From Five-Year Plans to Competitive Federalism: Planning Commission, NITI Aayog, and India's Development Strategy

NITI Aayog, Planning Commission and NDC

On August 13, 2014, the Modi government announced the dissolution of the 65-year-old Planning Commission. Its successor, the NITI Aayog (National Institution for Transforming India), was formally constituted on January 1, 2015.

Like the Planning Commission before it, NITI Aayog was brought into existence through an executive resolution of the Union Cabinet — not by the Constitution or by an Act of Parliament. This makes it:

• Non-constitutional (extra-constitutional): not established by the Constitution
• Non-statutory: not created by any Parliamentary legislation

NITI Aayog serves as the premier policy think tank of the Government of India, offering both directional and strategic policy inputs. It provides technical guidance to both the Centre and the States. Crucially, the old top-down, centre-to-state flow of policy that defined the Planning Commission era is replaced by a genuine partnership model based on cooperative federalism.

In a fundamental departure from the command-and-control approach of the past, NITI Aayog embraces diverse viewpoints in a collaborative and consultative framework, with policy thinking driven from the bottom up rather than imposed from the top.

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The Union Government explained the rationale as follows: India has undergone sweeping transformation over six decades — politically, economically, socially, technologically and demographically. The old Planning Commission, suited to a command economy, could no longer address the needs of a complex, diverse, and rapidly growing India.

Finance Minister Arun Jaitley noted that the Planning Commission had become redundant in the context of a market economy, and that a 'one-size-fits-all' approach to planning was obsolete in a country where states are at very different stages of economic development.

The government resolution also emphasized that India must find its own strategy for growth — no external model can be transplanted wholesale. NITI Aayog was positioned as a distinctly Bharatiya approach to development.

The three foundational pillars of this new institution are:

1. Empowered States as equal partners — operationalising Cooperative Federalism
2. A knowledge hub — repository of good governance best practices and a think tank offering domain expertise
3. A collaborative platform — facilitating implementation by monitoring progress, plugging gaps and aligning ministries at the Centre and State levels

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1. Research Wing Functions as an in-house think tank staffed by top domain experts, scholars and specialists, developing sectoral expertise across policy areas.

2. Consultancy Wing Operates as a marketplace connecting Central and State Governments with vetted panels of expertise and funding sources — both public and private, national and international. Rather than being the sole service provider, NITI Aayog plays a matchmaking role, freeing up resources for priority matters.

3. Team India Wing Comprises representatives from every State and Central Ministry. It functions as a permanent platform for national collaboration. Each representative:

• Ensures the State/Ministry has a continuous voice in NITI Aayog's functioning
• Acts as a dedicated liaison interface for all development-related communication

NITI Aayog makes recommendations to Central and State Governments but does not bear executive responsibility — the power to decide and implement rests with the governments themselves.

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The core objectives include:

1. Evolve a shared national vision on development priorities with active State involvement
2. Foster cooperative federalism through structured, continuous support to States
3. Develop mechanisms for village-level credible planning, aggregating upward
4. Ensure national security considerations are embedded in economic strategy
5. Pay special attention to vulnerable sections of society
6. Design strategic long-term policy frameworks with mid-course correction capabilities
7. Encourage partnerships among think tanks, research institutions and stakeholders
8. Build a knowledge, innovation and entrepreneurship ecosystem
9. Resolve inter-sectoral and inter-departmental conflicts to accelerate implementation
10. Maintain a resource centre on good governance and sustainable development
11. Actively monitor and evaluate programme implementation
12. Focus on technology upgradation and capacity building
13. Undertake any other activity needed to advance the national development agenda

Broader Opportunities NITI Aayog Aims to Unlock

• Shift the government's role from 'provider of first and last resort' to an 'enabler'
• Move beyond food security to focus on farmer income and agricultural returns
• Make India a proactive player in global commons debates
• Engage the middle class and leverage their potential
• Harness India's entrepreneurial, scientific and intellectual capital
• Leverage the geo-economic and geo-political strength of the NRI community
• Use urbanisation as an opportunity through modern technology
• Use technology to reduce opacity in governance

Challenges NITI Aayog Seeks to Address

• Realising the demographic dividend through education and skill development
• Elimination of poverty and ensuring life of dignity for every Indian
• Redressal of gender, caste and economic inequalities
• Integrating villages institutionally into the development process
• Policy support for 50 million+ small businesses
• Safeguarding environmental and ecological assets

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NITI Aayog's functioning is anchored in seven guiding principles:

1. Antyodaya — Prioritise the uplift of the poorest and most marginalised, as envisioned by Pandit Deendayal Upadhyay
2. Inclusion — Empower vulnerable groups; redress inequalities of gender, region, religion, caste and class
3. Village — Integrate villages into the development process as the bedrock of Indian society
4. Demographic Dividend — Harness India's human capital through education, skilling and livelihood creation
5. People's Participation — Make development a citizen-driven process with participative governance
6. Governance — Nurture transparent, accountable, proactive governance; shift focus from Outlay → Output → Outcome
7. Sustainability — Embed environmental sustainability at the core of planning

