Change in Planning Commission

A key component of the Nehruvian socialism – the economic approach by India’s First Prime Minister – the Five Year Plans have been laid to rest by the NDA Government. The 12^th Plan, the last of the Five Year Plans, had come to an end on March 31, though it has been given an extension of six months to allow ministries to complete their appraisals.

The decades old Five Year Plans will make way for a three year action plan, which will be a part of a seven year strategy paper and a 15 year vision document. The Niti Aayog, which has replaced the Planning Commission, had launched a three year action plan from April 1.

Five Year Plans – FYP were centralized economic and social growth programs. Joseph Stalin, president of the USSR implemented the first Five Year Plan in the late 1920s. India too followed the socialist path but here the planning was not as comprehensive since the country had both public and private sectors. The Planning in India was only about the public sector. The first Five Year Plan was launched in 1951. The idea was to plan public spending for equitable growth rather than leaving expenditure to the market forces.

The Five Year Plans played a great role in lifting India’s social sector and building of heavy industry. A centralized planning system could ensure that the money gets spent where it was the most needed.

For a long time, there had been a feeling that for a country as diverse and big as India, centralized 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 centralized 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 Aayog, 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 Aayog has no power to grand funds or makes decisions on behalf of states. It is only an advisory body.