Module 22: Economic History and Planning

ECONOMIC HISTORY OF INDIA AND

PLANNING
Pre-Independent India
“India is the pivot of our Empire... If the Empire loses any other part of its
Dominion we can survive, but if we lose India, the sun of our Empire will have
set.”
-------------------------------------------------------------------------------------------------
Victor Alexander Vruce, the Viceroy of British India in 1894

The structure of India’s present day economy-- current ongoing + history,

particularly under British

To assess the progress I.E has made in last 6 decades, an understanding of the
exploitative nature of this relationship is essential

1. LOW LEVEL OF ECONOMIC DEVELOPMENT UNDER THE COLONIAL

RULE:
Independent economy before British advent. Though agriculture was the
mainstay, various manufacturing activities also existed-- reputed
worldwide for quality and craftsmanship in handicraft industries in the
fields of cotton and silk textiles, metal and precious stone works etc.

The economic policies pursued by the colonial government= protection

and promotion of the economic interests of their home country than with
the development of the Indian economy.

Result: A fundamental change in the structure of the Indian economy —

transforming the country into supplier of raw materials and consumer of
finished industrial products from Britain.

No attempt by colonial government to estimate India’s national and per

capita income. Some individual attempts— Dadabhai Naoroji, William
Digby, Findlay Shirras, V.K.R.V. Rao and R.C. Desai — Rao's considered
very significant.

Aggregate real output during the first half of the twentieth century was
less than two per cent coupled with a meagre half per cent growth in per
capita output per year.

Textile Industry in Bengal

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Muslin is a type of cotton textile which had its origin in Bengal,

particularly, places in and around Dhaka. ‘Daccai Muslin’ had gained
worldwide fame as an exquisite type of cotton textile. The finest variety of
muslin was called malmal/ malmal shahi / malmal khas.

2. AGRICULTURAL SECTOR
Agriculture During Pre-British India as accounted by a French traveller,
Bernier, described 17th cen Bengal:
• it is richer than Egypt.
• It exports, in abundance, cottons and silks, rice, sugar and butter.
• It produces amply — for its own consumption — wheat, vegetables,
grains, fowls, ducks and geese.
• It has immense herds of pigs and flocks of sheep and goats. Fish of
every kind it has in profusion.
• From rajmahal to the sea is an endless number of canals from
Ganges for navigation and irrigation.
Fundamentally agrarian — about 85 per cent livelihood-- under the
British too. But
• continued to experience stagnation and frequent deterioration.
• Sector saw some growth due to increased area under cultivation, but
Agricultural productivity became low
• Reason for stagnation: Various systems of land settlement, especially
zamindari system in the then Bengal Presidency-- profits accrued to
zamindars/British. Nothing done to improve the condition of
agriculture-- caused immense misery and social tension
▪ Terms of the revenue settlement were also responsible for the
zamindars adopting such an attitude; dates for depositing
specified sums of revenue were fixed, failing which the
zamindars were to lose their rights.
• Low levels of technology, lack of irrigation facilities and negligible
use of fertilisers= aggravated the plight and contributed to the dismal
level of agricultural productivity.
• Some evidence of a relatively higher yield of cash crops in certain
areas of the country due to commercialisation of agriculture-- to aid
industries in Britain
• Starved of investment in terracing, flood-control, drainage and
desalinisation of soil.
• While a small section of farmers changed their cropping pattern to
commercial crops, a large section of tenants, small farmers and
sharecroppers neither had resources and technology nor had
incentive to invest in agriculure.

3. INDUSTRIAL SECTOR

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No corresponding development of a sound industrial base, even as world

famous handicraft industries declined

Motive behind such systematic deindustrialization:

a. reduce India to the status of a mere exporter of important raw
materials for the upcoming modern industries in Britain
b. to turn India into a sprawling market for the finished products

Decline of the indigenous handicraft--> massive unemployment, new

demand for British goods

Industrialization
o During the second half of the nineteenth century, modern industry
began to take root in India but its progress remained very slow.
Cotton (Dominated by Indians, west: Gujarat and Maha) and Jute
textile mills (Dominated by foreigners, east: Bengal)
o Beginning of 20th cen, iron and steel industries [The Tata Iron and
Steel Company (TISCO in 1907)]
o After WWII -- sugar, cement, paper etc.

