The legacy of planning: achievements, alternatives and the move to NITI Aayog

Detail

1. Why judge the planning era?

• NCERT asks three questions about the planning model:
• What did it achieve?
• Where did it fail?

• Why was it later given up?

• Planned development means the state sets national goals for five years at a time. It then directs investment, especially public investment, towards those goals.

• The Planning Commission (1950) was neither a constitutional body (one created by the Constitution) nor a statutory body (one created by an Act of Parliament). It was set up by a resolution of the Union Cabinet. NITI Aayog was later created in the same way.

2. Achievements of the planning era

• A public-sector industrial base: the state built heavy industry, such as steel, machinery and power. Private capital in the 1950s was too weak to build these on its own.
• Dams and irrigation: big multipurpose projects that gave irrigation, power and flood control. Together these laid the base for later farm growth.
• Scientific and technical institutions: plans paid for research labs, engineering colleges and technical training. This built the skilled workforce India needed.
• A drive for self-reliance: the aim was to make capital goods (machines that make other goods) at home and depend less on imports and foreign aid.

3. Limitations (beyond NCERT)

• Slow growth:
• For about three decades, national income grew slowly.

• The economist Raj Krishna called this the 'Hindu rate of growth'. The phrase means a low but steady rate that persisted. It does not refer to religion.

• Continuing poverty and weak land reform:

• Zamindari was abolished, but ceilings on land holdings were weakly enforced.

• Many tenants and landless workers gained little.

• The licence-permit raj:

• Licence-permit raj means a system in which a firm needed government licences to start a business, expand it or import inputs.

• This led to delay, corruption and weak competition.

• Inefficient public companies: many public-sector undertakings made losses and needed budget support.

• Regional imbalance: investment and growth were concentrated in some states and regions.
• Displacement: big dams and industrial projects forced many people, often Adivasis (tribal communities), off their land, frequently with poor rehabilitation.

4. Exam trap: what early policy did NOT include (Exercise 2)

Part of early development policy	NOT part of early policy
Planning	Liberalisation
Cooperative farming
Self-sufficiency

• Liberalisation means cutting state controls so that markets and private firms play a bigger role. It came with the 1991 shift (→ planning-mixed-economy).

5. An alternative path: the Kerala model of development

• Kerala model of development: Kerala achieved high human development even though income per person was fairly low.
• High literacy
• Long life expectancy

• Low infant mortality (the number of babies who die before their first birthday)

• How Kerala got there:

• Public education and public health care reached ordinary people.
• Land reform gave tenants rights to the land they worked.

• Social mobilisation: caste-reform movements, trade unions and political parties organised people to demand services.

• People's Plan Campaign (1996), beyond NCERT:

• Kerala's People's Campaign for Decentralised Planning began in 1996. It handed functions, funds and staff to local self-governments.
• About 40% of the state's development budget went to village panchayats [8].

• Citizens were trained to take part through gram sabhas (meetings of all voters in a village) [8].

• Do not confuse the two "People's Plans":

Plan	Year	By whom
People's Plan	1945	M.N. Roy
People's Plan Campaign	1996	Government of Kerala (decentralised planning)

• Critiques of the Kerala model:
• Slow growth of the economy and of jobs
• Educated unemployment (many educated young people without matching jobs)

• Heavy dependence on money sent home by workers in the Gulf countries

• Lesson: development results depend on political mobilisation as much as on plans written in Delhi.

6. From the Planning Commission to NITI Aayog (NCERT "Fast Forward")

• After 1991: plans became indicative. This means they set targets and direction and relied on markets and private investment. The state no longer directed most investment.
• 15 August 2014: the abolition of the Planning Commission was announced.
• 1 January 2015: the Union Government set up NITI Aayog (National Institution for Transforming India) through Cabinet Secretariat Resolution No. 511/2/1/2015-Cab [2].
• Nature of NITI Aayog:
• It is a policy think tank that gives advice.
• It has no power to allocate funds to ministries or states.
• It is non-constitutional and non-statutory.

