India’s economic planning landscape underwent a significant transformation with the replacement of the Planning Commission by the NITI Aayog in 2015. Both bodies have played crucial roles in shaping the country’s fiscal policy, but they differ in structure, function, and approach.
Planning Commission
Establishment and Role:
- Established: March 15, 1950.
- Objective: To promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production, and offering employment opportunities.
- Function: Formulate five-year plans for economic development, allocate resources, and determine priorities.
Structure:
- Chairman: Prime Minister.
- Members: Full-time members, including a Deputy Chairman, and part-time members from various sectors.
Approach:
- Centralized Planning: Emphasized a top-down approach where the central government played a dominant role in decision-making.
- Five-Year Plans: Created comprehensive plans every five years, outlining objectives, targets, and resource allocations.
NITI Aayog
Establishment and Role:
- Established: January 1, 2015.
- Objective: To foster cooperative federalism, involve states in policy-making, and promote sustainable development.
- Function: Act as a think tank, provide strategic and technical advice, and foster innovation and entrepreneurship.
Structure:
- Chairman: Prime Minister.
- Vice-Chairman: Appointed by the Prime Minister.
- Governing Council: Includes Chief Ministers of all states and Union territories with legislatures, and Lt. Governors of other Union territories.
- Full-time Members: Subject experts in various fields.
Approach:
- Decentralized Planning: Emphasizes a bottom-up approach, encouraging states to be active partners in decision-making.
- Strategic Planning: Focuses on medium- and long-term policies and strategies for economic development.
Key Differences
- Centralization vs. Decentralization:
- Planning Commission: Centralized, with the central government setting priorities and allocations.
- NITI Aayog: Decentralized, involving states in the decision-making process and promoting cooperative federalism.
- Planning Horizon:
- Planning Commission: Operated through five-year plans with specific targets and resource allocations.
- NITI Aayog: Focuses on continuous planning, offering flexibility and addressing emerging challenges.
- Resource Allocation:
- Planning Commission: Allocated funds to states based on plan priorities.
- NITI Aayog: Does not allocate funds; instead, it acts as an advisory body to guide policy and strategy.
- Role and Function:
- Planning Commission: Primarily a planning body with a directive role.
- NITI Aayog: Acts as a policy think tank, fostering innovation and providing strategic advice.
Example: Transition from Planning Commission to NITI Aayog
Planning Commission:
- Twelfth Five-Year Plan (2012-2017): Focused on faster, sustainable, and more inclusive growth. It set ambitious targets for economic growth, infrastructure development, and social welfare.
NITI Aayog:
- Strategy for New India @ 75: Aimed at transforming India by 2022, focusing on sectors like health, education, agriculture, and infrastructure.
- Health: Proposed measures to increase public health expenditure to 2.5% of GDP.
- Education: Emphasized improving the quality of education and increasing digital literacy.
- Agriculture: Suggested doubling farmers’ income by enhancing productivity, reducing post-harvest losses, and promoting agro-based industries.
- Infrastructure: Aimed at enhancing connectivity through roads, railways, and digital infrastructure.
Impact on Fiscal Policy
Planning Commission:
- Resource Allocation: Centralized resource allocation sometimes led to inefficient use of funds and lack of accountability at the state level.
- Top-Down Approach: Limited flexibility for states to address local issues and priorities.
NITI Aayog:
- Cooperative Federalism: Encourages states to take ownership of their development plans, leading to more tailored and effective use of resources.
- Flexibility and Innovation: Promotes innovative solutions and flexible planning, allowing for quick adjustments to changing economic conditions.
Conclusion
The transition from the Planning Commission to NITI Aayog marked a significant shift in India’s approach to economic planning and fiscal policy. While the Planning Commission operated through a centralized, top-down approach with fixed five-year plans, NITI Aayog emphasizes a decentralized, cooperative federalism model that involves states in the decision-making process and focuses on strategic, continuous planning. This shift aims to promote more efficient use of resources, foster innovation, and ensure sustainable and inclusive growth.