Hardly any capital goods industry to help promote further

industrialisation. Furthermore, the growth rate of the new industrial
sector and its contribution to the Gross Domestic Product (GDP) remained
very small.

Public sector had limited area of operation, a significant drawback:

railways, power generation, communications, ports and some other
departmental undertakings.

4. FOREIGN TRADE
Important trading nation since ancient times.

But the restrictive policies of commodity production, trade and tariff

pursued by the colonial government adversely affected the structure,
composition and volume of India’s foreign trade.

For all practical purposes, Britain maintained a monopoly control over

India’s exports and imports.
o More than half of India’s foreign trade was restricted to Britain
o The rest was allowed with a few other countries like China, Ceylon
(Sri Lanka) and Persia (Iran).
o The opening of the Suez Canal further intensified British control over
India’s foreign trade
o Several essential commodities—food grains, clothes, kerosene etc.
— were scarcely available in the domestic market.

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o Large export surplus-- but no inflow of gold/silver-- used to make

payments for the expenses incurred by an office set up by the
colonial government in Britain, expenses on wars fought by the
British government, and the import of invisible items, all of which led
to the drain of Indian wealth.

Trade Through the Suez Canal

• Isthmus of Suez in north-eastern Egypt.
• Connects Port Said on the Mediterranean Sea with the Gulf of Suez,
an arm of the Red Sea.
• The canal provides a direct trade route for ships operating between
European or American ports and ports located in South Asia, East
Africa and Oceania by doing away with the need to sail around
Africa.
• Strategically and economically, it is one of the most important
waterways in the world.
• Its opening in 1869 reduced the cost of transportation and made
access to the Indian market easier.

5. DEMOGRAPHIC CONDITION
Various details about the population collected first: Census 1881, after
which every decade

Before 1921: first stage of demographic transition.

After 1921: second stage. However, neither the total population of India
nor the rate of population growth at this stage was very high. The various
social development indicators were also not quite encouraging.
o The overall literacy: <16 per cent. Female: 7%
o Public health facilities were largely unavailable: water and air-borne
diseases were rampant
o Overall mortality rate was very high, IMR @ 218/1000
o Life expectancy @ 44 years
o No reliable data, but extensive poverty prevailed in India
contributing to the worsening profile of India’s population of the
time.

6. OCCUPATIONAL STRUCTURE
Showed little sign of change: over 70-75% in Agri and 15-20% in
Manufacturing and Services

String aspect of growing regional variation:

a. Madras Presidency (Tamil Nadu, Andhra Pradesh, Kerala and
Karnataka), Bombay and Bengal witnessed a decline in the
dependence of the workforce on the agricultural sector with a

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commensurate increase in the manufacturing and the services

sectors.
b. Increase in the share of workforce in agriculture during the same
time in states such as Orissa, Rajasthan and Punjab.

7. INFRASTRUCTURE
Basic infrastructure such as railways, ports, water transport, posts and
telegraphs did develop.

Real motive: to subserve various colonial interests.

o Erstwhile roads not fit for modern transport. New roads would serve
mobilising the army within India and drawing out raw materials
from the countryside to the nearest railway station or the port for
exporting
o Acute shortage of roads remained-- no allweather roads and hence
rural populace suffered during floods, drought and famine

o Introduced the railways in India in 1850, considered as one of their

most important contributions. Affected the structure of the Indian
economy in two important ways.
▪ Social benefits accrued: long distance travel breaking
geographical and cultural barriers
▪ Traded off with economic loss: commercialisation of Indian
agriculture which adversely affected the self-sufficiency of the
village economies in India. Increased exports, with no benefits
▪ First Railway Bridge linked Bombay with Thane, 1854

o Measures for inland trade and water ways were far from satisfactory.
The inland waterways, at times, also proved uneconomical as in the
case of the Coast Canal on the Orissa coast-- huge cost but could not
compete with railways

o Expensive system of electric telegraph: for maintaining law and

order.

o Postal services: a useful public purpose, remained all through

inadequate.

CONCLUSION
By the time India won its independence, the impact of the two-century long
British colonial rule was already showing on all aspects of the Indian economy.
• The agricultural sector was already saddled with surplus labour and
extremely low productivity.
• The industrial sector was crying for modernisation, diversification,
capacity building and increased public investment.
• Foreign trade was oriented to feed the Industrial Revolution in Britain.

