Planning in India - Five-Year Plans, Planning Commission, NITI Aayog, Centralized vs Decentralized Planning, and Recent Developments

Planning in India - Five-Year Plans, Planning Commission, NITI Aayog, Centralized vs Decentralized Planning, and Recent Developments

India's planning story is not only about "Five-Year Plans". It is also about how the Indian State tried to solve a real problem after Independence: limited money, weak industry, low farm productivity, poverty, and huge development gaps across regions.

In the early decades, India followed state-led planning with Five-Year Plans, prepared mainly by the Planning Commission. Over time, India's economy became more open and market-driven. Planning also changed from "command and control" to "guidance, coordination, and monitoring". This is why the Planning Commission was replaced by NITI Aayog in 2015.

Economic Planning (Core Definition)

Economic planning means a deliberate and systematic effort by the government to decide priorities, allocate resources, set targets, and coordinate policies to achieve development goals (growth, jobs, poverty reduction, infrastructure, social justice).


1) Introduction to Economic Planning in India

1.1 Why do countries plan?

🎯 Why Do Countries Plan? – Five Key Reasons

πŸ’°
Scarcity
Limited resources vs huge needs require prioritisation
βš–οΈ
Balance
Markets may neglect backward regions
πŸ—οΈ
Infrastructure
Roads, power, schools need long-term coordination
🀝
Social Justice
Poverty reduction needs targeted action
πŸ”„
Transformation
Shift from agriculture to industry/services

1.2 Types of planning (UPSC-ready)

πŸ“‹ Types of Economic Planning – UPSC Framework

⚑ Directive vs Indicative
Directive: Direct state control (licenses, quotas, PSUs)
Indicative: Targets & incentives; private sector decides
πŸ›οΈ Centralized vs Decentralized
Centralized: Decisions at national level
Decentralized: States, districts, local bodies
πŸ“… Perspective vs Medium-term
Perspective: Long-term vision (15-20 years)
Medium-term: 5-year programmes
πŸ”„ Rolling vs Fixed Plan
Rolling: Annual revisions based on performance
Fixed: Set targets for entire plan period

Directive Planning vs Indicative Planning

Directive planning uses direct state control (licenses, quotas, state ownership) to decide what and how much to produce. Indicative planning uses targets, incentives, and policy signals to guide the economy, while production decisions are largely taken by private firms and markets.

Centralized vs Decentralized Planning

Centralized planning concentrates major decisions at the national level. Decentralized planning shifts planning responsibilities to States, districts, and local bodies, so local needs shape priorities and budgets.


2) Roots of Planning Before 1950

Even before Independence, India saw planning ideas through multiple proposals. A government compilation notes early efforts such as the National Planning Committee (1938), the Bombay Plan (1944), the Gandhian Plan (1944), the People's Plan (1945), and the Sarvodaya Plan (1950).

πŸ“œ Pre-Independence Planning Proposals – Timeline

1938 – National Planning Committee
Chaired by Jawaharlal Nehru under INC; first systematic planning attempt
1944 – Bombay Plan
By industrialists (JRD Tata, GD Birla etc.); industry-led growth proposal
1944 – Gandhian Plan
By Shriman Narayan; village-centred, decentralized development
1945 – People's Plan
By M.N. Roy; focus on agriculture and consumer goods
1950 – Sarvodaya Plan
By Jayprakash Narayan; inspired by Gandhian economics

Bombay Plan and Other Pre-Independence Plans

The Bombay Plan (1944) was a development proposal by leading industrialists. Along with other plans, it shows that India's planning debate included both industry-led growth and village-centred development even before 1950.


3) Planning Commission (1950–2014): Establishment, Composition, Functions

3.1 Establishment (1950)

The Planning Commission was established in March 1950 by a Government of India resolution, with the Prime Minister as Chairperson.

πŸ›οΈ Planning Commission (1950–2014) – Key Facts

πŸ“…
March 1950
Establishment
GoI Resolution (Extra-Constitutional)
πŸ‘”
PM as Chair
Leadership
Prime Minister headed the body
🎯 Core Functions
πŸ“Š
Assess Resources
πŸ“
Formulate Plans
🎯
Set Priorities
βš™οΈ
Decide Methods
πŸ“ˆ
Appraise Progress

Planning Commission (What it was)

The Planning Commission was a central institution that prepared India's Five-Year Plans and coordinated development priorities. It assessed resources, formulated plans, set priorities, and guided implementation.

