UPSC  >  Indian Economy for UPSC CSE  >  Ramesh Singh Summary: Planning in India- 2

Ramesh Singh Summary: Planning in India- 2 - Notes | Study Indian Economy for UPSC CSE - UPSC

1 Crore+ students have signed up on EduRev. Have you?


  • It was by the late 1950s and early 1960s that the states demanded the right to plan at the state level, 
  • By the mid-1960s, the states were given the power to plan by the Centre, ad vising them that they should promote planning at the lower levels of the administrative strata, too, i.e., at the district level planning— via the municipalities and corporations in the urban areas and via block level through panchayats and the tribal boards.
  • By the early 1980s, India was a country of multilevel planning (MLP) with the structure and strata of planning.
    (i) First Strata : Center-Level Planning At this level three types of Central Plans had evolved over the years— the Five Year Plans, the Twenty-Point Programme and the MPLADS.
    (ii) Second Strata : State-Level Planning By the 1960s, the states were planning at the state level with their respective planning bodies, the state Planning Boards with the respective CMs being their de-facto Chairman. The plans of the states were for a term of five years and parallel to the concerned Five Year Plans of the Centre.
    (iii) Fifth Strata : Local Level Planning By the early 1980s, plans were being implemented at the local level via the blocks and had the District Planning Boards (DPBs) as the nodal agency. Due to socio-economic differentiations among the population, local-level planning in India developed with its three variants, namely :
    (a) Village-Level
    (b) Hill Area Planning
    (c) Tribal Area Planning


  • A Economic planning was basically an element of the centralised kind of political system (i.e., the socialist and the communist).
  • When India decided in favour of a planned economy it was to face double challenges :
    (i) The first challenge was to realise the objectives of planning in a time-bound frame.
    (ii) Making economic planning a suitable instrument of development in the democratic set up— to democratise and decentralise the process of planning itself.
    (iii) The government tried to decentralise the planning process by setting up the NDC and promoting the MLP, but without being able to achieve the desired results.
  • By the late 1980s, a direct link was established between development and democracy.
  • Though the planning at the central and the state levels are still extra-constitutional activities, it has become constitutional at the level of local bodies.
  • The Panchay at Adhyakshas handed over a '21 Point Memorandum' to the government which specially dealt with the financial status of the PRIs. In July 2002, while the then PM was addressing the annual meet of the District Rural Development Agency (DRDA), he announced that the PRIs will be given 'financial autonomy' very soon.
  • He further added that once there is a political consensus, the government might go in for further constitutional amendment. Unfortunately, the same coalition (i.e., the NDA) did not come to power in the forth coming general elections.


  • Federal political systems provide independent financial control to the central as well as the state governments so that they are able to perform their exclusive functions.
  • He Constitution of India has made elaborate provisions, i.e., setting up of a Finance Commission to recommend to the President certain measures relating to the distribution of financial resources between the Union and the states.
  • P.J. Rajamannar who headed the finance Commission (1966-69 ) suggested to clearly define the relative scope and functions of the two commissions by amending the Constitution, and the Planning Commission was advised to be made a statutory body in dependent of the government.
  • The Fiscal Responsibility and Budget Management (FRBM ) Act in 2003, which empowers the state governments to go for market borrowings to fulfil their plan expenditure with out prior permission from the Central Government.
  • A general tendency of enabling the states to collect more and more taxes, the Value Added Tax (VAT) being a glaring example by which almost all states have been able to increase their gross tax revenue receipts.


Lack of 'Perspective' in Planning

  • To have perspective in planning, two basic elements need to be fulfilled, namely —
    (i) Planning should be evaluation-based, and
    (ii) 'Long-term' goals should be followed up besides the 'short-term' goals.
  • In the Indian content, the succeeding plans have been always commenced without the full evaluation of the preceding Plan. This was mainly due to the following reasons :
    (i) Lack of a nodal body responsible for data collection at the national level;
    (ii) Federal nature of polity made data collection full of delays and also due to higher dependence on the states.
    (iii) Speedier data delivery was not possible.
  • The National Statistical Commission (Chaired by C.Rangarajan), 2000, the government discussed to set up a nodal body for data collection at the pan-India level, cutting across federal hurdles.