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• Infrastructure facilities, including the famed railway network, needed

upgradation, expansion and public orientation.
• Prevalence of rampant poverty and unemployment required welfare
orientation of public economic policy.
In a nutshell, the social and economic challenges before the country were
enormous.

Economic Capitalism Mixed Economies Socialism

System
Ownership of Pvt. Sector Few industries Public Sector /
the industries? reserved for Govt / Collective
public sector, ownership.
remaining by Pvt. There is no ‘pvt’
sector. property.
What goods and ‘Free Market - Essential Govt. will decide
services should Economy’: Let the goods/services what must be
we produce? market forces of by Public Sector produced & in
supply & demand - Others by Pvt how much
decide it. sector. quantity

During Whichever mode of In public sector Preference for

production production is more industries- govt labour intensive
should we use cheaper. will decide. In pvt modes of
more labour or sector- production.
more capital entrepreneur will
(machines)? decide.
How to Only the - For essential Govt to decide
sell/distribute consumers who goods and who needs how
those goods and can afford them, services → much, and will
services among can purchase them. government may distribute
people? If a sick man fix the prices e.g. accordingly,
cannot afford NPPA-Stent. using subsidy /
medicine, it is not - For others → rationing shops.
govt’s problem. market forces
will decide.

Presently, most nations are ‘Mixed Economic System’ including USA and
India. While China officially claims to be ‘Socialist’ but, in practice, they too
have become a Mixed Economy.
• The socialist economic system stopped in most nations after the
collapse of USSR, except a handful of outliers like North Korea, Cuba &
Venezuela.

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• Communism is a branch of socialism, (usually) run by a totalitarian

government made up of one and only one party.

ECONOMIC PLANNING

It is the process through which Govt. prepares a list of socio-economic

problems e.g. mass poverty, inequality, low productivity in agriculture, lack
of industrial and infrastructural development etc.; and then Govt. sets goals
/ targets / plans to fix these problems.

By the late 1930s, there was an almost political consensus that

independent India will be a planned economy.

We may define planning as a process of realising well-defined goals by

optimum utilisation of the available resources. It is about organising a
framework for implementing, coordinating, and monitoring a development
plan.

Types of planning
After the first national planning was started by the Soviet Union, many more
countries followed it but with variations in their methods and practices.

Totalitarian (in USSR, North Korea) vs Democratic (India)

Centralised (USSR, N.Korea) vs Decentralised (In India post 73rd and 74th
Amendments)

• Imperative planning
• The planning process followed by the state economies (i.e the socialist
or communist) is known as the imperative planning.
• Such planning is also called as directive or target planning.
• Such planning had two main variants- socialist and communist.
• The communist China was the purest example of such planning. In the
case of Soviet Union a little bit of ‘market’ did exist—even after the
collectivisation of agriculture was enacted by Stalin in 1928 only 94
per cent of Soviet peasants could be included in the process.
• Numerical (i.e. quantitative) targets of growth and development are set
by the plans.
• As the state controls the ownership rights over the resources, it is very
much possible to realise the above-cited planned targets.
• Almost no role for market, no price mechanism with all economic
decisions to be taken in the centralised way by the state/Government.
• No private participation in the economy, only state played the
economic role.

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• It is strict and rigid

• Indicative planning
• In the following two decades after the Soviet planning(1928)
commenced, the idea of planning got attention from the democratic
world.
• As they were neither the state economies nor Communist/Socialist
political systems, the nature of their planning was to be different from
the command economies. Such planning has been called as indicative
planning by the economists and the experts.
• Every economy following the indicative planning were the mixed
economies.
• Government prepares an outline of plan after consulting with public
and private sector. They are given funds, incentives, subsidies, tax
breaks to maximize production, income & employment
• Government does not force the private sector but just indicates the
areas of cooperation and targets to be fulfilled.
• Unlike a centrally planned economy (countries following imperative
planning) indicative planning works through the market (price
system) rather than replacing it.
• Side by side setting numerical/quantitative targets (similar to the
practice in the imperative planning) a set of economic policies of
indicative nature is also announced by the economies to realise the
plan targets.
• The indicative nature of economic policies which are announced in
such planning basically encourage or discourage the private sector in
its process of economic decision making
• It is soft and flexible

Planning --> Operational Tactical Strategic/Perspective

Timeframe--> Upto 1 Year 3 - 7 years 10 or more years

After the Second World War, almost all the newly independent countries
adopted the route of planned development. Though they followed an overall
model of the indicative planning, many of them had serious inclination
towards imperative planning. As in the case of India, the heavy bias towards
imperative planning could only be reformed once the process of economic
reforms was started in 1991.

