal year of the Second Plan.