PLANNING COMMISSION

FIVE YEAR PLAN

NITI AYOG

BY

PAATHHSHALA

Timeline of planning in India

1934 Visvesvaraya plan in this book “The planned economy of India”. He was an Engineer, Ex-Diwan of

Mysore and Bharat Ratna recipient. National Engineering day 15 september.

1938 1938:‘National Planning Committee’ was established under the chairmanship of Jwahar Lal Nehru by the Indian

National Congress. Its recommendations could not be implemented because of the beginning of the Second World War

1944 Bombay plan by noted industrialists such as JRD Tata, GD Birla, Kasturbhai Lalbhai et al.

1944 Sriman Narayan Agrawal’s Gandhian plan.

1945 MN Roy’s “people’s plan” – with socialist leanings.

1950 Jayprakash Narayan’s Sarvodaya Plan based on Vinoba Bhave’s philosophy

15March 1950,

Cabinet resolution to form Planning commission.

6 Aug. 1952, National Development council (NDC) made by Cabinet resolution.

2014,Aug. Modi shuts down planning commission.

2015, Jan Government notified the formation of Niti Aayog- National Institution for Transforming India.

Why there is a need for Planning in India?

• Large Population

• Low per capita income

• Inequality of distribution

• Inefficient production

In India the Planning was taken up to overcome the above said problems

OBJECTIVE S OF INIDAN PLANNING:

1. To achieve total employment

2. To maximize the Per capita income

3. To enhance rapid industrialization

4. To achieve self sufficiency

5. To reduce inequalities of income

WHAT ARE THE BASIC FEATURES OF INDIAN PLANNING?

1. MIXED ECONOMY: This is the co-existence of both the Public (government) and Private sector.

2.BALANCED GROWTH STRATEGY: Both agriculture and industrial infrastructure are to be strengthened.

3. MINIMIZING FOREIGN ASSISTANCE: this is in terms of both aid and transfer of technology.

What is cabinet resolution? This is a decision taken by the Cabinet.

The Planning Commission prepares the draft of the five year plans.

Note: Planning Commission is not a Constitutional body. It means this is not mentioned in the Constitution of India.

Constitutional bodies are those, that are mentioned in the constitution of india. It derives power directly from the constitution. Any type of change in mechanism of this body needs constitutional amendment. Eg:- CAG, UPSC, EC, FC

Non Constitutional or Extra Constitutional bodies are same. They are those, that aren't defined in the constitution. These can be statutory or non-statutory.

Statutory body is a non-constitutional body. This body is created by statute (i.e. act of parliament.) A cabinet resolution is to be passed to establish this body. It has to rely upon its statute to derive power. Eg: National commission for OBCs, SEBI etc.

Non Statutory bodies are those that are created by executive resolution. It has no Law backing on them. Eg: NITI Aayog.

THE PLANNING COMMISSION OF INDIA

• The Planning Commission was set – up on March 15, 1950 under the chairmanship of JL Nehru, by a resolution of Union Cabinet.

• It is an extra – constitutional, non – statutory body. (i.e., No provision in Constitution for its formulation.)

• It consists of Prime Minister as the ex – officio Chairman, one Deputy – Chairman appointed by the PM and some full time

members.

• The tenure of its members and deputy chairman is not fixed. There is no definite definition of its members also.

• They are appointed by the Government on its own discretion. The number of members can also change according to

the wishes of the Government.

NATIONAL DEVELOPMENT COUNCIL INDIA

• All the plans made by the Planning Commission have to be approved by National Development Council first.

• It was constituted to build co – operation between the States and the Planning Commission for economic planning.

• It is an extra – constitutional and extra – legal body.

• It was set – up on August 6, 1952, by a proposal of the Government. The PM is the ex – officio chairman of NDC.

• Other members are Union Cabinet Ministers, Chief Ministers and Finance Ministers of all States, Lt. Governors of Union Territories and

Governors of Centrally – ruled States.

• NDC was set up on the recommendation of Planning Commission.

• The NDC is the final approval body for the five year plans.

Five Year plans in India

Plan Period theme/Model/target

1st

April 1,

1951 to

March

31, 1956

• Harrod Domar Model • Main focus: Agriculture, irrigation and power. • Got more GDP growth than its original target. • The industrial sector was neglected. • CDP (Community Development Programme) was launched in the year 1952. • Locomotive factory (Chittaranjan), Fertilizer factory (Sindri), Indian Telephone Industry (Bangalore) were

set up during 1st plan • Main architect was KN raj. • This plan was successful and achieved growth rate of 3.6% (more than its target)

2nd 56-61

• Also called ‘Mahalanobis Plan’ after its chief architect PC Mahalanobis.