After the revival of the role and the need of market in promoting growth and
development via the Washington Consensus (1985), the Santiago/New
Consensus (1998) and the World Trade Organisation (1995), only indicative
planning has remained possible with the state playing only a marginal role
in the economy especially in the areas of social importance (i.e. nutrition,
healthcare, drinking water, education, social security, etc.).
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Planning in India
The whole lot of colonial world and the democracies of the time were
fascinated by the idea of planning as an instrument of economic progress.
The nationalist leaders with socialistic inclination of the erstwhile British
colonies were more influenced by the idea of economic planning. This was
true for Indian nationalists as well.

Independent India was thus destined to be a planned economy. The

economic history of India is nothing but the history of planning

By the decade of 1930s, the idea of planning had already entered the domain
of intellectual and political discussion in India. Many fresh proposals
suggesting immediacy of planning in India were put forward though the
erstwhile British Government remained almost immune to them.

1. The Visvesvaraya Plan

• The first blueprint of Indian planning by M. Visvesvaraya—in his book
The Planned Economy of India, published in 1934.
• His ideas of state planning were an exercise in democratic capitalism
(similar to the USA) with emphasis on industrialisation—a shift of
labour from the agrarian set up to the industries targeting to double
national income in one decade.

2. The FICCI Proposal

• In 1934, the leading organisation of Indian capitalists, FICCI,
proclaimed that the days of undiluted laissez-faire were gone forever
and for a backward country like India, a comprehensive plan for
economic development covering the whole gamut of economic
activities was a necessity.
• This thinking was further reinforced by the Keynesian ideas in the
wake of the Great Depression, the New Deal in the USA and the Soviet
experiment in national planning.

3. The Congress Plan

• The Gandhians and some of the business and propertied
representatives were opposed to commit the party to centralised state
planning (including Mahatma Gandhi)
• It was on the initiative of the INC president Subhash C. Bose that the
National Planning Committee (NPC) was set up in 1938 under the
chairmanship of J.L. Nehru to work out concrete programmes for
development encompassing all major areas of the economy.

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• The work of the committee was interrupted when the Second World
War broke out and in the wake of the Quit India Movement many of its
members including the chairman were arrested, and between 1940
and 1945 the Committee had only a nominal existence. The final report
of the NPC could only be published in 1949.

4. The Bombay Plan

• Bombay Plan was the popular title of ‘A Plan of Economic Development
for India’ which was prepared by a cross-section of India’s leading
capitalists. The eight capitalists involved in this plan were
Purshotamdas Thakurdas, J.R.D. Tata, G.D. Birla, John Mathai.
• The Plan was published in 1944–45.
• The popular sentiments regarding the need of planning and criss-cross
of memberships between the NPC and the Bombay Plan club made
possible some clear-cut agreements between these two major plans
which ultimately went to mould the very shape of the Indian economy
after independence.

We may have a look at some of the very important agreements:

o A basic agreement on the issue of the agrarian restructuring
o Agreement on rapid industrialisation
o Simultaneous development of the essential consumer goods
industries but as a low-key affair.
o Promoting the medium-scale, small-scale and cottage industries
o Wanted the state to play an active role in the economy through
planning
o Large-scale measures for social welfare
o A planning which could do away with the gross inequalities.

o The Gandhian Plan

• Espousing the spirit of the Gandhian economic thinking, Sriman
Narayan Agarwal formulated this plan in 1944.
• This plan laid more emphasis on agriculture.
• Even if he referred to industrialisation it was to the level of promoting
cottage and village-level industries, unlike the NPC and the Bombay
Plan which supported a leading role for the heavy and large industries.
• The plan articulated a ‘decentralised economic structure’ for India with
‘self-contained villages’.
• It needs to be noted here that the Gandhians did not agree with the
views of the NPC or the Bombay Plan, particularly on issues like
centralised planning, dominant role for state in the economy and the
emphasis on industrialisation being the major ones.
• For Gandhi, the machinery, commercialisation and centralised state
power were the curses of modern civilisation, thrust upon the Indian
people by European colonialism.