3.2 Key functions (as used in Indian planning practice)

A PIB note summarises the Planning Commission's assigned roles as: assessing and allocating plan resources, formulating plans and programmes, deciding the implementation methodology, identifying resource constraints, and appraising/adjusting implementation.

3.3 Achievements (broad UPSC view)

3.4 Limitations (why reforms became necessary)


4) Five-Year Plans (1951–2017): Evolution, Focus, Achievements, Shortcomings

4.1 What is a Five-Year Plan?

A Five-Year Plan is a medium-term development framework that sets priorities, targets, and resource allocations for approximately five years. India launched the first plan in 1951 and continued up to the Twelfth Plan (2012–2017).

Five-Year Plan

A Five-Year Plan is a medium-term programme where the government sets development priorities, estimates resources, and fixes broad targets (growth, sectoral expansion, poverty reduction, infrastructure, social outcomes).

4.2 Comprehensive table: All Five-Year Plans (1st to 12th)

Note for UPSC accuracy: Growth targets and realised outcomes can vary across sources depending on the GDP series and definitions used. The target/actual figures for Plans 1–11 below follow a Government of India statistical compilation. For the Twelfth Plan, the target was approved at 8%, and an appraisal noted likely achievement around 7%.

πŸ“Š Five-Year Plans (1951–2017) – Key Milestones

12
Five-Year Plans
1951–2017
66
Years of Planning
Continuous Process
3
Plan Holidays
Crisis Periods
8%
Peak Target (11th)
Achieved 8%
🎯 Plan-wise Focus Evolution
1st-3rd
Agriculture & Heavy Industry
4th-7th
Poverty Removal & Modernisation
8th-10th
Reforms & Human Development
11th-12th
Inclusive & Sustainable Growth
Plan Period Main Focus (Exam Keywords) Target Growth (%) Achieved/Realised Growth (%) Major Achievements Major Shortcomings
1st 1951–56 Agriculture, irrigation, price stability 2.1 3.6 Strong agricultural push; irrigation and basic infrastructure momentum Heavy dependence on good monsoon; limited industrial expansion
2nd 1956–61 Heavy industry, public sector, Mahalanobis strategy 4.5 4.3 Industrial base strengthened; big projects and PSUs expanded Forex crisis; inflation and import dependence pressures
3rd 1961–66 Self-reliance, agriculture + industry balance 5.6 2.8 Some foundation for later agricultural strategy Wars (1962, 1965) + drought; major target failure
Plan Holiday (Annual Plans) 1966–69 Stabilisation, agriculture focus β€” β€” Shift to new agricultural strategy (HYV seeds etc.) Short-term crisis management, not long-term planning
4th 1969–74 Growth with stability, self-reliance, regional balance 5.7 3.3 Green Revolution expansion; stronger bank credit systems (nationalisation context) Poor monsoon years; inflation and refugee pressures
5th 1974–79 Garibi Hatao, poverty removal, basic needs 4.4 4.8 Stronger poverty and employment focus; Minimum Needs approach Oil shock inflation; political change led to termination
Rolling Plan 1978–80 Flexibility, annual revisions β€” β€” Adaptable approach attempted Instability; frequent revisions reduced predictability
6th 1980–85 Modernisation, poverty reduction, technology 5.2 5.7 Better growth momentum; programmes for employment/skills Fiscal stress; uneven outcomes across regions
7th 1985–90 Food, work, productivity; technology push 5.0 6.0 Higher growth; productivity orientation Macroeconomic imbalances built up toward 1991 crisis
Annual Plans 1990–92 Crisis management; start of reforms β€” β€” Transition to LPG reforms Political instability and BoP crisis
8th 1992–97 Reforms era, human development, infrastructure 5.6 6.8 Higher growth; reforms stabilised economy and expanded opportunities Rising inequality concerns; uneven sectoral outcomes
9th 1997–2002 Growth with social justice; human development 6.5 5.4 Social sector emphasis; continued reforms Slower growth; fiscal and structural constraints
10th 2002–07 Inclusive growth; monitorable targets 8.0 7.6 Strong growth; poverty reduction momentum in many areas Job quality and regional disparities remained
11th 2007–12 Faster & more inclusive growth 9.0 8.0 Higher social spending; outcomes focus strengthened Global crises (2008, 2011); inflation and slowdown pressures
12th 2012–17 Faster, more inclusive & sustainable growth 8.0 (approved) ~7.0 (likely, appraisal) Infrastructure + skills + sustainability focus; outcome orientation Lower-than-target growth; investment slowdown and global headwinds