Seven Pillars of Effective Governance (as articulated by NITI Aayog)

1. Pro-people agenda aligned with societal and individual aspirations
2. Pro-active responsiveness to citizen needs
3. Participative — involving citizens in governance
4. Women's empowerment in all spheres
5. Inclusion of all groups, especially SCs, STs, OBCs and minorities
6. Equality of opportunity for youth
7. Transparency through technology

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The Opposition raised several objections to the replacement of the Planning Commission:

• Described the move as 'mere gimmickry' and 'fluff without substance'
• CPI(M) leader Sitaram Yechury coined the phrase 'aniti aur durniti' (no policy and bad policy) for the renamed body
• Critics alleged that the change was primarily anti-Nehruvian in motivation rather than driven by genuine reform
• Some argued it would lead to an unregulated market economy without the discipline of planning
• Others felt the NDC should have been strengthened instead of the Planning Commission being dissolved
• Congress leaders contended that renaming alone — without structural reform — was purely cosmetic

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The National Institute of Labour Economics Research and Development (NILERD) — formerly the Institute of Applied Manpower Research (IAMR) — is a subordinate office of the NITI Aayog.

• IAMR was established in 1962 under the Societies Registration Act of 1860 as a clearing house for ideas and policy research on human capital development
• Renamed NILERD on June 9, 2014
• Primarily funded by grants-in-aid from NITI Aayog, supplemented by contracted research and training revenues
• Main objective: develop an institutional framework for applied human resource planning research
• Moved to its own campus at Narela (a Special Economic Zone for Knowledge in NCR) in 2002

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Establishment

The Planning Commission was set up in March 1950 by an executive resolution of the Union Cabinet, on the recommendation of the Advisory Planning Board (constituted in 1946 under K.C. Neogi). It was neither constitutional nor statutory — and it was India's supreme organ for social and economic planning.

Functions

1. Assessment of material, capital and human resources; investigation of augmentation possibilities
2. Formulation of plans for optimal and balanced resource utilisation
3. Setting priorities and defining stages for plan implementation
4. Identifying factors that retard economic development
5. Determining the machinery required for plan implementation at each stage
6. Periodic appraisal of plan progress and recommending adjustments
7. Making recommendations on matters referred by Central or State governments

Additional matters assigned via Allocation of Business Rules:

• Public cooperation in national development
• Perspective planning
• Institute of Applied Manpower Research (IAMR)
• Unique Identification Authority of India (UIDAI)
• National Rainfed Area Authority (NRAA)
• (National Informatics Centre was later transferred to the Ministry of Information Technology)

Key distinction: The Planning Commission was purely a staff/advisory agency with no executive responsibility. Decision-making and implementation rested with the Centre and State Governments.

Composition

• Chairman: Prime Minister (presided over meetings)
• Deputy Chairman: De facto executive head; appointed by the Cabinet for a fixed tenure; enjoyed Cabinet Minister rank; invited to Cabinet meetings (without voting rights); responsible for the draft Five-Year Plan
• Part-time Members: Certain Central Ministers; Finance Minister and Planning Minister were ex-officio members
• Full-time Expert Members: 4 to 7 experts with rank of Minister of State
• Member-Secretary: Usually a senior IAS officer
• States had no representation — the Planning Commission was wholly a Centre-constituted body

Internal Organisation

Three organs:

1. Technical Divisions — major functional units for plan formulation, monitoring and evaluation; divided into general divisions (economy-wide) and subject divisions (sector-specific)
2. Housekeeping Branches — General Administration, Establishment, Vigilance, Accounts and Personal Training
3. Programme Advisors — created in 1952 to serve as the link between the Planning Commission and the States in the field of planning

Dual hierarchy:

• Administrative: headed by the Secretary; supported by Joint Secretaries, Deputy Secretaries, etc. — drawn from IAS, IRS, CSS, IA&AS and other non-technical services
• Technical: headed by the Advisor (rank of Additional/Joint Secretary); supported by Chiefs, Directors, Joint Directors — drawn from IES, ISS, Central Engineering Service and other technical services

Programme Evaluation Organisation (PEO)

• Established in 1952 as an independent unit of the Planning Commission (now under NITI Aayog)
• Headed by a Director/Chief; assisted by Joint Directors, Deputy Directors, Assistant Directors
• Has seven regional offices: Chennai, Hyderabad, Mumbai, Lucknow, Chandigarh, Jaipur, Kolkata
• Each regional office is headed by a Deputy Director
• Function: assess implementation of development programmes in Five-Year Plans and provide feedback to the Planning Commission (now NITI Aayog) and executive agencies; also provides technical advice to State evaluation bodies
• In February 2015, reports emerged of a major revamp of the PEO under NITI Aayog

Critical Evaluation of the Planning Commission

Though originally envisioned as a purely advisory body, the Planning Commission evolved into a powerful directive authority. Eminent critics described it as:

• 'Super Cabinet', 'Economic Cabinet', 'Parallel Cabinet', 'Fifth Wheel of the Coach'

Key observations:

1. Administrative Reforms Commission (ARC): noted that the Planning Commission had earned the reputation of a 'Parallel Cabinet' and sometimes a 'Super Cabinet', inconsistent with the constitutional role of ministers
2. D.R. Gadgil (former Deputy Chairman): criticised the Commission for mixing itself into public policy formation well beyond its advisory mandate; blamed the membership of the PM and Finance Minister for giving it unnatural prestige
3. Ashok Chanda: argued the Commission's undefined position led it to act as an economic cabinet for the Union as well as the States, inconsistent with cabinet government
4. K. Santhanam: stated that planning had effectively superseded the federal structure, making India function like a unitary system in many respects
5. P.V. Rajamannar (Chairman, 4th Finance Commission): highlighted the functional overlap between the Planning Commission and the Finance Commission in federal fiscal transfers
6. P.P. Agarwal: observed that the Commission's advisory role had, in practice, extended over the entire administration
7. Estimates Committee (1957–58): recommended a review of the formal association of Cabinet Ministers with the Planning Commission

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Establishment

The NDC was established in August 1952 by an executive resolution of the Government of India, on the recommendation of the First Five-Year Plan (draft outline). Like the Planning Commission, it is neither a constitutional body nor a statutory body.

The Sarkaria Commission (1983–87) recommended that the NDC be accorded constitutional status under Article 263 and renamed the National Economic and Development Council.

Composition

1. Prime Minister (Chairman)
2. All Union Cabinet Ministers (since 1967; before 1967, only select ministers like Home, Finance, Defence, External Affairs, etc.)
3. Chief Ministers of all States
4. Chief Ministers/Administrators of all Union Territories
5. Members of the Planning Commission (now NITI Aayog)

The Secretary of the Planning Commission (now NITI Aayog) acts as the Secretary to the NDC. Administrative support is provided by the Planning Commission/NITI Aayog.

Objectives

1. Secure State cooperation in executing the Plan
2. Mobilise national efforts and resources in support of the Plan
3. Promote common economic policies across all vital sectors
4. Ensure balanced and rapid development across all parts of India

Functions

1. Prescribe guidelines for preparation of the national Plan
2. Consider the Plan prepared by the Planning Commission (now NITI Aayog)
3. Assess resources required for Plan implementation; suggest measures to augment them
4. Consider important questions of social and economic policy affecting national development
5. Periodically review the progress of the national Plan
6. Recommend measures to achieve Plan aims and targets

Plan Approval Process

Draft Five-Year Plan (by Planning Commission/NITI Aayog) → Union Cabinet approval → NDC acceptance → Parliament approval → Official Plan (published in official gazette)

The NDC is thus the highest body below Parliament responsible for policy matters relating to planning for social and economic development. However, its recommendations are advisory and not binding, and it must meet at least twice every year.

Critical Evaluation of NDC

Two sharply contrasting assessments exist:

• 'Super Cabinet' view: due to its powerful composition and national mandate, its advisory recommendations can hardly be ignored in practice
• 'Rubber Stamp' view: it merely ratifies decisions already made by the Union Government — a result of prolonged single-party dominance at the Centre and in States

With the rise of regional parties, the NDC has increasingly acquired a genuine federal character, giving States a larger voice in national planning.

Key observations:

1. M. Brecher: noted that the NDC had effectively relegated the Planning Commission to the status of a research arm
2. H.M. Patel (former Finance Minister): argued that the NDC was clearly superior to the Planning Commission, and its recommendations functioned as policy decisions, not mere advisory suggestions
3. K. Santhanam: described the NDC as approximating a 'super cabinet of the entire Indian federation'
4. A.P. Jain (ex-Food Minister): argued the NDC encroaches upon functions constitutionally belonging to the Council of Ministers; it is suited only to debate and advise, not to decide

NDC and NITI Aayog

In January 2016, it was reported that the Modi government planned to abolish the NDC and transfer its powers to the Governing Council of NITI Aayog. However, as of August 2016, no such resolution had been passed. The last (57th) NDC meeting was held on December 27, 2012, to approve the 12th Five-Year Plan (2012–2017).

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• NITI Aayog is non-constitutional and non-statutory — created by Cabinet resolution
• The Vice-Chairperson holds Cabinet Minister rank; CEO holds Secretary rank; full-time members hold Minister of State rank
• Regional Councils are a unique feature of NITI Aayog with no equivalent in the Planning Commission
• The Planning Commission was a purely Centre-constituted body — States had no representation
• The Deputy Chairman of the Planning Commission was the de facto executive head, not the Chairman (PM)
• NDC is the highest body below Parliament on planning policy — but its recommendations are not binding
• The Sarkaria Commission recommended giving NDC constitutional status under Article 263
• PEO was established in 1952, has 7 regional offices, and now functions under NITI Aayog
• NILERD (formerly IAMR) is a subordinate office of NITI Aayog
• The guiding principle of Antyodaya links NITI Aayog to Pandit Deendayal Upadhyay's philosophy
• NDC's 57th meeting (last held) was in December 2012 for the 12th Plan