The Indian government plans to replace the Planning Commission with a more contemporary think tank. Over the next few weeks, we will present views of experts from various stakeholder groups – private sector, civil society, academia, media and the government – on what should be the character and functions of the new body.
In this post, Pranab Bardhan – Professor of Graduate School at the University of California, Berkeley – provides a perspective on some of the issues involved in replacing the Planning Commission. In his view, several functions that were performed by the Planning Commission can now be located in other existing bodies. He outlines the functions that the new body should perform and contends that it needs to be more than just a think tank.
In his address to the nation, from the ramparts of the Red Fort on India´s 68th Independence Day, Prime Minister Modi announced his government´s decision to abolish the Planning Commission:
“I believe that when Planning Commission was constituted, it was done on the basis of the circumstances and the needs of those times…but the prevalent situation in the country is different, global scenario has also changed, governments are no longer the centre of economic activities, the scope of such activities has broadened... therefore within a short period, we will replace the planning commission with a new institution having a new design and structure, a new body, a new soul, a new thinking, a new direction, a new faith towards forging a new direction to lead the country based on creative thinking, public-private partnership, optimum utilization of resources, utilization of youth power of the nation, to promote the aspirations of state governments seeking development, to empower the state governments and to empower the federal structure.”
The Planning Commission performed the following functions;
a. Preparation of the Plan Document
b. Allocation of funds between: (a) states and centre; and (b) central ministries
c. Appraisal of all expenditures of the central ministriesd. Mediating between states and central governmente. Providing independent opinion on all project/ programme proposals of central ministriesf. Monitoring progress of central government schemes
g. Mediating between central ministries on issues of a crosscutting nature
In view of the above;
Q. Of the functions which need to continue to be performed which should be retained in the new institution and which can be located in other existing bodies? Reasons may please be provided.
- The allocation of all funds between the states and the centre should be largely handed over to the Finance Commission, which needs to be a permanent body (with membership regularly rotated) instead of being periodically appointed. The mandatorily appointed State Finance Commissions (often disregarded or rendered dysfunctional in reality) should decide on allocations between the state government, panchayats and municipal bodies, and should be institutionally linked up with the national Finance Commission.
- The negotiations and deliberations on inter-state issues (including allocations) should be done at the Constitution–mandated Inter-state Council (already in existence since 1990), suitably rejuvenated. This body is the appropriate forum for meaningful discussions on the ‘federal structure’. The permanent Finance Commission should have regular interchange with this Council before announcing their periodic allocations.
- The allocation of funds between central ministries should be the responsibility of the Ministry of Finance.
- Appraisal of expenditures and evaluation of programmes should be done by a permanent Expenditure Commission in collaboration with a permanent Independent Evaluation Office.
Q. Are there other (new) functions that should be performed by the new institution? Please specify with reasons.
Nostalgia for the glory days of the Planning Commission or the largely false cliché that a market economy does not need planning should both be avoided. A statutory body replacing the Planning Commission should be called something like the Long-Term Development Commission (LTDC). Its main functions will be to:
(a) study the long-term investment goals of different sectors of the economy in terms of a coherent framework of the economy as a whole;
(b) sort out inconsistencies and trade-offs in moving towards such goals;
(c) work out the modalities of balancing conflicting objectives for large projects — for example, how to reconcile the often conflicting needs of high growth, environmental challenges, job creation, macroeconomic stability, Keeping the rise in social, economic and regional inequalities in check, etc.;[Let me elaborate a bit on this need for balancing with an illustration. Caught in the cross-fire between corporate lobbies, real estate and mining tycoons on the one hand and social activists and judiciary on the other, in recent years official land and environmental clearances for infrastructure and other development projects have become extremely slow, non-transparent or erratic (lurching from one side to the other — in the current regime the signs are that it’ll now lurch to one extreme). Under the circumstances it is imperative to have an expert body, beholden to neither side, which will carefully and transparently examine the merits and demerits on both sides and come to a balanced assessment of the social costs and benefits for each major project and make that assessment publicly available.]
(d) formulate ‘indicative’ 20-year plans on issues particularly requiring broad long-term visions — like those relating to the looming problems of energy, water, urban infrastructure and climate change; and,
(e) work on the conceptual and design problems of a coordinated and comprehensive programme for social protection for the citizens.
Q. In order to perform the functions envisaged for the new institution, what should be its legal position, character and structure? What should be the composition and staffing of the new institution?
- LTDC, while doing a lot of wide-ranging and long-term thinking, MUST NOT be just a think tank, of which there are quite a few in Delhi. To get political attention, its head should be a member of the cabinet, where some of its occasional reports will be submitted and discussed. The cabinet then should present to the parliament a statement on what action has been taken on the basis of these reports.
- In view of the ongoing and somewhat unhealthy concentration of power in the Prime Minister’s Office (PMO), it is important to ensure the independence of the LTDC to critically examine the long-term implications of all major government policies. In choosing the members of LTDC one has to keep in mind that the respectability of LTDC will depend on, apart from their expertise, their demonstrated ability to make critical judgments devoid of narrow partisanship. The tenure of the members should be durable, and their critical examination of government policy should be open for discussion in the parliament and the media. The administrative staff of LTDC should not be transient like in the ministries; as befitting an organisation given to thinking long-term, one should devise ways to ensure their spending a large part of their career there.
- If the Inter-state Council approves, there should be equivalents of LTDC at the state levels, and scope for regular communication and exchange of ideas between the LTDC’s at different levels. The state-level body should be encouraged to carry out experiments and trial-and-error exercises on a small scale with new policies, the results of which could then be shared with the national body.