Economic Planning is the process where a country’s government sets goals and makes a roadmap to achieve them over a specific period. Think of it like making a personal budget and investment plan, but for the entire nation.
The main goals are usually to:
- Increase national income.
- Reduce poverty and unemployment.
- Make the country self-reliant.
- Ensure balanced growth across all regions.
The Old System: Planning Commission and Five-Year Plans
From 1950 to 2014, India’s economic planning was managed by an organization called the Planning Commission.
Its main tool was the Five-Year Plans.
- What they were: A series of detailed national plans, each lasting five years, that outlined the country’s economic goals and how the government would spend money to achieve them.
- Approach: This was a top-down approach. The central government in New Delhi would create the plan, and the states were expected to follow it. This was often criticized for not involving the states enough.
- Total Plans: India had a total of 12 Five-Year Plans, with the last one running from 2012 to 2017.
Key takeaway: The old system was centralized, with the Planning Commission at the top creating plans for the states.
The New System: NITI Aayog – A Fresh Approach
In 2015, the government replaced the Planning Commission with a new body to better fit the modern economy.
What is NITI Aayog?
- Full Form: National Institution for Transforming India.
- Role: It’s the Government of India’s primary policy think tank.
- Think Tank: An organization that provides advice and ideas on important problems. It focuses on research and expert guidance rather than just creating rigid plans.
The main idea behind NITI Aayog is Cooperative Federalism. This means the Centre and the States work together as a team to achieve national goals.
Planning Commission vs. NITI Aayog:
The Key Differences
| Feature | Planning Commission (Old) | NITI Aayog (New) |
| Approach | Top-Down Approach: Centre created plans for states. | Bottom-Up Approach: Considers inputs from states to form policy. |
| Role of States | States were mostly passive participants. Their role was limited to meetings. | States are active and equal partners. They have a greater say in policy making. |
| Power to Allocate Funds | Had the power to allocate money to states for various programs. | It’s a think tank. It does not have the power to allocate funds. This job is now done by the Ministry of Finance. |
| Structure | Had a Deputy Chairman, full-time members, and part-time members. | Has a Vice-Chairperson, full-time members, and importantly, a Governing Council which includes all State Chief Ministers and Lt. Governors of Union Territories. |
| Nature of Plan | Created rigid Five-Year Plans. | Creates long-term strategic plans (e.g., a 15-year vision), medium-term strategies (7 years), and short-term action plans (3 years). More flexible. |
Main Functions of NITI Aayog Summarized
- Policy Think Tank: Provides strategic and technical advice to the central and state governments on economic issues.
- Promotes Cooperative Federalism: Encourages teamwork between the Centre and States.
- Monitoring & Evaluation: Tracks the progress of government schemes and policies to see if they are working well.
- Knowledge & Innovation Hub: Acts as a center for research, best practices, and new ideas.
By understanding these points, you can clearly explain the evolution from the rigid, centralized Planning Commission to the flexible, collaborative NITI Aayog.