India’s Planning Commission has left the building—hopefully not forever

The planning commission made policy for all of India.
The planning commission made policy for all of India.
Image: AP Photo/Rajesh Kumar Singh
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So for the first time since 1950, India does not have a Planning Commission. The rooms of Yojana Bhavan, the building that houses this ode to a socialist economy, might still be populated. But that doesn’t mean much.

Technically, the Planning Commission comprises of the powerful deputy secretary and the various members. The denizens of Yojana Bhavan are merely the secretariat to the Commission. They are all jobless, as of now.

The Narendra Modi government may not have formally rescinded the March 1950 cabinet resolution setting up the Planning Commission, but by not naming a new commission, even a month after taking over, it has indicated that it has little use for the body that dominated the commanding heights of the economy for 64 years. Already one of its central functions—plan allocations in the budget—is being handled directly by the finance ministry. It was rather ridiculous for one body to sit and determine how much funds ministries and states should get and what they should spend it on.

In this 1959 photograph, Che Guevara of Cuba is seen in talks with members of India’s planning commission
In this 1959 photograph, Che Guevara of Cuba is seen in talks with members of India’s planning commission
Image: AP Photo

This is not the first time a government has been dismissive about the plan panel. It was expressed in far more contemptuous terms by Rajiv Gandhi, who ridiculed the Commission as “a bunch of jokers” (incidentally, former prime minister Manmohan Singh was the deputy chairman at the time). But he stopped short of dismantling it. None of the post-1991 governments questioned the Commission’s relevance. The closest anyone came to it was the Bharatiya Janata Party (BJP) which, in its manifesto of 1998, said, ”the Planning Commission will be reformed and reorganized in light of the changing developmental needs of our country”. However, the revamp plan drawn up by Jaswant Singh, the deputy chairman during its 13-month first tenure, only attempted to expand the Commission’s remit. Subsequent BJP manifestos remained silent on this matter.

But the idea that the Commission needs to be recast in a different mould stayed. Singh’s immediate successor, K.C. Pant (in the National Democratic Alliance government of 1999), roped in private consulting firms to suggest what the Commission’s role should be. In the United Progressive Alliance’s (UPA) second stint, Manmohan Singh tasked member Arun Maira to suggest how to overhaul the Planning Commission as a Systems Reform Commission. We never got to know what this meant, though Maira has been vocal in complaining that nothing got done. Nevertheless, the proposed name change itself was a major gain; it showed growing acceptance of the irrelevance of the Planning Commission in a liberalized era.

So, the Modi government’s failure to name a new Commission is welcome. In fact, it is high time the cabinet passed a resolution quashing the 1950 one.

But should all the economist-bureaucrats in Yojana Bhavan be given a golden handshake and the piece of prime real estate be turned into a money-spinning office complex? (Incidentally, this was a suggestion given in the late nineties by a Congress ideologue before he took an ideological left turn.)

Perhaps not. Over the six decades of economic management, the Planning Commission has built up some expertise and resources which could be put to good use. What could these be? Here are four possibilities:

  • It will be silly to assume that economic policy making will be done in a vacuum, without any forecasts and projections on macro-economic indicators. Sure, there’s a chief economic advisor and a planning unit in the finance ministry but that need not preclude an independent thinktank of sorts that will monitor economic developments, assess their impact on India and provide intellectual inputs for economic policy. During Pant’s stint as deputy chairman, a Delhi-based consulting firm, ACOR, had suggested recasting the panel along these lines, with experts on contractual appointments.
  • Why not, as the former disinvestment minister Arun Shourie suggested in a recent newspaper interview, replace the Planning Commission with a Reforms Commission? There is a slew of second generation reforms that are needed; there could be many more that are not evident right now. A Reforms Commission can suggest how to prioritize reforms, how to implement them and also help in the political management of reforms. It could be something similar to the Productivity Commission of Australia which its website describes as the “government’s principal advisory body on all aspects of microeconomic reform”. Its recommendations, which cover both private and public sector, are based on extensive research and public enquiries.
  • Another option could be to have something like the Congressional Budget Office of the United States. The CBO, though it is part of the Congress system, provides independent assessment and analyses of the economic and other costs of every legislation. Its recommendations are taken with utmost seriousness. This is something that is completely missing in India. There is hardly any impact analysis of laws and the result is that the government is ill-prepared for the costs—economic and non-economic—that surface at the time of implementation. India sorely needs a body that assesses the impact of our multiple regulations and laws both before they are passed and periodically after they are implemented.
  • We have seen enough examples of inter-ministerial wrangling making for messy policy, policy paralysis and implementation problems. The Prime Minister’s Office is supposed to sort these issues out but sometimes it may need some expert inputs to work out a compromise. For years, the Planning Commission has played a coordinating role between ministries as well as between the Centre and the states. Why not institutionalise this in a new organization?

A body that replaces the Planning Commission can do any one of these or a combination of these. The basic idea should be that the idea of central planning is anachronistic and contradicts the spirit of a liberal economic order. It’s time to make a clean break from the past.