Once someone asked the late economist Raj Krishna what he made of the approach to the sixth Plan (1980-85). Krishna replied, “This is not the approach to the sixth Plan. This is the sixth approach to the same Plan."

Krishna was among the first economist to openly criticize India’s disappointingly slow growth rate under the planning era. It was in this regard that he coined the term Hindu rate of growth to characterize the sub-4% growth inertia India suffered from in the 1970s.

In a nutshell, that comment tells us why Prime Minister Narendra Modi has announced that the Planning Commission should be scrapped. The Soviet-style central planner was given the cabinet nod in 1950 under the Nehruvian vision where the public sector single-handedly did everything in the country. However, even before the crisis of 1991 forced the government’s hand to liberalize and deregulate the economy, the commission had its flaws. The plan process was too lengthy and yet yielded incremental improvements over five years. Moreover, post liberalization in 1991-92, there was a serious question mark over the very existence of the institution.

Perhaps it was persisted with because it provided an anchor to a whole generation of politicians and planners for whom it was difficult to comprehend how things may pan out without centralized planning. The political masters had difficulty in accepting the transition to an indicative role for the commission. Writing the preface for the eighth Plan (1992-97), Pranab Mukherjee, who was the deputy chairman of the Planning Commission at the time, stated, “Centralized economies are opening up to free market forces and competition... This tidal wave of change has not left India untouched. In these trying and turbulent times, we have to respond and adjust to the changes quickly and creatively... In line with the changed circumstances, we have redefined the role of the Planning Commission."

However, the redefinition really did not work. Part of the problem was the frantic change in the nature of Indian politics. The 1990s saw several new parties gain foothold in different parts of the country, thereby bringing down the curtains on Indian National Congress’ one-party rule across the country. This essentially meant two things. One, states ruled by regional favourites had their own ideas and demands and grew increasingly restive with the overly centralized role of a Planning Commission. It was justifiably asked why an elected chief minister had to visit Yojana Bhavan in New Delhi with a begging bowl or why indeed he must follow the centralized vision. The other problem was that of timing. Elections started happening all round the year. And neat clean worksheets of pre-planned growth started looking very messy. This resulted in glaring oddities like the ninth Five Year Plan (1997-2002) getting approval well into the third year of its existence. It was no surprise that planning targets were rarely met. The process of making the plan and getting it approved was so onerous and time consuming that it looked like a self-goal.

The scrapping of the Planning Commission is perhaps the most concrete policy step announced by Modi in his maiden Independence Day speech. What is important to note is the clear break from the past that the Prime Minister emphasized. “Sometimes it costs more to repair the old house, but, it gives us no satisfaction. Thereafter, we have a feeling that it would be better to construct a new house altogether and therefore within a short period, we will replace the Planning Commission," he said.

It is not very clear though what the new institution would look like. Modi threw in a lot of charming words such “a new soul" to assure doubters that the replacement would be much better than the incumbent. But frankly, that bar is set too low. In fact, it would be grossly missing the point if the new government tried to have another body that pontificates on how this large country should develop.

The truth is India has a democratic process by which the electorate can give its verdict about the kinds of policies they prefer. Once that is in, it is for the government to perform. And that is one area where successive governments have failed. The public sector is riddled with inefficiencies and rent seeking – both at the central and state government level.

What we need is not another commission for the country, rather one for the government. The central mandate of the new body should be to reduce inefficiencies in governmental functioning. It should not be anchored in any ideological traps—socialist or capitalist. It should not tell the government what to do. It should advise on how to do it effectively.

Close