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• It was industrialism itself, Gandhi argued, rather than the inability to

industrialise, which was the root cause of Indian poverty. This was
until the 1940s that the Congress supported the above-given view of
Gandhi to mobilise a mass movement against the colonial rule. But it
was in the NPC that the Congress tried to articulate a different view on
these issues, almost taking a break from Gandhi’s ideas.

6. The People’s Plan

• In 1945, yet another plan was formulated by the radical humanist
leader M.N. Roy.
• The plan was based on Marxist socialism and advocated the need of
providing the people with the ‘basic necessities of life’.
• Agricultural and industrial sectors, both were equally highlighted by
the plan. Many economists have attributed the socialist leanings in
Indian planning to this plan.
• ‘Economic reforms with the human face’, the slogan with which the
economic reforms started early 1990s has also the resonance of the
People’s Plan.

7. The Sarvodaya Plan

• formulated by the famous socialist leader Jaiprakash Narayan—the
Sarvodaya Plan published in January 1950.
• The plan drew its major inspirations from the Gandhian techniques of
constructive works by the community and trusteeship as well as the
Sarvodaya concept of Acharya Vinoba Bave, the eminent Gandhian
constructive worker.
• Major ideas of the plan were highly similar to the Gandhian Plan
• By the early 1960s, Jayprakash Narayan had become highly critical of
the Indian planning process especially of its increasing centralising
nature and dilution of people’s participation in it.

Basically, the very idea of democratic decentralisation was disliked by the

established power structure, namely, the MLAs/MPs, the bureaucracy and
the state-level politicians. It was only after the 73rd and 74th Amendments
effected to the Constitution (1992) that the role of local bodies and their
importance in the process of planned development was accepted and the
views of Jayprakash got vindicated.

THE GOALS OF FIVE YEAR PLANS

Growth: It refers to increase in the country’s capacity to produce the output

of goods and services within the country. It is necessary to produce more
goods and services if the people of India are to enjoy a more rich and varied
life.

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Modernisation: To increase the production of goods and services the

producers have to adopt new technology. However, modernisation does not
refer only to the use of new technology but also to changes in social outlook.

Self-reliance: A nation can promote economic growth and modernisation by

using its own resources or by using resources imported from other nations.
The first seven five year plans gave importance to self-reliance which means
avoiding imports of those goods which could be produced in India itself.
This policy was considered a necessity in order to reduce our dependence
on foreign countries, especially for food.

Equity: A country can have high growth, the most modern technology
developed in the country itself, and also have most of its people living in
poverty. It is important to ensure that the benefits of economic prosperity
reach the poor sections as well instead of being enjoyed only by the rich.

Planning, in the real sense of the term, began with the Second Five Year
Plan. This plan was based on the ideas of Mahalanobis. In that sense, he can
be regarded as the architect of Indian planning.

Mahalanobis established the Indian Statistical Institute (ISI) in Calcutta and

started a journal, Sankhya, which still serves as a respected forum for
statisticians to discuss their ideas.

Plan Period GDP Features Outcome

target/Achieved
1st 51-56 2.1 / 3.6 Harrod Domar Successful: Got
Model more GDP
growth than its
Influx of Refugees, original target.
food shortage,
Mounting inflation Good harvest,
rehab of
Main focus: refugees, price
Agriculture, stability
irrigation and
power.
2nd 56-61 4.5 / 4.3 P.C. Mahalanobis Moderately
model. He was Successful:
Chief Statistician of Achieved the
India. GDP growth
➢ Socialist target.
pattern/model of
society,
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➢ Rapid
industrialization,
heavy industries.
3rd 61-66 5.6 / 2.8 Sukhmoy FAIL due to
Chakraborty and droughts and
John Sandy Model wars with Pak-
➢ Also called China
“Gadgil Yojana”: to
make the economy
independent -
already has
reached take off
stage. So, make it
self reliant and self
generating
Holidays 66-69 Plan Holiday
declared thanks to
FAILURE of 3rd
FYP.

