From Five Year Plans to NITI Aayog: how India plans development

After independence, India adopted economic planning to direct scarce resources towards industrialisation, agriculture, infrastructure and social development. The Planning Commission, set up by a Cabinet resolution on 15 March 1950, formulated Five Year Plans that set targets, allocated central assistance to states, and coordinated public investment. The First Five Year Plan began in 1951, and planning remained the central framework of development policy for more than six decades, even as the economy moved from a heavily controlled system towards markets.

Planning in its early decades reflected the mixed economy: the public sector led heavy industry and infrastructure, while private enterprise operated under licensing and controls. Later plans placed more weight on poverty removal, employment, agriculture and human development, but critics argued that centralised targets fitted diverse states poorly, that plan and non-plan spending distinctions distorted budgets, and that allocation power concentrated too much authority in the Planning Commission. Supporters replied that planning gave coherence to investment in a poor, newly independent country and helped build industrial and scientific capacity.

The Twelfth Five Year Plan, covering 2012 to 2017, was the last of the series. The Planning Commission was dissolved in 2014, and NITI Aayog, the National Institution for Transforming India, was created by a Cabinet resolution that came into force on 1 January 2015. Like its predecessor, NITI Aayog is neither a constitutional nor a statutory body. Its chairperson is the Prime Minister, and its Governing Council includes chief ministers of states and lieutenant governors of union territories, reflecting a stated shift from top-down planning to cooperative federalism.

NITI Aayog does not allocate plan funds in the old sense; that function rests with the Finance Commission's devolution and the Union Budget. Instead, it works as a policy think tank, monitors programmes such as the Aspirational Districts Programme, and promotes competition and learning among states through indices and rankings. Critics ask whether advice without financial leverage can change state behaviour, while supporters argue that a more federal, evidence-based approach suits a market economy. The change is therefore best read as a change in the style of coordination, not the end of development strategy itself.