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Primakov Institute of International Relations, Russian Academy of Sciences

Key words: India, Narendra Modi, Planning Commission, planning process, center - states relationship, NITI Aayog

The idea of Prime Minister Narendra Modi to abolish the Planning Commission, which was announced in an official speech at the Independence Day celebration ceremony on August 15, 2014, did not come out of the blue. Questions about the effectiveness and methods of improving its performance have been discussed for a long time. Back in the late 1980s, a commission specially set up by the Government to analyze the center - states relationship made a number of important recommendations to eliminate shortcomings in the work of the Planning Commission and improve the planning mechanism as a whole.

Arguments that the Planning Commission is an outdated body and requires major changes remained at the level of discussions in 1998-2004, during the government of the National Democratic Alliance (NDA) coalition led by the leader of the Bharatiya Janata Party (BJP), then Prime Minister A. B. Vajpayee.

Modi's speech renewed interest in this topic. At the national level, questions were raised about the historical role and place of the Planning Commission in the development of the state, the need to strengthen interaction between the Center and the states in formulating a national development strategy, and what the creation of a new body to replace the Planning Commission should bring to the planning process.

During the 64 years of its existence, the Planning Commission has repeatedly proved its necessity, but at the same time managed to accumulate a number of significant errors that have not been overcome until now.


The Planning Commission was established by a special government decree in March 1950. It should be noted that the work on the establishment of the planning institute began in the 1930s.The most intensive period of this work falls on the years 1937-1938, when for the first time in the history of British India, provincial legislative elections were held. Then the Indian National Congress (INC) showed, as expected, amazing results, forming a government in 8 out of 11 provinces.1

In October 1938, a Planning Committee was established, with Jawaharlal Nehru as Chairman. This committee was the forerunner of the future Planning Commission. It is also important to note that the so-called Bombay Plan, drawn up by eight of India's largest industrialists in 1944.2 is no less interesting from the point of view of the emergence of the very idea of planning.

The Bombay Plan became the starting point for a new, independent, national vision of the country's economic development model. It also outlined the outlines of economic planning.

Work on the development of a program of economic development of India was continuously carried out both on the eve of 1947 and in the first years of independence. Historically, this was the time when the fundamental foundations of the Indian economy were laid, which the planning tool would later rely on.

The next stage in the history of the Planning Commission was the establishment of the All India Committee of the INC at the regular session in Bombay in 1948, under the leadership of the Prime Minister of the country, J. R. R. Tolkien. Nehru of the Permanent Economic Committee. One of its main tasks was to prepare the necessary recommendations for the early establishment by the Government of the national Planning Commission.

At the end of April 1950, a planning conference was held with the participation of the top officials of the state, the chief Ministers of the states, and representatives of the government. -

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members of the Congressional Sub-committee on Economic Planning, and presidents of provincial congressional committees. The main outcome of this conference was the approval of the Memorandum on Immediate Economic Program3.

The Memorandum set out the pre-defined goals of the planned economy and set tasks for the next planned five-year period. Nehru emphasized that "planning is an essential process, and without it, our economic development will be in disarray." 4

At the initial stage of independence, the key task of planning was to initiate the process of creating a strong foundation for the national economy. The five-year plans provided an analysis of previous achievements and results, but at the same time they provided a powerful springboard for solving subsequent strategic tasks.

The Indian planning system was strongly influenced by the experience of the Soviet Union and absorbed its fundamentals. But it is necessary to make one significant reservation: unlike the directives of the Soviet state plan, planning in India was indicative, i.e., it was mainly advisory in nature.

The activities of the Planning Commission were formed and improved over the years. After a fairly successful implementation of the first three five-year plans (1951 - 1956, 1956 - 1961, 1961 - 1966), due to certain difficulties, in particular due to the poor harvest that befell the country, it is time to draw up annual plans (1966 - 1967, 1967 - 1968, 1968 - 1969).

When preparing for the 4th five-year plan (1969-1974), the so - called "Gadgil formula" (named after a famous Indian economist) was used. The innovation introduced made it possible to distribute allocations among the states using specially derived parameters: 1) the size of the state's population; 2) lower per capita income in the state compared to the national average; 3) state tax revenues per capita; and finally, 4) state-specific issues.

