The Planning Commission was established on March 15, 1950, through an executive resolution of the Government of India. It was a non-constitutional and non-statutory body, meaning it was neither mentioned in the Constitution nor created by an Act of Parliament. Its primary mandate was to assess the country’s resources and formulate Five-Year Plans (FYPs) for their most effective and balanced utilization.
Organizational Structure
The Commission functioned as an advisory body to the Union Government, characterized by a top-heavy structure designed to integrate political leadership with technical expertise.
- Chairman: The Prime Minister served as the ex-officio Chairman.
- Deputy Chairman: The de facto executive head, responsible for submitting the draft Five-Year Plan to the Union Cabinet. They usually held the rank of a Cabinet Minister.
- Members: Included Union Ministers (ex-officio) and full-time expert members specializing in various sectors like economics, industry, and science.
- Member-Secretary: Usually a senior IAS officer responsible for administrative functions.
Core Functions and Responsibilities
The Planning Commission performed several critical roles that shaped the Indian economy for over six decades:
- Resource Assessment: Conducting comprehensive surveys of material, capital, and human resources.
- Plan Formulation: Designing Five-Year Plans with specific targets for national growth and sectoral development.
- Priority Determination: Allocating resources between competing sectors like agriculture, industry, and social services.
- Progress Evaluation: Monitoring the execution of plans and recommending adjustments based on periodic reviews.
- Financial Allocation: Determining the allocation of central assistance to State Plans under the Gadgil-Mukherjee formula.
The Interplay with National Development Council (NDC)
While the Planning Commission formulated the plans, the National Development Council (NDC)—established in August 1952—acted as the supreme body for decision-making. The NDC included the Prime Minister, Union Cabinet Ministers, and Chief Ministers of all States. Its role was to ensure that the plans had the political consensus of the entire nation, effectively acting as a bridge between the Centre and the States.
Evolution of Planning Models
The Planning Commission adopted different economic philosophies over time to address contemporary challenges:
| Phase | Dominant Model | Focus Area |
| 1951–1956 | Harrod-Domar Model | Agriculture, irrigation, and power (First FYP). |
| 1956–1961 | Mahalanobis Model | Rapid industrialization and heavy industries (Second FYP). |
| 1960s | Gadgil Strategy | Focus on self-reliance and regional balance. |
| 1990s | Indicative Planning | Shift toward a market-led economy post-LPG reforms (8th FYP onwards). |
Critical Analysis and Limitations
Despite significant achievements in building a diversified industrial base and achieving food security, the Planning Commission faced several criticisms that eventually led to its dissolution:
- Top-Down Approach: It followed a “one-size-fits-all” strategy, often ignoring the specific needs and diversity of different States.
- Encroachment on Federalism: The power to allocate funds to States made it a “parallel cabinet,” often bypassing the Finance Commission’s role.
- Rigidity: Five-year targets were often too rigid to respond to global economic shocks or rapid technological changes.
- Implementation Gap: While plan formulation was robust, the lack of direct implementation authority led to significant “target vs. achievement” gaps.
Transition to NITI Aayog
On January 1, 2015, the Planning Commission was replaced by NITI Aayog (National Institution for Transforming India). This marked a fundamental shift in India’s planning philosophy:
- From Command to Consultative: NITI Aayog moved away from the “command and control” model to a “Think Tank” model.
- Cooperative Federalism: Unlike the Planning Commission, NITI Aayog mandates the active involvement of State Chief Ministers in the Governing Council from the outset.
- Bottom-Up Approach: Planning now begins at the village level and is aggregated upward to the national level.
- Ending Financial Allocation: NITI Aayog does not have the power to allocate funds; this power was returned to the Ministry of Finance.
UPSC Facts and Trivia
- First Deputy Chairman: Gulzarilal Nanda.
- Last Deputy Chairman: Montek Singh Ahluwalia.
- Plan Holiday: The period between 1966 and 1969 when three Annual Plans were implemented instead of a Five-Year Plan due to economic instability (war and drought).
- Rolling Plan: Introduced by the Morarji Desai-led Janata Government in 1978, discarding the Fifth FYP a year early.
- Article 282: The constitutional provision under which the Centre provided discretionary grants to States based on Planning Commission recommendations.