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Planning Commission

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updated on April 11th, 2019

Planning Commission

Once the National Planning Committee published its Report (1949), there was a firm inclusion of the need for ‘Economic and Social Planning’ in the Constitution, the stage was set for the formal launching of planning in the country. Though the economy was run on the principles of planning very much after the Independence itself it was in a piecemeal manner only. For formal planning to begin, for the whole economy at the national level, there was a need for a permanent expert body which could take over the responsibility of the whole gamut of planning, i.e., plan formation, resource aspects, implementation, and review—as planning is a technical42 matter. Thus, in March 195043 the Planning Commission (PC) was set up by the government by a Cabinet Resolution (without resorting to legislation). Important details regarding the composition, legal status, etc., of the PC, were as under:

(i) An extra-constitutional (i.e., nonconstitutional) and non-statutory body (though planning originates from the Constitution there is no reference to the PC in it).
(ii) An advisory body to the Government of India on an array of issues of economic development.
(iii) A ‘think tank’ on economic development with the Prime Minister as its ex-officio Chairman and with the provision or a Deputy Chairman.44 The main function of the Deputy Chairman was to coordinate the work of the Commission.
(iv) Had an open provision for the number of its membership (as many area experts are required by the particular proposed period of planning) other than six Union Cabinet Ministers as its ex-officio members and a Member Secretary. The Minister of Planning is already an exofficio member of the PC.
(v) An autonomous body entitled to form its own views on important issues and place them before the governments. It worked closely with the Union and State cabinets and had full knowledge of their policies.
(vi) Was invariably consulted on changes proposed in social and economic policies. To ensure free and full exchange of ideas, the PC had established a convention that it will not give publicity to differences of views between the Commission and the Union and State governments.
(vii) Linked with the Union Cabinet at the secretariat level. The PC was part of the Cabinet organisation and the ‘demand for grants’ for it was included in the budget demand for the Cabinet Secretariat.
(viii) Seated at the ‘Yojana Bhavan’, the Commission had a staff of secretaries and advisers and also a research organisation.
(ix) The PC was a technical body with experts and professionals coming from an array of specific areas as per the need of planning of the concerned period (see footnote 42).
(x) The Commission had executive powers.

Though the PC was set up with a definite purpose of planning, nobody knew that it would extend its functions over the entire spectrum of administration in the country. It was described as the ‘economic Cabinet of the country as a whole’ even encroaching upon the constitutional body like the Finance Commission and not being accountable to the Parliament. Through time it built up a heavy bureaucratic organization which led even Nehru himself to observe—“The Commission which was a small body of serious thinkers has turned into a government department complete with a crowd of secretaries, directors and of course a big building.”

Though the functions of the PC were extended to include timely changes in the planning needs (in the reforms era), its functions were announced by the same government order which did set up the Planning Commission. The order says:

“The Planning Commission will—
(i) Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of those resources as are found to be deficient in relation to the nation’s requirements;
(ii) Formulate a plan for the most effective and balanced utilisation of the country’s resources;
(iii) On a determination of priorities, define the stages in which the plan should be carried out and propose the allocation of resources for the due completion of each stage;
(iv) Indicate the factors which are tending to retard economic development, and determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the plan;
(v) Determine the nature of the machinery which will be necessary for securing the successful implementation of each stage of the plan in all its aspects;
(vi) Appraise from time to time the progress achieved in the execution of each stage of the Plan and recommend the adjustments of policy and measures that such appraisal may show to be necessary; and
(vii) Make such interim or ancillary recommendations as appear to be appropriate either for facilitating the discharge of the duties assigned to it; or on a consideration of the prevailing economic conditions, current policies, measures and development programmes; or on an examination of such specific problems as may be referred to it for advice by Central or State governments.”

With the commencement of the Tenth Plan (2002–07), the government handed over two new functions to the Planning Commission in 2002, namely:

(i) To monitor the plan implementation with special reference to the process of ‘economic reforms’ with the help of the steering committees.

It should be noted here that once the process of economic reforms was initiated in the country (the early 1990s) there was a diminishing role proposed for the state in the economy in some areas and the increased role for the state in some other areas. The re-definition of the state’s role in the economy (though it was the contemporary thinking worldwide) made most of the experts and the business community to conclude as if there will be no role for planning in the economy. The New Economic Policy (NEP) of 1991–92 was a prima-facie proposal for the expansion of the market economy in the country. But it was not the case altogether. Planning has not become irrelevant though it needed to search for a new orientation. And it was highly essential that the process of planning keeps its relevance to the bigger and the broader process of economic reforms. This particular new function of the PC must be seen in this light.

