The Planning Commission, the NDC and the five-year plan

Detail

1. The Planning Commission: how it was born

• Planning Commission: the body that made India's five-year plans. It was set up on 15 March 1950.
• The government created it through a Cabinet Resolution, a simple executive order. Parliament passed no law to create it [2].

• The order's official number was Resolution No. 1-P(C)/50 [3].

• Its legal status:

• Not constitutional. No article of the Constitution created it, so the Constitution does not mention it.
• Not statutory. No Act of Parliament created it either.

• So it was an extra-constitutional, non-statutory body: one created only by a government order.

• It was only advisory. It wrote plans and gave advice.

• Its advice took effect only after the Union Cabinet approved it.

• The Central and State governments took the decisions and carried them out. The Commission only planned and coordinated [4].

• Who led it:

• The Prime Minister was its chairperson. Jawaharlal Nehru was the first.

• Gulzarilal Nanda was the first Deputy Chairman. The Deputy Chairman ran its day-to-day work.

• Its first task was the First Five-Year Plan (1951-52 to 1955-56) [4].

2. Where its mandate came from: Fundamental Rights and Directive Principles

• The 1950 resolution based the Commission's work on two parts of the Constitution:
• the Fundamental Rights (Part III): rights a citizen can ask a court to enforce;

• the Directive Principles of State Policy (Part IV): goals the state must keep in mind when it makes laws. No court can enforce them (Art. 37).

• The resolution named three clauses of Article 39 in particular:

Clause	What it asks the state to secure
Art. 39(a)	Men and women equally have the right to an adequate means of livelihood
Art. 39(b)	Ownership and control of material resources are shared out to serve the common good
Art. 39(c)	The economy does not let wealth and the means of production gather in a few hands to the common detriment (harm to everyone)

• NCERT calls the Commission "the most influential and central machinery" for India's development plans.
• NCERT asks an open question: did the Commission actually follow these goals in practice?

3. Criticisms of the Planning Commission

• 'Parallel cabinet' / 'super cabinet':
• The PM chaired it and senior ministers sat on it, but no law created it.

• Critics said it took major economic decisions away from the elected Cabinet and Parliament.

• Less freedom for the states:

• States had to fit their projects into plans made in Delhi.

• So central planning cut into state autonomy, which weakened federalism (power shared between the Union and the states).

• Plan grants given outside the Finance Commission:

• The Finance Commission is a constitutional body under Art. 280. It recommends how tax money is shared between the Union and the states.
• The Planning Commission gave its own plan grants to states, which used Art. 282 (grants for any public purpose).

• So a body that no law had created controlled a large share of the money sent to states (→ fiscal federalism in the economy subject).

• Its end: the government replaced it with NITI Aayog (National Institution for Transforming India). NITI Aayog's resolution came into force on 1 January 2015 and replaced the 15 March 1950 resolution [3][8].

4. National Development Council (NDC)

• National Development Council: a body set up on 6 August 1952 to bring the states into national planning.

• It too was extra-constitutional and non-statutory, created by a government order.

• Members:

• the Prime Minister (chair);
• Chief Ministers of all states;

• members of the Planning Commission [4].

• What it did:

• It gave the final approval to each five-year plan. The Planning Commission drafted the plan, and the NDC approved it.
• It gave the states a voice in planning and helped growth stay balanced across regions [4].

• It continued to meet for decades. The PM chaired its 49th meeting in September 2001 [9].

• Today: most of its role has passed to the Governing Council of NITI Aayog. That council has the Chief Ministers of all states and the Lieutenant Governors of Union Territories [8].

Feature	Planning Commission	NDC	NITI Aayog Governing Council
Created	15 March 1950	6 August 1952	With NITI Aayog, 1 January 2015 [3]
How created	Cabinet resolution	Executive order	Cabinet resolution
Chair	PM	PM	PM
States' role	Little	All CMs are members	All CMs and UT Lieutenant Governors are members [8]
Main job	Draft plans and give advice	Approve plans	Shape a shared national agenda (no five-year plans)

5. The five-year plan

• Five-year plan: a document that sets out the government's income and spending for the next five years.
• India borrowed the idea from the USSR.

• It lets the government focus on the big picture and take long-term action. Without it, the government thinks only one yearly budget at a time.

• India had twelve plans (1951-2017).

• The First Plan ran from 1951-52 to 1955-56 [4].

• The Twelfth Plan (2012-17) was the last. Its theme was "Faster, More Inclusive and Sustainable Growth" [7].

