BackThe end of Planning Commission
The Planning Commission is a relic that should be discarded immediately
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The recently created Independent Evaluation Office (IEO) has submitted a report to Prime Minister Narendra Modi that recommends scrapping the Planning Commission. If that happens, as it should, it will be a coup de grace for a system of ideas and experiments that did not work in India, or anywhere else for that matter.
The Commission—an extra-constitutional body created by a Cabinet decision—was at the centre of a web of a system of controls that choked the Indian economy for almost four decades. Its other harmful legacy was that of a template for other extra-constitutional establishments (for example, the National Advisory Council) that came to lord over elected governments and states.
The IEO said that since state governments have better information about what is required at the local level, they can carry out investments in important projects on their own.
Three things marred the prospects of planning in India. First, the intellectual framework of the planning process—seen from the vantage of any variant, the Mahalanobis-Feldman, Harrod-Domar or even Karl Marx’s Department I and Department II dualism—relied largely on physical balances in the economy instead of working through prices. Second, coherence in planning, especially if investments are to be made on the basis of a mathematical model requires ruthless execution of plans or a coherent system of allocation- cum-investment. India had neither: its leaders were either democrats by conviction or were subject to constraints of democracy. Finally, the huge diversity of the country made centralized planning an incongruity. It was only a matter of time before the process became incoherent.
In practice, there were only two plans that were intellectually underpinned by a planning model: the second and third Five-Year Plans. The first plan was basically an assessment exercise. After the third plan—plan holidays and all—ad-hocism prevailed until, of course, the private sector gained a bigger role than the state-sector. The later plans just became collections of targets and wishful thinking.
Understood from this perspective, the Commission was a national investment commission—tasked with deciding on investments. Instead, over time, the Commission turned into a spending commission, defeating even its original purpose. Instead of rational investments, it became an organization dispensing “favours": an airport here, a project there became the norm instead of the exceptions due to political exigencies.
There is a strong case for strategic planning in India—say over a 20 or a 25 year time horizon. This involves, for example, thinking and planning about energy security and national security in changing geo-strategic conditions. There are other issues that need equal attention as well. But this requires an organization endowed with a different talent pool and imagination. The Planning Commission, staffed by civil servants and cherry-picked members, is incapable of fulfilling this role.
The IEO says the task of long-term economic thinking and coordination can be carried out by a think tank in the government. “This institution should be staffed with experts with domain knowledge and kept free from a ministerial administrative structure. It is also recommended that it should have full-time representation of major trade and industry organizations, civil society representatives, academics etc., so as to capture their concerns and benefit from their expertise in formulating long term strategy."
Hence the IEO’s suggestion for creating a Reforms and Solutions Commission (RSC). This is not a useful idea. Most of the roles of a RSC—as a repository of successful ideas, experiences from different states and identifying new challenges—can be undertaken by different ministries. An RSC, if created, will become another collection of secretaries and members who write reports that no one reads.
The idea of planning had meaning at one point in India’s evolution as a nation-state. The process largely led to mistakes, an important part of learning. But it was costly learning. India is far more mature now and the discarding of an institutional relic is part of learning too.
Was planning a costly mistake for India? Tell us at views@livemint.com
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