Mahalanobis Strategy (2nd Plan)

The Mahalanobis model prioritised building capacity in heavy and capital goods industries so that India could grow faster in the long run with greater self-reliance.

Plan Holiday

Plan Holiday refers to years when the normal Five-Year Plan cycle was paused and replaced by Annual Plans (notably 1966–69 and 1990–92) because of major economic and political shocks.

Rolling Plan

A Rolling Plan is a flexible approach where plan targets and allocations are revised every year based on performance and changing conditions. India experimented with this in 1978–80.


4.3 Plan-wise explanation (1st to 12th) with focus, achievements, shortcomings

First Five-Year Plan (1951–56)

Second Five-Year Plan (1956–61)

Third Five-Year Plan (1961–66)

Plan Holidays / Annual Plans (1966–69)

Fourth Five-Year Plan (1969–74)

Gadgil Formula

The Gadgil Formula was used as a structured method to distribute plan assistance among States with the idea of balancing development and reducing regional inequalities (often discussed in context of later plans and Centre-State resource allocation debates).

Fifth Five-Year Plan (1974–79)

Minimum Needs Programme (MNP)

Minimum Needs Programme reflects the idea that the State must ensure basic public services (health, education, water, housing, roads) so that growth becomes meaningful for ordinary people.

Rolling Plan (1978–80)

Sixth Five-Year Plan (1980–85)

Seventh Five-Year Plan (1985–90)

Annual Plans (1990–92)

Eighth Five-Year Plan (1992–97)

LPG Reforms

LPG stands for Liberalisation, Privatisation, and Globalisation. It refers to the shift after 1991 toward a more market-driven economy, greater private sector role, and deeper global integration.

Ninth Five-Year Plan (1997–2002)

Tenth Five-Year Plan (2002–07)

Eleventh Five-Year Plan (2007–12)

Twelfth Five-Year Plan (2012–17)


5) End of Planning Commission Era: Why was it Discontinued?

India moved away from the Planning Commission model because the economy and governance needs changed:

NITI Aayog was formed via a Union Cabinet resolution on 1 January 2015, and the planning process transitioned toward new policy documents and cooperative mechanisms rather than rigid Five-Year Plans.


6) NITI Aayog (2015 onwards): Establishment, Composition, Functions, Initiatives

6.1 Establishment (2015)

NITI Aayog was formed via a Union Cabinet resolution on 1 January 2015.

NITI Aayog (Exam Definition)

NITI Aayog is the apex public policy think tank of the Government of India, designed to promote cooperative federalism, policy innovation, and outcome-focused development by involving States more actively.

πŸ›οΈ NITI Aayog – Structure & Key Bodies

πŸ‘₯
Governing Council
  • PM as Chairperson
  • All Chief Ministers
  • Lt Governors of UTs
  • Key platform for cooperative federalism
πŸ—ΊοΈ
Regional Councils
  • Formed for specific issues
  • Addresses multi-state concerns
  • Regional coordination
  • Problem-solving focus
βš™οΈ
Executive Structure
  • Vice Chairperson
  • Full-time Members
  • CEO (Secretary rank)
  • Secretariat support
πŸ“… Established: 1 January 2015 | 🎯 Nature: Policy Think Tank | πŸ“œ By: Cabinet Resolution

6.2 Composition and key bodies

Cooperative Federalism

Cooperative federalism means Centre and States jointly design priorities and implement development goals through consultation, coordination, and shared ownership. NITI's Governing Council is explicitly designed as a platform for this.

