Planning Commission of India and its functions : Is there a need for replacement

By Deepak Parvatiyar

(A shortened version of this blog was published in www.elections.in on 27th August 2014)

It was in the budget session of the parliament in 1950 that President Dr Rajendra Prasad, in his Presidential Address announced the Planning Commission would be set up. The Commission was the brain child of India’s first Prime Minister Jawaharlal Nehru who accepted planning to be a tool of economic rebuilding of the country and planned development as a means of raising the country's standard of living.

The Idea behind the Planning Commission

The immediate reasons for a Planning body then were multi-dimensional – inflationary pressures inherited from the World War, balance of payment problems, partition and the resulting influx of millions of people to the country causing deficiencies in the food supply on one hand and dislocation supplies of certain essential raw materials on the other. Besides, even as the Centre and the newly integrated Provinces initiated schemes of development, there was no proper coordination between the Centre and states on sharing of precise information about the availability of resources.

Yet deliberations on the need for planned development were on from the Raj days itself. As early as in 1938, during British Raj, the Indian National Congress had even appointed a National Planning Committee in this regard.  In 1944 too, the British Government of India had established a separate Department of Planning and Development to initiate a number of development schemes to be undertaken after the war by the Central as well as the Provincial Governments. After Independence, problems of planning were reviewed yet again towards the end of 1949 by the Advisory Planning Board appointed by the Interim Government that recommended the appointment of a Planning Commission “to devote continuous attention to the whole field of development”.

Subsequently in his budget speech on the 28^th February 1950, the then Union Finance Minister Dr.John Mathai, told the House about the composition of the Commission and explained the logic behind setting up the Commission: “ It is necessary to undertake a review of our existing programme of development and our existing schemes of production. The geographical and economic facts on which the present programme is based no longer hold good, the estimate of financial resources on which the existing programme is based is no longer valid, and public opinion rightly demands a different kind of approach to the whole problem of development. In view of these facts,Government have decided to set up a Planning Commission as announced by the President.”

Thereafter on 15thMarch 1950, a Cabinet Secretariat Resolution (Planning) laid down the role of the Commission that was broadly to:

·         assess and augment the material, capital and human resources of the  country in relation to the nation's requirements;

·         formulate a Plan for the most effective and balanced utilisation of the country's resources; 

·         define and prioritise the stages of planning and propose the allocation of resources for the same;

·         indicate the factors that retarded economic development, and

·         determine the conditions to be established for the successful execution of the Plan;

·         determine the nature of the machinery necessary for securing the successful implementation of each stage of the Plan in all its aspects;

·         appraise the progress and recommend the necessary adjustments of policy and measures; and

·         make appropriate interim or ancillary recommendations;

·         examine specific problems as may be referred to it for advice by Central or State Governments.

Nehru’s idea of a Planning Commission was based on the premise that countries that woke up late to the need of industrialisation, needed state intervention to transform their economies – an idea borrowed from the experience of the (erstwhile) Soviet Union and Japan. Hence, it was obvious that the Socialist lobby dominated the Commission once it was set up. What is interesting to note was that Nehru did not find it necessary to include Finance Minister Mathai in the Commission and he remained absent from the meetings of the Commission to evolve the proposed structure of Indian Economy. Mathai subsequently resigned as Finance Minister following his disagreement with Nehru about the basic agenda of economic development!

Planning Commission did offer good input to the country’s planned development through 5-year-plans. ( Currently, the plan panel is overseeing the 12th such plan, 2012-17).

Changed Scenario Post-Globalisation

 Yet, the institution was conceptualised and formed at a time when the country’s economy was much smaller and wasn’t tied up with the global economy as it is today. The political situation too was not as complex as it is now since there were not much chances of a political standoff between the Centre and states then as almost all the states and the Centre were governed by the same political party – the Congress. Hence central planning and resource allocation in the federal structure was not that big a challenge then as it is now in an era of coalitions and regional power set ups.

Has the Planning Commission Lost its Relevance?

Much has changed in India since the 1980s and the Planning Commission has failed to keep pace with the changes. How often do we hear the state chief ministers of an Opposition party blaming the neglect of their respective states to the Centre-controlled Planning Commission? In recent times, Prime Minister Narendra Modi has been the most fierce critic of the Commission. As the Chief Minister of Gujarat – a position that he held for over a decade till he became the PM – in a meeting of the National Development Council in 2011, he had assailed the Central Government for not paying any attention to inflation, power crisis and poor governance while finalizing the Approach 12^th Five Year Plan and even demanded discussions to to preserve federal structure of the country.(The Planning commission is answerable to the NDC, which comprises chief ministers of all states and administrators of the union territories, and he members and deputy chairman of the Planning Commission. The Prime Minister is the de facto chairman of both the Planning Commission as well as the NDC).

The Flaws in the Planning Commission

Besides, a major criticism of the Commission of late was that it has been unable to make the desired transformation in its orientation from Soviet-style planning, with power over others, on which it was founded. In other words it has been rather resistant to the new changes introduced into the Commission in the last half a decade , such as:

n  to shun its central authority to determine the sizes of industries as well as states’ plans by replacing the 5-year-plans with a more dynamic planning process to guide the states, the private sector, and even central ministries.

n  To shun the practice of bringing in the states, one-by-one, for an annual evaluation of states by setting up  lateral learning processes to facilitate faster learning in the states to produce the results they need.

n  To remove the bottlenecks arising due to conflict among the stakeholders, be they the states, the ministries, government, industry or civil society, by introducing systematic methods to enable coordination amongst them.

n  To morph into a small catalytic organisation.

Narendra Modi’s Idea of a New Planning Body

As the old ways carry on, it is in this light that PM Modi’s call for a replacing the Commission with a new body should be seen.

 "We envision the proposed Institution as one that caters to the aspirations of the 21st century India and strengthens participation of the states," Modi tweeted about his idea of the new body.

However, to replace an established institution that plays the most important role in our development  with a suitable body  is a challenge. Modi has invited the people’s participation in the debate on a better alternative. Yet, the onus is on the government to ensure that the new body that replaces the Planning Commission has enough safeguards to address the dangers associated with financial matters in Free Economy and ensures that it remains a critical platform  to review policies and programmes.