• It was based on 1928 Soviet Model of Feldman Plan.

• Socialist model, Rapid industrialization, heavy industries. • The main objectives of the second plan were • Rapid industrialization • Rapid increase in the National income • Massive expansion of the employment opportunities • Reduction in inequalities of income and wealth

• Steel plants at (Bhilai(MP), Rourkela (Odisha) and Durgapur (West Bengal) were set up.

• Heavy engineering plant Ranchi, Lignite Corporation (Neyveli), Integral coach factory at Perumbudur were set up.

• This plan was successful and achieved growth rate of 4.1%

Multi-purpose projects - Nagarjuna Sagar, Bhakra Nangal, Hirakud started during this Plan.

• Deficit financing started in this plan.

• “Socialist pattern of society” is accepted as a goal.

•

3rd 61-66

• Sukhmoy Chakraborty and Sanddy • Indian economy has entered a Take – Off Stage. Therefore, its aim was to make India a ‘Self – Reliant’

and ‘Self – Generating’ Economy

• Also called “Gadgil Yojana”. • Complete failure due to unforeseen misfortunes, vizard Chinese aggression

(1962), Indo – Pak war (1965), severest drought in 100 Years (1965 – 66). • Prices increased by 36% in 5 – Years.

• Rupee devalued in June 1966 (devaluation was first done in 1949). • Bokaro Steel Plant in 1964.

PLAN

HOLIDAY

THREE

ANNUAL

PLANS

(1966 – 69)

• Holiday declared thanks to #EPICFAIL of 3rd FYP.

• Emphasis on agriculture during the Annual Plans.

• During these plans a whole new agricultural strategy involving wide – spread distribution of High – Yielding

Varieties (HYVs) of seeds, the extensive use of fertilizers, exploitation of irrigation potential and soil

conservation was put into action to tide – over the crisis in agricultural production.

• Green Revolution in 1966 Kharif.

• 14 Banks nationalized in 19 thJuly 1969

•

4th 69-74

• Ashok Rudra-Alon Manney • GROWTH WITH STABILITY AND PROGRESS TOWARDS SELF – RELIANCE.

• Gadgil Formula : It was followed since 4th plan for central assistance for state

plans. This formula was modified by NDC in Dec. 1991 when Pranab Mukherjee was

the Chairman of Planning Commission. Hence, it became Gadgil -Mukherjee formula

since 8th Plan : “Planning from below

• . [Garibi Hatao came here, says LucentGK] • #EPICFAIL due to Bangladeshi refugee problem and drought.

• During this plan the slogan of “Garibi Hatao” is given during the 1971 elections by Indira Gandhi.

• • Privy purses were abolished in 4th Plan

• Privy Purse.In India, the Privy Purse was a payment made to the ruling (royal or lower) families of

erstwhile princely states as part of their agreements to first integrate with India in 1947, and later to merge their states in 1949 whereby they lost all ruling rights. The Privy Purse was continued to the royal families until the 26th Amendment in 1971

5th 74-79

• DP Dhar drafted. • ‘Removal of Poverty’ (Garibi Hatao) and ‘Attainment of Self Reliance. • The plan was terminated in 1978 (instead of 1979) when Janta Government, came to

power. • Poverty removal became distinct objective for the first time.

•

• “Minimum Needs Programme” launched. • Command Area Development Programme was started in 1974-75 to utilise

water in major and medium irrigation projects in an optimum manner.

• Oil crisis : 1973 Sept.

• 20 point programme 1975 replaced 5th plan discontinued 1 year in advance.

• In the year 1977 the Janata Party came to the power.

• PDS (Public Distribution System) was

introduced during this period

RollingPlan 78-80

MMoarji Desai’s Janta government came up with Rolling plan system – we’ll

measure progress every year and make new plans accordingly for next year.

ü This rolling plan gave priority to the rural

development.

The idea “Rolling Plan” was taken from Japan.

“Rolling Plan” concept coined by Gunnar Myrdal. author of the more famous book

‘Asian Drama’)

“Hindu rate of Growth” crossed from 5th plan. This concept was coined by Prof.

Raj Krishna

(Growth Rate 3% to 3.5%).

Hindu rate of growth is a term referring to the low annual growth rate

of the planned economy of India before the liberalisations of 1991, which

stagnatedaround 3.5% from 1950s to 1980s, while per capita income

growth averaged 1.3%.

ü

6th 80-85

Poverty removal (Garibi Hatao), IRDP, NREM, TRYSEM etc. [Garibi Hatao came here says Ramesh

Singh]

Energy was given the highest priority with 27.9%.

