Economic Highlight

New Delhi, 23 August 2014

Central Planning

REGIONAL VISION CRITICAL

By Shivaji Sarkar

The corridors of power and well-wishers of the economy are wondering what should happen to the Planning Commission. There is no unanimity over making it a titular body and giving the ministries and departments a free hand.

Despite a copy of the Soviet Union model, a lot of criticism and even sharp attacks from politicians and bureaucrats, the Commission has not outlived its mission. It should not be a case of throwing the baby with the bathwater. Serious thinking is required as to how to trim it, give a sharper focus and have vision away from the air-conditioned rooms in Delhi.

The Commission is a bête noire particularly for the officials of the Union Finance Ministry and they want that the issue of allocations should be merged with the expenditure department of the finance ministry so that it could become the boss of every one. The Commission despite many of its problems has been able to be an arbiter for States – a role not liked much by the Finance Ministry. The Government’s thinking to clip the panel’s wings has to be viewed with circumspection.

It has to be made a more rational organization so that it could function as an effective arbiter. The Finance Ministry views everything from the prism of revenue; Plan panel takes a broader view. This role of the panel has to be strengthened.

If the Government feels it wants to change its name it is up to it, but in reality the flaw is not in its name but how broad-based it could be with a wider vision. In fact, it should become a conglomeration of several regional planning bodies, may be six to begin with. But all should function in tandem with the centralized body to create a unified-diversified vision.

Presently, it has top to down functioning and the States are supposed to accept its vision without demure. That has to change. It now has to become a body that functions from the below to above. State Planning Commissions should be merged with regional commissions. There should be separate bodies for the southern and north-eastern States; one could look after Himalayan States. Eastern States of Bihar, Bengal, Jharkhand and Odisha may have one regional panel.

It also needs to identify the States with large agricultural base and protect it. Industrialisation alone should not be the panacea for all. This was the malaise that the Second Plan infected the country with. The old order is changing but to give place to the new order, it again requires a vision. That is what the centralized plan panel needs to do.

It has to collate the vision of regional panels and ensure diversified regional growth in a unified plan. It should also be remembered that since the beginning the plan panel has been preparing a five-year Plan but with a 20-year vision. In the new dispensation, that cannot be given up.

In the post-colonial era, the then Prime Minister Jawaharlal Nehru, partly inspired by the Congress’ vision of economy given to it by Netaji Subhash Chandra Bose, decided to have a centralized body to take the country’s development forward.

It served well at least till 1980s and according to some till the advent of the new economic regime in 1991.The first Plan launched in 1951, a little before the first election, marked the beginning of an era of development.

China and India both continue to use five-year Plans. Even China has been having a rethink and renamed its Eleventh Plan from 2006 to 2010, a guideline (guihua), rather than a plan (jihua), to signify the central government’s more hands-off approach to development. The basic Chinese approach has not changed except that it is more decentralised.

The First Five-Year Plan was one of the most important because it had a great role in the launching of Indian development after the Independence. Thus, it strongly supported agriculture production and it also launched the industrialization of the country (but less than the Second Plan, which focused on heavy industries). It built a kind of mixed economy with a great role for the public sector as a concept of a welfare State.

It also encouraged a growing private sector, a concept given by the so-called Bombay Plan formulated by eight industrialists in 1944-45. Though Nehru officially did not accept the Plan, he imbibed many of its concepts into the planning process.

A key principle of the Bombay Plan was that the economy could not grow without government intervention and regulation. Its other salient points were an active role by government in deficit financing and planning equitable growth, a transition from an agrarian to an industrialized society, and—in the event that the private sector could not immediately do so—the establishment of critical industries as public sector enterprises - while simultaneously ensuring a market for the output through planned purchases.

The concept is yet not outdated. The industry still calls for government protection, whenever it is in crisis. The worst case scenario was the way it sought and got “incentive” in 2008-09. In this case, the views of Plan panel were not sought officially. The Finance Ministry succumbed to the pressures.

The plan panel in 1950s, 1960s and 1970s, despite some problems, mainly due to economic reasons, has been able to give the country a direction on industrialisation. But on agriculture, it has been faltering particularly under pressures from industry since 1991.

Its major default was seeing the entire country through one prism and one-fit-for-all solution. It had the same solution and programmes from Kerala to the North-East and Punjab to Tamil Nadu. It had one solution of industrialising all States with the same gusto, whether it was required or not.

The reform should not mean making ministries more powerful, that officials want. The new plan panel should have a central vision but it must emerge out of regional deliberations. In the changing economic scenario, it has a greater role to sort out the issues between the government departments, States, farmers, industries and industrial houses. It should be recast with this vision and not with a bias against it. The child may have gone a bit off-track but it must be allowed to change and reform to become an asset for the family. --- INFA

(Copyright, India News and Feature Alliance)