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From the Planning Commission to NITI Aayog

Planning and NITI Aayog · Part 2 / 2 · Fact-checked on 26 October 2026 · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

Why the Planning Commission was replaced; NITI Aayog (Union Cabinet resolution, 1 January 2015), its Governing Council, Regional Councils and full-time structure; a think tank with no power over funds, its two hubs and the DMEO; cooperative federalism (the 2015 sub-group on centrally sponsored schemes) and competitive federalism (SDG India Index and other state indices); the Atal Innovation Mission and the Aspirational Districts and Blocks Programmes; the 15-7-3 documents and the end of plan/non-plan; and how money reaches states after 2015.

Part 1 followed the Five-Year Plans until the last one ended in March 2017. This part explains what took the place of that system. It covers why the Planning Commission was wound up, how NITI Aayog was set up and is organised, what it does and what it cannot do, how it works with the states through cooperation and competition, the programmes it runs, the documents that replaced the Plans, and how money now reaches the states without a Plan. The Planning Commission decided how much plan money each state got; NITI Aayog is a think tank that advises and has no money of its own to hand out.

By the 2000s the Planning Commission was widely criticised. Its national Plans were drawn up in Delhi and applied a single model to states with very different needs. Each year Chief Ministers had to bring their annual plans to the Commission for approval, so a body that the Constitution did not mention had real say over how states spent development money. Its plan grants also ran alongside the transfers recommended by the Finance Commission, the constitutional body for sharing revenue, which blurred responsibility and gave the Centre a second, discretionary channel. After 1991, when most investment was private and markets set most prices, fixing sector-wise outlays from the top looked out of date. On 15 August 2014, in his Independence Day speech, the Prime Minister announced that the Commission would be replaced by a new institution suited to the needs of the time.

NITI Aayog, short for the National Institution for Transforming India, was set up on 1 January 2015 by a resolution of the Union Cabinet. Like the body it replaced, it is neither constitutional nor statutory: no Article of the Constitution and no Act of Parliament created it, and its advice is not binding. Its Governing Council first met on 8 February 2015. The first Vice-Chairperson was Arvind Panagariya, and the first Chief Executive Officer was Sindhushree Khullar. The resolution described the new body as the government's premier policy think tank, giving directional and policy inputs to the Union and the states. The National Development Council was not formally abolished, but it has not been convened since it approved the Twelfth Plan, and in practice NITI Aayog's Governing Council is now the forum where the Prime Minister and the Chief Ministers meet on development.

The structure follows the 2015 resolution. The Prime Minister is the Chairperson. The Governing Council is made up of the Chief Ministers of all states and of the union territories that have a legislature, and the Lieutenant Governors of the other union territories. Regional Councils can be formed for a fixed period to deal with issues affecting more than one state or a region. The full-time organisation is led by a Vice-Chairperson appointed by the Prime Minister and has full-time members. There can be up to two part-time members, drawn by rotation from universities, research organisations and similar bodies, and up to four Union ministers nominated by the Prime Minister as ex officio members. A Chief Executive Officer of the rank of Secretary to the Government of India, appointed by the Prime Minister for a fixed tenure, runs the secretariat, and experts can be nominated as special invitees.

NITI Aayog's main job is to think and advise, not to allocate money. It prepares long-term strategies, advises ministries and states on policy, and studies what works elsewhere. The 2015 resolution called for planning from the bottom up: credible plans should be drawn up at the village level and aggregated upwards, instead of being sent down from Delhi. To organise this work NITI Aayog describes two hubs. The Team India Hub leads its engagement with the states, and the Knowledge and Innovation Hub builds its capacity as a think tank. A third task is checking whether schemes deliver. For this, the Development Monitoring and Evaluation Office (DMEO) was formed in 2015 as an attached office of NITI Aayog by merging the Programme Evaluation Organisation and the Independent Evaluation Office, both of which had worked under the Planning Commission.

