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India: The planning commission – DO WE NEED IT ?

, March 3, 2014, 0 Comments

The Planning Commission India-MarketExpressIndia’s first Prime Minister, Jawaharlal Nehru had spearheaded the idea of introducing economic planning in India on the lines of similar efforts in the Soviet Union. Nehru was largely instrumental in the setting up of the Planning Commission in India. We have completed implementation of eleven Five Year Plans in India and are now in the 12th Five Year Plan period.

Planning in India cannot be considered to have been a failure though it achievements have, time and again, fallen far short of expectations. With the introduction of economic reforms in the country about two decades ago people have now started questioning the relevance of economic planning in India. The very need for the existence of the Planning Commission is now being questioned.

Whatever may have been the relevance of planning in India during the initial years of the country’s existence, we are of the view that this organization does not perform any significant role in today’s world. In the Planning Commission, as it exists, we have a Division corresponding to each of the Departments of the Government of India. These Divisions in the Planning Commission supports the plan formulation process corresponding to the Annual Plans and Five Year Plans of the concerned Government Departments.

By and large the functions of the Subject Divisions in the Planning Commission are a duplication of what goes on in the Departments and could easily be done away with. The Planning Commission has today become a white elephant without whose intervention the Departments of the Government of India will be able to function with greater autonomy and freedom. The Commission’s job today is only to provide employment to a large body of experts whose interference in the Departments’ functioning only creates more problems than it solves. The Departments will be better off without the indulgence of this super body. The Departments can formulate and implement their own plans and programmes and the allocation of funds for this purpose can be made by the Finance Ministry.

Besides the plan programmes of Central Government Departments, the Planning Commission also overseas the planning process of the State Governments. Here again the super body is nothing more than an unwanted intruder and the State Governments will be happier taking care of their own plans and programmes.

The essential role played by the Planning Commission with respect to Central Plans and State Plans is allocation of funds among State Governments and Departments of the Central Government. This role of allocation of funds can be easily performed by a small unit attached to the Economic Division in the Finance Ministry. The Economic Division in the Finance Ministry is the one headed by the Chief Economic Adviser.

The Economic Division in the Finance Ministry can also play the role currently played by the Perspective Planning Division of the Planning Commission. The essential role here is forecasting of growth rates, savings, investment and so on. Today, Planning Commission does not do much by way of forecasting macro economic variables like inflation, money supply, balance of payments, exchange rates and so on. The Planning Unit in the Finance Ministry should be strong in matters of forecasting all types of macro economic variables. As regards the input-output model this is a practice that has been discarded in most parts of the world.

The Planning Commission as it exists today should be wound up and its essential functions can be carried out by the Economic Division in the Ministry of Finance. This, needless-to-say will also be a major exercise in the process of downsizing of the Central Government machinery.