TRANSFORMATIVE PLANNING
Don't Throw the Baby with the Bath Water
Manoj Kumar Managing Partner, India Strategy Group, Hammurabi & Solomon Consulting, New Delhi 1/20/2011 1:25:17 AM
The Planning Commission is chaired by the Prime Minister of India and has a Deputy Chairman and other members. The Planning Commission is answerable to the Parliament of India through the Hon’ble Prime Minister as its Chairman. Would it make a difference to identify planning as just another ministry having a dedicated Minister of the rank of a Cabinet Minister? Would this increase the level of accountability of the Planning Commission or would it act as a oversight mechanism over the conduct of the Planning Commission?
The answers appear to be in negative since the inherent role of planning cuts across and impacts practically all other departments of the Government of India. One argument could be that if the US doesn’t have a body like this, why are we stuck with something that seems to jar of the old Soviet-style of functioning. It is invariably overlooked that the role of planning in the US, as is evident from the massive package for shoring up US infrastructure, is played by the US Treasury. Conceptually, in India too it can be undertaken by the Finance Ministry; but the first government of the Republic, in its wisdom, didn’t burden the Finance Ministry with yet another responsibility.
Having the activity of Planning along side the other Ministries would not address the issue of accountability and oversight of the Planning Commission. In fact as a autonomous body under the Chairmanship of the PM, the Planning Commission enjoys the requisite autonomy from interference of other Ministry or departments and is able to prioritize planning in accordance with the constitutional mandate and common minimum programme under the mentorship of the Prime Minister.
What else therefore can be done to ensure that the Planning Commission of India does not exceed its brief by over — stepping into the domain of other Ministry or department in relation to various development projects of the Government of India or the recommendations of the Planning Commission?
Clearly, there is continuous need to make the functioning of the Planning Commission more transparent and accountable. A transparent and vibrant oversight mechanism is essential to address the above issues and concerns. Additionally, the role of the Planning Commission to assist and guide on issues of planning and wherever the Planning Commission wishes to give any specific recommendation, advise, remark, observation or view pertains to any other department or the Ministry of Government the same should be made through the office of Chairman of the Planning Commission. This is essential to ensure that the planning is kept distinct from implementation both in practice and in perception.
The other solution lies in more questions relating to the Planning Commission in Parliament and more queries under the Right to Information.
‘Planning’ it is said as a program for action, for a particular period to achieve certain specific progressive developmental goals. Socio- economic planning has been one of the most note worthy invention of the 20th century.
In most developed countries the role of economic thinking and Planning have been discharged by their respective treasury teams/department. As a contrast, in the case of emerging economies where resources are scarce and the demand for meeting multiple social economic needs are much higher, the need for social and economic Planning have become very dynamic and therefore require a very focused approach. In emerging economies the role has often been discharged by a dedicated team assisting the finance and the treasury. In India this need was felt way back at the time of independence of the Country and the then Prime Minister Shri Jawahar Lal Nehru set up the Planning Commission as a dedicated resource to assist in the socio economic Planning to meet the development challenges before India at that time.
Much has changed in the last 53 years and as India has emerged from being identified as a poor/third world economies to being presently identified along with China and Brazil as an emerging economy and being looked upon amongst the league of developed nations in time to come. Therefore India is very uniquely placed where its Planning and development needs are neither the same as those of the poor/third world economies nor same as those of the developed economies, instead it has its own challenges faced by economy in transition.
In India the significance of planning was recognized even before independence. Varying ideological perspective were brought to bear on the efforts made at plan formulation by few eminent individuals and institutions. Important plans which were discussed in politico-economic circles were The Bombay plans, The People’s Plan and the Gandhian plan. The Congress had taken initiative by appointing a high level committee to give blue print for National Planning and even at the governmental level a Planning and Development Department was created in the Government of India in 1944.
But it was only after attainment of Independence, The Planning Commission of India was set up on 15th March 1950 by a resolution of Government of India to carry out the objectives set out by the Government towards achieving economic growth. It is an extra constitutional and a non-statutory body set up by an executive order. A commission delegated to propose plans for future activities and developments which formulates India’s five – year plans, along with other functions to be aimed at. More than making plans and allocating resources, the Planning Commission seeks to transform itself into System Reform Commission, a strategic group which will look ahead and think ahead to cope up with the ever changing needs and demands for the uplift of the country as a whole.