The Janata Party coalition won the early parliamentary elections in 1977. In accordance with the policy of the new government, the 5th five-year plan (1974-1979) was seriously changed. However, before the Janata Party government lasted even two years, it resigned.

Indira Gandhi (INC.), who had already held this position in 1966-1977, returned to the post of Prime Minister of the country, having won a convincing victory in the 1980 elections. Preparations began for the implementation of the 6th five-year plan (1980-1985), in which the Planning Commission set tasks for stabilization and alignment economic situation in the country. By this time, major changes have been made in the planned allocation of appropriations to the states. One of them was that in 1980 the per capita income ratio, which was originally 10% according to the Gadgil formula, was doubled.

This formula underwent another revision in 1991, and the "Gadgil-Mukherjee formula"entered scientific circulation. Pranab Mukherjee (President of India since 2012) was at one time Deputy Chairman of the Planning Commission. In 1990, he chaired a specially created committee to review the calculation parameters in the old "Gadgil formula" with the aim of more equitable distribution of central financial assistance among the states. The main reason for trying to revise the formula is to mitigate the development disparities that arise among the states.

In the estimation of economists, the activities of the Planning Commission have always been strongly associated with the great success in the socio-economic development of India in the first years of independence. Indeed, planning was integrated seamlessly with the INC Government's public policies. A decisive role was also played by the commitment of the country's leadership to the course of promoting socialist values, as reflected in the resolutions of the most important INC sessions in Avadi in 1955 and in Bhubaneswar in 1964.Thus, planning was closely interwoven into the canvas of state-building in India, first "a society of the socialist model", and then "democratic socialism".

In the early 1990s, the country embarked on economic reforms with the measured approach of Indian politics. Then it was decided not to abandon the five-year planning periods. On the contrary, the Planning Commission served as an important tool for regulating relations between the Center and the states at the next turning point in the country's historical development.

The Planning Commission makes recommendations on possible financial support for the states. In May 2013, at the initiative of the central government, the co was established-

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mitet, which was headed by R. Rajan, who at that time held the position of economic adviser. The main goal of this committee was to find a way to determine the level of backwardness of the states and conduct calculations using a new formula-Multi Dimensional Index.

To determine the backwardness index, 10 indicators were proposed: monthly consumer spending per capita, poverty level, level of education, health care, female literacy, percentage of the population of registered castes and tribes, degree of urbanization, financial inclusion, physical connectivity, and household amenities.3

Under the new scheme, only three states (Arunachal Pradesh, Assam, Meghalaya) out of 11 with "special category status" fall into the list of the most backward states in the country. The remaining 8 (Uttarakhand, Himachal Pradesh, Sikkim, Tripura, Mizoram, Jammu and Kashmir, Nagaland and Manipur) are equally classified as "relatively developed" and "less developed" states.

Not all state leaders approved the committee's recommendations. An article in The Hindu newspaper accurately notes that "any new method of disbursing funds is politically fraught, because some states may suffer losses, while others will benefit." 6

In the transition to a regulated or, as Indian reformers often emphasized at the time, "market-driven economy", with a marked decline in the role of the public sector and the simultaneous rise of the private sector, it was necessary to think about reducing the resulting contrast.

The 8th Five-Year Plan (1992-1997) emphasized that the Planning Commission would have to "indicate the directions in which the economy and its various subsectors should move" and "play an integrative role in developing a holistic approach to policy formulation in crucial and cross-sectoral areas of human and economic development".7. A characteristic feature of the modern Indian economic model is that it is based on a reasonable combination of the principles of planned regulation and a market-oriented economy.

It should be noted that over the past two and a half decades, since the beginning of the "economic reforms" in India, the Planning Commission has played no less important role in state development than at the beginning of its establishment. Some experts believe, and it is difficult to disagree with them, that the Planning Commission needed major updates to continue its work, but the occasional attempt to improve the effectiveness of its work did not lead to drastic improvements.