6.3 Core functions (practical UPSC framing)

6.4 Key initiatives

A) Aspirational Districts Programme (ADP)

NITI Aayog's ADP ranks districts based on incremental progress across 49 KPIs under five themes: Health & Nutrition, Education, Agriculture & Water Resources, Financial Inclusion & Skill Development, and Infrastructure.

Aspirational Districts Programme (ADP)

ADP is a data-driven programme where districts are ranked based on incremental improvement across key human development themes and monitored regularly to push fast improvements in lagging regions.

B) Atal Innovation Mission (AIM)

Atal Innovation Mission is a flagship initiative of NITI Aayog set up in 2016 to promote a culture of innovation and entrepreneurship.

Atal Innovation Mission (AIM)

AIM promotes innovation and entrepreneurship in India. It aims to build an innovation mindset in schools and strengthen the startup ecosystem through platforms like Atal Tinkering Labs and incubation support.


7) Planning Commission vs NITI Aayog: Detailed Comparison

βš–οΈ Planning Commission vs NITI Aayog – Key Differences

πŸ›οΈ Planning Commission
πŸ“… 1950–2014 (GoI Resolution)
🎯 Central planning body with Five-Year Plans
⬇️ Top-down approach with target setting
πŸ’° Plan assistance allocator to States
πŸ“‹ NDC for plan approval
πŸ’‘ NITI Aayog
πŸ“… 2015–present (Cabinet Resolution)
🎯 Policy think tank for strategy & coordination
↕️ Cooperative & consultative bottom-up approach
πŸ“Š Monitors outcomes via dashboards & indices
πŸ“‹ Governing Council for shared vision
Aspect Planning Commission NITI Aayog
Nature Central planning body that prepared Five-Year Plans Policy think tank, strategy and coordination body
Establishment March 1950 (GoI resolution) 1 January 2015 (Union Cabinet resolution)
Approach More top-down planning and target setting More cooperative and consultative, bottom-up emphasis through States
Federalism lens Often associated with "bargaining" style plan assistance Explicitly built around cooperative federalism platform
Primary outputs Five-Year Plans; plan outlays and programmes Action agendas, strategy documents, dashboards, evaluations; issue-focused working groups
Institutional forum National Development Council used for plan approval (historical practice) Governing Council as main forum for shared vision and national priorities

Previous Year Question (UPSC 2018)

Q: How are the principles followed by NITI Aayog different from those followed by the erstwhile Planning Commission in India?

Answer: Planning Commission followed a more centralized, plan-target and plan-allocation style, closely linked with Five-Year Plans. NITI Aayog focuses more on policy inputs, outcome monitoring, cooperative federalism, and flexibility through action agendas and real-time data systems. A good UPSC answer should compare approach (top-down vs consultative), role (allocator vs think tank), and federalism impact (bargaining vs cooperative/competitive).


8) Centralized vs Decentralized Planning: Meaning, Comparison, Constitutional Provisions

8.1 Why decentralize planning?

πŸ›οΈ Centralized vs Decentralized Planning

🏒
Centralized Planning
Decision Level: National/State HQ decides priorities
Strength: National coordination, scale, uniform standards
Weakness: One-size-fits-all risk, slower feedback
🏘️
Decentralized Planning
Decision Level: District/local bodies shape priorities
Strength: Local relevance, better targeting, participation
Weakness: Capacity gaps at local level, uneven quality
πŸ“œ Constitutional Tools for Decentralization
73rd Amendment
Panchayats empowered
74th Amendment
Municipalities empowered
Article 243ZD
DPCs for district plans

8.2 Constitutional push: 73rd and 74th Amendments

The constitutional design after the 73rd and 74th amendments encourages planning and implementation at local levels through Panchayats and Municipalities. A PIB note explains that under Article 243G, States endow Panchayats with powers to function as institutions of self-government and to plan and implement schemes for economic development and social justice.

8.3 District Planning Committees (DPCs)

Article 243ZD requires District Planning Committees to consolidate plans prepared by Panchayats and Municipalities and to prepare a draft development plan for the district as a whole.

