By Baisali Mohanty

Edited by Nandita Singh, Senior Editor, The Indian Economist

Is planning essential for the development of the nation? Should the planning commission be then the responsible body for undertaking planning, and what precludes effective planning? As the Modi government has taken a stand on revamping the planning commission, it brings us an opportune moment to reflect upon the relevance of the institution in the context of a rapidly changing Indian economy and society.

As the debate evolves, anticipations about the fate of the planning commission drive us into oblivion. Some believe that it should be shunned from its roots, while others articulate the need for a substantial restructuring of planning in India. These divergent views urge us to think deeper about the role, relevance and utility of the commission. Informed views will keep speculations at bay.

Why ‘plan’: Is Planning a Pre-requisite for ‘Development’?

While the discourse on the relevance of Planning Commission has garnered substantial vigor, the essentiality of Planning as a pre-requisite for growth and development of the State acquires huge importance.

As aptly put forward by Ashok Nag, the state being defined as one of the most complex organisation structures invented, nurtured, used and abused for and against its own fellow human beings. It is, therefore, a pipe dream to think that such a complex organisation should not embark on a detailed plan about its future activities. However, for such a plan to be effective, the planners must understand the emerging possibilities that the future beckons and the means available to bring to fruition such possibilities.

Planning emerged since the idea of a state has continued to bother the nationalist leaders. However, conceptualisation followed only a decade from the evolution of independent India.

It was not before the formation of the National Planning Committee in 1938, first initiated by Netaji Subhash Chandra Bose when he was the Congress president, and later formalised in 1950 with Nehru as chairman, that India witnessed the conceptualisation of the idea of planning in the political arena. This left the process of planning enmeshed into the Indian political arena. The very process of planning became a means for determining priorities on behalf of the nation. As early as the 1940s, planning has emerged as a crucial institutional modality by which the state would determine the material allocation of productive resources within the nation – a modality of political power constituted outside the immediate political process itself.

In order for the post-colonial state to gain legitimacy, it had to be dependent on what Hegel concedes as the ‘universal rationality.’ Hegel stresses upon containing ‘universal rationality’ through the dual mechanism of bureaucracy as the universal class, and the monarch as the existing will of the state. Planning pronounced itself in the domain of rational determination and pursuit of these universal goals. It was a bureaucratic function, to be operated at the level above the particular interests of civil society, as argued by Partha Chatterjjee. It was in planning, above all, that the post-colonial state would claim its legitimacy as a single will and consciousness – the will of the nation-pursuing a task that was both universal and rational: the well being of the people as a whole. It is in its legitimising role, therefore, that planning constituted a domain outside politics, but was also used as an instrument in the political domain.

With this line of thought, the country set upon forming the Planning Commission in India on 28th February 1950 to formally inaugurate the planning process in India. The Planning Commission in India was set up as a replica of the Gosplan/state planning committee of Soviet Russia. The ministries, the Reserve Bank of India and the central statistical organisations have come to be regarded as the extended arms of the planning commission, at variance with the approach of keeping the ministries at arm’s length distance.

 Important to note here is that the above mandate was articulated mainly in the backdrop of compelling factors like the lack of coordination between centre and the states on development issues, integration of new states in the polity of India, inflationary pressures inherited from the war, and food deficiency aggravated by partition, to name just a few. The constitution promulgation ran parallel to the formulation of the planning commission in India. The constitution in India had wisely included Planning in the concurrent list. Over the years, while the patterns at large have broadened and liberalised, the fundamental nature of centre – state relations in planning has not changed materially.

Clearly many of these reasons were unique to a fledging economy, and hence the government resolution conceived a top – down approach to planning that envisaged a stronger central government.

 In the 1950s, there was a broad consensus on a ‘commodity – centred’ approach. That is to say, everyone agreed that more goods were preferable to lesser goods, and a higher level of capital stock per worker was necessary for an improved standard of living. The two objectives, which broadly went about shaping the planning process in India, were accumulation and legitimisation, which had two implications for planning in India. On one hand, planning had to be a way of avoiding the unnecessary rigors of an industrial transition insofar as it affected the masses residing in Indian villages. On the other hand, planning was to become ‘a positive instrument’ for resolving conflict in a large and heterogeneous subcontinent.

