The Planning Commission is responsible for devising the most suitable programs for the country’s economic development. The five-year planning model was inspired by the Soviet Union’s practice of centralized planning. Until the early 1990s, the state continued to hold great sway in matters of economic planning. This trend was decisively reversed during P.V.Narsimha Rao’s government (1991-1996). The current prime minister, Manmohan Singh, then Finance Minister, was the chief architect of the shift.

The Planning Commission has always had to operate according to the social and economic conditions existing at any given point of time, taking into account the political situation as well.

The prime minister is the ex-officio chairman of the Planning Commission. The current deputy chairman of the Planning Commission is Montek Singh Ahluwalia.

The Planning Commission was recently pilloried in the press for fixing the poverty line in India at Rs. 32 ($.65 USD), a figure widely derided for being unrealistically low.

The earliest attempts towards organized economic planning in India are traced back to the colonial period. In 1934, M. Visvseraya, then India’s most well known engineer published a book called Planned Economy For India. Visvesraya wrote about the need for a model of economic planning that would ensure minimum levels of education and health care in India. He favored industrialization as the favored mode of development.

Pt. Jawaharlal Nehru was interested in Visvesraya’s ideas, which matched his own zeal for progress through industrialization. Nehru’s economic ideas differed from those of his mentor, Mahatma Gandhi, who preferred a village centric economy.

The collapse of the American economy during the Great Depression of the 1930s also influenced Nehru by exposing the pitfalls of a capitalist economy. He became impressed with development through centralized economic planning after visiting the Soviet Union in 1927.

The National Planning Committee was established by the Indian National Congress in 1938 to enact a five-year model of economic planning. Nehru described its aim as ensuring the masses of India had a minimum standard of living.

The next important step was the Bombay Plan of 1944. Officially called “A Plan Of Economic Development Of India,” it was prepared by noted businessmen like J.R.D. Tata, G.D. Birla and economists like John Matthai, who would later become the finance minister after independence.

The Bombay Plan favored a socialist economy for India. The main aim was doubling the per capita income over the next fifteen years and to raise the industrial and agricultural output by a factor of five.

After independence, India adopted the five-year plan system, inspired by the similar model existing in Soviet Union. The Planning Commission was set up in 1950, as an extra-constitutional, non-statutory body. Pt. Jawaharlal Nehru was the first chairman of the Planning Commission.

The first five-year plan (1951-1956) concentrated mainly on agriculture, considering the need to help overcome India’s food deficit.

The second five-year plan (1956-1961) reversed the preference and concentrated more on Industry. It was based on the Mahalonobis Model, formulated by P.C. Mahalonobis, a Cambridge educated statistician.  The Mahalonobis model was based on an input-output matrix, factoring in the various sectors of Industrial productions, feeding into and lending to one-another. Investment was directed towards heavy industries.

The third five-year plan (1961-1966) was largely interrupted by the two wars India fought with its neighbors, first with China in 1962 and the next with Pakistan in 1965. This shifted the focus to defense production and price stabilization more than anything else.

The next five-year plan (1969-1974) started after a gap of three years. The gap was necessitated by two terrible droughts, a devaluation of the currency, and spiraling inflation.

The fourth five-year plan was also interrupted due to India’s war with Pakistan in 1971. However, by then, the Green Revolution had brought India close to self-sufficiency in food. This allowed the government to consider problems of transport and urban housing in the plan. The nationalization of 14 banks during this period led the government to reiterate the supremacy of public sector in the country.

The fifth five-year plan (1974-1979), formulated during the Emergency, was dismissed by the Janata Party government that came to power in 1977.

The sixth five year plan (1980-1985) took stock of the last thirty years of planning, by affirming the progress made by the country in fields of agriculture, industry and science and technology. However, the planners conceded that the pace had been slower than expected.

The sixth plan set itself a target of a 5% annual growth. It aimed to reduce poverty and unemployment. The plan also made substantial allocations towards developing infrastructure and indigenous sources of energy.

The seventh five-year plan (1985-1990) sought to build upon the realization of the 5% growth rate. It also emphasized the need for modernizing technology. It continued to identify agriculture as an important focus and linked it to better industrial production. The writers also made the candid admission that development must mean the betterment of the people, not just the construction of more factories, dams and roads.

For the years 1991 and 1992, planning was done on an annual basis. This was a period of great economic uncertainty. The crisis was primarily caused by the severe depletion of India’s foreign reserves. 

This led to a game changing shift in India’s economic policy from a planned socialist economy to one more tied to the free market. This sea change, commonly referred to as “liberalization,” was reflected in the next five-year plan.

