Economy Planning

14 minutes, 23 seconds Read
Indian Economy on the Night of Independence
  • The structure of Indian Economy nowdays has its root in history, perticularly in the period when India was under British rule. The sole purpose of the British colonial rule in India was to reduce the country to being a raw material supplier for British’s own rapidly expanding modern industrial base.

Low Economic Development under the British Rule

  • India was having an independent economy before the British rule advent. Alongwith agriculture as main source of livelihood for most people, the country’s economy was characterized by various kinds of manufacturing activities. India was known for its handicraft industries in the fields of cotton and silk textiles, metal and precious stone works etc. These products enjoyed a worldwide market based on the reputation of the fine quality of material and the high standards of craftsmanship.
  • The economic policies of the British government in India were only concerned for the protection and promotion of the economic interests of their home country than with the development of the Indian economy. These policies took changed the  fundamental structure of the Indian economy -transforming the country into supplier of raw materials and consumer of finished industrial products from Britain. The British government never took any serious attempt to estimate India’s national and per-capita income. Some individual attempts from notable estimators – Dadabhai Naoroji, William Digby, Findlay Shirras, V. K. R. V. Rao and R. C. Desai which were made to measure such incomes, often yielding conflicting and inconsistent results. However, many studies actually finds that the country’s growth of aggregate real output during the first half of the twentieth century was less than two per cent coupled with a mare of half per cent growth in per capita output a year.

History Related to Planning In India & Need of Five Year Plans

  • The planning of economic development in India begans with 1951 with the inception of First Five Year Plan.

  • Five-Year Plans (FYPs) are centralized, integrated national economic programs.

Five Years Plans
First Plan(1951-56)The Plan Focused on agriculture, price stability, power and transport.
Second Plan(1956-1961)The Plan Focused on rapid industrialization- heavy & basic industries.
Third Plan(1961-66)Aim was to make India a ‘self-reliant‘and’ self-generating‘ economy.
Three Annual Plans Wars and Drought forced Plan holiday and three annual plans were introduced.
Fourth Plan(1969-74)Twin objectives of “growth with stability” and “progressive achievement of self-reliance“. Emphasis on agriculture, Family Planning Programs.
Fifth Plan(1974-79)It proposed to achieve two main objectives: ‘removal of poverty (Garibi
Hatao) and ‘attainment of self-reliance‘.
Sixth Plan(1985-90)It focused on modernization of technology, ensuring continuous decrease in poverty and unemployment.
Seventh Plan(1985-90)The Plan aimed at raising productivity with focus on ‘food, work &productivity’.
Eighth PlanIntroduction of fiscal & economic reforms including liberalization.
Ninth Plan(1997-2002)The Plan focused on “Growth With Social Justice & Equality“.
Tenth Plan(2002-2007)The Plan set ‘monitrable targets‘ like reduction in gender gaps in literacy and wage rate, reduction in Infant & maternal mortality rates, improvement in literacy etc
Eleventh Plan(2007-2012)Plan was aimed “Towards Faster & More Inclusive Growth“.
Twelfth Plan(2012-2017)The plan aimed to achieve “faster, sustainable and more inclusive growth”.
Criticism of Planning Commission
  • With passing years and changing needs, Planning Commission (PC) failed to deliver on various fronts, including the stated objectives. The working of the Planning Commission has been criticized on many accounts.

Issues with the working of Planning Commission were:

  • The institution was not able to address the problems of socially vulnerable groups such as Dalits,Adivasis, women and the disabled.
  • It failed to fulfill the idea of cooperative federalism (NITI Aayog, GST are some steps in this direction). States had no role in formulating plans.
  • It remained a toothless organization without any power to hold the government accountable. The Commission was only an advisory body. Its recommendations were not necessarily accepted by the Cabinet.
  • Post 1991 liberalization, the private sector has played a major role in contributing resources physical, financial and technological to the development priorities of the country, leaving little role for the PC.