The Planning Commission was brought to life to formulate ways of efficiently increasing the living standards of people at large. At the apex of the planning system, the commission was devised by a group of experts capable of charting out the path of development. It was further suggested that the body would be responsible for the material, capital and human resources of the country, including technical personnel, and also had the responsibility to investigate the possibilities of augmenting those resources, which were found to be deficient in relation to the nation’s requirement. It was also to formulate a plan for the most effective and balanced utilisation of the country’s resources. The Planning Commission was required to make recommendations to the cabinet. In framing its recommendations, the commission was supposed to act in close understanding and consultation with the ministries of the central government and the government of the states, while the implementation of decisions rested upon the central and state governments.

The formulation of the five-year plans and annual plans based on the commission’s suggestion was an important function of the planning commission.

 Context: Mobility of the planning procedure

The role of Planning Commission can be broadly gauged by deploying these two lenses, as suggested by Mihir Shah: Potential Positive Power and Potential Negative Power. He goes on to say, both the PC and FC stake high claims on PPP and PNP. This comes out more significantly on a brief survey of the five-year plans over the years.

As aptly connoted by A. Mazoomdar, the idea that an economy as large as India could be effectively industrialised and its agriculture modernised within a space of thirty years or so, raising average living standards from abject poverty to tolerable levels, has failed.

The early FYPs seemed to have not taken a note of the great regional variations. However, though the economic dualism has found a space in the subsequent plans, its absolute implementation has hardly been understood. From the second plan itself, the rapid rise of import demands came as a shock for the planners, which indicated that capital inflows on concessional terms would be critical for sustaining the industrialisation effort.

Several scholars hint at tracing the decline of planning to the1960s, when in the aftermath of the droughts of 1965-67, the war with Pakistan and the resulting inflation, planning as a system of working out inter-sectorial balances was effectively given up. This period witnessed heavy inflationary and balance of payment crises, which led to the suspension of medium terms planning for three years. In these circumstances, the planning commission reconstituted itself with professor D.R Gadgil as the Deputy Chairman, however, as represented by the fourth plan, the planning process stepped into a new crisis that continues to persist till date.

Meanwhile, the results of the 1971 population census revived concerns about the effort of demographic trends on the growth of per capita income and the reduction of under-employment. Indian economists initiated the worldwide debate on the extent and persistence of poverty. Redistribution of incomes, employment creation strategies and the basic need approach became a part of the vocabulary of international discourse.

In the eighties, the main issues facing the planners were the fact that the number of people below the poverty line remained at an unacceptably high level; the growth of agriculture, especially food grain output was apparently leveling off; and sections of Indian industry established in the sixties faced technological obsolescence. In addition, the view long espoused by the World Bank that the controls over industry were a critical factor constraining the growth of this sector, and that a higher overall growth rate was attainable through policy changes, gained influential adherents in the government. These concerns have been major determinants of the priorities reflected in the sixth and seventh plan.

The power increasingly lay with the hands of the prime minister’s office and the ministry of finance.

With the economic reforms of the early 1990s, the commission was rendered defunct, the then Prime Minister, Rajiv Gandhi, dismissing the body as a ‘bunch of jokes.’

 Several factors behind this abysmal failure include:

a)    Planning authorities are inefficient in gathering relevant information
b) By the time they respond, the underlying situation has changed
c) When the public agencies through which the plans are to be implemented do not have the capacity to carry them out, the private agencies combine in strategic ways to disrupt the expectations about their behavior, which the planners had taken as ‘parametric’.

The premise is that of the separation between the planner on one hand and the objects of planning on the other, the latter consisting of both physical resources and human economic agents. Information is precisely the means through which the objects of planning are constituted, which otherwise remain alienated from the planner and the process. Thus, the non-existence of information results in the non-recognition of those entities in the planning process. Therefore, planning as the concrete embodiment of the rational consciousness of a state promoting economic development, can proceed only by consulting the objects of planning as objects of knowledge.

Present Scenario: How apparent is the need for change?

The question that often leaves us tongue-tied is not whether or not we need Planning, but whether the most effective place to do planning is in a government-centralised bureau or at the level of the firm. Today, most economists are skeptical about the ability of a centralised bureau to do effective planning. The above words by Joseph Stigletz, seem to sum up for us the biggest dilemma that the government of the day faces.

The mode of centralised planning in a market economy has been long debated in the wake of the reforms launched in the nineties to liberate the economy from licensing and controls. The eighth plan confirms this by stating clearly in its preface: “The Plan is indicative in nature.” That planning now has to be primarily indicative, and that the state can at best be a facilitator for private enterprise, was reiterated in the two plans that followed- the Ninth and the Tenth. Hence, the Eighth Plan is a “Plan for managing the change, for managing the transition from a centrally planned economy to a market-led economy without tearing our socio-cultural fabric.” As connoted by V.M Dandekar, it is time to realise that our ‘socio-cultural fabric’ is essentially anti-market.

