Wednesday, 22 January 2020

Sad Demise Of Planning Commission

Updated: February 14, 2015 5:15 am

It is sad that the Government of India (read Modi Sarkar) has finally scrapped the 65- year-old Planning Commission and replaced it with NITI Aayog. NITI is an acronym for National Institution for Transforming India. Aayog is Hindi equivalent of Commission. Therefore the word Aayog cannot be coupled with NITI which is only an institution with advisory role. NITI cannot be both an Institution and Commission. If we translate NITI Aayog then it would be National Institution for Transforming India Commission which does not make any sense. On the other hand, the Commission is a statutory authority whereas NITI is an advisory body purported to be the Think Tank of the government. Therefore scrapping of Planning Commission will automatically scrap the system of Five Year Plans for planned development of national economy. Obviously PMO will acquire the role of Planning Commission with Annual Budget of the Finance Ministry taking the shape of Annual Plan. No country can grow economically or otherwise without an appropriate planning apparatus. Japanese are known for spending more time in planning than execution. Jawaharlal Nehru, the late PM of India, was not a fool to have set up the Planning Commission and initiate the process of planned economic growth. He copied Five Year Plan model from Russia because Russia made tremendous strides with this model for her economic development. NITI being only an advisory body , cannot be a substitute for the Planning Commission .Without the Planning Commission or its equivalent the government will be moving ahead like Alice in the wonderland and one cannot visualise where the country will be led to.

The system of planned growth with Planning Commission as the Planner-in-Chief worked neither too bad nor too good. Fault lay partly with the Planning Commission and more with successive governments failing to fulfil the targets of executing various schemes set out by the Planning Commission. Faults with the Planning Commission were many and some of the important ones are described below:

1)            The basic mistake committed was that the PM himself became the chairman of the Commission. Accordingly the Commission tried to toe the line of the government throughout and never showed guts to work with an independent mind like the Election Commission particularly under T.N. Seshan or the present RBI Governor Raghuram Rajan. It never blamed and rebuked the governments for their failures to meet the targets and not preparing annual budgets co-terminus with the plan projections.

2)            It did not study the pattern of growth of economies of developing nations. It allowed the Indian economy to be strangulated with severe governmental controls. The economy was on the verge of collapse in 1990. It was opened at the behest of IMF and the World Bank and not the Planning Commission. The government had no option but to do this because IMF laid, for opening the economy, the pre-condition for the grant of $ 4 billion loan by the IMF.

3)            Even in the post reform regime, the Planning Commission remained static in its approach and did not do its homework properly to wake up the government from time to time to introduce second generation reforms. For example the Commission never warned the government against the rising population at the rate of 18 million people per year. No government, however efficient it may be can bring prosperity and eradicate poverty if there is an addition of 18 million mouths every year.

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4)            The procedure for preparing the planned document for successive Five Year Plans remained stereotyped. The planned document for the 10th Five Year Plan was the second addition of the 9th Five Year Plan. As per procedure, the Commission asks the state governments and the Central Ministers to submit their respective Five Year Plan documents. These documents, then, are pieced together with minor additions and alterations to form the Plan Document for the corresponding Five Year Plan. The Commission never showed any initiative to put meaningful inputs from its own side. For example Commission never asked the Ministry for Water Resources Development to put up projects to build storage dams across river Yamuna and its tributaries to utilise the water for irrigating the parched lands in Haryana, Rajasthan and UP. Likewise the Commission never goaded the government to start the execution of 50000 MW Hydro Power plan initiated by Shri A.B Vajpayee—the then Prime Minister of India.

5)            The Commission gets the Plan Document approved from the National Development Council (NDC) in one day deliberation. The document is never placed on the floor of the House of the Parliament or subjected to any brain storming session outside the Parliament at different fora of various planning institutes or the media. The public never comes to know the contents of the Five Year Plan Document as an abridged version of the document is never circulated to the universities or other institutions. For example, how many people know that the 12th Five Year Plan started on 1/4/2012 and the Plan Document was approved 18 months after?

6)  The Commission never looked in the future beyond a period of five years. It never worked to prepare a Plan Document for a prospective planning of at least 30 years in future.

7)  14-02-2015 The Commssion never brought a single document exclusively dealing with the subject of poverty eradication in India. The job of the Planning Commission is to perform the following duties:

  1. i) To prepare a sound Plan Document into two stages, i.e. for the Five Year Plan and 30 year Master Plan with following four main objectives:
  2. a) Total eradication of poverty by 2025.
  3. b) To beat China in the economic race by 2025.
  4. c) To improve the Human Development Index and achieve the Million Development Goals (MDG) set by UNO.
  5. d) Total sanitation by 2010-2019 (Swach Bharat Abhiyan)
  6. ii) To develop a proper financial model so that the flow of funds for the execution of core sector projects remains continuous and undisturbed.

iii)           To suggest reforms in various sectors for promoting growth and the economic development.

  1. iv) To point out like CAG, the deficiencies in the working of the governments (both Centre and States) which retard the progress of execution of various schemes contained in the planned document.
  2. v) To take a synoptic view of the entire canvas of economic development in the country, study the local factors which come in the way of growth and suggest suitable remedial measures to overcome the problems. For example, the Commission never studied the causes for large scale suicide by farmers in Vidharbh Region and never suggested a suitable development model there.
  3. vi) To study a growth model of developed economies and to transplant new ideas and blend them in the planning process of India.

When the PM made the first announcement to scrap the Planning Commission on 15/8/2014 and replace it with a new body with new soul, the general reaction of the experts was that the Planning Commission needed reformation, remodelling and re-mandating and not scrapping. In fact the UPA government too had planned to restructure the commission.