In the May 2014 general parliamentary elections, the BJP won a landslide victory. BJP Prime Minister candidate Narendra Modi, a former chief minister of Gujarat, presented an election program aimed at improving the country's economic situation.

In his address to the nation on the occasion of India's Independence Day, Modi spoke frankly about the most pressing and sensitive issues. He presented his own vision of the country's development, set important and primary goals and aspirations facing the government at the moment.

In the final part of his speech, Modi also explained the situation with the Planning Commission. Pointing to the special circumstances of its creation in the early years of India's independent development, he said that in the current global and domestic conditions, when "governments are no longer the center of economic activity, but the scale of such activities has expanded", it is necessary to create a new institution "with a new soul, a new mindset", which will be able to create a it will replace the outdated Planning Commission 8.

After this speech, the media and television began actively discussing the idea of abolishing the Planning Commission put forward by the Prime Minister. The serious attitude with which the public and representatives of various political forces reacted to this message is quite understandable. First, the discussions logically raised the issue of the fate of the 12th five-year plan (2012-2017) approved by the National Development Council; second, the future of the planning process itself remained unclear. Today, the constituent entities of the Indian Federation - the states - are naturally interested in expanding their participation in the plans for the strategic development of the state due to the intensive growth of federalist tendencies.

On December 7, 2014, Narendra Modi convened a special meeting,

page 54

It brought together almost all the Chief Ministers of the states to discuss the future "structure and powers" of the new body to replace the Planning Commission. At the end of the consultations, and this, in my opinion, was the positive side of the meeting, the meeting participants still managed to reach an understanding. The Central government was able to assess the reaction at the subnational level and at the same time get acquainted with public sentiment, and there was a desire to strengthen interaction between the Center and the states. A name was also proposed for the new institute-NITI Aayog*.

Finance Minister Arun Jaitley stressed the importance of the postulate that the country's development depends on the development of its regions and said that " The Central Government will take advantage of the advisory opinion... The majority of people (among the chief ministers who attended the event) were in favor of creating such a structure, in which the states are also represented. " 9

I would like to pay particular attention to the statements made available in the press on this subject by several Chief Ministers of the States. I must say that the range of these opinions and arguments is extremely wide and multifaceted, but it is useful for studying, because it allows us to draw conclusions about what changes representatives of the political elites of the states expect from the creation of a new body to replace the Planning Commission. After all, each of the country's regions has its own characteristics, and its own set of contradictions.

Let's compare the views of two very experienced politicians and statesmen-the Chief Minister of Assam, Tarun Gogoi, who represents INC and has been in office for 15 years, as well as the Chief Minister of Orissa (since 2011, the state is officially called Odisha) Naveen Patnaik, founder and leader of the Biju Janata Dal party, which won the majority of votes in the state Legislative Assembly in the 2014 local elections. Naveen Patnaik has been the head of the state for 16 years.

During the discussions, T. Gogoi noted, first of all, the importance of the Planning Commission. In his opinion, it " played a big role in the period of independent development, and India turned into a power with a rapidly developing economy."10. However, he stated: "Replacing the Planning Commission without a carefully designed new structure to carry out our state and economic planning tasks is likely to do more harm than good." 11

Unlike his counterpart, Naveen Patnaik, the Chief Minister of Orissa, supported the proposal to replace the Planning Commission. It should be noted that Orissa, according to the results of a study conducted in 2013 by a committee chaired by the head of the National Reserve Bank of India R. Rajan (already mentioned in the article), topped the list of the most backward states of India 12.

N. Patnaik has been trying for a long time to achieve a "special category status" for his state, which provides for the elimination of disparities in the development of this subject of the federation in comparison with other states, including financial support in solving problems that are specific to this territory. It expresses concern about the ubiquitous " proliferation of Centrally Sponsored Schemes, which, in turn, can be used as a tool for the development of the Internet.".. they undermine the flexibility of states to design development programs that are appropriate to their specific needs, "and insist on" fair distribution of resources, free from any political background," while "appreciating the" spirit of cooperative federalism. " 13

The resolution of this problem, one of the most pressing facing Indian society, spans more than a decade. It is not surprising that when discussing issues related to the future of the Planning Commission, Indian politicians automatically focused on the problem of uneven distribution of resources.

