Planning Commission

The Planning Commission of India was a central government institution responsible for formulating the country’s five-year plans, assessing resource allocation, and guiding economic development strategies. Established in 1950 by a resolution of the Government of India, it played a pivotal role in shaping India’s post-independence economic trajectory through centralised planning. For over six decades, the Commission functioned as the principal agency for coordinating national policies and programmes until it was replaced by the NITI Aayog in 2015.

Historical Background and Establishment

The roots of planned economic development in India can be traced to the pre-independence era. Several efforts, such as the Visvesvaraya Plan (1934) and the National Planning Committee (1938) under Subhas Chandra Bose and Jawaharlal Nehru, advocated for systematic economic planning. The Bombay Plan (1944) by Indian industrialists also emphasised state-led industrialisation and social welfare.
After independence in 1947, India faced immense challenges, including poverty, unemployment, and low industrial productivity. To address these, the Planning Commission was constituted on 15 March 1950 by a Cabinet resolution under the chairmanship of Prime Minister Jawaharlal Nehru. It was not a constitutional or statutory body but functioned as an advisory and coordinating agency directly under the Prime Minister’s Office (PMO).

Composition and Structure

The Planning Commission consisted of:

• Chairperson: The Prime Minister of India (ex officio).
• Deputy Chairperson: Appointed by the Prime Minister and generally a Cabinet-rank minister.
• Full-time Members: Experts in economics, industry, agriculture, and administration.
• Part-time Members: Selected from ministries, state governments, or academia.
• Member Secretary: A senior government official responsible for administrative coordination.

Over time, several distinguished economists and policymakers such as P.C. Mahalanobis, D.R. Gadgil, and Montek Singh Ahluwalia contributed to its evolution and methodologies.

Objectives and Functions

The overarching objective of the Planning Commission was to formulate national plans for economic and social development through the optimal utilisation of resources. Its major functions included:

1. Assessment of Resources: Evaluating available material, capital, and human resources of the country.
2. Formulation of Five-Year Plans: Designing medium-term plans outlining national priorities and developmental goals.
3. Policy Coordination: Integrating central and state-level policies to ensure balanced development.
4. Programme Evaluation: Monitoring implementation of development schemes and assessing performance.
5. Advisory Role: Recommending policy interventions on poverty alleviation, employment generation, and infrastructure development.
6. Resource Allocation: Determining plan outlays for central ministries and state governments.
7. Inter-sectoral Balance: Ensuring equilibrium among agriculture, industry, and services sectors.

The Commission also undertook special studies, published reports, and advised the government on long-term strategies for growth and equity.

The Five-Year Plans

One of the most significant contributions of the Planning Commission was the introduction of Five-Year Plans (FYPs) — systematic frameworks for economic development based on socialist principles of planned growth.

• First Five-Year Plan (1951–1956): Focused on agriculture, irrigation, and energy; inspired by the Harrod-Domar model.
• Second Plan (1956–1961): Formulated under P.C. Mahalanobis, it emphasised industrialisation and the development of the public sector.
• Third Plan (1961–1966): Targeted self-reliance and food security but was disrupted by wars and droughts.
• Fourth and Fifth Plans (1969–1979): Prioritised poverty reduction, employment generation, and infrastructure.
• Sixth to Ninth Plans (1980–2002): Introduced elements of liberalisation, technology adoption, and social justice.
• Tenth and Eleventh Plans (2002–2012): Focused on inclusive growth and human development.
• Twelfth Plan (2012–2017): Emphasised faster, sustainable, and more inclusive growth; it was the final plan prepared before the Commission’s dissolution.

These plans collectively shaped India’s transition from an agrarian to an industrialising and service-oriented economy.

Planning Methodology and Approach

The Planning Commission initially adopted a centralised and directive approach, inspired by the Soviet model of economic planning. The Mahalanobis model during the Second Plan laid the foundation for heavy industrialisation and import substitution.
Over the decades, the approach evolved toward indicative planning, especially after the 1991 economic reforms. Planning became more flexible and consultative, focusing on liberalisation, market efficiency, and private sector participation.
The Commission used a variety of tools, including:

• Input-output analysis to assess inter-sectoral linkages.
• Growth models for projecting investment and output.
• Plan monitoring frameworks for evaluation and feedback.

Relationship with States and Other Bodies

The Planning Commission maintained close coordination with state governments through the National Development Council (NDC), which was established in 1952. The NDC, chaired by the Prime Minister, included Chief Ministers of all states and served as a forum for cooperative federalism.
The Commission’s recommendations influenced not only central government expenditure but also the Gadgil formula, used for allocating central assistance to states based on criteria such as population, per capita income, and performance.

Achievements and Contributions

The Planning Commission played a vital role in shaping India’s economic and social landscape:

• Institutional Building: Helped establish key public sector enterprises and research institutions.
• Agricultural Growth: Supported Green Revolution initiatives and irrigation development.
• Industrialisation: Promoted heavy industries and infrastructure expansion.
• Human Development: Contributed to education, health, and poverty alleviation programmes.
• Economic Stability: Enabled resource mobilisation and fiscal planning during post-independence reconstruction.

It also created a data-driven policy environment through systematic surveys and performance evaluations, supporting evidence-based decision-making.

Criticism and Decline

Despite its achievements, the Planning Commission faced growing criticism over time:

• Centralisation of Power: It was accused of undermining federalism by imposing top-down policies on states.
• Bureaucratic Inefficiency: Critics argued that its processes were rigid, slow, and overly procedural.
• Outdated Structure: The model of centralised planning was seen as incompatible with the liberalised economy after 1991.
• Lack of Accountability: Its recommendations were advisory without clear accountability for implementation.
• Resource Allocation Disputes: States often criticised the Commission’s discretionary control over funds.
• Redundancy: With increasing globalisation and private investment, its role in directing national planning became less relevant.

By the early 2010s, policymakers and economists called for a new institutional model focused on policy think-tanking, innovation, and cooperative federalism rather than centralised planning.

Replacement by NITI Aayog

In August 2014, Prime Minister Narendra Modi announced the abolition of the Planning Commission, citing the need for a more dynamic and inclusive institution suited to contemporary economic challenges. On 1 January 2015, the National Institution for Transforming India (NITI Aayog) was established as its successor.
Unlike the Planning Commission, NITI Aayog functions as a policy think tank rather than a centralised planning body. It focuses on:

• Cooperative and competitive federalism.
• Policy innovation and knowledge sharing.
• Evidence-based strategies for sustainable development.
• Collaboration with states and private sector stakeholders.

This marked a structural shift from planned economic control to strategic policy guidance and partnership-based governance.

Legacy and Significance

The legacy of the Planning Commission remains deeply embedded in India’s developmental history. It provided a coherent framework for national resource allocation, industrialisation, and socio-economic transformation during a crucial phase of nation-building. The concept of Five-Year Plans introduced by the Commission fostered systematic economic thinking and long-term policy continuity.