Failure in Promoting a Balanced Growth and Development

  • Indian planning is blamed for failing the objective of a regionally balanced growth and development.
  • Though the Second Plan itself had noticed this fact, the measures taken were not sufficient or were short-sighted.
  • Economic planning at the national level has proved to be a highly effective tool of promoting balanced growth.
  • Political reasons, enough discrepancies cropped up in the method of allocating funds to the states. At the theoretical level, the governments knew the remedies, but at the practical levels politics dominated the planning process.
  • Democratic immaturity and politicisation of the planning process is to be blamed for this.

Highly Centralised Nature of Planning

  • Decentralising the process of planning has been a major goal of the governments since the 1950s.
  • But after Nehru, with every Plan we see greater tendency of centralisation in the planning process. Setting up of the NDC and promoting multi-level planning (MLP) did not serve much purpose in this direction.
  • It has been among the criticised areas of planning in India as the National Planning Committee as well as the First Plan itself had called for 'democratic planning'. 
  • In the country. By the mid-1980s, the mindset of the Centre went for a change and the need for decentralised planning got proper attention.
  • Finally, by early 1990s two constitutional amendments (i.e., the 73rd and the 74th) promoted the cause of decentralised planning by delegating constitutional powers to the local bodies.

Lop-sided Employment Strategy

Planning in India has been tilted heavily in favour of'capital intensive' industries, especially from the Second Plan onwards. Such industries in the public sector could not generate enough employment.

Excessive Emphasis on PSUs

  • Indian planning emphasised on public sector undertakings (PSUs) for the right reasons, but in the wrong way and for a considerably longer period of time.
  • The state's monopolies in certain areas continued over such a long period that too in losses that there came a demand-supply gap in the major goods and services produced by the PSUs.
  • Though very conducive policy changes were effected after the country started the reform processes, the hangover of the past is still looming large.

Agriculture Overshadowed by the Industry

  • Promoting the cause of faster industrialisation over time became so dear to the planning process that the agriculture sector got badly over-shadowed.
  • Though the Plans were highlighting or prioritising agriculture, the industrial sector and the PSUs were glorified in such a way that time and resources both were scarce for the agriculture sector.

Faulty Industrial Location Policy

  • There are time-tested theories of 'industrial location' considering the nearness of raw materials, market, cheaper labour, better transportation and communication, etc.
  • But the Plans always prioritised setting up of new industrial units (i.e., the PSUs) in the backward regions of the country, which falsify the theories of industrial location.

Wrong Financial Strategy

  • Mobilising resources to support the highly capital-intensive Plans (courtesy the PSUs) has always been a challenge for the government.
  • To support the Plans, no stones were left unturned namely, going for a highly complex and liberal tax structure, nationalising the banks, etc.
  • Ultimately, tax evasion, the menace of parallel economy and lesser and lesser capital for the private sector were the bane of India.

Politicisation of the Planning Process

  • In a democratic political system, almost every issue of socio-political importance is influenced by politics.
  • It is more correct in the case of lesser matured democracies. The same stands true for the process of planning in our country.
  • Greater and greater politicisation of the planning process culminated in such a design that at times economic planning served the opposite purpose.


Inclusive grow this a growth process which yields broad-based benefits and ensures equality of opportunity for all (UNDP and the 11th Plan). Fundamentally, the ideas of growth and development already include the element of 'inclusiveness' in them, but at times, due to certain reasons, the processes might occur in non-inclusive manner.