District Planning Committee (DPC)

A DPC consolidates rural (Panchayat) and urban (Municipality) plans in a district and prepares a draft district development plan for integrated development.

8.4 Centralized vs Decentralized Planning (comparison table)

Point Centralized Planning Decentralized Planning
Decision level National/State headquarters decide priorities District/local bodies shape priorities based on local needs
Strength National coordination, scale, uniform standards Local relevance, better targeting, participation
Weakness One-size-fits-all risk; slower feedback Capacity gaps at local level; uneven quality
Constitutional tools Union/State executive planning mechanisms 73rd/74th amendments; DPCs (243ZD); Panchayat powers (243G)
UPSC angle Good for national missions, infrastructure corridors Essential for inclusive growth and last-mile delivery

9) Role of Finance Commission vs Planning Commission / NITI Aayog

9.1 Finance Commission (Constitutional role)

The Finance Commission is a constitutional body constituted by the President (normally every five years). Its duty is to recommend:

This is laid out in constitutional provisions hosted on the Finance Commission's official portal.

Finance Commission (UPSC Definition)

The Finance Commission is a constitutional commission (Article 280 framework) that recommends tax devolution and grants-in-aid to ensure balanced fiscal relations between Centre and States.

9.2 How Planning Commission and Finance Commission differed (classic UPSC framing)

9.3 Finance Commission vs Planning Body (comparison table)

Aspect Finance Commission Planning Commission / NITI Aayog
Constitutional status Constitutional (Article 280 framework) Planning Commission: executive resolution body; NITI: Cabinet resolution
Main role Tax devolution + grants-in-aid recommendations Planning: set development priorities, plans, programmes; NITI: policy inputs and coordination
Frequency Normally every five years Continuous policy process; Five-Year Plans ended after 2017
Focus Fiscal federalism and resource distribution Development strategy and implementation coordination

Previous Year Question (UPSC 2018)

Q: How is the Finance Commission of India constituted? What do you know about the terms of reference of the Finance Commission?

Answer: The Finance Commission is constituted by the President under the constitutional framework (Article 280 system) and is normally set up every five years. Its terms broadly include recommending the distribution of net proceeds of taxes between Centre and States and among States, and principles governing grants-in-aid of State revenues from the Consolidated Fund of India. A strong answer should also explain why FC matters for fiscal federalism and balanced development.


10) Recent Developments: Vision Documents, India@2047, and Cooperative Federalism in Practice

10.1 New planning style after Five-Year Plans

After the Planning Commission era, NITI Aayog moved toward a set of policy documents and frameworks. NITI's Governing Council meeting notes mention a 15-year vision accompanied by a 7-year strategy and a 3-year action agenda presented in 2017.

Post-Five-Year Plan Framework

Instead of rigid Five-Year Plans, India's planning now uses vision documents, medium-term strategies, and short-term action agendas to remain flexible while still guiding national priorities.

10.2 Strategy for New India @75 (2019) and outcome focus

NITI Aayog's "Strategy for New India @ 75" emphasises governance, implementation, modernisation, technology, and cooperative centre–state work to achieve national goals.

10.3 Viksit Bharat @2047 and India's long-term vision

NITI Aayog's Governing Council meetings have explicitly used the theme Viksit Rajya for Viksit Bharat@2047, reflecting a long-term national development agenda with strong State participation.

NITI Aayog has also hosted a working paper titled "India's Path to Global Leadership: Strategic Imperatives for Viksit Bharat @2047" (April 2025), which signals the increasing role of research-backed long-term visioning in place of rigid five-year planning cycles.

India@2047 / Viksit Bharat @2047

India@2047 broadly refers to India's long-term development vision for the centenary of Independence, built around higher income, inclusion, sustainability, strong institutions, and improved quality of life. NITI's forums increasingly link State strategies to this national vision.


11) SDG India Index and Sustainable Development Monitoring

11.1 Why SDG monitoring matters for planning

11.2 SDG India Index (NITI Aayog)

A PIB release (July 2024) notes that India's overall SDG score improved from 57 (2018) to 66 (2020–21) to 71 (2023–24).