Poverty eradication.

• IRDP, TRYSEM, NREP launched during this Plan.

• Visakhapatnam Steel Plant (Andhra Pradesh), Salem (TamilNadu) Bhadravathi Steel Plants were

built.

• Its growth target was 5.2% but it achieved 5.7%.

7th 85-89

• Pranav Mukherjee • Focus on employment. Jawahar Rozgar Yojana started. • Food, Work, Productivity, “Jawahar Rozgar Yojana”launched in April 1989’.

• Vakil and Brahmananda’s wage good strategy adopted in the 7th Plan. • Objectives of this plan include the establishment of the self sufficient economy, opportunities for productive

employment. III. For the first time the private sector got the priority over public sector.

• It was a great success, the economy recorded 6% growth rate against the targeted 5%.

2 Annual plans

89-91 • Political instability at Centre. Hence only annual plans.

8th 92-97

Indicative planning : Based on the model of John.W.Muller.

This plan achieved highest growth rate of 6.8%.

“Indicative planning” implemented first in France in 1947–50.

• • John W.Miller model. • PV Narasimha Rao- LPG reforms

Human resources was given the top priority and called

human face element of adjustment.

ü Alleviating (removal) poverty and removing

Unemployment was stressed.

ü Since the Human development is not possible without

economic growth priority was given to energy, transport

and communication.

ü The GDP (Gross Domestic Rate) target was 5.6

percent, but, achieved 6.54 percent.

•

9th 97-02 • Growth with social justice and equity. Mostly “indicative” planning.

• #EPICFAIL due to global slowdown after Asian financial crisis.

10th 02-07 • 8% GDP growth rate,

• DOUBLE PER CAPITA INCOME IN 10 YEARS.

Growth rate target 8.7%, achieved 7.8%

Highest in the entire planning era : 5 crore employment, largest allocation to energy.

•

11th 07-12

Theme “towards faster and more inclusive growth”.

• C.Rangarajan framed it with targets: 8-10% growth rate, 70 million new jobs, lower IMR, CMR, TFR etc.

12th 12-17

Theme “Faster, sustainable and more inclusive growth”.

• • Target growth rates: 9% GDP, 4% Agriculture, 10% Mfg. • 10% reduction in poverty, create 50 million new jobs. • Get IMR:26, MMR:1000,Child Sex ratio: 950, TFR: 2.1 • Increase mean school years, forest cover, infrastructure investment, rural tele-density.

Planning Commission: Criticism/Anti-Arguments

1. Achieved >9% GDP growth-rate during 2005-07, thanks to American boom prior to sub-prime crisis. But almost all nations of world experienced high growth. So 9% GDP did not come from Montek’s magic wand.

2. Post sub-prime crisis, failed to evoke the “animal spirit” in Indian economy. GDP-fell, inflation rose during 2008-13 nonstop. 3. Reduced poverty by doctoring the BPL-line. Tendulkar line says 27 crore BPL, if we use Ranga line then 37 crore BPL. Planning commission

brags reducing poverty line on Tendulkar’s parameters. 4. Toothless body, can’t hold State/union/ministries/departments accountable for failing to achieve targets. 5. Hopes that CAG and Public accounts Committee will take care accountability part. But PAC too is pretty much toothless.

6. Failed to implement land reforms. Faulty policies for MSME, industrialization, Factory-labour law problems. 7. Office manned by Generalist IAS/IES with short tenure; panel members filled with academicians and jholachhap NGOs. Need subject

specialists with international exposure like Rajanbhai. 8. Designed CSS with One size fits all approach and a few extra crores to NE/J&K/Hill-states and LWE. But for long, it did not use pilot projects

/ sample testing / interaction with states. 9. Hence, IAY, ICDS etc. programs failed to show tangible result despite pumping crores. 10. They tried to bypass state Governments via NGO-funding, DRDA. Hence States unenthusiastic about implementing Central-schemes named

after you know who. 11. Only in 2013- reforms done like reducing number of Centrally sponsored schemes (CSS), 10% flexifund to states, direct transfer of money to

state consolidated fun etc. But it’s too little too late. 12. Shortcomings in planning commission => new bodies sprung up like PM’s economic advisory council, PM’s project monitoring group and so

on=> more brains=> more lack of coordination. 13. Hence Modi felt that PC is beyond fixing- just like Gotham city and Delhi city. 14. For so many years, Government worked as the “provider of first and last resort”. But, today Indian industry and service sector has reached on

global scale, a neo-middle class has emerged. 15. Times have changed, from being a underdeveloped country in 1950s – India has become a major economic force. 16. Hence our needs have changed- from mere food security to profitable agriculture. In this playground, Government needs to become an

“enabler” rather than a “player”.

