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UPPSC Batch

DAILY
CLASS NOTES
Economics

Lecture – 08
Planning Commission, National
Development Council
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Planning Commission, National Development Council

PLANNING COMMISSION OF INDIA
The Planning Commission of India was an influential advisory body established in 1950 by an executive
resolution of the Government of India on the recommendation of the advisory planning board constituted in 1946
under the chairmanship of KC Neogi. It played an important role in India's economic development through the 5-
year plans until it's dissolution in 2014. It was headed by the Prime Minister as chairman, hence Pandit Jawaharlal
Nehru was the first Chairman of the Planning Commission.
Key Features
❖ It was set up as an extra constitutional and non statutory body meaning it was not explicitly mentioned in the
constitution of India.
❖ The commission functions as an advisory body to the Government of India on economic development issues.
❖ It was also the supreme organ of planning for social and economic development.
❖ The headquarters of the Planning Commission was located at Yojana Bhawan.
❖ It adopted the path of development planning known as socialist path and mixed economy which encouraged
private business while maintaining government control over major entrepreneurial activities.
Composition and Structure
❖ The Prime Minister of India was the chairman of the commission and presided over all the meetings of the
commission.
❖ The Deputy Chairman of the commission was the de facto head (i.e. full time functional head) of the
commission. He was responsible for the formulation and submission of the draft 5 year plan to the Central
Cabinet.
❖ He was appointed by the Central Cabinet for a fixed tenure and enjoyed the rank of a cabinet minister. He
could attend the cabinet meetings without the right to vote.
❖ Some central ministers were appointed as part-time members of the commission.
❖ The finance minister and the planning minister were the ex-officio (by virtue of) members of the
commission.
❖ The commission had 4 to 7 full-time expert members who enjoyed the rank of a Minister of State.
❖ The commission had a member secretary who was usually a senior member of the Indian Administrative Service.
❖ The commission worked under the overall guidance of the National Development Council.
❖ There was a close relationship between the cabinet and the Planning Commission, with members attending
cabinet meetings when required.
❖ Important issues arising in Ministries were generally discussed in the commission before consideration by
the cabinet.
❖ The state governments were not represented in the commission in anyway. Thus, the planning commission
was a Centre constituted body.
Functions and Responsibilities
❖ To make an assessment of material, capital and human resources of the country and investigate the
possibilities of augmenting them.
❖ To indicate the factors that slow economic development.
❖ To formulate 5-year plans for the most effective and balanced utilisation of the country’s resources.
❖ To determine priorities and to define stages in which the plan should be carried out.
❖ To monitor the progress achieved in the execution of the plan and to recommend necessary adjustments.
❖ To determine the nature of tools required for the successful implementation of the plan in each stage.
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Objectives and goals

