NITI Aayog: Why It Replaced the Planning Commission

In one line

NITI Aayog replaced the Planning Commission because India stopped needing a body that allocated money to States and started needing one that advises them.

In the wording a student can write in an exam: the National Institution for Transforming India, NITI Aayog, was created by a Resolution of the Cabinet Secretariat dated 1 January 2015, which superseded the Resolution of 15 March 1950 by which the Planning Commission had been established, and it replaced a body that formulated Five Year Plans and allocated resources to the States with one that acts as a think tank and a policy adviser to the Union and the States, on the principle of cooperative federalism.

The instrument, exactly

Both bodies were created by executive resolution, and neither by statute or by the Constitution. That is the first thing to say and it is worth a mark.

• The Planning Commission was set up by Resolution No. 1-P(C)/50 of 15 March 1950.
• NITI Aayog was set up by Cabinet Secretariat Resolution No. 511/2/1/2015-Cab, dated 1 January 2015, published in the Gazette on 7 January 2015. Paragraph 15 provides that the Resolution comes into force with effect from 1 January 2015 and that the Resolution of 15 March 1950 stands superseded from that date.
• The composition clause was amended by a further Resolution of 16 February 2015, discussed in [The Structure of NITI Aayog].

Neither body has statutory status. Neither is mentioned in the Constitution. That is why the National Development Council, the Finance Commission and the Inter State Council, of which the Finance Commission at least is constitutional under article 280, occupy a different position, and it is the ground of a standing criticism of both bodies.

What the Planning Commission did

Five Year Plans. It prepared them, the first covering 1951 to 1956 and the twelfth 2012 to 2017, setting targets for output, investment and social indicators.

Allocation of resources. This is the part that mattered most in practice. Central assistance to the States for their plans was determined largely by the Commission, from 1969 substantially by the Gadgil formula and its later revisions, which weighted population, per capita income, tax effort and special problems.

Approval of State plans. A State's annual plan was discussed with, and effectively approved by, the Deputy Chairman of the Commission.

Sectoral planning and monitoring through its divisions, and the setting of physical and financial targets.

Its authority came from money, not from law. A body that decides how much a State receives is listened to whether or not it has statutory power. That is the central fact about the Planning Commission and the key to understanding what changed.