From Planning Commission to NITI Aayog

The Planning Commission was set up by a government resolution on 15 March 1950, with the Prime Minister as chair, to formulate Five-Year Plans and allocate central assistance to states. It became the most powerful economic body in the country: its approval mattered for state plans, and its Gadgil formula governed how plan funds were shared. But it was never a constitutional body, and its top-down style — one plan, one set of targets for a diverse federation — drew growing criticism, including from chief ministers who said it treated states as supplicants.

In his Independence Day speech in 2014, Prime Minister Narendra Modi announced the Commission would be replaced. It was dissolved in August 2014, and by a Cabinet Secretariat resolution dated 1 January 2015 the National Institution for Transforming India, NITI Aayog, took its place, again chaired by the Prime Minister. The change was presented as a shift from centralised planning to cooperative federalism: NITI Aayog's Governing Council includes all chief ministers and lieutenant governors, and states are meant to be partners rather than recipients of a plan handed down from Delhi.

The substantive difference is that NITI Aayog does not allocate funds. Financial transfers to states now run mainly through Finance Commission devolution and central schemes decided by ministries. NITI Aayog's work is advisory and evaluative: it publishes strategy documents, runs the Aspirational Districts programme for lagging districts, ranks states on indicators such as health and school education, and maintains an SDG India Index tracking progress on the Sustainable Development Goals.

Critics argue that without money to distribute, NITI Aayog has less leverage than the Planning Commission, and that rankings can oversimplify complex state realities. Supporters reply that advice, data and competition between states are more appropriate tools for a market economy, and that the old allocation power sat uneasily with fiscal federalism. Either way, the change marks a real institutional break: India no longer plans in five-year blocks from the Centre.