We mustn't allow Modi to scrap the Planning Commission
Ever since the new government came to power, the future of the Planning Commission, a body that symbolises the economic structure of our country, has become a subject of intense speculation. With the BJP in power, Nehru's economic legacy is being dismantled. One of the first acts of Prime Minister Narendra Modi was to announce the unceremonious shutting down of the Planning Commission - that venerated pillar of old nation-building - and then to announce the proposal to set up a "Niti Ayoga". A recent circular directed all major ministries and departments to furnish their plan budget estimates for 2015-16 directly to the finance ministry, marking the formal shift of responsibility of determining annual plan expenditure from the Planning Commission to the ministry.
Every institution has its own inherent mechanism that allows it to evolve over time. Since Planning Commission has been constituted, it has also evolved according to the requirements of time. Planning Commission has been holding discussions with stakeholders on PPP projects on power sector, infrastructural sector to name a few. The commission held discussions for skill building in schools with stakeholders at various fora. Therefore, to assume that Planning Commission is immune to changing needs is not correct. It is not that the commission has not realised its maladies. It has started taking corrective measures by introducing greater stakeholder participation, and identifying critical intervention areas such as improving business regulatory environment and human asset environment for enhancing manufacturing.
Yes, there is ample further scope for improvement and those areas need to be identified and strengthened to make it an effective mechanism in the process of good governance. The commission should be allowed and allowed to evolve with the needs of the economy, and its actions must be open to public scrutiny. If the need be, Planning Commission can be made answerable and accountable to Parliament. Modalities in this regard can be worked out. Of course, detailed examination is required examining the pros and cons of bringing the commission under Parliamentary control.
Planning Commission has been perceived by many as an instrument of centralisation against the spirit of federalism. This is a wrong perception that the Planning Commission has one framework for all the states or stakeholders. In fact, the ministries have such a mindset. The commission in its right has insisted that you must have an objective method of allocating funds. Like, for education, it is the extent of deprivation of education in a state that should drive the allocation of funds. All this straight-jacketing emanates from the ministries. It doesn't come from the Planning Commission. Rather, financial planning by the ministry of finance will violate the spirit of an independent view on allocation of funds in light of competing demands between ministries (and states), need for planning body to assess appropriate schemes and to have an integrated view of the economy.
The Planning Commission was set up by a resolution of the Government of India in March 1950 in pursuance of prime objectives of the Government to promote better standards of living. India as a state is not matured enough to move away from economic and investment planning and to completely shed the welfare character of the state. Fruits of development are yet to reach millions.
The prime minister is pushing hard for the new body but there is no clarity when the new body will take shape. There are many unanswered questions. Will it mean the end of the planning process itself? If not, who will formulate and monitor the five year plans as the Planning Commission was doing? What will happen to the 12th plan document? How will plan fund flow from Centre to the states? Who will answer? As Modi is discovering, the fate of the Indian economy and the country's planning shall depend on the charity of the private sector.
Planning Commission is not only a fund allocator and target setter but also facilitates, within an institutional framework, the dialogue process, cutting across party lines, to set a national goal. There is no doubt that, if reformed effectively, the Planning Commission can meet the requirements of the new 21st century. Even in a market-oriented economy, a body such as the Planning Commission can have a useful role to play.
The NDA Government should work closely with a strengthened Planning Commission, the tools and functions of the commission can be restructured, and the idea of abolishing the Planning Commission should be dropped. When nearly half of the states are opposed to the idea, the Centre should not press it further as the essence of federalism lies in consensus and not in coercion. Doing away with the Planning Commission means diluting the spirit of federalism and cutting the bridge that connects the Centre with the periphery.