State leaders belonging to the INC party reject the idea of dismantling such an important institution for the public administration system, which is the same age as the Republic of India itself. The Communist Party of India (Marxist) (CPI/m) agrees with its colleagues from the INC, considering that this could cause quite serious damage to the center - states relations, since the NITI Aayog created on the site of the Planning Commission will be "an expansion of the all-powerful cabinet of the Prime Minister" 14.

The Hindu newspaper reported that the Politburo of the CPI/m

* The word niti in Hindi has several meanings: "policy", "leadership", "morality"; aayog - "commission". In fact, NITI is an acronym made up of the capital letters of the National Institution for Transforming India, which thus gives the name of the new organization an additional clarifying connotation. author's note).

page 55

It went even further, describing the government's move to abolish the Planning Commission as an obvious "step backward"; it also described as" illusory "the ruling BJP's view that the formation of NITI Aayog as a suitable replacement for the Planning Commission"will be based on the principles of cooperative federalism" .15

The Consultative meeting held in New Delhi in December 2014, which brought together the so-called "Team India" -representatives of the top leadership of most states, led by Prime Minister Narendra Modi, showed the desire for greater cooperation between the two levels of government.

After consultations, it became clear that the central authorities had already made a final decision on the fate of the Planning Commission, which should be replaced by the Commission of the National Institution for the Transformation of India - NITI Aayog, clothed in a new form and filled with a completely new meaning.


According to the Prime Minister's idea, a new organization - NITI Aayog-should cope with the accumulated difficulties. In January 2015, a special order of the Government created a new body, the main purpose of which is to promote greater interaction between the Center and the states on the formulation of the state development strategy.

NITI Aayog is a government body, it is advisory in nature. Its format is nothing more than a "think tank", a "hub of thought and ideas", an expert council that makes recommendations on the country's economic development.

The Constitution of the Republic of India does not mention the Planning Commission anywhere, nor does it give the slightest description of the scope of its powers. Therefore, the establishment of NITI Aayog did not require any special legislative procedures, except for the decree of the Cabinet of Ministers headed by N. Modi.

Prime Minister Narendra Modi is the chairman of NITI Aayog, and Arvind Panagaria, a well-known economist and professor at Columbia University in the United States, was appointed Deputy Chairman. Ex Officio members of the commission are the four Union Ministers of Finance, Interior, Railways and Agriculture. NITI Aayog also includes invited experts and specialists, in particular, the Ministers of Transport, Human Resource Development, Social Justice and Empowerment.

NITI Aayog has a Governing Council, which is a vertical interaction between the Center and the states and consists of the Chief Ministers of the states and the heads of the Union Territories under the chairmanship of Prime Minister N. Modi, as well as Regional Councils, which will act to resolve issues and disputes affecting two or more states or regions, in order to build a dialogue and further strengthen inter-state cooperation.

According to the official government decree, the new organization has several goals and objectives, which are as follows: first, to promote greater interaction between the Center and the states; second, to build coordination links between the states; and third, to evaluate and monitor the implementation of development programs.

According to the Hindustan Times, " unlike the Planning Commission, the new body (NITI Aayog) does not have the authority to allocate funds to the states or recommend a budget plan to the Finance Ministry. It also does not approve the annual plans of the State and Union Territory Governments. This work was handed over to the Finance Ministry " 16. It is important to note that so far the issues of state funding remain poorly understood, which is explained by the current transition period.

On February 8, 2015, the first meeting of the NITI Aayog Governing Council was held under the chairmanship of Narendra Modi. The following key decisions were made: first, NITI Aayog will conduct an interim evaluation of the 12th five-year plan developed by the previous Government; second, 3 subgroups of Chief Ministers will be organized within the framework of NITI Aayog; each of them will study a particular program with a view to suitability and options their use in the United States.

The main topics of the meeting were the fight against poverty, achieving economic growth, solving employment problems and attracting investment. The famous installation of Narendra Modi-sab ka saath, sab ka vikas ("together with all, development for all") - became for the participants

page 56

events are the main tool for discussing the most important issues for the development of the state.

