Addressing the nation from Red Fort, he said the 64-year old Planning Commission, a vestige of socialist era, would be soon replaced with a new institution to address the current economic challenges and strengthen the federal structure.

"We need a new body with a new soul... We will have to think about giving a new shape to the Planning Commission...Very soon this new institute will start working in place of Planning Commission," Modi said.

Announcing the abolition of Planning Commission, Modi said it was set up to cater to the needs of earlier times and has participated in its own way in the development of the country.

"The internal situation of the country has changed, global environment has changed. Government is no longer the centre of economic development. Economy is much more broad-based now. State government is also a centre of development. I feel it is a good sign. If we have to take India forward, then states have to be taken forward," Modi said.



Justifying the need to replace the Commission, Modi said: "Sometime it becomes necessary to repair a house. It costs a lot of money. But it does not give us satisfaction. Then we feel it is better to make a new house".

The Planning Commission will be replaced with a more modern insitution.There is speculation that the new institution will be modeled on the lines of China’s National Development and Reform Commission.

The Planning Commission was set up in March 1950 by India's first Prime Minister Jawaharlal Nehru to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community.

Set up by a Cabinet Resolution, the Commission enjoyed immense power and prestige as it had always been headed by the Prime Minister. Its most important function was to fix targets for sectoral growth and allocate resources to achieve them.

The Soviet-era style planning body, however, lost its relevance after the opening of the economy in the 90s. With the dismantling of the licence raj, it functioned only as an advisory body without any effective power.

It was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

India had launched the first Five-year Plan in 1951 and two subsequent five-year plans were formulated till 1965, when there was a break because of the Indo-Pakistan Conflict.



Two successive years of drought, devaluation of the currency, a general rise in prices and erosion of resources disrupted the planning process and after three Annual Plans between 1966 and 1969, the fourth Five-year plan was started in 1969.

The Eighth Plan could not take off in 1990 due to the fast changing political situation at the Centre and the years 1990-91 and 1991-92 were treated as Annual Plans. The Eighth Plan was finally launched in 1992 after the initiation of structural adjustment policies.

For the first eight Plans the emphasis was on a growing public sector with massive investments in basic and heavy industries, but since the launch of the Ninth Plan in 1997, the emphasis on the public sector has become less pronounced and the current thinking on planning in the country, in general, is that it should increasingly be of an indicative nature.

Currently, the 12th Five-year-plan is on and will end in March 2017.

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