The end of Five-Year Plans: All you need to know about this big policy change


    The decades-old Five-Year Plans will make way for a three-year action plan, which will be part of a seven-year strategy paper and a 15-year vision document.

    The decades-old Five-Year Plans will make way for a three-year action plan, which will be part of a seven-year strategy paper and a 15-year vision document.
    NEW DELHI: A key component of the Nehruvian socialism—the economic approach adopted by India's first Prime Minister Jawaharlal Nehru—the Five-Year Plans have been laid to rest by the Narendra Modi-led NDA government. The 12th Plan, the last of the Five-Year Plans, is coming to an end on March 31, though it has been given an extension of six months to allow ministries to complete their appraisals.

    The decades-old Five-Year Plans will make way for a three-year action plan, which will be part of a seven-year strategy paper and a 15-year vision document.

    The Niti Aayog, which has replaced the Planning Commission, is launching a three-year action plan from April 1.

    What were Five-Year plans?
    Five-Year Plans (FYPs) were centralised economic and social growth programs. Joseph Stalin, president of the erstwhile USSR, implemented the first Five-Year Plan in the late 1920s. India too followed the socialist path but here the planning was not as comprehensive since the country had both public and private sectors. The planning in India was only about the public sector. The first Five-Year Plan was launched in 1951. The idea was to plan public spending for equitable growth rather than leaving expenditure to the market forces.

    What they did
    The Five-Year Plans played a great role in lifting India's social sector and building of heavy industry. A centralised planning system could ensure that the money gets spent where it was the most needed.

    Why they aren't needed now
    For a long time, there had been a feeling that for a country as diverse and big as India, centralised planning could not work beyond a point due to its one-size-fits-all approach. Moreover, since the Planning Commission used to be controlled by the Central government, it often ended up as a tool to punish states ruled by the opposition parties when it came to allocating funds. Due to the top-to-bottom approach in centralised planning, it was felt that the states needed to have greater say in planning their expenditure. The Planning Commission was seen to be imposing its diktats on states who could have better known what and how much they needed.

    How is Niti Ayog different?
    The Niti Ayog, which has replaced the Planning Commission, is the new body that gives policy direction. Its founding principal is ‘cooperative federalism’. Most important difference is that Niti Ayog has no power to grant funds or make decisions on behalf of states. It is only an advisory body.

    Is the three-year action plan the new Five-Year Plan?
    No. This document only provides a broad roadmap to the government. The document does not detail any schemes or allocations as it has no financial powers. Since it need not be approved by the Union Cabinet, its recommendations are not binding on the government. With the government having done away with the categorisation of expenditure into plan and non-plan heads, the documents of the Niti Ayog have no financial role. They are only policy guidemaps for the government.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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