Topic 05 of 6 · Chapter 02 · Indian Economy
National Development Council & Plan Expenditure
NDC composition and functions, Plan vs Non-Plan expenditure, Finance Commission vs Planning Commission.
📋 In This Article
1. National Development Council (NDC)
The National Development Council (NDC) was established on August 6, 1952. It was the apex body for planning in India — above the Planning Commission.
- Composition: PM (Chairman) + All Chief Ministers + Lt. Governors of UTs + Members of Planning Commission + Cabinet Ministers
- Functions: Approve Five Year Plans, review plan progress, recommend measures for national development
- Status: Extra-constitutional body (like Planning Commission)
- Current status: NDC has not met since 2012. With NITI Aayog’s Governing Council (which includes all CMs), the NDC has become redundant.
⭐ Key Fact: The NDC was the body that formally approved Five Year Plans. The Planning Commission prepared the plans, but NDC gave final approval. This ensured states had a say in national planning.
2. Plan vs Non-Plan Expenditure
Until 2017, India’s budget was divided into Plan and Non-Plan expenditure. This distinction was abolished from 2017-18 budget.
| Feature | Plan Expenditure | Non-Plan Expenditure |
|---|---|---|
| Definition | Expenditure on Five Year Plan schemes and programmes | Expenditure on routine government functions |
| Examples | MGNREGA, PMGSY, irrigation projects, new schools | Salaries, interest payments, defence, subsidies |
| Nature | Development expenditure | Maintenance/routine expenditure |
| Abolished | This distinction was abolished from Budget 2017-18. Now only Capital and Revenue expenditure distinction is used. | |
💡 Why Abolished? The Plan/Non-Plan distinction was misleading — it suggested Non-Plan expenditure was unproductive. In reality, salaries of teachers and doctors (Non-Plan) are as important as building new schools (Plan). The new classification (Capital vs Revenue) is more meaningful.
3. Finance Commission vs Planning Commission
| Feature | Finance Commission | Planning Commission |
|---|---|---|
| Constitutional status | Constitutional body (Article 280) | Extra-constitutional body |
| Established | Every 5 years by President | 1950 (dissolved 2015) |
| Function | Devolution of taxes between Centre and States | Allocation of plan funds |
| Transfers | Statutory transfers (mandatory) | Discretionary transfers (plan grants) |
| Current | 16th Finance Commission (2026-31) | Replaced by NITI Aayog |
✅ Key Difference: Finance Commission transfers are statutory — the Centre must give states their share as recommended. Planning Commission transfers were discretionary — the Centre could give more or less based on political considerations. This made Planning Commission transfers controversial.
4. Key Points for Exam
🔑 Must-Remember Facts
- NDC established: August 6, 1952
- NDC approved Five Year Plans
- NDC composition: PM + All CMs + Planning Commission members
- Plan vs Non-Plan distinction abolished from Budget 2017-18
- Finance Commission = Constitutional body (Article 280)
- Planning Commission = Extra-constitutional body
- Finance Commission transfers = Statutory (mandatory)
- Planning Commission transfers = Discretionary
- 16th Finance Commission covers 2026-31
- Finance Commission set up every 5 years by President