The Government and the State
The Constitution seeks to constitute India into a Sovereign, Socialist, Secular and Democratic Republic. The mandate of the Constitution of India includes a socialist agenda for development and therefore a need to allocate due priority to the social development of its citizens and their health needs, education needs and financial independence to be assured by the Union of India.
Para IV of the Constitution of India further set outs the Directive Principal of State Policy which inter alia seeks to guide the state towards insuring the attention of the Constitutional mandates of socialist republic amongst others. The Planning Commission therefore has to take into account this Constitutional mandate while advising in relation to socio and economic Planning.
Part V of the Constitution further provides for Union, the Executive, the Parliament and the Judiciary. The executive power of the Union are vested in President of the country and are to be exercised under the aid and advise of the Council of Ministers by the President of India. The Council of Ministers are accountable to the Parliament of India which is the house of People and the Judiciary mandated with the responsibility to ensure that the basic structure of the Constitution of the country including provisions thereof are observed by the Executive.
The Market
On one hand we have seen global economies halted and shaken by issues like market manipulation as in the case of Enron and Subprime crisis, on other hand we are faced with debate between inter department independence and extent and role of planners.
At present when the most perceptible accent is on market forces and liberalization, the talk of economic planning might appear to be anachronistic but considering the state of economic development in most developing countries, the co-existence of liberalization and planning is most likely to continue for a long time. Beside the nature of economic planning, the Commission is likely to experience modifications from time to time as the economies of the developing countries undergo structural changes. In such a vast and diverse Country like India the only way one can get a sensible plan is when people make local plans. Moreover planning does not mean everything automatically in an execution form but first devising a scheme, selling the scheme then allocating money for the plan and so it goes on for its coming into an existing/implementing mode. There should be ‘Indicative Planning’ and the role of government becomes that of ‘persuader’ using the moderate strategy of ‘moral persuasion’ and not any strong regulatory and controlling measures. Since the major chunk of the economy in a developed country is owned and managed by the private sector, the government is expected to act as a facilitator and not as a regulator or director. Restructuring of the Planning Commission and planning process has been the constant refrain of economists since the initiations of the big bang market reforms in the early 1990’s. The issue has resurfaced as the government has to start work on the twelfth plan with reports of new efforts being made to transform the Planning Commission into System Reform Commission such that good things and right things happen at the right time. Another important change that has to happen is much more local empowerment and then creation of conditions around the local bodies so that they function effectively.
The Planning Commission has played a critical role in the past 60 Years, striking a balance between limited resources and unlimited objectives. The growth in the Indian economy is increasing demand for infrastructural needs. However, the resources to finance remains limited. Despite this perpetual gap, the Planning Commission has played a role in allocation of resources to fulfill its mandated objective of ‘balanced utilization’ of resources. The Indian economy has grown at a growth rate of 2.4% in 1950-1980 to 7.8% now. The growth rate going toward, is expected to touch 10% as per projections. In agriculture sector food production has increased to 237 million tones.
The Gross Domestic Product (GDP) which was at 3.5% during the year 1960 – 1980 and is at 6.4% in the year 2000- 2009. Further there has been positive growth in various sectors of the Indian economy.
The model Public Private Participation ( PPP) documents prepared by the planning commission to provide a uniform policy in PPP to the various departments of the Government of India helped to accelerate project development in various areas including roads, railways , ports, logistics, heavy engineering , manufacturing, aviation etc.
Concerns :
Is there a Need For a Relook
In the year 1966 the most comprehensive administrative reform was appointing the Administrative Reforms Commission (ARC) under the Chairmanship of Morarji Desai. The Commission during the 4 ½ years of existence, presented 20 main
reports.
One of the main reports of the commission was relating to the Machinery of Planning (1967).It highlighted that the Planning Commission should restrict itself to the formulation of perspective five years and annual plans, resource assessment and evaluation and should not interfere in the implementation of the plans which should be the exclusive responsibility of executive agencies. The ARC argued that in order to make the Planning Commission a professional body, its control by the political leadership should be reduced. It recommended that the Prime Minister who has headed the Planning Commission ever since its inception, should cease to be its chairman, though the Prime Minister and the Finance Minister should be closely associated with its working. The ARC was against the PM’s chairmanship, as the Planning Commission has “steadily added to its functions and personnel and has stepped into the area of the executive authority of the Centre and the state governments. It was viewed by the people as a parallel cabinet or a super cabinet. ARC favored the Prime Minister’s association with the Planning Commission in the following manner:
It is necessary to prevent the Planning Commission from developing into a sort of parallel or super cabinet. It should not be deprived of its vital link with the Prime Minister.