During this period,

annual plans were
made.
4th 69-74 5.7 / 3.3 ➢ Ashok Rudra FAIL due to
and Alon Manney Bangladeshi
Model. refugee problem
➢ growth with and drought.
stability and self-
reliance.
➢ Indira gave
‘Garibi Hatao’
slogan in 1971
election campaign
5th 74-79 4.4 / 4.8 ➢C.Subramaniam While it
and later achieved the
redrafting by targets but
D.P.Dhar terminated in
➢ Focus: 1978 as Morarji
agriculture > Desai became
Industry & Mines PM.
➢ Originally it was
a 10 year long term

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perspective plan
with focus
on poverty
removal and self-
reliance
Rolling 78-80 Morarji Desai’s
Plan Janta government:
“we’ll measure
progress every
year and make new
plans accordingly
for next year.”
6th 80-85 5.2 / 5.7 ➢ Poverty
removal, IRDP,
NREM, TRYSEM
etc.
7th 85-90 5.0 / 6.0 ➢ Pranab
Mukherjee Model
➢ Focus on
employment.
Jawahar Rozgar
Yojana started.
➢ For the first
time, due to the
pressure from
private sector the
private sector got
the priority over
public sector
2 annual 90-92 Political instability
plans at Centre. So, only
two annual plans:
(i) 1990-91 & (ii)
1991-92.
8th 92-97 5.6 / 6.8 ➢ John W.Miller Successful: Got
Model. more GDP
➢ Prime Minister growth than its
PV Narasimha Rao- original target.
LPG reforms, New ➢ Fiscal deficit
Economic Policy also ⏬but that
➢ Top priority to was done by
human resources manipulation,
using extra
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i.e. employment, budgetary

education resources (EBR)
and public health.
9th 97-02 6.5 / 5.4 ➢ Growth with FAIL due to
social justice and global
equity. Mostly slowdown after
“indicative” Asian Financial
planning. Crisis
➢ identified 7
Basic Minimum
Services (BMS) like
health,
education,
nutrition, roads &
gave more ₹₹ for
that.
10th 02-07 8 / 7.6 Target 8% GDP Failed to
growth rate, achieve targets.
double per capita
income in 10 years,
reduce poverty to
15% etc
11th 07-12 9/8 ➢ Theme: FAIL due to US-
“Towards Fast and subprime crisis,
more Inclusive failed to achieve
Growth” targets.
➢ C.Rangarajan
framed it with
targets: GDP 9%
growth rate, 70
million new jobs,
lower IMR, CMR,
TFR etc.
12th 12-17 8 /around 6.5 ➢ Theme: Faster,
More Inclusive &
Sustainable
Growth
➢ Target growth
rates: 9% GDP, 4%
Agriculture, 10%
Mfg. but
due to continued
global economic

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slowdown, most of
these
targets not
achieved.
➢ 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: LIMITATIONS / SHORTCOMINGS

• Achieved ~9% GDP growth-rate during 2005-07, thanks to American
boom prior to Subprime crisis. But almost all nations including
Pakistan had experienced high growth in that era. So 9% GDP did not
come from PC.
• Post-Subprime crisis: GDP-fell while food-inflation &NPA rose during
2008-13. PC couldn’t fix it.
• PC was a toothless body, couldn’t punish any government
organizations if targets failed.
• Failed to implement land reforms, labour laws.
• PC designed Government schemes with ‘One Size Fits’ all approach and
a few extra crores to NE/J&K/Hill-states and LWE-affected states. But
for long, PC did not use pilot projects / sample testing / interaction
with states. So, Indira Awas Yojana (IAY), ICDS child development
scheme etc. programs failed to show tangible result despite pumping
crores of rupees over the decades.
• PC tried to bypass State Governments by designing schemes that
directly funded money to NGO & private agencies. So, non-Congress
states became unenthusiastic about implementing Central Schemes.
• Only in 2013, PC attempted to undo its mistakes by reducing number
of Centrally sponsored schemes (CSS), Performance based funding to
States etc. But it was too little, too late.

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• PC’s shortcomings resulted in creation of new bodies like PM’s Project

Monitoring Group, PM’s Economic Advisory Council (PM-EAC), Group
of Ministers (GoM) committees etc. → more lack of coordination.
• So, Modi felt PC is a hopeless mess beyond repairs & replaced it with
NITI Ayog.