πŸ“Š SDG India Index – Score Progress

57
2018
Baseline Year
66
2020–21
+9 points
71
2023–24
+14 points total
🎯 SDG Score Categories
Aspirant
0–49
Performer
50–64
Front Runner
65–99
Achiever
100

The same release also explains the "Front Runner" category as a score between 65–99. UN India's SDG Index note (2019) presents the common categorisation: Aspirant (0–49), Performer (50–64), Front Runner (65–99), Achiever (100).

SDG India Index

The SDG India Index is a tool to measure progress of States/UTs on SDG goals using a 0–100 scale, encouraging competition + cooperation to improve outcomes.

11.3 Sustainable development monitoring beyond NITI

MoSPI also works on the national SDG monitoring architecture and publishes progress reporting on indicators, helping ensure that planning and budgeting can be linked with measurable development outcomes.


12) Challenges and Way Forward

🎯 Planning in India – Challenges & Way Forward

⚠️ Key Challenges
1 Centre-State Gaps: Alignment across departments and levels
2 Local Capacity: DPCs need technical & financial support
3 Data Quality: Dashboards only as good as input data
4 Regional Inequality: Growth alone doesn't reduce gaps
5 Employment: Link growth with job creation & skilling
βœ… Way Forward
1 State Planning: Better state-level vision documents
2 Functional DPCs: Regular meetings, trained staff
3 Outcome Budgeting: Link funds with measurable results
4 Evidence-Based: Scale what works; stop ineffective spending
5 SDG Alignment: Use Index insights for targeted interventions

12.1 Key challenges (current planning realities)

12.2 Way forward (UPSC Mains-ready points)


Multiple Choice Questions (MCQs)

Q1. The Planning Commission of India was established in:

a) 1947

b) 1950

c) 1952

d) 1962

Answer: b) 1950. Explanation: It was established in March 1950 by a Government of India resolution.

Q2. NITI Aayog was formed via a resolution of the Union Cabinet on:

a) 26 January 2015

b) 15 August 2014

c) 1 January 2015

d) 2 October 2014

Answer: c) 1 January 2015. Explanation: NITI Aayog was formed via a Union Cabinet resolution on 1 January 2015.

Q3. Which body comprises the Prime Minister, Chief Ministers of States, and Lt Governors of UTs to evolve a shared vision of national priorities under NITI Aayog?

a) National Development Council

b) Governing Council

c) Finance Commission

d) Inter-State Council

Answer: b) Governing Council. Explanation: Governing Council is designed as the premier platform for cooperative federalism and shared priorities.

Q4. District Planning Committees (DPCs) are required to consolidate Panchayat and Municipal plans under which constitutional provision (as referenced in official notes)?

a) Article 243G

b) Article 243ZD

c) Article 280

d) Article 324

Answer: b) Article 243ZD. Explanation: Article 243ZD requires DPCs to consolidate plans and prepare a draft district development plan.

Q5. The Finance Commission primarily recommends:

a) Union Cabinet formation rules

b) Distribution of net proceeds of taxes and grants-in-aid principles

c) Election schedule for Panchayats

d) Criminal law reforms

Answer: b) Distribution of net proceeds of taxes and grants-in-aid principles. Explanation: This is a core constitutional duty under the Finance Commission framework.

Q6. According to a NITI Aayog programme description, the Aspirational Districts Programme rankings are based on incremental progress across:

a) 25 indicators under 3 themes

b) 49 KPIs under 5 themes

c) 100 KPIs under 10 themes

d) 12 goals under 12 themes

Answer: b) 49 KPIs under 5 themes. Explanation: The ADP ranks districts based on incremental progress across 49 KPIs under five themes.

Q7. India's overall SDG score in the SDG India Index 2023–24 was reported as:

a) 57

b) 66

c) 71

d) 79

Answer: c) 71. Explanation: PIB release noted India's overall SDG score as 71 for 2023–24.

Q8. The approved growth target for the Twelfth Five-Year Plan was set at:

a) 6%

b) 7%

c) 8%

d) 9%

Answer: c) 8%. Explanation: The Twelfth Plan's target was revised and approved at 8% (down from 9%).

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