Intimate association should be secured without formally making the PM the Chairman of the Commission
The PM should be kept informed from time to time of the important decisions taken by the commission.
The ARC also pointed out that the Prime Minister of the country and the minister- members have not been able to contribute significantly to the deliberations of the country's Planning Commission. It showed that if the ministers were the members of the commission, the commission was likely to be committed to the minister’s stand with regard to the executive matters related to the implementation of the plan. This affected the capacity of the Commission to make critical appraisal and evaluation of the implementation of the plan by the executive.
The Government of India did not fully accept the ARC’s view. It decided that:
The Prime Minister and the Finance Minister would continue to be the chairman and members respectively of the Planning Commission.
Rest of the members may not be appointed as members.
However this decision has been violated most of the time and three or four ministers continue to be the members of the Planning Commission, the Finance Minister being invariably one of them.
The chairmanship of the Prime Minister bestows on the Commission the legitimacy and authority that would be respected by all the Union Ministers and the state governments.
The PM’s and the union minister’s presence on the Commission facilitates close relationship between the Government and the Commission.
The presence of the PM and ministers makes the Commission’s decisions more pragmatic and practical.
Since Planning is a political activity, in an environment of scarce resources , the broader issues of governance cannot be divorced from the authoritative allocation of values. In fact allocation of resources is the most important political activity in a developing country.
The Government of India agreed with the view of the ARC that the Planning Commission should be a compact body.
Much water has flown ever since, and a series of concerns have been expressed regarding the role, need, continuity and reforms pertaining to the Planning Commission including:
The Planning Commission has generally perceived to have overstepped its role or its expected jurisdiction and allocated to itself certain executive function. It may be recalled that the Administrative Reforms Commission (ARC) in its report on the machinery of planning had underscored that the Planning Commission should restrict itself to the formulation of perspective five years and annual plans, resource assessment and evaluation and should not interfere in the implementation of the plans which should be the exclusive responsibility of executive agencies. It has also been argued since long that the Planning Commission has encroached upon the autonomy of the states under the federal system. This encroachment is seen in terms of the Planning Commission’s acceptance, modification or rejection of the states proposal for development programme for which central financial assistance is sought and which can be granted only on the recommendation of Planning Commission.
The Planning Commission is not a statutory body and it does not find any place in the Constitution. But that’s the case with all ministries. Over the years with the expansion in the scope of planning, its function have extended substantially and have enveloped almost the entire sphere of administration excluding only defense and foreign affairs. It has been alleged that because of its powerful position by virtue of the chairmanship of Prime Minister it has even encroached upon the functions of constitutional bodies such as finance commission and yet not accountable to parliament. Even the National Development Council (NDC) which is a body responsible for the approval of plans envisaged by Planning commission approved it without any critical analysis of the same.
The Planning Commission is built upon a heavy bureaucratic organization. The Commission which was initially a small body of serious thinkers had turned into government department with a crowd of secretaries, directors and big buildings. Neither the Planning Commission has been able to apply an integrated approach and actions nor coordination has been emphasized, which results in the overlapping among and duplication of efforts of various organizations, resulting in wastage of resources. There are overlapping responsibilities between the Planning Commission and Finance Commission. Perhaps, the constitution maker could not anticipate the setting up of an extra constitutional authority in less than a couple of months after the promulgation of the constitution. Since there can be no neat distinction between plan expenditure and non-plan expenditure, so unambiguous distinction between the role of two bodies cannot be made.
The votaries of liberalization and free market have been more critical to the whole concept of Planning Commission. According to them the Planning Commission should be shut down as the Finance Ministry already has a pool of talented experts. The Planning Commission only creates duplicity and lengthy procedures. Instead of Planning Commission there should be Implementation Commission which should be created under some act of Parliament. The Planning Commission has only multiplied the schemes but has completely failed to monitor those schemes. The Planning Commission is an unnecessary burden on line ministry. It has outlived its utility. The finance ministry and its various offices and Independent regulators like Reserve Bank of India (RBI) have enough talent to suggest and formulate policies.
