Ever since the all-powerful Planning Commission was set up in 1950 by a cabinet resolution to assess, coordinate and allocate government’s resources efficiently for social and economic growth, this non-statutory body has often been criticized as a bunch of “arm-chair advisors and ivory-tower experts” who have failed to capture the pulse of ground realities.
With 30 divisions manned by 109 senior officers and staff strength of over 800, the Planning Commission, though lacking any constitutional and legal authority, has been distributing and monitoring plan funds to the state governments and central government departments right since its inception. The panel had been central to the process of projects getting clearance, timely funding and also coordinating with ministries, sectors and states.
However, state governments, mainly those run by regional parties opposed to the political party at the Centre, have rarely been satisfied by the funds allocated to them by the federal government on the recommendation of the planning body, which is not accountable to Parliament.
While many policy-makers and economists have called for revamping the plan panel, mandarins of the erstwhile UPA regime have also advocated a change in the role of the planning commission. Furthermore, recent media reports say that the new government views the Planning Commission as only adding to red tape and as a creature of the old ‘Licence Raj’ serving no useful purpose in the current liberalized economic scene.
Even former Prime Minister Manmohan Singh himself, in his farewell speech, called for a review of the Commission’s role in an increasingly open economy. India’s former Finance Minister P Chidambaram has also favoured downsizing of the Planning Commission and said that the plan panel should be a much more limited body tasked with drawing up prospective plans. At the moment it is too big, flabby and unwieldy, he emphasized.
The extreme opinion currently floating around is about abolishing the planning body, as many believe under the new dispensation of Narendra Modi there is hardly any space for planners devoid of grassroots connects and exposure, as the focus is now more on realistic execution and result-oriented implementation.
While abolishment of the Planning Commission may be a huge blow to the ivory-tower expert community, it is unlikely to happen soon. However, reliable sources say Prime Minister Narendra Modi, who is the commission’s new chairman, would review the planning body’s functioning and opt to restructure it.
The election manifesto of the BJP had also talked about revamping the Commission since it is seen as a legacy of our country’s socialist past. It had said that the Centre should only be an enabler and facilitator for state governments.
For the first time since its inception in 1950, this year the Planning Commission was not involved in the decision making process while finalizing the gross budgetary support for the Indian Railways. Furthermore, the recent decision to give the Finance Ministry charge of allocations for state and central level ministries shows the Commission will not function in its present form any longer.
The fact that Yojana Bhavan has been divested of its financial powers seems to hint at the end of the important role the Commission used to play so far. It also indicates the beginning of the biggest change that the Indian fiscal space has witnessed in decades. Recently, Rao Inderjit Singh, Minister of State for Planning (Independent Charge) made the nature of the likely change clear by indicating that his government was undecided about appointing a new Deputy Chairman for the Planning Commission.
Till May 2014, the key post of the Deputy Chairman was held by Montek Singh Ahluwalia. He and former members of the Commission resigned, vacated their offices and stepped out of Yojana Bhavan on May 27. Most of what were on the Members’ tables have since been transferred to Secretary-level officers posted as principal advisers at the Commission.
As such, currently everything related to the Planning Commission is in a state of flux. The Prime Minister has yet to decide whether he wants to appoint a Deputy Chairman. So far, this has always been a Cabinet-level post in every government.
In view of the aforementioned developments, it is recommended that the Narendra Modi-led NDA government should mull over the following three options while deciding on the future of the Planning Commission: (i) Restructure the Planning Commission or recast its role; (ii) Merge it with the Prime Minister’s Economic Advisory Council; or (iii) Totally scrap the Commission forthwith.
Here, let me elaborate on the scope of each of the above recommendations:
Recasting the role of the Planning Commission:
If the Central government believes that the Commission should be rejigged with a different structure and role from its conventional mandate of allocating funds to states and schemes, then the government should first take away the extensive powers vested in the plan panel.
Since, Rao Interjit Singh has been made the Minister of State for Planning with Independent Charge (MOSPI) under the new dispensation, he happens to wield more powers than the previous ministers. As such, the Commission can be made a part of MOSPI, and the current overlaps between MOSPI and the Commission can be eliminated.
Once that is done, the panel’s traditional role of doing budgetary and Plan allocations can be totally scrapped. The plan panel can then be assigned the task of monitoring implementation of projects. This would mean checking the progress of projects cleared by the state and central governments and also keeping a tab on how much of the allocated money has been spent. It can also review steps required to avert cost overruns with regard to each project.
The government can also do away with Five Year Plans and in lieu have annual plans for quick decision and fast implementation, which can be monitored by the Planning Commission working under MOSPI. The 12th Five Year Plan that started from April 1, 2012 has not made any concrete progress so far.
So scrapping the current Five Year Plan also does not pose any kind of problem. This move will perfectly align with Modi’s mantra, which says India needs implementation and not just planning and vision. Moreover, Modi has always been publicly critical of centralized planning and of one-size-fits all approach.
Merging the plan panel with PM’s Economic Advisory Council:
In 2012, a committee, which was headed by Dr C Rangarajan, had recommended eliminating the distinction between Plan and non-Plan allocations. The forthcoming Financial Budget that will be presented by Arun Jaitley on July 10, 2014 is expected to implement this recommendation for the first time.
As the interim Budget has already transferred most centrally-sponsored schemes to state governments, this time the Planning Commission has no major role to play in the allocation of funds to states. And each state government has made it very clear that they want the new arrangements to be continued and further expanded.
In the above context where the traditional role of the Planning Commission has been scrapped, its importance is on a declining curve. Furthermore, since Modi is against centralised planning he does not want Delhi-driven policies or resource allocations for states, but state-specific solutions.
As such, the Central government can consider merging the Commission with the Prime Minister’s Economic Advisory Council (PMEAC), which was set up in a bid to provide a sounding board for inculcating awareness in government on different points of view on key economic issues. PMEAC has been reconstituted time and again with different organizational structures headed by various economists of recognized international eminence.
The Planning Commission has been the Nodal Agency for the PMEAC for administrative, logistic, planning and budgeting purposes. As the work of these two organizations are closely connected and even seem to overlap in certain areas, their integration will definitely lead to optimization of resource allocation.
Abolishing the Commission:
Lately, because of the growing pitch for federalism, and better Centre-state relations, in certain cases the Planning Commission has been left out of the loop completely where states are concerned. The Finance Ministry has started dealing with the states directly for seeking their demands and for distribution of funds.
The Commission has also been left out from discussions to fix the size of the gross budgetary support as many Central ministries and state governments believe they are much better off without the Planning Commission sitting on top of their heads. Earlier, the figure was generally arrived at after discussions between the plan panel and the finance ministry, with the prime minister taking the final call.
Claiming that the Planning Commission is largely a Soviet era relic and has outlived its utility in the era of a market-driven economy, some say that the plans drafted in the air-conditioned chambers of Yojana Bhawan are more in the air and less on the ground. As such the planning body has become a “good for nothing” commission and this country cannot any more put up with such lavish nonperforming commissions, they argue.
In view of the above, there have been vociferous demands from some quarters for the outright scrapping of this outdated entity. For instance, emphasizing that there is a need to rethink on the need for institutions such as the Planning Commission, economist Arvind Panagariya, who is also a professor of economics at Columbia University in the US, says the Commission should be abolished.
Elaborating further, Panagariya says planning has become a habit in India and this habit needs to be broken. “We are in a market economy. It has to be planned, but not by the Planning Commissions, but by the ministries. It is time for a rethink on such institutions,” he emphasizes.