• Plan holiday (1966-69): three annual plans (one-year plans) were made instead of a five-year plan.

• Why:
  • the Third Plan failed after the China war (1962), the Indo-Pak war (1965) and a severe drought (1965-66);
  • the rupee was devalued (its value against other currencies was cut);
  • the economy was hit by inflation and recession at the same time.
• Result: the Fourth Plan was put off until 1969 [6].
• Annual plans were also used in some other gaps between plans.

6. Plan and non-plan expenditure

• Plan and non-plan expenditure: the Union and state budgets used to split spending into two kinds:
• Plan expenditure: money for the five-year plan's priorities, such as new dams, factories and schemes;

• Non-plan expenditure: routine yearly costs, such as salaries, interest and upkeep.

• Update: the Union Cabinet merged the two kinds. The split ended from the Union Budget 2017-18 [5]. (NCERT: describes the split in the present tense.)

• Why the split was dropped:
  • It gave a broken-up picture of where money went, so it was hard to know what a service really cost or to link spending to results [5].
  • Governments preferred "plan" spending, so they neglected upkeep of assets they had already built [5].
• What replaced it: budgets now focus on revenue expenditure (running costs) and capital expenditure (building lasting assets) [5].
• Money set aside for the Scheduled Castes Sub-Plan, the Tribal Sub-Plan and the North-Eastern states continued [5].
• The same Budget 2017-18 brought two more reforms: the Railway Budget merged into the General Budget, and the Budget presented earlier [5].

7. Public excitement about planning

• The draft of the First Plan and the final plan document (December 1951) were widely debated by:
• academics and journalists;
• government and private-sector employees;

• industrialists, farmers and politicians.

• Excitement peaked with the Second Plan (1956) and lasted to some extent until the Third Plan (1961).

• Postage stamps (1955-68) showed this vision of development:
• Dams: Damodar Valley, Bhakra Dam, Hirakud Dam;
• Industry: Chittaranjan Locomotives, Gauhati Refinery, Sindri Fertilisers, Hindustan Aircraft Factory;
• Farming and transport: a tractor, an electric train, the 'Wheat Revolution'.

Prelims Hooks

• Planning Commission was set up on 15 March 1950 by a Cabinet resolution. Trap: it was neither constitutional nor statutory.
• NDC (6 August 1952): PM is chair, all CMs are members, and it gave final approval to plans. It was also extra-constitutional.
• First Deputy Chairman of the Planning Commission: Gulzarilal Nanda. Chairperson: the PM.
• Art. 39(b) is about material resources serving the common good. Art. 39(c) is about stopping wealth from gathering in a few hands. Art. 39(a) is about an equal right to livelihood for men and women. All three are Directive Principles.
• Plan holiday: three annual plans, 1966-69, caused by the 1962 and 1965 wars, the 1965-66 drought and the rupee's devaluation.
• Twelfth Plan (2012-17) was the last five-year plan. Theme: "Faster, More Inclusive and Sustainable Growth".
• Budget 2017-18 merged plan and non-plan spending, merged the Railway Budget into the General Budget and moved the Budget date earlier.
• NITI Aayog came into force on 1 January 2015 and replaced the 1950 resolution. Its Governing Council = all CMs + Lieutenant Governors of UTs.
• The five-year plan model was borrowed from the USSR.

Mains Points

• Planning and federalism (GS-II):
• A Commission created by an executive order controlled plan grants under Art. 282, outside the Finance Commission (Art. 280). So it centralised money and policy, earning the name 'parallel cabinet'.
• The NDC gave states only a limited voice.

• NITI Aayog's Governing Council tries to build cooperative federalism, where the Union and states work as partners.

• Promise versus practice (GS-I/II):

• The mandate came from Art. 39(a)-(c), which aim at fair sharing and stopping wealth from gathering in a few hands.

• Aspirants should judge whether plan priorities, such as heavy industry and big dams, actually reduced inequality.

• Advisory body, real power (GS-II):

• On paper, the Commission only advised the Cabinet.

• In practice, the PM chaired it, so its "advice" carried great weight. This shows how bodies outside the Constitution can shape governance and blur who is accountable to Parliament.

• Budget reform (GS-II/III):

• Ending the plan/non-plan split in 2017-18 fixed the neglect of upkeep and linked spending to results.
• It also ended a key tool of central planning, consistent with the move from five-year plans to NITI Aayog's strategy documents.