PLANNING COMMISSION VS NITI AAYOG: STRUCTURE

Planning Commission NITI Aayog

Born Born: 15/3/1950 National Institution for
Dissolved: 13/8/2014 Transforming India was
born on 1/1/2015
Chairman Prime Minister same
Vice Last Dy.Chairman was Economist Rajiv Kumar.
Chairman Montek Singh Ahluwalia (previously Arvind
(Cabinet minister Rank). Panagariya). He enjoys ‘Cabinet
Minister’ rank in
the warrant of precedence and
salary.
CEO Member-Secretary (IAS) A Secretary level bureaucrat with
fixed tenure.
Presently, Amitabh Kant (IAS).
Ex-officio 1. Finance Minister PM will nominate Max 4 Union
members 2. Planning minister ministers.

Presently, Minister for

1. Home
2. Defense
3. Finance
4. Agriculture [presently this
minister Narendra
Tomar also holds portfolio of rural
dev, Panchayati raj as well]
Full time 4-7 full time members, 1. Dr. Ramesh Chand (Economist)
members who enjoyed “Minister 2. Dr. V.K. Saraswat (Technocrat,
of State” rank. missile scientist and Ex-DRDO
chief.)
3. Dr. Vinod Kumar Paul
(Pediatrician, Public Health
Expert)

They enjoy Minister of State rank

in warrant of precedence, but
salary = Secretary rank (IAS)

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Special N/A - Union ministers for Transport,

Invitees Social Justice, MSME, Textiles,
Women-Child, HRD, commerce,
statistics, planning.(these
ministers are sometimes
added/removed. List keeps
changing dynamically)
- PM can invite other experts as
and when needed.
Part-time N/A Tech experts from research
members institutes. Currently none declared
as of 2020-Jan.
Governing National Development − Chairman: Prime minister
Council Council (NDC) with PM, − CM of all states incl. Delhi,
CM etc. Puducherry
− Lieutenant governors of UT.
− Although cooperative federalism
spirit missing, West Bengal,
Telangana and Punjab boycotted
meeting in June 2019
Ad hoc N/A CMs & Lt.Govs of states/UTs that
Regional fall in the region. They’ll be dealing
Councils with specific issue affected them
e.g. irrigation, Naxal-problem,
infrastructure etc.

PLANNING COMMISSION VS NITI AAYOG: FUNCTIONS

While Finance commission (a constitutional body under Art.280) is
responsible for the tax devolution
from Union to states, these two non-constitutional bodies look/looked after
→

Planning Commission NITI Aayog

Prepared the Five-Year Plans It’s given responsibility to draft
of India ✓ Three Year Action Agenda (2017-20).
✓ Seven Year Strategy Document.
✓ Fifteen Year Vision Document (2017-32).
2018: drafted Strategy for New India @ 75
covering the period 2017 to 2022-23.
1. How much money should NITI doesn’t decide how much money should
union give to each state for be given to each state. That component is
implementation of centrally decided by the Finance Commission (tax
sponsored schemes (CSS)? devolution and grants) and Finance Ministry
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 Module 22: Economic History and Planning

2. How much money should (Allocations for schemes).

union give to the five year 1. NITI primarily serves as the think tank,
plans of the state helps in policy design.
governments? 2. Helps in monitoring schemes’
implementation through its dashboard e.g.
PC would answer these ‘School Education Quality Index’, ‘SDG India
questions using Gadgil Index’, ‘Digital Transformation Index’
Mukherjee formula (designed etc.
in 8TH FYP)- based on
population, per capita
income, special problems etc.
of a state.

NITI → NOTABLE INITIATIVES / HOW DIFFERENT FROM PC?

Darpan Portal 2017 onwards: NGO register here, get unique id → apply
for grants under various govt schemes.
Aspirational 2018 onwards: to rapidly transform 115 backward
District districts on 49 key performance indicators (KPIs)
Programme related to Health, Nutrition, Education, Agriculture,
Water Resources, Financial Inclusion, Skill Development,
Infrastructure etc.
- Their progress is monitored using NITI online
dashboard called ‘Champions of Change’ → 2018
Ranking: #1: Dahod (Guj). 2019: #1 Kondagaon
(Chhattisgarh)
Strategic NITI Aayog suggested strategic disinvestment of 30+
disinvestment sick / loss making CPSEs such as Air India, Pawan Hans
Helicopter, Scooters India etc.
POSHAN Ministry of Women and Child Development (MWCD) is
Abhiyaan implementing POSHAN Abhiyaan to make India
malnutrition free India by 2022 with focus on pregnant
women, mothers and children.
- NITI Vice-Chairman is the head of POSHAN Abhiyaan’s
National Council.
Bills and Since its inception Niti Aayog has
policies - Helped framing various policies on Energy, Mineral etc.
- Helped framing various bills, Model Acts on
Agricultural Land Leasing, Livestock Selling etc.
Agriculture NITI helped revamping the MSP by suggesting price
deficiency payments (under PM-AASHA), & revamping
fertilizer subsidies through DBT mechanism to fertilizer
companies