With liberalisation, the private sector has emerged as the primary sector providing investments at large. Meanwhile, the public sector has taken a backseat. Now the Public – Private Partnership has turned into the most important vehicle for taking initiatives in development. As Amresh Bagchi concedes, the consequences of these transformations in the planning process can be broadly classified into two: The role of planning has improved manifold, now dealing mostly with the distribution of information, which is a necessary pre-requisite in both private and public sector. Secondly, it has resulted in the growing realisation that even in a market economy, the state has a vital role to play not only as a facilitator, but also as a provider of basic infrastructure, physical, social and financial.

Not only does planning have to do with achieving desired objectives, but as a central agency with the requisite expertise, it also provides a set of parameters to guide action in all sectors. Another significant role played by planning is that it influences the behavior of both public and private agents in order to achieve public goals through “prescription” such as, by suggesting appropriate tax policies and measures to create incentives for economic agents to save and invest, to protect the environment, promote employment etc. The five-year plans are replete with such prescriptions, to which the planning commission can contribute valuably by spelling out the choices in critical policy issues like in goods and service tax. Thus, planning can be helpful in a market economy by providing “indication, coordination and prescriptions,” which has also been acknowledged in avowedly market-oriented countries like France and Korea.

While setting the stage for the reconfiguration of planning in a rapidly privatised sphere, V.M Dandekar critiqued the earlier process of Indian planning on three particular features based largely on planning methodology and the planning process. These are:
1. The use of sophisticated mathematical models to ensure inter-sectorial consistency among production targets set by the plan
2. Duplication of the jobs of central ministries and the states by setting up budgeting, which in the absence of annualised break-up of targets set in the plan, ends up compromising the goals of the plans in the most arbitrary way. As suggested the nature of planning needs to be in pace with the macro-level demands hinging upon the dual ideals of growth and enhancing economy.

Certain positive roles played by Planning Commission off-late can be summed up as: one, pioneering an inclusive planning process; two, facilitating and mainstreaming reform, especially emphasising the principle of subsidiarity, while recognising the deep diversity of India; three, coordinating across, if not breaking down silos; four, being the spokesperson of the states at the Centre; and five, arbitrating disputes by taking a more long-term and holistic view of issues.

The 12th Plan process saw a completely unprecedented architecture of plan formulation. For the first time in the history of the Planning Commission, the 12 working groups on water, rural development and panchayati raj, were chaired by eminent experts from outside the government, and included the best minds and practitioners from across Central and state governments, academia, research institutions, industry, civil society, and panchayati raj institutions. It was clearly recognised that all wisdom does not reside within the government structure, and that the best plans, programmes and policies could be made only with the active involvement of those with an outside perspective. However, numerous lacunas also find their place within this approach, reflected in the lack of accountability, state-centre differences, negation of states in the planning process, duplication of work, defects in the composition etc.

Conclusion: Looking for a safe future.

The arrival of the new government in Delhi in May 2014, has resurrected fresh dynamics in the debate on the future of the Planning Commission in India. The question that looms large is whether we need it or not, and if yes, then what shape should it take.

Today’s age is wrought with speculation about the role and relevance of many well-rooted institutions, and one such body is the Planning Commission of India, which for the past 64 years has steered the country without a constitutional or statutory standing.

By its own admission, the planning body should have been engaged in indicative planning since the eighth plan, but far from it, the commission remained the sole arbiter in the allocation of finances to the states and central ministries, smothering the spirit of federalism in the process. The argument, as has been expressed by many, is that since the states are not given a say in their own development, can one really hold them accountable when development is slow, or in some cases, regressive?

Furthermore, the commission in itself suffers from the problem of low accountability, as it is answerable only to the parliament, except through the minister of state for programme implementation and statistics.

Baisali belongs to the political science department of the prestigious Lady Shri Ram College for Women. For a brief period she has been associated with several international and national media houses including the Hindu, Times of India and Jasodhara Global Media. She has been involved with several national level campaigns including The honour for women campaign, One billion rising. Her contribution to several NGOs has also been quite noteworthy which includes OYSS, Kirti, Nirbhaya and several others.

Posted by The Indian Economist | For the Curious Mind