Scrapping of Planning Commission:

  • Keeping in mind India’s need for modern economy as well and its federal structure of the country, the government decided to do away with the Planning Commission.
  • The decision to scrap off the commission came after more than a half century of its functioning and had become almost redundant in its scope. The commission also lacked experts with extensive knowledge in the concerned domain.
  • The National Institution for Transforming India, also called NITI Aayog, was formed via a resolution of the Union Cabinet on January 1, 2015. It is the premier policy Think Tank of the Government of India, providing directional and policy inputs. While designing strategic and long term policies and programmes for the Government of India, it also provides relevant technical advice.
  • As an important change from the past, NITI Aayog bring States to act together in national interest,and thereby fosters Cooperative Federalism. It is a knowledge hub of internal as well as external resources, serving as repository of good governance practices and a think tank offering domain knowledge as well as strategic expertise to all levels of government. It is a collaborative platform facilitating implementation by monitoring progress, plugging gaps and bringing together the various ministries at the Centre and in states, in the joint pursuit of developmental goals.
  • Two key activities of the Planning Commission had been to prepare and implement the Five Year Plans and to allocate financial resources to states. Neither of these activities forms a part of the mandate of Niti Aayog. The Twelfth Five Year Plan, which was concluded in 2017, was India’s last Five Year Plan.
  • Likewise, Niti Aayog does not allocate any financial resources to states. The 14th Finance Commissionn raised the share of states in the divisible pool from 32% to 42%, leaving no additional funds for allocation to states through Niti Aayog.
  • Among many functions that Niti Aayog performs, three stand out: promotion of cooperative, competitive federalism; assisting the central government in policy making and serving as the government’s think-tank. These three functions complement each other instead of being mutually exclusive.

The NITI Aayog has been divided into 2 large hubs:

  • 1. Knowledge and Innovation hub and
  • 2. Team India hub
  • The former has the responsibility to create, accumulate and disseminate knowledge, while the latter serves as the link between states and ministries at the centre.


The composition of the NITI Aayog is as follows:

  • Prime Minister of India is the Chairperson. The Governing Council comprises the Chief Ministers of all the states, Chief Ministers of union territories with legislatures, viz., Delhi and Puducherry and Lt. Governors of other union territories. The full time organizational framework consist of, in addition to the Prime Minister as Chairperson; Vice-Chairperson, to be appointed by the Prime Minister. Full time and part-time members will be maximum of 2, from leading universities, research organizations and other relevant institutions in an ex-officio capacity. Part time members will be on a rotational basis. Ex officio Members will be maximum of 4 members of the Union Council of Ministers to be nominated by the Prime Minister. Chief Executive Officer is to be appointed by the Prime Minister for a fixed tenure, in the rank of Secretary to the Government of India.


  • The institution plays a leadership role in policy making in the central government working closely with state governments,
  • It provides relevant strategic and technical advice across the spectrum on key policy elements to Centre and States.
  • It fosters cooperative federalism through structured support and policy guidance to the states on a continuous basis.

  • NITI Aayog actively monitors and evaluates the implementation of programmes and initiatives.

  • The Aayog publishes policy research papers on contemporary issues, brings out books on best practices, and prepares model laws.

Functions of NITI Aayog

  • To evolve a shared vision of national development priorities sectors and strategies with the active involvement of States.
  • To foster cooperative federalism through structured support initiatives and mechanisms with the States.
  • To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels of government
  • To pay special attention to the sections of our society that may be at risk of not benefiting adequately from economic progress
  • To provide advice and encourage partnerships between key stakeholders and think tanks, as well as educational and policy research institutions.
  • To create a knowledge, innovation and entrepreneurial support system through a collaborative community of experts, practitioners and partners.
  • To offer a platform for resolution of inter-sectoral and inter-departmental issues in order to accelerate the implementation of the development agenda.
  • To focus on technology up gradation and capacity building for implementation of programmes and initiatives.
Planning Commission VS NITI AAYOG

Planning Commission acted as an advisory body, and so is NITI Aayog. But the key difference between them is that while the former had powers to allocate funds to Ministries and states; NITI Aayog does not have any such power. NITI Aayog is essentially a think tank and a truly advisory body. Other differences are as follows:

  • The role of states in the planning commission era was limited. Since NITI Aayog has all chief ministers of states and administrators of UT in its Governing Council, states are expected to have greater role and say in planning/ implementation of policies.
  • The top down approach is reversed in NITI Aayog with mechanisms to formulate credible plans to the village level and aggregate these progressively.
  • The provision of regional council is there in NITI Aayog to address local / regional development issues.
  • One of the new functions of NITI Aayog is to address the need of the National Security in the economic strategy.
  • While the planning commission formed Central Plans, NITI Aayog will not formulate them anymore. Vested with the responsibility of evaluating the implementation of programmes, NITI Aayog retains the advisory and monitoring functions of the Planning commission, the function of framing Plans and allocating funds for Plan assisted schemes has been taken away.
Summarized: Three Year Action Agenda

Selected Key Action Agenda Items

Three Year Revenue and Expenditure Framework:

  • The layout consistes of shifting additional revenues to high priority sectors: health, education, agriculture, rural development, defence, railways, roads and other categories of capital expenditure.

Agriculture: Doubling Farmers’ Incomes by 2022

  • Reforms in Agricultural Produce Marketing to ensure the farmers receive remunerative prices.
  • Raising productivity through enhanment in irrigation, fast replacement of seed and precision agriculture.

Industry and Services: Job Creation

  • Creating employment in Coastal Zones to boost exports to generate high-productivity jobs.
  • Enhance labour-market flexibility through reforming key laws
  • Action points for labour intensive sectors like Apparel, Leather and footwear, Real estate, Tourism. Gems and jewelry, Food processing etc

Urban Development

  • Need to bring down land prices to make housing affordable through increased supply of land

1. Conversion rules to be more flexible from one use to another

2. Release of land held by sick units

3. Other urban land release potentially available

4. More generous Floor Space Index.

  • Rent Control Act to be reformed along the lines of Model Tenancy Act;
  • Initiate titles of urban property
  • Promote dormitory housing
  • Address issues related to city transport infrastructure and waste management

Regional Strategies

  • Actions targeted aimed at improving development outcomes in the (1) North Eastern Region, (i) Coastal Areas & Islands, (iii) North Himalayan states and (iv) Desert and Drought prone states.

Transport and Digital Connectivity

  • Strengthen infrastructure in roadways, railways, shipping & ports, inland waterways and civil aviation.
  • Ensuring digital connectivityto the last-mile, particularly for e-governance and financial inclusion, through developing infrastructure, simplifying the payments structure and improving literacy.
  • Facilitate PPPs by reorienting the role of the India Infrastructure Finance Company Ltd. (IIFCL), introducing low cost debt instruments and operationalizing the National Investment Infrastructure Fund (NIIF).


  • Adopt steps which are consumer friendly like electricity to all households by 2022, LPG connection to all BPL households, elimination of black carbon by 2022, and extension of the city gas distribution programme to 100 smart cities.
  • Cross-subsidy reduction in the power sector to ensure competitive supply of electricity to industry.
  • Coal sector reforms by setting up a regulator, promoting commercial mining and improving labour productivity.

Science & Technology

  • Creation of a “National Science, Technology & Innovation Foundation” so to identify and deliberate national issues, recommend priority interventions in S&T and prepare frameworks for their implementation.


  • Re-calibration of government role by reducing its involvement in activities that do not serve a public purpose and expanding its role in areas that necessarily require public provision.
  • Implementation of the layout on closing select loss-making PSEs and strategic disinvestment of 20  Identified CPSEs.
  • Expand the government’s role in public health and quality education.

Taxation and Regulation

  • Tax evasion to be tackled, expand the tax base and simplify the tax system through reforms. For example, existing custom duty rates should be consolidated to a unified rate.
  • Create an institutional mechanism to promote competition through comprehensive review, reform of government regulations across all sectors.

