Chapter:2

Planning and Development

What is Planning?
👉 Systematic regulation of an activity which is undertaken by the
government to set priorities and reduce the wastage of time and
resources is called Planning.
• It is an invaluable aid to policy and help to achieve National goals and
is a continuous process.
• Planning is a rational process and concerns itself with the proposals
for the future with the evolution of alternate proposals and the
methods with which these proposals may be achieved.
• What is Development?
👉 Development means
different things to different
people. For an industrialist
development means setting
up of a steel industry. Steel is
useful for an urban
consumer while for an
adivasi it means intrusion in
his area. Any idea of
development is bound to to
lead contradictions, conflicts
and debates.
Left Vs Right: Two Alternatives to Development:
Parties are often grouped as rightist or leftist. These reflect
ideological alternatives to development. Left refers to those
who are in favour of poor and downtrodden and support
government policies for the benefit of these sections. Right
refers to free market economy and free competition. It is an
approach in which government does not interfere in the
matter of economy.
 Planning for Development
• Lifting India out of poverty and, building a modern technical and industrial
base were among the major objectives of the new nation.
• In 1950, the government set up a Planning Commission to help design and
execute suitable policies for economic development.
• Planning plays an important role in the smooth functioning
of an economy. The Government set up the Planning
Commission to create, develop, and execute India’s five-
year plans.
• The Planning Commission was formed by the government of India to
formulate economic plans and policies. The commission started
functioning from 1951. The first plan was formulated for the year 1951-
56.
• The objectives of planning are- to make Indian economy self reliant & self
generating and to achieve distributive justice.
• Therefore, an “Extra constitutional body” set up with the Prime Minister as its
chairman to make plans for the country. It was set up in March 1950.
ROLE AND FUNCTIONS OF PLANNING
COMMISSION:
👉The Planning Commission was constituted in March, 1950 by a
Resolution of the Government of India, and works under the overall
guidance of the National Development Council. The Planning
Commission consults the Central Ministries and the State Governments
while formulating Five Year Plans and Annual Plans and also oversees
their implementation. The Commission also functions as an advisory
body at the apex level.

👉The Prime Minister in his capacity as Chairman of the Planning

Commission, participates and gives direction to the Commission on all
major issues of policy.

👉 The function of planning commission was to formulate a plan for the

most effective and balanced utilisation of country's resources. To define
the stages, on the basis of priority, in which the plan should be carried
out and propose the allocation of resources for the due completion of
each stage.
 National Development Council
• (1) National Development Council was Establishment on 6 August 1952 by Executive
Resolution. (It was set - up by a proposal of the Government. All the plans made by the
Planning Commission have to be approved by National Development Council first).
• (2) It is a Non Constitutional body(Not created by Constitution)
• (3) It is a Not Statutory body(Not by act of Parliament)
• (4) It was constituted to build co-operation between the States and the Planning
Commission for economic planning.
• (5)The background of National Development Council was set up on the recommendation
of first five year plan draft.
• (6) The Composition of NDC-
*Ex-officio Chairman is the Prime Minister
*Other Members • All Union Cabinet ministers, Chief Ministers of all the states,
representatives of Union Territories and the Members of Planning Commission.
*The secretary of the Planning Commission acts as the secretary of National Development
Council.
• (7) Functions of National Development Council:
• • Provides the guidelines for preparation of the five year plan.
• • Considers the national plan as prepared by the Planning Commission.
• • Makes an assessment of the resources that are required for implementing the plan and suggest
methods for augmenting them.
• •Considers the important questions of social and economic policy affecting national development.
• •Reviews the working of national plan from time to time.
• •Recommends the measures for achievement of aims and targets set out in the national plan.
• (8)Other Important Things:
• •The National Development Council is an advisory body to the Planning Commission.
• •The recommendations of NDC are not binding.
• •NDC should meet at least twice every year.
• • The Sarkaria Commission (1983 – 1987) on Center-state relations recommended that the National
Development Council should be given a constitutional status under article 263.
• The Sarkaria commission also recommended that the NDC should be renamed as National Economic and
Development Council.
• (9) National Development Council has been proposed to be abolished. But till date no resolution has
been passed to abolish it.
The process of plan formulation
in India:
Plans are formulated by the planning commission on the basis of
guidelines given by the National Development council.
• A draft of the final plan it is considered by the Union Cabinet and then
submitted for approval to the NDC.
• After approval of the NDC and Cabinet the plan is presented before
the parliament.
• After its formulation the plan is divided into to annual plans for
convenient implementation and allocation of resources.
The implementation of plans is not done by the Planning Commission
but by the the state and union government.
Objectives of Five Year Plan of
India
The objectives of these five-year plans were
as follows:
• Economic Growth
• Economic Equity and Social Justice
• Full Employment
• Economic Self-Reliance
• Modernisation
Five Year Plans of India(1951-1956)
The First Five Year Plan which commenced in 1951 was
drafted by the young economist K. N. Raj. This plan sought
to get the country’s economy out of the cycle of poverty.
The major thrust area or aim of the first five year plan was:
1. Agrarian sector including investment in dams and
irrigation. It is because agricultural sector was hit
hardest by partition and need urgent attention.
2. Huge allocations were made for or large-scale projects
like the Bhakhara Nangal Dam.
3. The first five year plan also focused on land reforms as
for country’s development.
4. Actually the basic in of the planners was to raise the
level of National Income.
The second five year plan (1956-1961)
The second five year plan was drafted bye economist and planners under the
leadership of P. C. Mahalanobis for the year 1956-1961.
1. The main aim of the second five year plan was to bring about quick
structural transformation by making changes simultaneously in all
possible directions.
2. Second five year plan was based on the socialist pattern of society. In this
plan government imposed substantial tariffs on imports in order to
protect domestic industries.
3. The second five year plan stressed on heavy industries- A bulk of
industries like electricity, railway, Steel machineries and communication
could be developed in the public sector.
4. Thus, such a push for industrialisation marked a turning point in India’s
development.
The end of Five-Year Plans: The 12th five
year Plan was the last of the Five-Year Plans.