The eighth five-year plan (1992-1997) advocated freeing the economy of “unnecessary controls” and withdrawal of state intervention. It favored greater private initiative in the industrial sector, and limited the state’s role to focusing on “strategic, high-tech and essential infrastructure.” It emphasized the active participation of the people in the process of development and brought the focus back on providing education, healthcare and other basic amenities to the masses.

The ninth five-year plan (1997-2002), while continuing to build upon the changes initiated in the last plan, included environmental sustainability as part of the development process. It also spoke of strengthening Panchayati Raj institutions, apart from empowerment of women and Dalits.

The tenth five-year plan (2002-2007) visualized India as a market economy. It pushed for further deregulation of the economy, to allow market forces to influence industry in an era of increasing globalization. It also sought better governance at all levels and identified the need to provide better services to the people.

The eleventh five-year plan (2007-2012) referenced the growth rate of 7.7%, achieved during the previous plan period, the highest ever. A growth rate of 8.9% during the last four years made the Indian economy one of the fastest growing in the world.

The plan has set a growth target of 9% for the period and expects the final rate to be 10% at the end of the plan period. It has also set 26 measurable indices in the fields of poverty alleviation, education, health, women and children, infrastructure, environment and others.

The plan also admits that rates of growth are not the only measure of development and speaks of inclusive growth, while mentioning that although poverty has declined, it has been at a slow pace.

The plan makes a very special reference to the need for improving the system of education in the country, providing double the budgetary allocation over the last plan. It also mentions the National Rural Health Mission, launched to improve healthcare in the country.

The Planning Commission takes into account the various resources – capital, material and human – available in the country and works towards improving their productive capabilities. This enrichment goes hand in hand with devising the most suitable plan for the development of the nation, utilizing these resources. The process includes prioritizing the areas that need the resources, allocation of theses resources and deciding upon the time frame in which the task has to be carried out.

The Planning Commission periodically appraises work being conducted and identifies the roadblocks that might be hindering progress. In 2008, for example, the Planning Commission convened a working group to examine development-related challenges in areas racked by insurgencies.  In 2012, the Planning Commission convened a working group to examine the challenges India’s school age-children face. The findings were included in the 2012-2017 five-year-plan.

An important function of the Planning Commission is to act as an intermediary between the Union Ministries and the state governments that seek resource allocation and at times, special development packages. Since state governments tend to take a narrow, state-centered view, whereas the Central government is bound to adopt an impartial approach, the Planning Commission helps the two parties negotiate terms.

Often state governments make direct appeals to the commission for additional funds, as Himachal Pradesh did in 2011, when it needed 121 crore to build a road so that vegetable and flower farmers could buyers could access their crops.

The Planning Commission does not disburse money. It comes up with a Central Plan Outlay, under which budgetary allocations are made towards various heads. This includes grants to central ministries/departments, investments in public enterprises, Central Assistance for State and Union Territory Plans, among others.

The Central Plan Outlay is Rs. 592456.99 crore ($120.64 billion USD). Out of this, the budgetary support for Central Plan is Rs. 335521.00 crore ($68.7 billion USD). The Internal and Extra Budgetary Resources of Public Enterprises is Rs. 256935.99 crore ($52.58 billion USD).   Central Assistance for State and Union Territory Plans is Rs. 106025.75 crore ($21.7 billion USD).  

A substantial amount of grant is made to agriculture and allied activities. Rs. 15676.63 crore ($3.20 billion USD) have been allocated to crop husbandry. Rs. 7810.87 crore ($1.6 billion USD) have been ear-marked for Rashtriya Krishi Vikas Yojna - a scheme launched to achieve 4% annual growth in agriculture. Crop insurance has been allocated Rs. 11500.00 crore ($2.35 billion USD). 

The Department of Rural Development has been allotted Rs. 74100.00 crore ($15.17 billion USD). Key components include Swanjayanti Gram Swarojgar Yojna for which Rs. 2914.00 crore ($596.36 million USD) have been provided. A huge chunk of the allotment is made to Mahatma Gandhi National Rural Employment Guarantee Scheme - Rs. 40,000.00 crore ($8.19 billion USD). 

Infrastructure has also been provided generous grants. The total outlay for Ministry of power is Rs. 66,382.73 crore ($13.59 billion USD). Nuclear power development has been allotted Rs. 5581.00 crore ($1.14 billion USD). The expenditure provision for Central Road Fund is Rs.18,500 crore ($3.79 billion USD). Ministry of Steel has been allotted Rs. 21,102.71 crore ($4.32 billion USD). Department of Heavy Industry has been provided Rs. 2124.29 crore ($434.75 million USD). 

