India-First-Global-Insights-Analysis -Sharing-PlatformIndia-First-Global-Insights-Analysis -Sharing-Platform

What should replace the planning commission?

, August 26, 2014, 0 Comments

indian planning commission-marketexpress-in
Chief Ministers of all states had to fulfill the annual ritual of appearing before the Planning Commission at the time of the Annual Plan discussions where the plan of the state governments were formalized. The Chief Ministers have not always been happy to go to Delhi to meet this objective. As Chief Minister of Gujarat, Narendra Modi would have also, perhaps unwillingly, met the Deputy Chairman of Planning Commission on such occasions – may be about 10 times. He might have concluded on such occasions that this was an unwelcome ritual thrust upon the state governments by the central government. So on his very first Independence-day address to the nation, as Prime Minister, he announced the decision to disband the Planning Commission.

The Planning Commission has had its share of good times and was a darling of our first Prime Minister. Nehru was responsible for setting it up and nurtured it during his term in office.

The Commission did fit in well during the early days of our Republic when the country had a shortage of investment resources to fund its development programmes. But over a period of time and especially since the advent of the economic reforms era this organization started losing its relevance.

There is an enthusiastic debate in the country on what, if at all, should replace the Planning Commission. Before going into this debate let us first examine what were the important tasks being performed by the old Planning Commission. The Commission allocated financial resources to the central ministries and state governments. It prepared the Five Year Plans and Annual Plans of the country and the states. It had a perspective planning division which made long term forecast of growth rates and other economic variables. It had a project appraisal division which examined the suitability of large infrastructure projects to be implemented in the country. The Planning Commission also had a Programme Evaluation Organization which made ex-post evaluation of plan schemes and programmes being implemented in the country. These were some of the important tasks performed by the Planning Commission.

All these tasks undertaken by the Planning Commission were important by themselves. But the question was whether all these tasks were being performed well. Over a period of time all organizations in government set to get bureaucratized. They tend to lose the vitality with which they originally set up to undertake the task. The exercises being performed tend to become routine and gradually lose the charm of originality. This is what happened to the Planning Commission also.

As regards resource allocation to state governments there is already the constitutionally designated Finance Commission to undertake this task. Perhaps what is required is that instead of setting up a new Finance Commission every five years we need a permanent secretariat for the Finance Commission which could have its office where the Planning Commission was housed. The annual ritual of state plan discussions is relevant only if the planning body is able to provide creative ideas to state governments for implementation. In the absence of such creative ideas originating from the Planning Commission it is better leaving it to the state governments to decide what their plans and programmes should be.

Allocation of financial resources to central ministries can be done by a cell attached to the Finance Ministry. As regards schemes and programmes of the central ministries the concerned ministries themselves are in a better position to decide what is good for them and there is no need for a body like the Planning Commission to decide on the issue.

The role of perspective planning or long term forecasting is best undertaken by one or more of the economic research institutions which we have in the length and breadth of the country. Instead of depending on one single forecast, decision making by state governments and central ministries should be based on a multitude of specialized forecasts made by various economic think tanks that are already in existence. The central ministries and state governments should be encouraged to entrust various evaluation and project appraisal studies to the multitude of research institutes we have in various parts of the country.

There was an Economic Advisory Council providing advice to the Prime Minister on various economic matters. We can have in its place a Central Advisory Council which provides advice to the government on economics, technology, science, education, health, social issues, culture and so on.

Even better still, perhaps the best alternative to the Planning Commission may be to have nothing at all to replace it.