(i) Short-term policy

  • This policy is aimed at supplying those goods and services to the disadvantaged and marginalised sections of society which are bare minimum and are essential in nature.
  • Several Central Sector Schemes and Centrally Sponsored Schemes are run by the governments for this purpose.
  • This policy touches the are as like:
    (a) Food and nutrition (Annapurna, Antodaya, Mid-Day Meal, and the last being National Food Security Act, etc.).
    (b) Healthcare and sanitation (National Health Mission, Total Sanitation Campaign, ASHA, Mission Indradhanush, and the last being Swachh Bharat Abhiyan, etc .)
    (c) Housing (Indira Aawas Yojana, Rajiv Aawas Yojana, etc).
    (d) Drinking water (National Rural Drinking Water Programme, etc.)
    (e) Education (Sarva Shiksha  Abhiyan, Rashtriya Madhyamik Shiksha Abhiyan, Model School Scheme, etc.).

(ii) Long-term policy

  • This policy is aimed at bringing in self-dependence in the target population.
  • This policy contains in itself the sustain ability element, too. 
  • The attempts by the governments may be classified as given below :
    (a) All the schemes which aim at poverty alleviation and employment generation
    (b) All the programmes which promote education at any level
    (c) Vocationalisation of education
    (d) Skill Development


  • Resource mobilisation is a broad term which includes raising and directing the resources (physical and human) of the economy to realise the desired socio ­economic objectives. 
  • It involves all the economic policies activated by the governments— we can perceive it to be the very essence and the end result of the 'fiscal policies' of both the Centre and the states.
  • For Indian economy to move on the path of desired growth and development, the Government of India (Gol) needs to take care of the issue of resource mobilisation for various agents in the economy, namely -
    (a) Gol,
    (b) State governments,
    (c) Private sector
    (d) General public


  • 'Investment Models' are the means and tools by which the Gol has tried to mobilise required funds (resources) to promote the different goals of planned development. Since India started the planning process (1951). 
  • We see differing models being tried by the governments to mobilise resources—it has been a kind of 'evolutionary' process.

Phase-l (1951—69)

  • This was the phase of 'state-led' development in which we see the Gol utilisin external means to mobilise required resources. 
  • The main areas of resource allocations were for infrastructure and social sector. 
  • The famous Mahalanobis Plan gets implemented during this period. In this period.

Phase-ll (1970—731)

  • With the enactment of the Industrial Policy of 1970 we see Gol deciding in favour of including 'private capital' in the process of planned development—but not in a big and open way.
  • The idea of 'Joint Sector' comes under which a combination of partners— Centre, state and private sector —could enter the industrial sector.

Phase-III (1974-901)
With the enactment of the FERA in 1974 we see the government, for the first time, proposing to take the help of 'foreign capital' in the process of planned development— but not via cash foreign investment—only through the 'technology transfer' route that too up to only 26 per cent of the total project value proposed by the private sector.

Phase-IV (1991 onward)
Due to prolonged follow-up of weak fundamentals of economics and immediated after Gulf War-I, India headed for a severe Balance of Payment crisis by late 1980s, which made India go to the IMF for financial help. It comes up but at some 'conditions'—the design of the 'conditions' made India to go for a 'restructuring' of the economy under the process of economic reforms commencing in 1991.


  • The exercise of planned development in India has evolved two type of schemes over the time, viz.,— Central Sector Scheme and Centrally Sponsored Scheme.
  • The names are derived from the pattern of funding and the modality for implementation.
  • As per the Union Budget 2016-17, the existing 1,500 such schemes were restructured into 300 by the Gol to prevent overlapping of expenditure and help in better monitoring and evaluation. 

Central Plan Assistance

  • Normal Central Assistance (NCA) : The distribution of the NCA is formula based (Gadgil-Mukherjee Formula) and is untied. Gadgil Formula of determining the Central Assistance to the State is being adopted from the Fourth Plan and revised subsequently— allocation was made by the Planning Commission.
  • Additional Central Assistance (ACA) : This is provided for implementation of externally aided projects (EAPs), and for which presently there is no ceiling. Unlike NCA, this is scheme based. The details of such schemes are given in the Statement 16 of the Expenditure Budget Vol. I. There can be one time ACA and advance ACA.
  • Special Central Assistance (SCA) : This is provided for special projects and programmes, e.g., Western Ghats Development Programme, Border Areas Development Programme, etc.