(ii) To monitor the progress of various Central Ministries. It should be noted here that for the first time, the PC went to set the ‘monitorable targets’ for 10 areas indicating development. The Central Ministries have been linked to
these monitorable targets. The timely performances of the Ministries are now monitored by the PC as per its new function.

With the inclusion of the abovementioned two functions in the existing functions (which were already very broad), the PC had emerged as a real ‘supercabinet’. Since it was basically the Deputy-Chairman who officiated the general meetings of the Commission, he had a high-level say in articulating the direction and the nature of the economic policies. Through the first new function it articulated, the future dimensions of the economic reforms and through the second new function, it influenced the works of the various ministries—ultimately it seems as if the PC had been able to emerge as the real think-tank of development in the country.

The PC had also been able to influence the economic policies of the states since 2002 in a great way. Though the PC did not make the state plans it was able to influence the overall economic policies of the states. It had been possible due to the setting of ‘monitorable targets’ for states for the same development indicators/ areas as was been set for the Centre.58 The states were liable for being monitored by the PC concerning their performances regarding these monitorable targets. This way the Central Government had started having its say over the state governments via the new functions of the PC.

We may conclude that the PC had been able to unify not only the various economic policies of the Centre but also those of the states with the help of these two new functions. Earlier, there had always been a lack of congruence among the policies of the various central ministries and the ideas articulated by the PC.

An Epitaph To The PC

On January 1, 2015, the government formally abolished the PC by replacing it with the newly created body—the NITI Aayog. With this, there ended an era in the economic history of independent India. Whether it was better to revive the PC or abolish it has been a matter of much debate among the discipline experts, politicians and the media. The debate, at times, had emotional tones, too. But the government has its own wisdom behind the action (a detailed discussion on it has been included as the last subtopic of this Chapter titled ‘NITI Aayog’).

As an ‘epitaph’ to the PC (maybe an ‘ode’), it will be quite relevant to have an eye on the report of the Independent Evaluation Office (IEO) on the former which was submitted to the Prime Minister Office by late June 2014. As per it, the PC was created in response to the unique challenges faced by a nascent democracy and a fledgling economy—it conceived a ‘top-down approach’ to planning that envisaged a dynamic Central government building up the economic and social order of weak states. The report called the PC in its current form and function a hindrance and not a help to India’s development. It further added that it is not easy to reform such a large ossified body and it would be better to replace it with a new body that is needed to assist states in ideas, to provide long-term thinking and to help cross-cutting reforms. Some of the major recommendations of IEO on the PC are as follows:

(i) The PC be scrapped and replaced with the Reform and Solutions Commission (RSC), which should be staffed with experts with domain knowledge and kept free from any ministerial administrative structure. The new body should have the full-time representation of major trade and industry organizations civil society representatives, academics, etc., so as to capture their concerns and benefit from their expertise in formulating long–term strategy.

(ii) The RSC will perform three main functions:
(a) Serve as a solutions exchange and repository of ideas that have been
successful in different aspects of development in various states and districts, and in other parts of the world;
(b) Provide ideas for integrated systems reform; and
(c) Identify new and emerging challenges and provide solutions to preempt them.

(iii) The current functions of the PC are taken over by other bodies, ‘which are better designed to perform those functions’.

(iv) Since the state governments have better information about local requirements and resources than the central government and central institutions, they should be allowed to identify priorities and implement reforms at the state level, independent of mandatory diktats from the central institutions.

(v) The task of long-term economic thinking and coordination can be performed by a new body established to act solely as a ‘think tank’ within the government.

(vi) The Finance Commission be made a permanent body responsible for the allocation of centrally collected revenue to the states and the finance ministry be tasked with the division of funds among the various central ministries.

The recommendations of the IEO (a the brainchild of the PC itself) on the PC were quite surprising, even shocking to few. Whether the new body replacing the PC will be a betterment over the latter and will be able to carve out its desired aims is a matter to be evaluated and analyzed in the future. Meanwhile, we can visibly find some of the recommendations of the IEO resonating in the newly created body, the NITI Aayog, the replacement for the PC.