The results of the first meeting indicate that the NITI Aayog format will still be refined.

The researcher needs to continuously monitor the further course of events. We can definitely say that the core of the formed commission is the so-called "Team India". Finance Minister A. Jaitley, at a landmark meeting of Chief ministers held back in December 2014, explained exactly what he meant by this concept: "There are three different teams: first, the Prime Minister and the Chief Ministers of the states, second, the Prime Minister and the Council of Ministers, and third, this is the Prime Minister and the bureaucracy, their combination makes up the "Team of India "" 17.

* * *

"The federal structure of India is much more important today than it has been in the last sixty years," Prime Minister Narendra Modi said at the Independence Day celebrations on 18. To achieve the strengthening of Indian federalism, it is important to ensure close contact between the Center and the constituent entities of the federation - the states.

The dynamic nature of the central government's policy initiatives led by the BJP justifiably calls for a more flexible and efficient institution to support and accelerate reform. Despite the fact that at first the opinion of some of the country's political forces, including regional ones, was cautiously inclined towards a "soft reorganization" of the long-standing Planning Commission, one cannot but admit one very significant fact: the country's strategic development program announced by the new Prime Minister should be based on completely new institutions corresponding to this program.

The bottom line is that the Planning Commission, neither in its former nor in its updated form, was no longer a guide or a tool that could implement the ambitious tasks and goals set by the country's leadership for the future.

It should be emphasized that NITI Aayog will still have to prove its effectiveness, and the success of the new organization will largely depend on how far the socio-economic development projects and initiatives conceived by the BJP government can move forward. After all, now it is only a ship launched from the slipway into the open sea, and whether its sails are firmly fixed on the mast, whether it will withstand the onslaught of all kinds of storms and cyclones, whether it will be able to overcome all difficulties and obstacles, continuing to sail straight on course to the intended goal-it will be clear only with time.

1 India segodnya: spravochno-analiticheskoe izdanie [India Today: a reference and Analytical publication], Moscow, IV RAS, Ariavarta-Press, 2005, p. 120.

Lokanathan P.S. 2 The Bombay Plan // Foreign Affairs. July, 1945 - - 07 - 01/bombay-plan

3 Our immediate programme / Congress Party of India. New Delhi: The AICC, 1950. 99 p.

4 Nehru for Today // Mainstream Weekly. November 14, 2009 -

5 Rajan panel ranks Odisha most backward State // The Hindu. 27.09.2013 - 5170719.ece

6 Backwardness counts // The Hindu. 2.10.2013 -

7 Planning Commission. Eight Five Year Plan. Vol.1. Objectives and Orientation -

8 Prime Minister Narendra Modi's Independence Day address // The Hindu. 22.08.2014 - address/article6338687.ece

9 PM Modi seeks to replace Planning Commission with 'Team India', give more say to states / Anindita Sanyal ed. // NDTV. 7.12.2014 - -india-give-more-say-to-states-709796

10 Ibidem.

Prabin Kalita. 11 Gogoi slams idea to replace plan panel // Times of India. 8.12.2014 - cleshow/45405846.cms

12 Rajan panel ranks Odisha most backward State // The Hindu. 27.09.2013 - 5170719.ece

Mohanty Meera. 13 Odisha Chief Minister Naveen Patnaik welcomes decision to replace Planning Commission // Economic Times. India Times. 7.12.2014 - 12 - 07/news/56802783_l_odisha-cm-naveen-patnaik-odisha-chief-minister-gender-issues

14 NITI Aayog a threat to federal structure: Congress // The Hindu. 3.01.2015 - le6749671.ece

15 Ibidem.

Moushimi Das Gupta, Chetan Chauhan. 16 NITI Aayog: Old wine in new bottle // Hindustan Times. 13.02.2015 - hfAvUc9ZuoEI.htmI

17 English News Bulletin. Rajya Sabha Tv, 7.12.2014 -

18 Prime Minister Narendra Modi's Independence Day address...


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