Economics · Ch 8 — Economic Reforms
From Planning Commission to NITI Aayog
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From Planning Commission to NITI Aayog
India's centralised planning system was administered by the Planning Commission, set up in 1950, which formulated the Five-Year Plans and allocated central funds to states largely through a top-down process. As the economy became more market-oriented after 1991, the Planning Commission's rigid, plan-target model increasingly sat uneasily with a liberalised, globally-integrated economy — a mismatch this chapter's reforms had themselves created.
On 1 January 2015, the Government of India replaced the Planning Commission with the National Institution for Transforming India (NITI Aayog).
How NITI Aayog differs from the Planning Commission
| Feature | Planning Commission | NITI Aayog |
|---|---|---|
| Approach | Top-down, five-year plan targets | Bottom-up, cooperative and competitive federalism — states are treated as partners |
| Role | Allocated central funds to states/ministries (a financial power) | Acts as a policy think-tank; does NOT allocate funds (that role moved to the Finance Ministry) |
| Structure | Deputy Chairman + full-time members | Governing Council includes all State Chief Ministers and Union Territory Lt. Governors, chaired by the Prime Minister |
| Planning style | Rigid Five-Year Plans | Long-term Vision, Strategy and Action-Plan documents; more flexible |