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September 17, 2014

Governance & Politics

Planning Commission Mark II

By Nitin Desai


The Government's decision to wind up the Planning Commission and replace it with another institution has led to a spate of suggestions in this paper and elsewhere. So many and so diverse are these suggestions that the PMO will probably end up ignoring most of them and doing what the PM has had In mind for years. Despite this apprehension of futility let me, as a veteran of the old Planning Commission, add my bucketful to this flood.


A change in the structure of the Planning Commission is not possible without a change in the process and content of the Plan. If in 2017 yet another five-year plan has to be formulated on the same lines as earlier plans, then the new institution will not be very different from the present Planning  Commission, with perhaps some operational entities like the Aadhar authority being shifted out. Hence a radical restructuring of the Planning Commission will require an equally radical restructuring of what it does.


The case for change in planning rests on the changed environment for development.  The Commission and the planning methodology it follows was set up at a time when, for ideological and practical reasons, development policy involved large scale investment in public sector projects for infrastructure and industry. Even agriculture and the social services required investments and institution building by the public sector. The Commission was akin to a corporate strategy department that sought to plan and coordinate these investments in the context of a long term perspective of the economy. Again for ideological and practical reasons this perspective focused on self reliance as a key goal that translated into an import substitution strategy with poverty eradication being added explicitly later.


Today the Indian economy is very different. Both the ideological and practical constraints on development are a world away from the ethos of the Nehru era. The economy is more open with a rising trade ratio and large inward and outward flows of investment. The private sector has expanded far beyond the limited confines within which it operated in the fifties and sixties and even the public sector companies are getting integrated into the capital market and the market economy. The instrumentalities of policy are different with the big bang liberalisation of the nineties and the dependence on PPPs for infrastructure growth. Public spending has shifted sharply towards subsidy oriented anti-poverty programmes and social services where the locus of action is in the States.


In an open and liberalised economy planning can be useful both for public policy and for private investment planning. But it has to be different from the target setting frameworks that have been the staple diet so far. It should involve:


  • Medium and long term assessment of strengths, weaknesses, opportunities and threats to development, and innovative suggestions for addressing these.
  • Integrative strategies for issues that cut across ministerial responsibilities.
  • Consistent frameworks for PPP agreements across infrastructure sectors.
  • Evaluation of actual outcomes against accepted goals of poverty eradication, regional balance, self reliance, global competitiveness, etc. and needed course corrections.


The focus should be on specific issues rather than general purpose economy wide perspective planning, for example:


  • Implications of the rise of China as a key player on global trade, investment and technology transfer.
  • The impact of declining US interest in Middle East oil on prices, availability and security of supply.
  • Integrative energy  and transport policies that look beyond investment planning to coherent price regimes for a competitive market.
  • Investment and municipal reform to cope with rising pace of urbanisation and industrialisation.
  • Implications of development trends for environment and resource conservation.
  • Region specific implications for employment, education, health, skill development  of varying demographic trends - a younger population in some parts and an ageing population in others.


Studies of the type listed above can be done by the many think tanks that exist today. The value of a Governmental body doing this can only come from its proximity to decision making, more particularly to the PMO. Hence the new secretariat should be structured around the cross sectoral divisions in the present Commission (but with fresh expertise added) and be headed by a National Development Adviser located, like the National Security Adviser, in the PMO. It should serve as the secretariat for a revitalised National Development Council which already exists and is chaired by PM and includes  Union cabinet ministers and State Chief Ministers.


The National Development Adviser should be assisted in his or her task of advising the Government and managing the new secretariat by a National Development Advisory Board with non-official members including economists, social scientists, development activists, some full time, most part time, to advise on medium and long term development.


The NDAB should be the vehicle through which the Government structures it's dialogue with business associations, trade unions, academics and civil society groups on development issues. It's studies should be widely available as they are meant to influence private decisions as much as public policy.


Should these studies include a macroeconomic frame of projected growth rates, investment rates and so on? Perhaps yes, because if we don't do it the projections of the World Bank and others will grow in influence. But this macro frame should not be treated as setting targets but as an intelligence estimate to guide public and private decisions.


A structure on these lines cannot take on any role in resource allocation either at the Centre or between the Centre and the States. Yet someone, somewhere has to take on this task. Centre-State financial transfers should take place largely within the parameters set by the Finance Commission whose remit can be broadened to include predictable development requirements. Conditional transfers through centrally sponsored schemes should be greatly reduced and transfers beyond those recommended by the Finance Commission should take the form of block  grants based on the Gadgil-Mukherjee formula. The Finance Ministry can do the needful for allocations to Central Ministries as the distinction between plan and non-plan is quite tenuous with public sector investment shifting out of the budget.


Planning simply means thinking ahead, and that is useful however liberalised and market-oriented an economy may be. A National  Development Secretariat designed as  a think-tank with privileged access to centres of power can serve this purpose not just for the public but also the private sector. 

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