Planning Commission

The Planning Commission of India was constituted on 15 March 1950 by an executive resolution of the Union Cabinet, not by any constitutional provision or Act of Parliament. It was therefore an extra-constitutional, non-statutory advisory body, drawing its conceptual basis from Article 39 of the Directive Principles of State Policy and the resolution of the National Planning Committee set up by the Indian National Congress under Jawaharlal Nehru in 1938. The Prime Minister served as its ex-officio Chairman, with a Deputy Chairman of Cabinet rank functioning as the working head; Gulzarilal Nanda was the first Deputy Chairman and Montek Singh Ahluwalia the last. Its creation institutionalised the Nehruvian model of a planned, mixed economy modelled partly on the Soviet Gosplan.

The Commission's central function was the formulation of India's Five-Year Plans, the first running 1951–56 (focused on agriculture and the Harrod–Domar growth model) and the second (1956–61) built on the Mahalanobis model emphasising heavy industry. It assessed national resources, determined priorities, allocated plan outlays among the Centre and States, and reviewed implementation. Critically, the Commission controlled the discretionary transfer of central funds to States through Gadgil–Mukherjee formula grants and plan assistance, giving it enormous leverage over fiscal federalism — a power it exercised in parallel with, and often in tension with, the constitutionally mandated Finance Commission under Article 280. The National Development Council (NDC), set up in 1952 with the PM, Union ministers and all Chief Ministers, was the supreme body that approved the Plans, making the Commission its secretariat in effect.

The Planning Commission was abolished and replaced by the NITI Aayog (National Institution for Transforming India) through a Cabinet resolution dated 1 January 2015, following Prime Minister Narendra Modi's Independence Day address of 2014 criticising the Commission's top-down, "one-size-fits-all" approach. The Twelfth Five-Year Plan (2012–17) was thus the last, and India formally abandoned Five-Year Planning. NITI Aayog functions as a think-tank promoting "cooperative and competitive federalism" with no fund-allocation powers, marking a decisive shift from command-style planning to advisory facilitation. The transfer of plan funds was subsumed into the Finance Commission's tax-devolution mechanism, especially after the Fourteenth Finance Commission raised States' share to 42 per cent.

For the examinations this topic is heavily tested. In UPSC GS Paper II (polity and governance) and the post-independence history syllabus, the standard question angles are the non-statutory character of the Commission, its distinction from the statutory Finance Commission, and the rationale for its replacement by NITI Aayog. In CSS Pakistan Affairs, candidates contrast India's Planning Commission with Pakistan's own Planning Commission (established 1958 under the Ayub era) and the role of planning in South Asian development. Frequent prelims-style facts include the dates 15 March 1950, the first Plan year 1951, the NDC's establishment in 1952, the Mahalanobis and Harrod–Domar models, and the 1 January 2015 dissolution. Aspirants must clearly remember that planning was an executive innovation lacking constitutional sanction, a point that critics like the Administrative Reforms Commission repeatedly raised regarding its accountability.