And thus Niti Aayog was born.

Niti Aayog: Structure, Membership

Agency overview

Formed 1 January 2015; 3 years ago

Preceding • Planning Commission

Jurisdiction Government of India

Headquarters New Delhi

Agency executives • Narendra Modi, Chairman

• Rajiv Kumar, Vice Chairman

• Bibek Debroy, Member

• V. K. Saraswat, Member

• Ramesh Chand, Member

• Vinod Paul, Member

• Amitabh Kant, CEO

• Dinesh Arora, Director

Parent agency Government Of India

Website www.niti.gov.in

New Vice Chairman

NITI AAYOG: STRUCTURE, COMPOSITION, MEMBERSHIP

Position Planning Commission NITI Aayog

Born • 1950, March 15th • died in 2014, August after Modi

became PM. 2015, January 1st

Chairman Prime minister same

Vice Chairman Last Dy.Chairman was Montek Singh Ahluwalia (Cabinet minister rank).

• Free market economist Arvind Panagriya. He was the Chief economist of Asian Development bank, and the the brain behind Rajasthan’s land-labour reform.

CEO • Member-Secretary (IAS) • Sindhushree Khullar (IAS)

• A secretary level bureaucrat with fixed tenure. • Same Ms. Sindhushree Khullar is the first CEO.

Ex-officio members

• Finance Minister • Planning minister

PM can nominate four-Union ministers. Modi has nominated following:

1. Home 2. Finance 3. Railway 4. Agriculture

Full time members

4-7 full time members, who enjoy

“Minister of State” rank.

• Bibek Debroy (Free market economist) • Dr. V.K. Saraswat (technocrat, missile scientist and Ex-DRDO

chief.)

Special Invitees

Union ministers for

1. Transport 2. HRD 3. Social Justice

+PM can invite other experts as and when needed.

part-time members

Tech experts from research institutes. Currently none declared. Rotational posts.

Governing Council

• Chairman: Prime minister • Chief ministers of all states • Lieutenant governors of all Union territories.

ad hoc Regional Councils

Will have CMs of states that fall in the region. They’ll be dealing with specific issue concerning a group of states for example irrigation, naxal-problem, infrastructure etc.

NITI Aayog: functions, Mandates

NITI AAYOG: FUNCTIONS & MANDATE

1. Think tank for Government policy formulation. 2. Find best practices from other countries, partner with other desi-videsi bodies to help their adoption in India. 3. Cooperative Federalism: Involve state governments and even villages in planning process. 4. Sustainable development: + Modi’s Zero defect-zero effect (on environment) manufacturing mantra. 5. Urban Development: to ensure cities can remain habitable and provide economic venues to everyone. 6. Participatory Development: with help of private sector and citizens. 7. Inclusive Development or Antyodaya. Ensure SC, ST and Women too enjoy the fruits of Development. 8. Poverty elimination to ensure dignity and self-respect. (because Poet Tiruvalluvar said so) 9. Focus on 5 crore Small enterprises– to generate more employment for weaker sections. 10. Monitoring and feedback. Midway course correction, if needed. 11. Make policies to reap demographic dividend and social capital. 12. Regional Councils will address specific “issues” for a group of states. Example: Regional Council for drought, Left-wing extremism, Tribal

welfare and so on. 13. Extract maximum benefit from NRI’s geo-economic and Geo-political strength for India’s Development. 14. Use Social media and ICT tools to ensure transparency, accountability and good governance. 15. Help sorting inter-departmental conflicts. 16. Lot of bol-bachachan giri and vague ideas about national self-interest, capacity-building, participating in ‘global-village’ etc. 17. Demographic dividend refers to the growth in an economy that is the resultant effect of a change in the age structure of a country's population. The

change in age structure is typically brought on by a decline in fertility and mortality rates.

18. 19.

Functional Comparison: Niti vs PC

Planning commission NITI Aayog

Design FYP-Five year plans Design national agenda, and cooperative federalism.

Decide two “money” matters:

1. How much money to give to each state for centrally sponsored schemes (CSS)

2. How much money to give for each state’s own state-five-year-plans.

• Mostly work as a “policy-formulation-hub”. The Press release is ‘silent’ on money/funding. so, most probably it’ll be left to finance ministry.

• Some experts believe Inter-state council will decide money allocation to states, then finance ministry will release the fund.

• States/UT were represented in National Development Council.

• PC framed FYP=>went to Cabinet=>NDC approved FYP=>Tabled in parliament.