cooperative federalism means the Union and the states working together as partners on shared problems, rather than the Centre issuing instructions. NITI Aayog was given the task of fostering it through structured, continuing engagement with the states, and its Governing Council is the main forum. Early on, it formed sub-groups of Chief Ministers to settle questions that cut across both levels. The best known, set up in 2015, looked at the centrally sponsored schemes, which the Union funds jointly with the states and the states carry out. It recommended cutting their number and sorting them into three groups: core of the core schemes such as social protection, core schemes, and optional schemes that states may choose to join. It also proposed fund-sharing patterns, broadly 60:40 between the Centre and the states for core schemes and 90:10 for the north-eastern and Himalayan states, which the Union later adopted.

Alongside cooperation, NITI Aayog promotes competitive federalism: states compete with one another to improve outcomes, and public rankings create pressure and examples to copy. It publishes indices that score states on measurable results. The SDG India Index, first released in 2018, tracks each state's progress on the Sustainable Development Goals. Others rank states on health outcomes, the quality of school education, water management, export preparedness and innovation. A state that falls in a ranking faces questions from its own voters and media, while a state that rises can show what it did differently. The two ideas fit together: cooperation sets common goals and shares money and knowledge, and competition pushes each state to perform. Critics point out that index scores depend on how indicators are chosen and weighted, so rankings are a guide, not a final verdict.

Although it gives no grants to states, NITI Aayog anchors several programmes. The Atal Innovation Mission, set up in 2016, promotes a culture of innovation and entrepreneurship; its best-known parts are Atal Tinkering Labs, where school students build and test ideas, and Atal Incubation Centres for start-ups. The Aspirational Districts Programme, launched in January 2018, picked more than a hundred of the country's least developed districts and tracks them on indicators grouped under five themes: health and nutrition, education, agriculture and water resources, financial inclusion and skill development, and basic infrastructure. Its approach is summed up as convergence of schemes, collaboration between governments and officials, and competition among districts through regular public rankings. Building on it, the Aspirational Blocks Programme was launched in January 2023 to cover 500 blocks.

With the Twelfth Plan ending in March 2017, NITI Aayog proposed a new set of documents in place of the Five-Year Plan: a 15-year vision of where the country should be, a 7-year strategy to get there, and a 3-year action agenda tied to the government's finances. The Three Year Action Agenda covered 2017-18 to 2019-20, and Strategy for New India @75, released in December 2018, set goals for the 75th year of independence in 2022. Unlike the Plans, these documents do not fix outlays for each sector or state. A related change came in the Union Budget 2017-18, which ended the old division of expenditure into plan and non-plan. That split had led to new projects being favoured over the upkeep of existing assets. The Budget still separates revenue from capital expenditure.

How, then, does money reach the states after 2015? Mainly through two routes. The first is constitutional: on the recommendation of the Finance Commission under Article 280, states receive a share of the divisible pool of Union taxes under Article 270 and grants-in-aid under Article 275. The Fourteenth Finance Commission raised the states' share of the divisible pool to 42 per cent for 2015–20, which gave states more untied money just as the Planning Commission's discretionary plan grants disappeared. The second route is the centrally sponsored schemes and other transfers run by Union ministries and the Ministry of Finance, which rely on Article 282, under which the Union may make grants for any public purpose. NITI Aayog sits outside both routes. Supporters say this frees it to think independently and to treat states as partners; critics say that without money to back its advice it lacks teeth, and that the Centre's influence simply moved from Yojana Bhavan to the ministries.

For more than six decades a Planning Commission with no constitutional base set national targets, approved state plans and shared out plan money. The economy it planned for changed after 1991, and the Plans themselves became indicative. In 2015 that machinery was replaced by NITI Aayog, which keeps the Prime Minister at the top and the Chief Ministers in its Governing Council, but drops the power over money. Its tools are advice, long-term strategy, evaluation, programmes for lagging districts and blocks, and rankings that make states compete; its forums aim at cooperative federalism. Money to states now flows mainly through the Finance Commission and Union ministries. Whether this makes the states stronger partners, or simply shifts central influence elsewhere, is the main debate about the change.

