Planning to NITI Aayog
From the 1950 Planning Commission to the 2015 NITI Aayog: the institutions, Five-Year Plans, and the shift from directive to cooperative federalism.
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.
