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July 15, 2010

Development Strategy

Twelfth Plan

By Nitin Desai


The Planning Commission has begun the process for preparing the Twelfth Five Year Plan. They want this to be different from previous plans, which typically involved some macro economic jiggery-pokery to justify a growth target that is a percent or two above recent trends, some re-packaging of anti-poverty programmes  so that they appear to address charges of misuse and waste, pious promises to protect the environment and brave promises to make the country an economic super power.  We started doing this in the seventies and have repeated the exercise many more times since then.  How can the twelfth iteration of the planning exercise be different?

Judging by the first semi-public meeting on the Twelfth Plan (which I attended) it seems that the responsibility for managing  the process for the preparation of the approach to the Twelfth Plan has been assigned to Arun Maira, who has a lifetime of experience in catalysing change and reform at the enterprise level.  There is even some talk of converting Yojana Bhavan into a System Reforms Commission.

But writing a plan that is an effective blue print for radical change is much more difficult than reinventing a corporation and Yojana Bhavan will need a lot of support from well-wishers outside the Government. From this perspective, as a purana papi, let me make my suggestions on what I would like to see in Plan

The Plan is about what the Government will do.  But the starting point should be a clear analysis of the exogenous forces, the trends beyond governmental control that will make the future matrix for development substantially different from the past.  Let me mention three. The first is the demographic shift with a rising proportion of young workers in the North, the opposite phenomenon of a rise in the old age dependency ratio in the South and a massive shift of population from rural to urban areas. The second is the shift of the centre of gravity of the global economy to Asia, most particularly the rise of China. The third is the growing pressure to de-materialise growth, partly because of environmental concerns (e.g. global warming) and partly because of resource scarcities (e.g. of cheap oil). Other inflexion points could be added to this list and Yojana Bhavan would do well to talk to think tanks, corporate planners and security analysts  who are peering into the future for their own purposes.  Understanding the implications of these directional shifts in the underlying driving forces has to be the basis for a grand strategy for development.

A strategic approach, working with scenarios would be far more valuable for this purpose than the usual projection exercise that is based more on past trends than on future changes.  In particular the planners should not sweat too much over the macro-economics of growth.  It really is rather futile to get into an argument about whether the growth goal should be 9% or 10% or what the steel production target should be. Instead the Government should focus its deliberations on what it does control like its fiscal stance, the draft of the public sector on private savings, monetary policy, the regulatory system  and similar matters. Even here, if the planners have nothing new to say then they may as well keep quiet.

A grand strategy can only be the beginning. The real meat in the Plan is the programme of action. Here too Yojana Bhavan must restrict itself to the areas where a major policy shifts or redeployment of development resources is required.  These areas can only emerge after the analysis; but as a first guess one can say that they will be mostly about making development more inclusive and more sustainable,  that is more on the people and planet than on the profit side of the three-p triad that Yojana Bhavan has unveiled for organising discussions on the Twelfth Plan.   

Not that the basics of economic growth do not matter.  They do.  But the Indian economy is now quite robust and reasonably government proof.  The big reforms in the regulatory structure, fiscal policy, monetary management and external liberalisation  have already been undertaken.  There is a pending agenda on the external liberalisation side; but it is no longer something that would make much of a difference to the potential growth rate.  The big change that we need is in the management of the delivery mechanism for public services to make it less corrupt, more responsive to the needs of the beneficiaries it serves, more clearly accountable to the citizens and more open to innovation.  We need for the public sector a reform programme as far reaching as the 1991 big bang for the corporate sector.

The agenda for radical change in the policy areas that impinge on inclusion and sustainability can become quite extensive and all of us will have our own priorities for the areas that need special attention.  Let me offer my list of priorities:

  • connecting slow growth regions and remote areas (e.g. the tribal belt, the North East, the Gangetic Plain and Kashmir) to the fast growing mainstream economy;
  • providing top quality vocational training to widen opportunities for young workers;
  • reconstructing the plethora of anti poverty and affirmative action programmes as a structured social security system;
  • moving Indian agriculture from a low productivity staple producing system to a rising productivity commercially oriented sector;
  • reinventing the process and management of urbanisation; 
  • building much stronger economic links with China and East Asia;
  • managing emerging stresses in the water economy;
  • coping with the risks of climate change. 

These eight areas do not constitute the sum of all development.  But they are the areas where our present policies are grossly inadequate and need radical overhaul.

The type of selectivity that I am advocating will not come easily. A Plan is a negotiated product between the Planning Commission, the Finance Ministry, the line Ministries and their technocrats and the State Governments.  A vast network of bureaucrats will work through the various Working Groups and Steering Groups and Task forces to protect and expand their programmes.  The great challenge that Montek Ahluwalia and Arun Maira face is to persuade this grand army that a Plan can only add value to the development effort if it focuses on a few sectors and areas and really delivers results there. 

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