• States/UT represented in Governing council. But no specific mention about whether they can approve/reject/amend Niti Aayog’s proposals?

One size fits all, top-down socialist planning by Armchair Nehruvian economists and IES cadre officers (Indian Economic Service).

• Press release talks about participatory planning but how exactly will they do that? No specific details laid out.

• IES officers are rarely invited in Modi’s meetings. • But given the entry of Free market economists and Technocrats, most

probably it’ll be an ‘indicative planning + core planning’ i.e. after inputs of state governments, a broad outline with selected targets, limited subsidies and monitoring through ICT.

Allocation of funds to States?

Until now, States got funding from two places

Finance • Gave share from Union revenue to states. Decides the formula for every 5 years. • ~2% of GDP flew this way.

commission

Planning commission

Gave two types of funding

1. Centrally sponsored schemes (~66 schemes). Money given after consultation between PC and respective ministries of health, education etc. at union and state level.

2. Central assistance for state plans. Money given after consultation between PC, FM and State Government.

~2.5% of GDP flew this way.

After scrapping the planning commission, Modi wanted the Finance commission to overesee all three types of “money-allocations” i.e.

1. Share from union taxes 2. CSS: Centrally sponsored schemes 3. Union’s assistance to state’s plans.

Mock Questions

Q1. Arrange following plans in correct chronological order

1. People’s plan 2. Bombay Plan 3. Congress Plan 4. Visvesvaraya plan

Answer choices

A. 1234 B. 4321 C. 1243 D. 2143

Q2. MN Roy was associated with _____.

A. Congress Plan B. People’s plan C. Bombay Plan D. Gandhian Plan

Q3. First Five year plan was based on ____ model

A. Mahalanobis B. C.Subramaniam C. John W.Miller D. Harrod Domar

Q4. Find incorrect pairs of plan vs focus:

A. 1st FYP: heavy industries B. 2nd FYP: Agriculture, irrigation, power C. Both A and B D. Neither A nor B

Q5. Theme of the 12th Five year plan was

A. Faster, More inclusive and sustainable growth B. Faster, More sustainable and sustainable growth C. Inclusive growth with social justice D. Social justice and sustainable growth

Q6. if five year planning was continued, the period of 13th five year plan would be

A. 2013-2018 B. 2015-2020 C. 2017-2022 D. None of above

Q7. What is the full form of Niti Aayog?

A. National Institute to Transform India.

B. National Institute for Transforming India. C. National Institution to Transform India. D. National Institution for Transforming India.

Q8. Niti Aayog is formed via ____.

A. Presidential ordinance B. Allocation of business rules by President of India. C. Cabinet resolution D. None of above.

Q9. A union minister can become ___ of Niti Aayog

1. Part time member 2. Ex-officio member 3. Special invitee

Answer choices

A. Only 1 and 2 B. Only 2 and 3 C. Only 1 and 3 D. All of them

Q10. Find correct pairs of person vs position held in Niti Aayog

1. Sindhushree Khullar: Secretary 2. Economist Jagdish Bhagwati: part time member 3. VK Saraswat: special invitee

Answer choices

A. Only 1 and 2 B. Only 2 and 3 C. Only 1 and 3 D. none of them

Q11. Who can become a part time member of the Niti Aayog?

A. A serving IES officer B. A serving IAS officer C. A union minister D. An Expert from Research institutes

Q12. Governing council of the Niti Aayog includes

1. Prime minister 2. Finance minister 3. Chief ministers of all states

Answer choices

A. Only 1 and 2 B. Only 2 and 3 C. Only 1 and 3 D. all of them

Q13. Official mandate of the Niti Aayog includes ___.

1. Cadre controlling authority for Indian Economic service 2. Decide allocation of funding among the states, for centrally sponsored schemes 3. Approving funds for state plans.

Answer choices

A. Only 1 and 2 B. Only 2 and 3 C. Only 1 and 3 D. None of them

Q14. Match correct pairs- Person vs their brainchild service

1. All India services: Nehru

2. Indian Economic service: Lal Bahadur Shashtri 3. Indian Civil service: Lord Curzon

Answer choices

A. Only 1 and 2 B. Only 2 and 3 C. Only 1 and 3 D. None of them

Q15. Find statutory bodies among following

1. Niti Aayog 2. Controller of Certifying authorities 3. Atomic energy regulation board

Answer choices

A. Only 1 and 2 B. Only 2 and 3 C. Only 1 and 3 D. None of them

Q16. Find correct statements

a. If Modi wants to expand the powers of finance commission, he must amend article 335. b. If Modi wants to implement GST, he must amend article 315. c. Both A and B d. Neither A nor B