CSSs Restructured

  • For the 12th Plan period [2012-17] the existing 137 CSSs were restructured into 66 schemes, including the 17 flagship programmes.
  • The government had set up an expert Committee (Chaired by B. K. Chaturvedi, member of the erstwhile Planning Commission) for the purpose which submitted its report by late-2011.
  • The 14th FC recommended that sector-specific transfers from the Union to the states/UTs should be confined to sectors like education, health, drinking water and sanitation.
  • However, in view of the preponderance of CSSs being interventions in key sectors of national importance, the Gol kept 50 of the 66 ongoing CSSs in the Union Budget 2015-16.

Core of the Core Schemes

  • National Social Assistance Programme 
  • Mahatma Gandhi National Rural Employment Guarantee Programme 
  • Umbrella Scheme for Development of Schedule Castes 
  • Umbrella Programme for Development of Scheduled Tribes 
  • Umbrella Programme for Development of Minorities 
  • Umbrella Programme for Development of Other Vulnerable 

Groups Core Schemes

  • Green Revolution 
  • White Revolution 
  • Blue Revolution 
  • Pradhan Mantri Krishi Sinchai Yojana 
  • Pradhan Mantri Gram Sadak Yojana 
  • Pradhan Mantri Awas Yojana [PMAY] 
  • Jal Jeevan Mission [JJM] 
  • Swachh Bharat Mission [Urban] 
  • Swachh Bharat Mission [Gramin] 
  • National Health Mission 
  • National Education Mission 
  • National Programme of Mid-Day Meal in Schools 
  • Umbrella ICDS 
  • Mission for Protection and Empowerment for Women 
  • National Livelihood Mission - Ajeevika


  • An Independent Evaluation Office [IEO] was created by the Gol in February 2014, at an arm's distance from the government with the objective of strengthening public accountability of some of the important social sector programmes, which account huge resource mobilisation such as the flagship programmes.
  • Conceived on the lines of Independent Evaluation Office (IEO] of the IMF, the body was created on the basis of international experiences, in cooperation with the World Bank and the British DFID (Department for International Development] 
  • It was modelled on the lines of Mexico's National Council for the Evaluation of Social Development Policy.


  • The Programme Evaluation Organisation (PEO) was established in October 1952, as an independent organisation, under the general guidance and direction of the Planning Commission (PC) with a specific task of evaluating the community development programmes and other Intensive Area Development Schemes.
  • The evaluation set up was further strengthened by the development of methods and techniques of evaluation in the 1st Plan and setting up of evaluation machineries in the States during the 3rd (1961-66) and 4th (1969- 74) Plans.
  • Gradually, with the extension of the programmes/schemes in a variety of sectors, viz. 
  • Agricultural cooperation, rural industries, fisheries, health, family welfare, rural development, rural electrification, public distribution, tribal development, social forestry, etc. 
  • The evaluation work undertaken by the PEO was extended to other important CSSs.


  • The Development Monitoring and Evaluation Office (DMEO) was constituted by merging the erstwhile Program Evaluation Office (PEO) and the Independent Evaluation Offire (IEO) in September 2015. As an attached office under the Niti Aayog, it aims at fulfilling monitoring and evaluation (M&E] mandate (i.e., function] of the Aayog.
  • It is entrusted with building M&E ecosystem in the country with the following functions:
    (i) Monitoring progress and efficacy of policies/programmes, taking initiatives to help improvements including necessary mid-course corrections.
    (ii) Evaluating implementation of programmes and identification of needed resources to strengthen success and scope of delivery.


  • Planning has been in Indian psyche as our leaders came under influence of the socialist clime of erstwhile USSR. Planning commission served as the planning vehicle for close to six decades with a focus on control and command approach.
  • Planning Commission was replaced by a new institution - NITI AAYYOG on January 1, 2015 with emphasis on 'Bottom -Up' approach to envisage the vision of Maximum Governance, Minimum Government, echoing the spirit o f 'Cooperative Federalism'.