The Role of Law

  •  Significant judicial system reforms should be undertaken including increase in ICT use, structured performance evaluation and reducing judicial workload.
  • Legislative, administrative and operational reforms of police.

Education and Skill Development

  • Emphasis should be shifted to the quality of school education particular attention to be paid in foundational learning.
  • Move away from input-based to outcome-based assessments.
  • Rank outcomes across jurisdictions
  • Create a tiered regulation of universities and college to provide greater autonomy to top universities under the current system.
  • Focus on public universities under the World Class Universities program.


  • Focus on public health through significantly increasing government expenditure an it, establishing a focal point and creating a dedicated cadre.
  • Formulate a model policy on human resources for health, implement a bridge course for nurses/ AYUSH practitioners in primary care.
  • Reform acts governing modern, homeopathy and Indian systems of medicine.
  • Launch the National Nutrition Mission develop a comprehensive Nutrition Information System.

Building an Inclusive Society

  • Enhance the welfare of women, children, youth, minorities, SC, ST, OBCs, differently-abled persons and senior citizens.
  • Develop a composite gender-based index to reflect the status of women.
  • Introduce mandatory skill-based education and extra-curricular activities in schools; design CCT schemes to encourage girls’ education.

Environment and Water Resources

  • Adopt sustainable practices and streamline regulatory structures.
  • Promote sustainable use of water resources by improving groundwater management, adopting smart water meters for specific industrial units.
15-Year Vision
  • NITI Aayog has come forward with a draft 15-year vision plan to catapult the country’s economy to more than three times as compared to the present day. The new plan aims to replace the centralized five-year plans of the past.
  • The new plan is accompanied by shorter sub-plans-a seven-year strategy for 2017-24, and a three-year “Action Agenda’ from 2017-18 to 2019-20. 300+ specific action points covering a wide range of sectors have been drawn up as part of the 15 year vision.

The salient features of 15-years vision plan are:

  • India aims to more than triple the size of its economy in 15 years.
  • India’s urban population is expected to increase by 22 crores by 2031. The plan in likely to lay emphasis on urban development, taking a note from China’s elaborate long-term development agenda.
  • The plan includes the development of an NGO-focused portal NGO-Darpan portal. No grants to NGO will be allowed without a unique portal ID.
NITI AAYOG Critical Analysis

Arguments that support NITI Aayog relevance:

  • It can be visualized as a funnel through which new and innovative ideas come from all possible sources industry, academia, civil society or foreign specialists and flow into the government system for implementation.
  • Initiatives like Ayushmaan Bharat, POSHAN Abhiyaan, our approach towards artificial intelligence and water conservation measures, etc have all been conceptualized in NITI Aayog.
  • NITI Aayog is also bringing about a greater level of accountability.
  • NITI Aayog has established a Development Monitoring and Evaluation Office which collects data on the performance of various Ministries on a real-time basis.
  • The data are then used at the highest policy-making levels to establish accountability and improve performance.
  • This performance and outcome-based real-time monitoring and evaluation of government work can have a significant impact on improving governance.
  • NITI Aayog plays an important role in being the States representative in Delhi, and facilitates direct interactions with the line ministries.

Improving Innovation

  • The Atal Innovation Mission, established under NITI Aayog, has done commendable work in improving the innovation ecosystem in India.
  • It has established more than 1, 500 Atal Tinkering Labs in schools across the country and this number is expected to go up to 5, 000 by March 2019.
  • It has also set up 20 Atal Incubation Centers for encouraging young innovators and start-ups.

Arguments against for the NITI Aayog:

  • NITI Aayog can’t transform a deeply unequal society into a modern economy that ensures the welfare of citizens, irrespective of their social identity.
  • It has no role in influencing public or private investment.
  • It does not seem to have an influence in policy-making with long-term consequences. For instance, demonetization and the Goods and Services Tax.
  • As a think-tank, it has to maintain a respectable intellectual humility and honesty, but it is often seen as government mouthpiece.
  • Labour force participation rate of women is also declining, when neighbors like Bangladesh are registering an increase.

Similar Posts

Leave a Comment