For a long time, there had been a feeling that for a country as diverse
and big as India, centralised planning could not work beyond a point
due to its one-size-fits-all approach. Moreover, since the Planning
Commission used to be controlled by the Central government, it often
ended up as a tool to punish states ruled by the opposition parties
when it came to allocating funds. Due to the top-to-bottom approach
in centralised planning, it was felt that the states needed to have
greater say in planning their expenditure. The Planning Commission
was seen to be imposing its diktats on states who could have better
known what and how much they needed.

The Niti Ayog, which has replaced the Planning Commission, is the
new body that gives policy direction. Its founding principal is
‘cooperative federalism’. Most important difference is that Niti Ayog
has no power to grant funds or make decisions on behalf of states. It
is only an advisory body.
NITI AAYOG
• After independence, a Planning Commission based on socialist model was formed for the planned
development of India. But in the era of globalization, especially in the 21 st century, it was becoming
ineffective and irrelevant, particularly in terms of coping with the pressing challenges of development.
• *The Planning Commission which has a legacy of 65 years has been replaced by the NITI Aayog. The
utility and significance of the Planning Commission had been questioned for long. The replacement
seems to be more relevant and responsive to the present economic needs and scenario in the country.
Since 1990, Government had been dismissive of the Planning Commission. Even Narendra Modi, as the
Chief-minister of Gujrat had many times pointed the short-comings of the planning commission that is
why in May 2014, Narendra Modi led National Democratic Alliance government announced the
replacement of the 65 years old planning commission with a new institution called Niti Aayog. the
objective of providing the necessary and technical advice to the Union Government regarding policy
making at the Central and State levels.
• *NITI Aayog has been set up "to provide a critical directional and strategic input into the development
process". It will act as a "think-tank" and advise the Centre and states on policy matters. The Aayog
seeks to end "slow and tardy implementation of policy, by fostering better Inter-Ministry coordination
and better Centre-State coordination (co-operative federalism).
 NITI AAYOG EVOLUTION:
• The NITI Aayog was formed on January 1, 2015. In Sanskrit, the word
“NITI” means morality, behavior, guidance, etc. But, in the present
context, it means policy and the NITI stands for "National Institution
for transforming India”. It is the country's premier policy-making
institution which is expected to bolster the economic growth of the
country. It aims to construct a strong state that will help to create a
dynamic and strong nation. This helps India to emerge as a major
economy in the world. The NITI Aayog's creation has two hubs called
“Team India Hub” and “Knowledge and Innovation Hub”.
• 1. The Team India: It leads the participation of Indian states with the
central government.
• 2. The Knowledge and Innovation Hub: It builds institution's think tank
capabilities.
 COMPOSITION OF NITI AAYOG:-
Niti Aayog-National Institution for transforming India is composed to ensure greater participation of state
governments in policy making-thus fostering co-operative federalism-and will be more attuned to the nations
contemporary needs.
• 1. Chairperson-Prime-minister
• 2. Vice-Chair-person- Nominated by prime minister.
• 3. Chief Executive officer (C.E.O.)- nominated by prime-minister.
• 4. Governing Council-Chief ministers and Lt. governors of Union Territories.
• 5. Regional Council (formed on need basis) Chief Ministers and Lt. Governors of Union-Territories
• 6. Full time-members, Maximum five-members.
• 7. Short term members, Two ex-officio-members
• 8. Ex-officio members-Four central ministers.
• Special Invitees- Experts, specialists, practitioners with domain knowledge.
👉On January 5, 2015, the great economist Arvind Panagariya was appointed as Vice-chairman of the Niti Aayog
and then Sindu shree Khullar was appointed as the first CEO of the Niti Aayog. On December 29, 2015, Sh.
Amitabh Kant appointed as CEO of Niti Aayog after the retirement of Sindushree Khullar. On 5th August, 2017
Shree Rajiv Kumar appointed as vice-chairman of Niti Aayog.
 Home Work:-
1. Discuss the difference between NITI Aayog and Planning Commission.
(6)
2. What is the composition of NITI Aayog? (4)
3. Why NITI Aayog serve as a “think-tank’?(2)
4. What do you mean by bottom-up approach of NITI Aayog?(2)
5. Why the NDA government decided to established niti Aayog in place
of Planning Commission?(4)
6. Why Planning Commission called an extra-constitutional body?(2)
7. What has NITI Aayog achieved so far that the
Planning Commission couldn’t? (6)