The Planning Commission was established in March 1950 by an executive resolution of the Government of India, (i.e., union cabinet) on the recommendation of the Advisory Planning Board constituted in 1946, under the chairmanship of KC Neogi. Thus, the Planning Commission is neither a constitutional body nor a statutory body. In other words, it is a nonconstitutional or extra-constitutional body (i.e., not created by the Constitution) and a non-statutory body (not created by an act of Parliament). In India, it is the supreme organ of planning for social and economic development.


The functions of the Planning Commission include the following:

  1. To make an assessment of material, capital and human resources of the country and investigate the possibilities of augmenting them.
  2. To formulate a plan for the most effective and balanced utilisation of the country’s resources.
  3. To determine priorities and to define stages in which the plan should be carried out.
  4. To indicate the factors that retard economic development.
  5. To determine the nature of the machinery required for successful implementation of the plan in each stage.
  6. To appraise, from time to time, the progress achieved in execution of the plan and to recommend necessary adjustments.
  7. To make appropriate recommendations for facilitating the discharge of its duties, or on a matter referred to it for advice by Central or state governments.

The Allocation of Business Rules have assigned the following matters (in addition to the above) to the Planning Commission:

  1. Public Co-operation in National Development
  2. Specific programmes for area development notified from time to time
  3. Perspective Planning
  4. Institute of Applied Manpower Research
  5. Unique Identification Authority of India (UIDAI)
  6. All matters relating to National Rainfed Area Authority (NRAA)

Earlier, the National Informatics Centre was also under the Planning Commission. Later, it was brought under the Ministry of Information Technology.

The Unique Identification Authority of India (UIDAI) has been constituted in January 2009 as an attached office under the aegis of Planning Commission.

With the transfer of National Rainfed Area Authority (NRAA) from the Ministry of Agriculture to the Planning Commission, all matters relating to the NRAA will henceforth be looked after by Planning Commission.

It should be noted that the Planning Commission is only a staff agency—an advisory body and has no executive responsibility. It is not responsible for taking and implementing decisions. This responsibility rests with the Central and state governments.


The following points can be noted in context of the composition (membership) of the Planning Commission:

  1. The prime minister of India has been the chairman of the commission. He presides over the meetings of the commission.
  2. The commission has a deputy chairman. He is the de facto executive head (i.e., full-time functional head) of the commission. He is responsible for the formulation and submission of the draft Five-Year Plan to the Central cabinet. He is appointed by the Central cabinet for a fixed tenure and enjoys the rank of a cabinet minister. Though he is not a member of the cabinet, he is invited to attend all its meeting (without a right to vote).
  3. Some Central ministers are appointed as a part-time members of the commission. In any case, the finance minister and planning minister are the ex-officio (by virtue of) members of the commission.
  4. The commission has four to seven full-time expert members. They enjoy the rank of a minister of state.
  5. The commission has a member-secretary. He is usually a senior member of IAS.

The state governments are not represented in the commission in any way. Thus, the Planning Commission is wholly a Centre-constituted body.


The Planning Commission has the following three organs:

  1. Technical Divisions
  2. House keeping Branches
  3. Programme Advisors

Technical Divisions The technical divisions are the major functional units of the Planning Commission. They are mainly concerned with plan formulation, plan monitoring, and plan evaluation. These fall under two broad categories, that is, general divisions (concerned with aspects of the entire economy) and subject divisions (concerned with specified fields of development).

Housekeeping Branches The Planning Commission has the following housekeeping branches:

  1. General administration branch.
  2. Establishment branch.
  3. Vigilance branch.
  4. Accounts branch.
  5. Personal training branch.

Programme Advisors The post of programme advisors were created in the Planning Commission in 1952 to act as a link between the Planning Commission and the states of Indian Union in the field of planning.

They perform the following functions:
(i) To make an assessment of the implementation of development programmes in states
(ii) To keep the Planning Commission and Union Ministries informed about the progress of Centre-aided schemes as well as center-sponsored schemes
(iii) To advise the Planning Commission on the proposals received from states for their five year and annual plans


The internal organization of the Planning Commission has a dual hierarchy—administrative and technical. The administrative hierarchy is headed by the Secretary of the Planning Commission who is assisted by Joint Secretaries, Deputy Secretaries, Under Secretaries and other administrative and clerical staff. These functionaries are drawn from the Indian Administrative Service, Indian Revenue Service, Central Secretariat Service, Indian Audit and Accounts Service, and the other non-technical Central services.