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SDG For Sustainable Development Goals

- NITI developed SDG India Index to monitor our
progress in 17 SDG goals
- NITI suggested Govt. to focus on methanol / biofuel
based economy for reducing the fuel bill by around 30%
by 2030.
CSS NITI helped developing Output Outcome Monitoring
Framework to monitor the implementation of Govt
schemes. PC simply launched schemes after schemes,
without much attention to performance monitoring.
Seminars NITI regularly organizes seminars, workshops,
conferences for idea exchange with industries and
academicians. PC was ‘closed body’ in terms of
interaction with others.
Startups NITI runs Atal Innovation Mission (AIM) →grant of upto
₹ 10 crores to setup Atal Incubation Centres incubators.
→ AIM also started “Mentor India” program, wherein
experts from industry provide mentorship to students in
Atal incubator labs.
- SETU to help startups.
Digital Age NITI developing National Program on Artificial
Intelligence.

From above points, it is evident that NITI’s approach is more modernised,

forward-looking, less bureaucratic and less status-quo oriented than the
erstwhile Planning Commission. With such initiatives, NITI Ayog is playing a
pivotal role for economic growth, human development and good governance
in India.

ECONOMY PLANNING → PM-EAC?

Prime Minister's Economic Advisory Council
- Just like PC and NITI, this is also neither constitutional nor statutory body.
- Started in the 2000s to give advice on economic issues to the Prime
Minister.
- After PM Manmohan Singh’s term finished (2014), PM Modi did not
reconstitute it for a while. But in 2017, our growth rate ⏬ in the aftermath
of demonetisation and GST, so opposition parties & critics were making lot
of hue and cry about PM’s faulty economic policies. In that atmosphere, PM
Modi again reconstituted this Economic Advisory Council (2017-Sept).

Composition? Economist Bibek Debroy (as Chairman) & other notable full
time and part

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time members= Total 7 persons. NITI provides administrative / secretarial

support to PMEAC.

PMEAC has suggested to government to:

1) Set up a GST Council like body on public expenditure
2) Reduce the number of GST slabs.
3) Reduce the Direct Taxes to boost the demand & economy.

Economy Planning → PRAGATI?

2015: Pro-Active Governance and Timely Implementation (PRAGATI) is a
web platform under Prime Minister's Office (PMO) for
1. Monitoring scheme implementation
2. Addressing common man’s grievances related to tax refunds, EPFO claims
etc.

PM uses this digital platform for monthly video conferencing with ministries
& departments @Union, and Chief Secretaries(IAS) @States.
eSamikSha 2014: PM Modi launched web portal under Cabinet
Secretariat.
- After the Ministers / officials meet PM → decisions /
follow up actions are monitored through this portal.
- If an IAS is sitting on a file, this webportal allows PM /
Cabinet Secretary to digitally ask that IAS to explain the
delay or expedite the decision making.
Project 2013: PM Manmohan formed it under Cabinet
Monitoring Secretariat for fast tracking the approval /
Group implementation of various public sector, private sector
(PMG) and PPP Projects.
- They also operate a webportal ‘e-Nivesh Monitor’ for
investment / business proposals.
CPGRAMS 2007: Personnel Ministry → Department of
Administrative Reforms & Public Grievances (DARPG)
launched the portal Centralized Public Grievance
Redress And Monitoring System (CPGRAMS)
- Any citizens can file complaint against any Central
Ministries/Departments/Organisations for Corruption,
Nepotism, harassment, mismanagement, absenteeism,
Delay in providing services etc. They also launched a
mobile app ‘My Grievance’.
Misc. Following don’t fall under any ‘Ministry or Dept’

APEX/ INDEPENDENT OFFICES

1. President’s Secretariat

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2. Cabinet Secretariat → Research & Analysis Wing

3. Prime Minister’s Office → National Security Advisor
(NSA)
4. NITI Aayog (National Institution for Transforming
India)

INDEPENDENT DEPARTMENTS
1. Department of Atomic Energy
2. Department of Space

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