Planning to NITI Aayog

The Birth of Planned Development

India adopted centralized economic planning as the instrument of nation-building. The Planning Commission was established by a Cabinet Resolution on 15 March 1950 — not by statute and not by the Constitution. Jawaharlal Nehru chaired it as Prime Minister, making it an extra-constitutional, advisory body that nonetheless wielded enormous influence through its control over Plan allocations to states. Its intellectual lineage runs through the Bombay Plan (1944), the National Planning Committee (1938, chaired by Nehru under the Congress), and the Visvesvaraya 'Planned Economy for India' (1934).

The Directive Principles, especially Articles 38 and 39 of the Constitution, supplied the constitutional aspiration — a social order securing distributive justice and preventing concentration of wealth — that planning operationalized.

The Five-Year Plans

India ran twelve Five-Year Plans between 1951 and 2017. The candidate must retain the signature model and outcome of each early plan:

• First Plan (1951–56): Based on the Harrod-Domar growth model; priority to agriculture and irrigation after Partition and the 1950s food crisis. Target 2.1% growth, achieved 3.6%. A clear success.
• Second Plan (1956–61): The Mahalanobis model (P.C. Mahalanobis, Indian Statistical Institute); heavy-industry and capital-goods bias. It underpinned the Industrial Policy Resolution of 1956, which reserved commanding heights for the public sector.
• Third Plan (1961–66): Aimed at a self-reliant, self-generating economy; derailed by the 1962 China war, 1965 Pakistan war, and 1965–66 droughts.
• Plan Holiday (1966–69): Three Annual Plans amid devaluation (June 1966) and the launch of the Green Revolution.
• Fourth Plan (1969–74): Growth with stability; bank nationalisation (1969).
• Fifth Plan (1974–78): 'Garibi Hatao'; terminated a year early by the Janata government in 1978.
• Rolling Plan (1978–80): Concept associated with Gunnar Myrdal and D.T. Lakdawala.
• Sixth (1980–85) and Seventh (1985–90): Modernization, employment, productivity.
• Eighth Plan (1992–97): First plan of the post-1991 liberalisation era; managed by L.M. Singhvi's framework and Rao–Manmohan reforms; emphasised human development and indicative planning.
• Twelfth Plan (2012–17): 'Faster, More Inclusive and Sustainable Growth' — the last Five-Year Plan; targeted 8% growth.

The National Development Council (NDC), created in August 1952, was the apex body that approved each Plan, embedding states in the process. The Plans were financed via the Gadgil formula (1969, revised as Gadgil–Mukherjee in 1991) governing central assistance to states.

The key conceptual shift came in 1991: from a Soviet-style 'directive' or 'imperative' planning toward 'indicative' planning, where the state guides rather than commands a liberalising economy.

NITI Aayog: Cooperative and Competitive Federalism

The National Institution for Transforming India (NITI Aayog) replaced the Planning Commission via a Cabinet Resolution dated 1 January 2015. Like its predecessor, it is neither a statutory nor a constitutional body — it is a think tank and advisory body, with no power to allocate funds to states. That power moved decisively to the Ministry of Finance acting on the recommendations of the Finance Commission (Article 280). The 14th Finance Commission (Y.V. Reddy, 2015–20) raised states' share of the divisible pool of central taxes from 32% to 42%, and the 15th (N.K. Singh) set it at 41% — fiscally enabling the abolition of the Plan/Non-Plan distinction in 2017.

Composition and Function

The Prime Minister is the Chairperson. There is a Vice-Chairperson (Arvind Panagariya was the first; Suman Bery currently), a CEO (an officer of Secretary rank; the first was Sindhushree Khullar), full-time and part-time members, and ex-officio members. The Governing Council comprises all Chief Ministers and Lieutenant Governors of UTs — the engine of 'cooperative federalism'. NITI also promotes 'competitive federalism' through ranking indices.

NITI Aayog produces strategy documents rather than fixed Plans: the Three-Year Action Agenda (2017–20), a Seven-Year Strategy, and a Fifteen-Year Vision replaced the Five-Year Plan architecture. It runs the Aspirational Districts Programme (launched January 2018), the SDG India Index, the Composite Water Management Index, the School Education Quality Index, and the Atal Innovation Mission.

Why This Matters for the Exam

This topic is a Prelims staple and a Mains GS-3 anchor on the 'economic development, planning, mobilization of resources' theme. Prelims repeatedly tests precise distinctions: which body is statutory vs. constitutional vs. executive (none of the Planning Commission, NITI Aayog, or NDC is statutory; the Finance Commission is constitutional under Article 280); which Plan used which growth model (First — Harrod-Domar; Second — Mahalanobis); and who chairs what. A 2017-era PYQ angle asks the difference between the Planning Commission and NITI Aayog — the examiner rewards the fund-allocation distinction and the federalism framing.

Mains questions take the form 'Is planning still relevant in a liberalised economy?' or 'NITI Aayog has shifted India from directive to cooperative federalism — discuss.' High-yield retention: the dates 15 March 1950, 1 January 2015, and August 1952 (NDC); the 14th FC's 32%→42% devolution; and the abolition of the Plan/Non-Plan distinction. Always tie the institutional change to the 1991 liberalisation and the 14th Finance Commission, because the examiner looks for causation, not chronology.