Planning Commission

The Planning Commission

The Planning Commission was set up on the 15th of March 1950, through a cabinet resolution.

Planning Commission had evolved over time from developing a highly centralised planning system towards indicative planning where Planning Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities for the nation.

The commission works out sectoral targets and provides promotional stimulus to the economy (through its “plan funds allocation”) to grow in the desired direction.

Planning Commission attempted to play a system change role and provided consultancy within the Government for developing better systems. In order to spread the gains of experience more widely, Planning Commission also played an information dissemination role.

Thus, historically, Planning Commission’s work was three dimensional.

(a) design policy direction and suggest required schemes/ programmes;

(b) influence the resource allocation from budget; and

(c) oversee the performance and record the same on a standard framework for comparative assessment of all the states from time to time.

In short, Planning Commission was doing the job both that of a think tank and the function of allocation of plan resources among the Central Ministries and States in as judicious a manner as possible, given the limitations of resources.

The announcement on setting of Planning Commission and its expected role in the economic management was first made in the Parliament by the President, and the details were disclosed by the Finance Minister (Shri John Mathai) through his budget sppech in the first year of the Republic (1950-51).

Rightly, Planning Commission was anchored to India’s political history of immediate past and the Directive Principles of State Policy as enunciated in the Constitution of India.

Functions of Planning Commission

The 1950 resolution setting up the Planning Commission outlined its functions as to:

  1. Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nation’s requirement;
  2. Formulate a Plan for the most effective and balanced utilisation of country’s resources;
  3. 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;
  4. 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;
  5. 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;
  6. 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
  7. Make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it, or on a consideration of 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.

Planning Commission was replaced with NITI Aayog on 1 January 2015. However, the financial powers like setting sectoral priorities, designing the schemes and programmes, estimating the entitlements to State development programmes (other than devolution), and influencing the annual allocations as per the priorities etc. now come under the direct influence of the Ministry of Finance, Budget Division.


Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow,  CDS, Jawaharlal Nehru University

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Revisiting the Basics

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