Administrative Skeltal

  • Chairperson : Prime Minister
  • Vice-Chairperson : To be appointed by Prime-Minister
  • Governing Council : Chief Ministers of all states and Lt. Governors of Union Territories.
  • Regional Council : To address specific regional issues, Comprising Chief Ministers and Lt. Governors Chaired by Prime Minister or his nominee.
  • Adhoc Membership : 2 member in ex-officio capacity from leading Research institutions on rotational basis.
  • Ex-Officio membership : Maximum four from Union council of ministers to be nominated by Prime minister.
  • Chief Executive Officer : Appointed by Prime-minister for a fixed tenure, in rank of Secretary to Government of India.
  • Special Invitees : Experts, Specialists with domain knowledge nominated bv Prime-minister.

NITI Aavog Hubs

Team India Hub acts as interface between States and Centre.
Knowledge and Innovation Hub builds the think-tank acumen of NITI Aayog.

  • The Aayog planned to come out with three documents — 3-year action agenda, 7-year medium- term strategy paper and 15-year vision document.


  • The 65 year-old Planning Commission had become a redundant organization. It was relevant in a command economy structure, but not any longer.
  • India is a diversified country and its states are in various phases of economic development along with their own strengths and weaknesses.
  • In this context, a 'one size fits all' approach to economic planning is obsolete. It cannot make India competitive in today's global economy.


  • To foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis, recognizing that strong States make a strong nation.
  • To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels of government.
  • To ensure, on areas that are specifically referred to it, that the interests of national security are incorporated in economic strategy and policy.
  • To pay special attention to the sections of our society that may be at risk of not benefitting adequately from economic progress.
  • To provide advice and encourage partnerships between key stakeholders and national and international like-minded Think Tanks, as well as educational and policy research institutions.
  • To create a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and other partners.
  • To offer a platform for resolution of inter-sectoral and inter-departmental issues in order to accelerate the implementation of the development agenda.
  • To maintain a state-of-the-art Resource Centre, be a repository of research on good governance and best practices in sustainable and equitable development as well as help their dissemination to stake-holders.


  • To prove its mettle in policy formulation, the NITI Aayog needs to prioritize from the long list of 13 objectives with clear understanding of the difference in policy, planning and strategy.
  • To build the trust, faith and confidence more than the planning commission, NITI Aayog needs freedom of various kinds with budgetary provisions not in terms of plan and non-plan expenditures but revenue and capital expenditure as the higher rate of increase in capital expenditure can remove infrastructural deficits at all levels of operation in the economy.

Way Forward

  • Decentralization of planning but within a five-year plan framework.
  • Bureaucratic inertia need to be shaken, specializing it and fixing the accountability on basis of performance.
  • NITI Aayog could emerge as an agent of change over time and contribute to the government's agenda of improving governance and implementing innovative measures for better delivery of public services.
  • NITI Aayog continues to be representative of efficient, transparent, innovative and accountable governance system in country with distinguished work ethics.
The document Ramesh Singh Summary: Planning in India- 2 - Notes | Study Indian Economy for UPSC CSE - UPSC is a part of the UPSC Course Indian Economy for UPSC CSE.
All you need of UPSC at this link: UPSC
131 videos|325 docs|135 tests
131 videos|325 docs|135 tests
Download as PDF

How to Prepare for UPSC

Read our guide to prepare for UPSC which is created by Toppers & the best Teachers

Download free EduRev App

Track your progress, build streaks, highlight & save important lessons and more!

Related Searches

past year papers


Important questions


Extra Questions


Sample Paper


Ramesh Singh Summary: Planning in India- 2 - Notes | Study Indian Economy for UPSC CSE - UPSC


Previous Year Questions with Solutions




shortcuts and tricks


video lectures


Ramesh Singh Summary: Planning in India- 2 - Notes | Study Indian Economy for UPSC CSE - UPSC




practice quizzes




study material




mock tests for examination


Objective type Questions


Viva Questions


Ramesh Singh Summary: Planning in India- 2 - Notes | Study Indian Economy for UPSC CSE - UPSC


Semester Notes