Exam traps

• NITI Aayog was set up by a Union Cabinet resolution on 1 January 2015; it is neither constitutional nor statutory, exactly like the Planning Commission. The Independence Day announcement was on 15 August 2014.
• NITI Aayog has no power to allocate funds to states or ministries. Questions that say it "decides central assistance" or "recommends tax devolution" are wrong; devolution is the Finance Commission's job.
• The Prime Minister chairs NITI Aayog; the Vice-Chairperson and the CEO are appointed by the Prime Minister. The CEO has the rank of Secretary to the Government of India.
• The Governing Council includes the Chief Ministers of all states and of union territories with a legislature, and the Lieutenant Governors of the other union territories, not Governors of states.
• "Core of the core", "core" and "optional" are categories of centrally sponsored schemes (2015 sub-group of Chief Ministers), not GST rate slabs or Finance Commission grants.
• Aspirational Districts Programme: January 2018; Aspirational Blocks Programme: January 2023 (500 blocks); Atal Innovation Mission: 2016; DMEO: 2015.
• The plan/non-plan classification ended with the Union Budget 2017-18; the revenue/capital distinction remains.
• The National Development Council was never formally abolished; it has simply not been convened since the Twelfth Plan, and NITI Aayog's Governing Council now plays a similar role.

Recap

• Why replaced: one-size-fits-all Plans, central approval of state plans, plan grants overlapping the Finance Commission, a changed economy after 1991; announced 15 August 2014.
• NITI Aayog: National Institution for Transforming India, Union Cabinet resolution of 1 January 2015; non-constitutional, non-statutory, advisory.
• First Governing Council meeting 8 February 2015; first Vice-Chairperson Arvind Panagariya, first CEO Sindhushree Khullar.
• Structure: PM as Chairperson; Governing Council of Chief Ministers and Lieutenant Governors; Regional Councils; Vice-Chairperson, full-time members, up to two part-time and four ex officio members; CEO of Secretary rank.
• Functions: think tank with no power over funds; bottom-up planning; Team India and Knowledge and Innovation hubs; DMEO (2015) for evaluation.
• Cooperative federalism: Governing Council and sub-groups of Chief Ministers (2015 sub-group on CSS: core of the core, core, optional). Competitive federalism: SDG India Index (2018) and other state indices.
• Programmes: Atal Innovation Mission (2016), Aspirational Districts (January 2018), Aspirational Blocks (January 2023, 500 blocks).
• Plans replaced by a 15-year vision, 7-year strategy and 3-year action agenda; plan/non-plan ended in Budget 2017-18; funds to states now via the Finance Commission (Articles 270, 275, 280) and Union ministries (Article 282).

Practice questions

Sources

• Cabinet Secretariat resolution constituting NITI Aayog (1 January 2015); NITI Aayog: about us, Three Year Action Agenda 2017-18 to 2019-20, Strategy for New India @75 (2018), SDG India Index, Aspirational Districts and Blocks Programmes, Atal Innovation Mission, Development Monitoring and Evaluation Office — https://www.niti.gov.in
• Press Information Bureau: releases on the setting up of NITI Aayog (January 2015), the first Governing Council meeting (February 2015), the sub-group of Chief Ministers on centrally sponsored schemes (2015), the Aspirational Districts Programme (2018) and the Aspirational Blocks Programme (2023) — https://pib.gov.in
• Constitution of India, Articles 270, 275, 280 and 282 — https://legislative.gov.in/constitution-of-india/
• Union Budget 2017-18, Budget Speech and Budget at a Glance (removal of the plan/non-plan classification) — https://www.indiabudget.gov.in