An emerging area like Department of Information Technology has an outlay of Rs. 3619.07 crore ($740.66 million USD).  

Re-affirming the 11th five-year plan's emphasis on education, the plan outlay for Department of School Education and Literacy is Rs. 38,957.00 crore ($195.86 million USD), whereas Higher Education is to receive Rs. 13103.00 crore ($2.68 billion USD). Sarv Shiksha Abhiyan, a scheme for universalizing elementary education has been allotted Rs. 21,000.00 crore ($4.30 billion USD). For Mid-Day Meal scheme, Rs, 10380.00 crore ($2.12 billion USD) have been set aside.

The plan outlay for the Department of Health and Family Welfare is Rs. 23,560.00 crore ($4.82 billion USD). The National Rural Health Mission has been allotted Rs. 17, 840 crore ($3.65 billion USD).

Unique Identification project 

The Planning Commission has been involved in a protracted tussle with the Home Ministry over the UID project. The UID project, which seeks to provide biometric identification to every single Indian citizen, falls under the ambit of the Planning Commission. The tussle stems from the fact that the Home Ministry has been running a similar program called the National Population Register and feels that UID is encroaching on its area of work. The matter has yet to be completely resolved.

Setback for Planning Commission as Singh bats for UID (Mail Today)

Fixing of poverty line at Rs. 32  

The Planning Commission was criticized from all quarters for arbitrarily fixing the poverty line at Rs. 32 ($.65) in 2011. Based on the recommendations of the Tendulkar Committee, the commission stated that families of five, spending less than Rs. 4,824 in urban areas and Rs. 3905 in rural areas would be considered poor. The commission’s decision prompted N.C. Saxena, a member of the National Advisory Committee to say that the amount was sufficient only for cats and dogs. Congress general secretary Rahul Gandhi reportedly intervened to get the commission to re-think its poverty line. On May 1, 2012, a new survey more than doubled the original estimate for cities 66.10 and slightly raised it for rural areas.

Pro Rs. 32 poverty line

Some contrarians like the Times of India columnist Swaminathan Aiyar have argued that the horrified reaction of many of India’s talking heads only shows their privileged middle-class perspective. Aiyar argues that when a poor family of six each contribute Rs. 32 per day, the actual amount at the end of the month is close to Rs. 6000. He also says that, if middle-class Indians are so concerned about poverty, they might want to consider paying their servants more.  Columbia University Economics Professor Arvind Panagariya makes a good point is his defense of the original line. “The alternative was a poverty line that would assure a household comfortable living, a level at which, say, it could afford a scooter. But progress relative to such a poverty line would have provided no information on what was happening to the destitute.” TN Ninan points out that the UN’s millennium development goals definition of the poverty line of $1.25, when adjusted for purchasing parity is about Rs. 29 for both city and rural areas.

India's official poverty line doesn't measure up (by Jayati Ghosh, The Guardian)

Montek Singh Ahluwalia to clarify on Planning Commission’s Poverty Line Today (NDTV.com)

Spend Rs 32 a day? Govt says you can't be poor (by Dhananjay Mahapatra and Nitin Sethi, Times of India)

Govt scraps 32 rupees a day poverty rate benchmark (by Manoj Kumar, Reuters)

Anti Rs. 32 poverty line 

The opposing line holds that arguing about whether someone is just poor or utterly destitute misses the larger debate.  In a country where the middle class likes to think of itself as part of an emerging superpower, the vast majority of people, indeed anyone who makes under Rs. 200 per day, are by any reasonable definition, poor. Furthermore, the debate really doesn’t deal with the massive inequality, which by many measures, has worsened since economic liberalization.  As Vidya Bhushan Rawat posits on the left wing website Countercurrents.org: “Is not it hypocrisy as we still consider a person earning around Rs 65 per day as above the poverty line? Is not it a joke and are we not making a mockery of our own estimates…The focus should be on total growth and attempt should be made that none remain hungry, without medication and without schooling.”

Middle Class Hypocrisy on the Poverty Line (by Swaminathan Aiyer)

Politics Of Poverty Estimates (by Vidya Bhushan Rawat Countercurrents.org)

Righteous Rage Indeed (by TR Ninan, The Business Standard)

Sad debate on the poverty line (by Arvind Panagariya, The Economic Times)

K.C. Pant

Pant, son of G.B.Pant, distinguished Congressman and former CM of Uttar Pradesh, held the post from 1999 to 2004 during the National Democratic Alliance’s regime. Pant entered the BJP in 1998. Before that, he was with the Indian National Congress and held important portfolios like defense, home and finance in the central government.