The days of the Planning Commission are numbered with the BJP-led government launching consultation process to replace the Nehruvian era institution with a body more suited to contemporary economic realities. Questions and doubts on the utility of an institution that symbolizes a top-down model of economic governance were raised even before Prime Minister NarendraModi’s Independence Day speech earlier in August this year.
In 2009, the then Prime Minister Manmohan Singh had suggested that the Planning Commission had outlived its utility and asked the members to consider changes to make it more relevant. Even before, in the 1980s, Rajiv Gandhi had ridiculed the Plan Panel and their way of functioning.
More recently, Modi met state chief ministers and hinted at a body composed of the Prime Minister and key ministries, chief ministers, bureaucrats and technocrats and referred it as ‘Team India’. While no concrete form and shape has emerged out of these discussions, the core idea of any new body replacing the Planning Commission likely will give the states more autonomy in policy making. The centre’s role likely will shrink to policy direction or what is referred as ‘indicative planning’.
The Planning Commission, or more generally known as the Plan Panel, was set up by a simple government resolution in March 1950 at the behest of first Prime Minister Jawaharlal Nehru who thought a Soviet-style planned economic governance will usher India towards rapid industrialization and development.
In its 65-year-history since then, the Commission has initiated 12 five-year plans and six annual plans involving fund outlays of over Rs 200 lakh crore. The prime minister is the ex-officiochairman of the Planning Commission, but the Commission is actually run by the deputy chairman (who enjoys the rank of Cabinet minister), and full-time members of the Commission.
Currently, the position of the deputy chairman remains vacant, as the NDA government has not made any appointment. Cabinet ministers of key ministries also act as ex-officio members of the Commission. The full-time members are often experts of various fields like Economics, Industry, Science and General Administration. At present, ministers representing finance, agriculture, home, health, chemicals and fertilizer, IT, Law, Human Resources, Planning ministries are ex-officio members.
The Commission broadly works through its two divisions: General Planning Divisions, and Programme Administration Divisions. Overall, the Planning Commission works under the guidance of the National Development Council, the country's prime policy-making body.
The Commission advises and provides guidance for the formulation of India's Five-Year Plans, Annual Plans and state government plans. It also monitors plan programs, projects and schemes as detailed in the March 1950 Cabinet resolution. In a nutshell, the Plan Panel is charged with the responsibility of making assessment of all resources in the country, augmenting deficient resources, formulating plans for the most effective and balanced utilization of resources and determining priorities.
Over the years, the Plan Panel has faced criticism on multiple fronts. A very common criticism was that it was a ‘top-down‘ economic governance model with no structured mechanism for regular engagement with states and consideration for their say in policy matters. The Plan Panel’s long-term vision for states was often different from the agenda of the popularly elected government in the state.
As a forum where Centre-state and inter-ministerial issues will be worked out, the Panel rarely delivered effective results or solutions. The implementation and evaluation of projects remained weak and poor. Rigidity in approach defined the little consultative approach the Panel pursued and states hardly had any latitude in the implementation process.
In other words, the Commission became another relic of command economy unsuitable to cater to the economic assertiveness of states. In fact, economist Milton Friedman who was invited by Nehru to study the mixed economy famously observed about the Commission that it has pushed back India’s development process to centuries.
It is not very clear at the moment, how the new body will shape up and referred as. However, during his meeting with the chief ministers, the Prime Minister gave a broad outline of his vision. The new body likely will perform three main roles. First it will serve as a solutions exchange and repository for ideas that have been successful in different aspects of development in various states and districts and in other parts of the world. Second, it will provide ideas for integrated systems reform; and lastly, it will identify new and emerging challenges and provide solutions to preempt them.
The only cause for concern, however, is that India does not need another behemoth of an institution filled with technocrats to replace the Commission. While the idea of cooperative federalism and indicative planning is welcome, the Nehruvian idealism of having a top-down politico-economic vision with a long-term focus on guiding the nation remains relevant.