Topic 02 of 6 · Chapter 02 · Indian Economy
Planning Commission — Structure & Functions
Formation (1950), composition, functions, role in Five Year Plans, and why it was dissolved in 2014.
📋 In This Article
1. Formation of Planning Commission
The Planning Commission was established on March 15, 1950 by a Cabinet Resolution (not by an Act of Parliament). It was an extra-constitutional body — not mentioned in the Constitution.
💡 Key Fact: The Planning Commission was NOT a constitutional body. It was created by an executive order (Cabinet Resolution). This is why it could be dissolved by a simple executive decision in 2014 without any constitutional amendment.
2. Composition of Planning Commission
- Chairman: Prime Minister of India (ex-officio)
- Deputy Chairman: Full-time member, had Cabinet rank
- Members: Experts in economics, science, technology, etc.
- Member Secretary: Senior IAS officer
⭐ Notable Deputy Chairmen: Gulzarilal Nanda (first), P.C. Mahalanobis (architect of 2nd Plan), C. Subramaniam, Montek Singh Ahluwalia (longest serving — 2004-2014).
3. Functions of Planning Commission
- Assess India’s resources (material, capital, human) and formulate plans for their effective use
- Prepare Five Year Plans and Annual Plans
- Determine priorities and allocate resources between sectors
- Indicate factors retarding economic development
- Determine conditions for successful plan implementation
- Appraise progress of plan implementation
- Make recommendations for achieving plan objectives
4. Why Was Planning Commission Dissolved?
PM Narendra Modi announced the dissolution of the Planning Commission on August 15, 2014 (Independence Day speech). It was formally dissolved on January 1, 2015 and replaced by NITI Aayog.
Reasons for dissolution:
- Planning Commission had become a “super government” — too powerful, bypassing state governments
- It followed a top-down approach — states had little say in planning
- India’s economy had changed significantly since 1950 — private sector now dominant
- Planning Commission was seen as outdated and bureaucratic
- Need for a more cooperative federalism approach
📌 Important: The Planning Commission was NOT abolished by Parliament. It was dissolved by a Cabinet Resolution — the same way it was created. This shows it was an executive body, not a constitutional one.
5. Key Points for Exam
🔑 Must-Remember Facts
- Planning Commission established: March 15, 1950 (Cabinet Resolution)
- NOT a constitutional body — created by executive order
- Chairman: Prime Minister (ex-officio)
- Deputy Chairman had Cabinet rank
- Last Deputy Chairman: Montek Singh Ahluwalia (2004-2014)
- Dissolved: January 1, 2015
- Replaced by: NITI Aayog
- Announced by PM Modi on August 15, 2014
- Planning Commission was an extra-constitutional body
- National Development Council (NDC) approved Five Year Plans