❖ The primary objective was to promote rapid rise in the standard of living of people through efficient
utilisation of resources.
❖ Promote balanced and equitable economic growth across different sectors and regions.
❖ Efficient allocation of resources to achieve desired goals.
❖ Generating employment opportunities through various policies and programs.
❖ Elevating poverty and improving standards of living for marginalized communities.
❖ Developing infrastructure to support economic growth.
❖ Advancing agricultural development for food security and rural livelihood.
❖ It focused on economic and social development as envisaged in the Constitution’s Preamble, Fundamental
Rights and Directive Principles of State Policy.
Criticism and Dissolution
❖ The planning commission was criticized for acting as a “super cabinet” in economic matters despite being an
extra constitutional body.
❖ Critics argued that it interfered with the constitutional division of powers between the Union and states in a
federal system.
❖ The concerns of the states were not represented in the commission.
❖ The rigid structure did not allow for flexibility in responding to changing economic conditions or emerging challenges.
❖ The commission’s top down planning process often led to sub optimal allocation decisions.
❖ The commission failed to effectively implement Land Reforms which were crucial for equitable development.
❖ The commission’s role in allocating finances to States undermined their financial autonomy and created
overlapping functions with the finance commission.
❖ It failed to critically evaluate government schemes and policies leading to reactive rather than proactive
policy making.
❖ The commission’s financial and political clout overshadowed the role of other ministries particularly the
Finance ministry.
NATIONAL DEVELOPMENT COUNCIL (NDC)
The National Development Council was established in August 1952 by an executive resolution of the
Government of India on the Recommendation of the first five year plan. Similar to the planning commission it is
neither a constitutional body nor statutory body. It's main purpose was to consolidate and mobilize National
efforts and resources for implementing 5 year plans.
Composition
❖ Chairman: The Prime Minister of India
❖ Members: All Union cabinet ministers were members after 1967.
➢ Chief Ministers of all states
➢ Chief ministers or administrators of all union territories
➢ members of Niti Aayog (formerly Planning Commission members)
Functions and Responsibilities
❖ To provide structured guidelines for the preparation of the national plan.
❖ To consider the national plan as prepared by the planning commission.
❖ To evaluate the national plan to ensure alignment with national aspirations.
❖ To make an assessment of the resources that are required for implementing the plan.
❖ To serve as a platform for discussing and advising on economic and social development policies.
❖ To approve 5-year plans, annual plans and specific development projects.
❖ To review the working of the national plant from time to time.
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Objectives
❖ To secure the cooperation of states in the execution of the plan.
❖ To strengthen and mobilize the efforts and resources of the nation in support of the plan.
❖ To promote common economic policies in all vital spheres.
❖ To ensure balanced and rapid development of all parts of the country.
NITI Aayog vs Planning Commission
❖ Nature
➢ NITI Aayog-To be an advisory body or a think tank, the powers to allocate funds must be vested in the
Finance Ministry
➢ Planning Commission-enjoyed the power to allocate funds to Ministries and state governments. It was a
centralised body with a top top-down approach.
❖ Full-time members
➢ Niti Aayog-it has only two full-time members
➢ Planning Commission-the last Commission had 8 full-time members.
❖ State’s role
➢ Niti Aayog-state governments are expected to play a more significant role than they did in the Planning
Commission through the Governing Council
➢ Planning Commission-the state rule was limited to the National Development Council and annual
interaction during plan meetings.
❖ Member secretary
➢ Niti Aayog-to be known as the CEO and to be appointed by the Prime Minister
➢ Planning Commission-Secretaries or members were appointed through the usual government process
❖ Constitution
➢ Niti Aayog-the governing Council has state chief ministers and Lieutenant Governors
➢ Planning Commission-the commission reported to the National Development Council, which had state
chief ministers and Lieutenant governors.
❖ Organisation
➢ Niti Aayog-new post of CEO of secretary rank and vice chairperson. will also have two full time
members and two part time members. Four cabinet ministers serves as ex official members.
➢ Planning Commission-Had Deputy chairperson, a member secretary and full-time members.
❖ Participation
➢ Niti Aayog-Consulting States while making policy and deciding on fund allocation. The final policy
would be a result of cooperative federalism.
➢ Planning Commission-Policy was formulated by the commission, and states were then consulted about
the allocation of funds.
Aspect Planning Commission Niti Aayog
Year of 1950 2015
Establishment
Objective Centralised 5-year plans, resource Foster Co-operative federalism and act as a think
allocation and economic development tank for sustainable development and innovation
Structure Headed by the Prime Minister with a Headed by the PM And includes governing Council
Deputy Chairman and full-time members (State CMs and LGs), Experts and regional councils
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Financial role Allocated funds to states and Ministries No fund allocation role; advisory body only
and controlled Central grants.
Approach to Top-down planning where States had Bottom up approach; States collaborate via
States limited involvement governing Council for cooperative federalism
Planning 5 year plans 15 year vision, 7 year strategy and three year
duration Action Plan
Focus area Economic growth, resource allocation Innovation, sustainability, technology, SDGs And
and poverty alleviation monitoring or evaluation of schemes
Accountability Reported to National Development Direct involvement of states in governing Council
Council
Membership Full-time members from bureaucrats and Part-time experts, practitioners and flexible
economists membership
Key initiative 5-year plans; Gadgil formula for state Atal Innovation Mission, SDG monitoring, National
funds health policy, aspirational districts program
Nature Executive body with implementation Advisory body; recommends policies without direct
power implementation
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PW Web/App: https: //smart.link/7wwosivoicgd4

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UPPSC Batch
Economics DMP–07
Planning Commission, National Development Council
–Practice Questions

1. The Planning Commission served India for 65 long years. Why was it replaced by NITI Aayog? Discuss
the functioning of NITI Aayog in light of rising challenges in India and explain how it is more efficient
than the Planning Commission. (08 Marks, 125 Words)
How to approach the question:
❖ Introduction: Write about planning commission and its decline, emergence of NITI Aayog in about 20-30
words.
❖ Main Body: Compare NITI Aayog with the Planning Commission in about 70-80 words.
❖ Conclusion: Write about how NITI Aayog is better than the Planning Commission and how it promotes
cooperative federalism in about 20-30 words.

Model Answer:
Introduction:
The Planning Commission, established in 1950, served India for 65 years as a central planning authority.
However, changing socio-economic realities and the need for cooperative federalism led to its replacement
by NITI Aayog in 2015.
Main Body
The Planning Commission faced several criticisms, leading to its replacement by NITI Aayog. Key
differences and improvements are highlighted below:
❖ Centralized vs. Decentralized Approach: The Planning Commission followed a centralized planning
model, whereas NITI Aayog promotes cooperative federalism, giving states more autonomy and
flexibility in decision-making.
❖ Policy Formulation: NITI Aayog acts as a think tank, leveraging data-driven decision-making and
innovation to formulate policies that address diverse regional needs.
❖ Composition and Expertise: Unlike the Planning Commission, NITI Aayog includes experts from
various fields, enhancing its ability to develop comprehensive policies.
❖ Focus on Sustainable Development: NITI Aayog focuses on long-term strategic planning and
sustainable development goals, aligning with global best practices.
❖ Collaboration and Autonomy: It fosters collaboration between states and the center, allowing states
greater autonomy in resource allocation and policy implementation.
Conclusion:
NITI Aayog's decentralized approach and emphasis on collaboration make it more suited to India's evolving
needs. It represents a shift from rigid planning to flexible, inclusive governance focused on sustainable
development.
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