The technical hierarchy, on the other hand, is headed by the Advisor who is assisted by Chiefs, Directors, Joint Directors, and other technical staff. These functionaries are drawn from the Indian Economic Service, Indian Statistical Service, Central Engineering Service, and other Central technical services. The Advisor is head of the technical division and enjoys the rank of either an Additional Secretary or a Joint Secretary.


The Programme Evaluation Organisation (PEO) was established in 1952 as an independent unit of the Planning Commission. However, it functions under the general guidance and direction of the Planning Commission.

The PEO is headed by a Director/Chief who is assisted by Joint Directors, Deputy Directors, Assistant Directors, and other staff.

The PEO has seven regional offices at Chennai, Hyderabad, Mumbai, Lucknow, Chandigarh, Jaipur and Kolkata. Each regional evaluation office of PEO is headed by a Deputy Director.

The PEO undertakes an assessment of the implementation of development programmes and plans as contained in Five-Year Plans to provide, from time to time, feedback to the Planning Commission and executive agencies. It also provides technical advice to state evaluation organizations.


The Planning Commission was originally established as a staff agency with advisory role but in the course of time it has emerged as a powerful and directive authority whereby its recommendations are considered both by the Union and states. The critics have described it as a ‘Super Cabinet’, an ‘Economic Cabinet’, a ‘Parallel Cabinet’, the ‘Fifth Wheel of the Coach’ and so on.

The following observations are made on the domineering role played by the Planning Commission.

  1. Administrative Reforms Commission (ARC) of India The ARC observed: ‘Under the Constitution, the ministers, whether in the Centre or the states, are in effect, the ultimate executive authorities. Unfortunately, the Planning Commission has, in some measures, earned the reputation of being a Parallel Cabinet and sometimes, a Super Cabinet’.
  2. D R Gadgil D R Gadgil, the former Deputy Chairman of Planning Commission, also criticized the role of Planning Commission and concluded that it has failed in its task. He said: ‘The root of the failure lies in the process by which the Planning Commission, essentially only an advisory body, has come to mix itself with the actual process of the formation of public policies even in matters other than of development . . . The misdirection has been helped largely by the membership of the prime minister and the finance minister in the planning commission, which appears to have vested the Planning Commission and its decisions with an unnatural kind of prestige and importance’.
  3. Ashok Chanda This eminent administrative analyst said, ‘The undefined position of the commission and its wide terms of reference have gradually led to its growth as the economic cabinet not merely for the Union but also for the states’. He continued, ‘The Commission has seized upon this position and extended the scope of its activities to embrace the functions and responsibilities which must both traditionally and otherwise belong to the constituted government.’ He further observed, ‘the position of pre-eminence accorded to the Planning Commission is inconsistent with the conception of a cabinet form of government’.
  4. K Santhanam This eminent constitutional expert stated that, ‘Planning has superseded the federation and our country is functioning like a unitary system in many respects’.
  5. P V Rajamannar Rajamannar, the Chairman of the Fourth Finance Commission, highlighted the overlapping of functions and responsibilities between the Planning Commission and Finance Commission in federal fiscal transfers.
  6. P.P. Agarwal, He observed, “Though Planning Commission is an advisory organ of the government, it has come to exercise significant influence over the formation of public policies even in matters other than of development, and its advisory role, in a way, extends over the entire administration.”
  7. Estimates Committee The committee opined that “The time has come when a review of entire position regarding the formal association of Cabinet Ministers of the Central Government with the Planning Commission should be made.”

Technical Divisions of the Planning Commission

General DivisionsSubject Divisions
1. Development Policy and Perspective Planning Division1. Agriculture Division

2. Financial Resources Division2. Social Justice and Social Welfare Division
3. International Economics Division3. Communication, IT & Information Division
4. Labour, Employment and Manpower Division4. Human Resources Development Division

5. Plan Coordination Division

5. Environment and Forests Division
(including climate changes)
6. Project Appraisal and Management Division6. Health, Family Welfare & Nutrition Division
7. Socio-Economic Research Unit7. Housing & Urban Affairs Division
8. State Plan Division (including Island Development authority Cell)8. Industries Division

9. Decentralised Planning Division, Panchayati Raj and Special Area Programmes (Including Western Ghat Sectt).9. Minerals Division

10. Infrastructure Division10. Power & Energy Division
11. Rural Development Division
12. Science & Technology Division
13. Women & Child Development Division
14. Transport & Tourism Division
15. Village & Small Enterprises Division
16. Voluntary Action Cell
17. Water Resources Division

PS : How to prepare Indian Economy for UPSC ?

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