Planning the dismantling of a hallowed monolith

India’s post-Independence visionaries had laid down their development blueprint for the country with the constitution of the Planning Commission. The Planning Commission has played a pivotal role in setting the country’s development agenda and monitoring it with ruthless efficiency, a fact amply evident in the success of existing institutions like the Navaratna companies, public sector research and development establishments, India’s world class educational institutions and tipping points like the Green Revolution.

The Planning Commission played its role well during the post-British era because the task of capital formation driving the development agenda lay with the central government. So, public finance and its distribution for central and state governments was carried out by the Planning Commission effectively in the first two decades, even in the face of the numerous political and ideological churnings characteristic of the federal nature of the India polity.

But in the 21st century, capital formation alone is not enough to justify the development needs of the country. Policy makers who ushered in liberalisation in the 1990s had thought that the entry of private financing sources through greater liberalisation of capital flows, regulations and movement of labour could result in faster development.

Greater acceleration
Even though liberalisation did impart some momentum to the economy, the need for greater acceleration to match a growing industrial base, underpinned by the ambitions of a burgeoning middle class, did call for a summary reinvention of a hallowed institution from the Nehruvian era. The Planning Commission’s scope to shape India in line with its economic potential – the country is set to become the second largest economy by 2050 — and assume greater roles in the international arena has come under increasing scrutiny following the ascension of the Narendra Modi government.

The Modi government has decided to overhaul the Planning Commission to bring about in a paradigm shift in the development initiatives of the country. Taking into account the fact that a nation aiming for faster, more sustainable and inclusive growth must have a body to envision planning from a different perspective, this overhaul is the need of the hour.

Besides the Planning Commission’s Five Year Plan outlining the broad strategies for achieving the goals and objectives of the country’s development blueprint, it outlines how the broad macroeconomic parameters are expected to move, and a sector-wise analysis of what needs to be done with growth targets spelt out wherever appropriate. The Planning Commission, in consultation with the Finance Ministry, works on the annual plan only after getting approval for the Five Year Plan.
Noted economist Prabhat Patnaik says that the Planning Commission could still play a role under the new dispensation, but a role different from the one it had earlier.  “This new role can be to provide a counterpoint to neo-liberalism. Paraphrasing Bertolt Brecht’s famous line: ‘In the dark times, will there also be singing? Yes, there will also be singing about the dark times’, one could say: ‘Can there also be planning in the neo-liberal times? Yes, there can also be planning for coping with the neo-liberal times’.”

Patnaik says the Planning Commission can still be bothered with working out ways of preserving what remains of the public sector and preventing the decimation of peasants and traditional manufacturers which neo-liberalism brings in with the greater competition from organised industry. He says it can still play the role of a negotiator between the bourgeois nation state on the one hand and globalised capital on the other (with which domestic big capital is integrated).

Pushing for development
But a wide segment of people vouch for overhauling the Planning Commission to take on the mammoth task of bringing development to every nook and corner of the country. The Committee on Public Expenditure Management headed by C Rangarajan had recommended that distinction between Plan expenditure and non-Plan expenditure should go, and the Planning Commission should take a comprehensive look at public expenditure in key sectors of the economy.

“In fact, within the present structure of the Planning Commission, the federal element could have been enhanced, if, besides central ministers, some chief ministers were also included as members. This would have given it a national character. The current practice of approval by the National Development Council has also not been satisfactory,” Rangarajan has said.

“If the word ‘planning’ is reminiscent of an earlier period, it may be substituted by ‘development’ or ‘growth’. The other two functions performed by the Planning Commission now can be delegated to other authorities in government. The allocation function can go to the Finance Commission and project evaluation can be taken care of by strengthening the ministries. Thus, a National Development Commission or Growth Commission, charged with a mandate to prepare a blueprint with goals and objectives to be achieved over a defined period, may still be the need of the hour. This document can then be discussed by the National Development Council, a political body,” states Rangarajan.

Charan Singh, the RBI Chair Professor of Economics at IIM Bangalore, notes that after the 73rd and 74th amendments to the Constitution more than two decades ago, the relevance of the Planning Commission does not arise. “These amendments seek to empower local bodies like Panchayati Raj institutions and municipal bodies. The key to successful planning is not top-down planning but a bottom-up approach. So, I am convinced that the Planning Commission should have gone two decades ago,”he said.

The infrastructure springboard
The government has said that industrialisation should be given a boost through an infrastructure-backed policy which lays thrust on NIMZs, smart cities, clusters, SEZs and industrial corridors. “After the Mahalanobis model and the first few years of planning, where has the Planning Commission played a role in driving industrialisation or manufacturing growth? The key roles have to be played by the ministries themselves,” Singh says.

We should look at the process of planning from a different perspective, Singh notes. Arun Maira, a former member of the Planning Commission, says that “scenario planning” will be a key tool to predict economic troughs and know what lies ahead.
“Scenario planning is founded in the disciplines of systems thinking. All strong forces that can cause change in a system are considered: economic, environmental, social, and political forces. Conventional economic forecasting models do not include social and political forces because they are not quantifiable. Including only a slice of reality, their predictions can turn out very wrong when excluded forces such as political and social forces affect the economy. Most useful is the ability of systems scenarios to explain to policymakers where the high impact levers are that they can use to change the condition of the system,” Maira says.

Scenario planning was used unofficially in 2005 by a group of international and Indian scenarists to analyse the condition of the Indian economy when it was confidently “shining”. “Scenario planners foresaw three plausible scenarios for India by 2015 depending on the development strategy adopted thereon. They predicted that the Indian economy would grow even by 10 per cent per annum within the next years, but would decline towards 6 per cent if the wrinkles were not managed.”
We have greater macroeconomic stability now than a year ago — on the rupee, the twin deficit front or inflation. If we put in place proper systems of governance and decision-making, this positive sentiment can translate into confidence among businesses to actually invest, experts say, pointing out the need for a national body which may be called the ‘National Development and Innovation Council’ with a three-tier structure to coordinate with regional offices and national, state and panchayat/urban divisions.

Suggestions include the PM and key ministers holding  portfolios like finance, agriculture, environment, energy, commerce and infrastructure with 10 chief ministers being part of the proposed Innovation Council. Full-time Council members have been mooted with a strong secretariat and coordinators for each ministry with a senior bureaucrat monitoring each of them.

Single-window clearance
The body would give primacy to the public-private mode of planning and participation with single-window clearance for largescale project-based investments. Also suggested is public-private and foreign participatory planning in sectoral areas like water, sanitation, health, energy, infrastructure and environment.
A separate expenditure monitoring wing for the planning part has also been suggested for annual, five-year and ten-year time-frames. Experts have been calling for concerted efforts to decentralise planning at every ministerial/departmental levels and create a thinktank style standing body for all of them.
Third party monitoring and evaluation of projects would further boost the Council’s execution capabilities and maintain a lid on costs. Classifying core sector and peripheral areas separately in order to streamline the development agenda has also been suggested.

Bangalore Chamber of Industry and Commerce Secretary General T S Sampath Kumar says that the thinktank proposed to replace the Planning Commission should have new focus, direction and structure to serve as the backbone of decision-making.
“The alternative institution should work in tandem with all states to ensure that economic progress is achieved as per set targets,” Kumar says.
The new nuts and bolts are still piping hot on the anvil for an economic planning machine morphing from a residual Nehruvian “mixed socialist” economy to a full-fledged neoliberal state. As ideas cool down, the machine will need fuel — and direction, at least a sense of it. Consequently, sheer political and economic will, oftentimes lacking in the first 100 days of the Modi government, will need to come into play to future-proof a planning machine still in its nascence.