One of the jobs assigned to the Planning Commission was to allocate funds for some of the centrally sponsored schemes to the states. This process annoyed many non-Congress Chief Ministers particularly Shri Narendra Modi, the then Chief Minister of Gujarat. The CMs were criticizing the Planning Commissions on two grounds.

Firstly, why the Chief Minsters have to knock the doors of the Planning Commissions with a begging bowl? Secondly, the planning process had a top to bottom approach and it is imposed on the states. The second part of the protest is unfounded firstly because the states are required to develop their own planning Model both for the Five Year Plan document and the Annual Plan. The Commission also called the state’s Chief Ministers and discussed with them both the documents. Secondly, every State had set up its own Planning Board. Most states appointed Deputy Chairmen who were political lightweights and could not be adjusted on any important job. The planning board remains a moribund entity and is never properly staffed and consulted in the preparation of Plan Document of the state. At one time, in Haryana, the Chairman of the Planning Board was a politician who was a clerk in the Forest Department before joining politics.

Now it appears that the Central Government is not clear what functions it should assign to NITI whose very nomenclature is wrong. It probably wants NITI to offer suggestions/ reforms /new policy initiatives to transform India in every domain including national security. Government also wants NITI to transplant ideas of economic development being practiced in developed countries. In other words the role of NITI will be all encompassing but only as an advisory.

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The problem in India is not the dearth of ideas but the implementation of projects contained in the Plan Document. When the PM opened the portal for receiving suggestions, it received 4 lakh responses on the very first day. He opened another channel through Akashvani under the program Mann Ki Baat. There too, 200 suggestions are received every day. Besides this, the PM receives 4000 letters every day from the post office. My own experience is that these suggestions are never studied and answered by the PMO and probably marked to the concerned department or may be simply dumped in some corner. The second problem is the absence of speedy implementation of projects for one reason or the other (DMRC is the only exception to this observation and this model is never adopted).

For example Delhi Government tied up a project of building Renuka Dam across river Giri with Himachal Government to use the stored water for water supply to Delhi state. The project is held up in abeyance for the last ten years for want of forest clearance from the Ministry of Environment and Forest. Now everybody knows the country needs to drastically control its population growth. But this issue is never discussed either by the Planning Commission or political parties in the Parliament or other democratic institutions. Likewise no MP takes up the issue of poverty eradication or to control corruption in the Parliament. The fact of the matter is that all the political parties’ work on one philosophy- the vote- bank politics and the present government is no exception. Now the people have started calling it a government of “No Action, Only Rhetoric”. One doubts if NITI will be of any help in such situations. The third and the most crucial problem is that of generating adequate funds for executing various projects contained in the planned document. The government is unable to generate enough revenue to defray the expenditure for various infrastructure projects in the core sectors. Implementation of 6th Pay Commission created the maximum problems. The difference between revenue accruals and expenditure is known as Fiscal Deficit and the same is continuing to be 5 per cent of GDP. Problem of Current Account Deficit (CAD) is created mostly by the heavy import oil bill. The government has heaved a sigh of great relief in this quarter as the prices of crude oil crashed down to $55 per barrel. This crash has given the breathing space to the government. The main engine of GDP growth is the infrastructure development in core sectors. India had the taste of 9 per cent GDP growth for three years between 2008 and 2011, largely due to external environment i.e export of products manufactured in India. As the recession started in USA and Europe after 2008, the demand for Indian products slackened and the GDP growth came down to 5 per cent in 2013. Till now it has not picked up. This is largely due to two factors.

  1. During the peak growth period, the UPA government didn’t invest heavily on infrastructure projects particularly in the hydro power, railways, tourism, solar energy, and mining sectors. PPP model partly succeeded and partly failed. According to Jefferey Sachs: “Infrastructure projects are the keys to the engine of growth”. The present government is also bogged down by the paucity of funds and does not have the guts to raise more revenue at the cost of annoying the people in the face of state elections. The government seems to rely wholly on PPP model which has failed in India to a great extent.
  2. The UPA government introduced populist schemes like MNREGA and Food Security Bill. On paper, these schemes seem to help the poor but actually fill the pockets of the officials and politicians. The present government is unable to rationalise these two schemes. States, on the other hand are competing with each other in doling out soaps to the people like free scooties to students or increasing old age pension. The economies of many developing countries crashed because they over spent money on populist projects.

iii.            Another problem is that right projects promoting growth have not been identified or if identified, then have not been worked upon. Some of these projects are: rising NPAs in banking sector, increasing debts on States (West Bengal government has bank loans of Rs. 2.25 lakh crore and Haryana Rs.85000 crore), bleeding Airlines, tunnel roads in hill states, absence of horticulture and dairy development projects in seven North-East states, lack of irrigation projects and mechanised farming in central India, power thefts in various states, poor progress of discovering oil and gas and splitting the bigger states. All these issues can be sorted out only if we have a strong and sound Planning Commission like the Judiciary or CAG or RBI. A mere advisory body like NITI will be of no help in the present scenario of complex vote-bank politics.

Now the crux of the whole issue is that if India has to compete with other developing countries and remove the tag of an “underdeveloped country”, she must work on the following four principles of growth:

  1. Formulate N-point National Programme like the earlier 20-point programme for the economic development of the country and work upon it very seriously.
  2. Spend on infrastructure projects on a massive scale.
  3. Completely stop the vote-bank politics and take hard decisions to generate revenue.
  4. Do not scrap the Planning Commission. Only recompose and re -mandate it. NITI Aayog with advisory role is no substitute for the Planning Commission.

This is the only desired path of progress and there is no other short-cut to beat other countries in the economic race. The economic situation in China was worse than in India in 1974. But Deng Xiaoping called some world experts to develop a proper economic model and he revolutionised the Chinese economy. The results are before all of us to see. The Indian government needs to explore these kinds of models urgently.

By Ramniwas Malik

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