Composition of NITI Aayog

Part	Who
Chairperson	Prime Minister
Governing Council	Chief Ministers of all states and of UTs with legislatures, plus Lieutenant Governors of other UTs; notified on 16 February 2015 [3]
Vice-Chairperson	Appointed by the PM
Members	Full-time members and part-time members
Ex officio members	Union ministers nominated by the PM
Special invitees	Nominated by the PM [3]
CEO	Runs the Aayog day to day

• Stated aim: cooperative federalism. This means the Centre and the states work together as partners on national goals instead of the Centre giving orders.
• The Governing Council meets with the PM. At its third meeting (23 April 2017), the Vice-Chairperson presented a 15-year vision, 7-year strategy and 3-year action agenda [5].

7. The end of five-year plans

• The Twelfth Plan (2012–17) ended on 31 March 2017. It was the last five-year plan [4].
• What replaced the plans:
• In May 2016 the PMO asked NITI Aayog to prepare a 15-Year Vision (2017-18 to 2031-32), a 7-Year Strategy and a 3-Year Action Agenda [4].

• The Three-Year Action Agenda covered 2017-18 to 2019-20, matching the last years of the Fourteenth Finance Commission period [4].

• Budget change in the same year:

• The Union Budget 2017-18 removed the old Plan / Non-Plan split of spending. Spending is now shown as revenue and capital expenditure [7][6].
• Revenue expenditure is day-to-day spending. Capital expenditure is spending that creates assets or reduces liabilities.

• The Finance Minister announced this in the Budget speech of 29 February 2016 [9].

• Why the Plan / Non-Plan split was dropped:

• Plan spending was treated as "good" and non-plan spending as "bad".
• As a result, the upkeep of existing assets was neglected.
• It was also hard to link spending to outcomes [6][7].

8. The debate: was the change good for federalism?

For NITI Aayog	Against / concerns
Lighter, advisory and less centralised; ends "one plan for all" from Delhi	States lost a forum: plans and plan transfers were once negotiated in the Planning Commission and the National Development Council
CMs sit in the Governing Council, which is the stated route to cooperative federalism	States lost a formula for plan transfers (the Gadgil formula). Transfers now depend more on the Finance Commission (Article 280) and on Union ministries' schemes
Separates policy advice from money, which ends bargaining over plan grants	Without funds, NITI has little power over states. Grants outside a formula (Article 282) can become discretionary

• Cross-links: → federalism-centre-state; fiscal-federalism (economy subject).

Prelims Hooks

• NITI Aayog was set up by a Cabinet Secretariat resolution dated 1 January 2015. It is neither constitutional nor statutory, just like the Planning Commission (1950).
• NITI Aayog cannot allocate funds. It is a policy think tank.
• Governing Council = PM + CMs of all states and of UTs with legislatures + LGs of other UTs; notified on 16 February 2015.
• Twelfth Plan (2012–17) was the last five-year plan. It ended on 31 March 2017.
• The plan that followed = 15-year Vision (2017-18 to 2031-32) + 7-year Strategy + 3-year Action Agenda (2017-18 to 2019-20).
• Union Budget 2017-18 ended the Plan / Non-Plan classification and replaced it with revenue / capital spending.
• Trap: liberalisation was NOT part of early development policy. Planning, cooperative farming and self-sufficiency were.
• 'Hindu rate of growth' — the phrase was coined by Raj Krishna.
• People's Plan (1945) → M.N. Roy. People's Plan Campaign (1996) → Kerala, with about 40% of the development budget given to panchayats.
• Kerala model = high literacy + long life expectancy + low infant mortality at low income per person.

Mains Points

• Mixed record of planning (GS-I):
• It built the industrial, irrigation and scientific base of the economy.
• But it also produced the licence-permit raj, losses in public companies, slow growth, regional imbalance and displacement.

• By the end of the 1980s these problems made the 1991 shift hard to avoid.

• Kerala model vs growth-first models:

• Spending on people (education, health, land reform), together with political mobilisation, can deliver human development before high income.
• Decentralisation in 1996, with about 40% of development funds going to panchayats, deepened this.

• Weak growth and dependence on remittances show the limits of the model.

• Planning Commission → NITI Aayog (GS-II, federalism):

• The change moved India from command-style planning to advice and cooperative federalism.
• But states lost a bargaining forum and a formula for plan transfers.

• Transfers now rest on the Finance Commission (Article 280) and centrally sponsored schemes, which raises questions about fiscal autonomy.

• Reform idea: give NITI Aayog's Governing Council a regular, rule-based role in Centre-state economic coordination. Alternatively, strengthen the Inter-State Council, so that the forum states lost is restored without restoring central control.