By Aditi Khanna

Edited by Namitha Sadanand, Senior Editor, The Indian Economist

With the entire country abuzz with speculation about what should the contours of the new body set to replace the planning commission of India should look like, here is a brief comment on the question of whether there is a need for central planning in the country anymore and what should be the description of the new body according to the author.

Tackling the most pertinent question first: Is central planning required in India anymore? Is the invisible hand of the markets competent enough to take prudent decisions that can be counted upon to feed India’s hungry millions? There can be no doubt about the fact that the answer is in the negative. Markets’ decision horizon is too short for that. The resources and data at their disposal are not enough. Most importantly, it is not their job to take care of the citizens from whom they derive no economic benefit – there is simply no incentive. As the role of the public sector has considerably reduced in the economy and the Fiscal Responsibility and Budget Management Act puts further pressure on the finances of the Central and State governments, planning the utilization mechanism of scarce resources becomes even more important. Further, as Joseph Stiglitz correctly pointed out in a 1996 paper, the government’s role of being a facilitator to the private sector and providing a basic level of physical, social and financial infrastructure remains intact, if not expands with the fast pace of economic growth.

Thus, planning that has a long term perspective and a strategic nature is the need of the hour. This feat can only be accomplished by a body of non-partisan experts that do not have a claim in the political pie of the country, and have the expertise as well as authority to deliver on their mandate. Therefore what the country really needs is a centralized body comprising of a few domain experts that direct and mobilize Central government resources in a manner as to be able to fulfill its objective and undertake the following functions:

Proposed Objective: To act as a horizontal cross sectional forum that take a holistic and system-wide view of things, something that individual ministries working in their own vertical silos cannot envisage; in order to plan and aid the process of sustainable development of the country’s citizens.

Proposed Functions:

1. Strategic Long Term Planning:  For planning to be effective it needs to have two essential characteristics – it should be strategic with a long term perspective, and it should be accommodative of short term macroeconomic changes. Thus, the proposed body must have a long term planning horizon coupled with an annual monitoring and auditing of the various schemes. It must engage all the stakeholders from states, ministries and relevant industry experts and academicians, particularly on the plans concerning the priority sectors of the economy such as agriculture, industrial policy, education and skill formation, public health, energy etc. The long term plan should also be dynamic to the yearly budget constraints and the unforeseen needs that crop up either in the development sector by way of a new (short term) sector requirements or unforeseen supply side shocks that require damage control. The 5 year (or longer) plan should thus work as an indicative document and not a plan set in stone that becomes a hindrance to the changing macro needs of the economy.

2. Setting Acceptable Levels of Development Outcomes: In a country that has a very diverse range of values that the economic and developmental variables of the different states take, there is a dire need for the planning body to set the minimum acceptable levels of certain outcomes, particularly in education and health, to be attained by each state within a stipulated time frame. It should also be a forum for states to discuss their regional issues and seek expertise on the same.

3. Institutionalized Learning Platform: The body needs to focus on creating an institutionalized central learning platform based on systematic and continuous accumulation of data and analytics regarding the best practices employed by different states and where they can apply. Also, there must be learning created from failed schemes or the failed parts of otherwise successful schemes – that is, investigating the legislative and implementation issues that prevented its successful rollout and intended result. An international learning wing must also be instituted where developmental experiments abroad are studied and their feasibility and applicability in the Indian context is adjudged.

 

4. Piloting of Programmes: Learning from the Chinese experiment, the body should also be responsible for piloting of all major projects in different target regions before their full-scale rollout.

While the aforementioned objectives and functions may require a sizable outlay by the Central government, it is a daunting need faced by the country that its elected representatives can no longer choose to ignore.

Posted by The Indian Economist | For the Curious Mind