The Planning Commission was initially set up under an executive order, probably with the aid of Article 73, which envisages that the executive powers of the union shall extend to the matters with respect to which Parliament has power to make laws. Thus Planning Commission has legal status though the constitutional status was never given.
Contrary to the provisions of Constitution, Planning Commission has started dealing with devolution of huge funds for investment of a capital nature while Finance Commission concentrated in the fields of revenue expenditure with of course some over-lappings. The new terms of ‘plan grants’ and ‘non-plan grants’ were then got introduced with no provisions and much less indication in the Constitution of India.
If we assume the whole scenario as contemplated therein, the only thing that comes to mind is that the economy of the Nation must be looked as a whole. Following the example of human eyes, one can deduce a principle that there must be convergence of vision in an unified manner to have a clear and complete picture of a sight to be seen. One need not hypothetically attempt that left eye may be directed to see the left landscape only and the right eye the right one. One can safely say that any such attempt will give distorted vision. So for all this reason, its better either to shut down the whole machinery of Planning Commission, or Finance Commission and Planning Commission shall work together as one Commission under Article 280 by making necessary constitutional amendments to have a full view of both plan and non-plan sided of the economy.
The Planning Commission needs to be in the process of reinvention of itself. More than making five year plans and allocating resources, it seeks to transform itself into what has been described above as System Reform Commission, a strategic group of intellects who can look ahead and think ahead sensing the emerging concepts of development, liberalization, opportunities and challenges in this era of globalization. It needs to formulate appropriate response for the government evaluating the present and future scenario.
The Way Forward
As discussed above ,the Planning Commission does not form part either of the Executive, the Parliament or the Judiciary and as such therefore there role should be limited no more than advisory rest the basic structure of the Constitution would get disturbed if Planning Commission has to go beyond.
Further, the institutional resistance from within the commission which is motivated by fear of further shrinkage has already downsized its role. In the new economic environment, economic planning continues to be an important and determining strategy for public investment beside providing guidelines for channelising private sector investment in desired direction. The Planning Commission has to act as mutually complimentary forces in ensuring rapid economic development of the nation. Sixty years ago the story was different, the Country was more centrally managed but now there is devolution of power to the states and other corporation. Private sector plays a vital role in making economies of the county and the world has become much more dynamic because of interconnection, mobility, globalization and speed. So in the changing circumstances the Planning Commission needs to refurbish its tools, make themselves foresee the real and dynamic world and enhance its ability to communicate with the people.
With the emergence of revenue constrains on available budgetary resources, the resource allocation system between the states and the ministries of the central government is under strain. This requires Planning Commission to play a mediatory and facilitating role, keeping in view the best interest of all concerned. It has to ensure smooth management of the change and help in creating a culture of high productivity and efficiency in the government. The key to efficiency and optimum utilization of resources lies in the creation of appropriate self-managed organizations of all level. In this area Planning Commission shall attempt to play a system change role to provide consultancy within the government for developing better system. In order to spread the gains of experience more widely, the Planning Commission
is suppose to play an information dissemination role.
Much of the criticism and concerns relating to the Planning Commission, emanate from the myopic view taken by critics. Issues of planning require a comprehensive all round approach to ensure development carries with it , the constitutional mandate set out in the Constitution of India naming a few, health care, education, water supply, sanitation, poverty
alleviation etc. With a three sixty degree approach to achieve our constitutional mandate alongside development through planning, the following lessons seem
to have emerged from our past experiences:
Markets, left to themselves, do not care about development or inclusive growth, both of which are necessary to meet the Constitutional mandates set out in the Indian Constitution.
Markets are amenable to manipulation or distortions in practice which has often led economies to near collapse situations i.e. the impacts of Enron and Subprime crisis to United States and the European economies are the classic case to point.
The myopic vision of each Ministry or departments to its own segment of its overall constitutional mandate or the common minimum programme has often led to difficulties in balancing the priorities amongst the most important social issues like health care, water, and education vis-a- vise other objectives like better urban planning in infrastructure — although both impact the other in more than one way.
Planning in itself is a distinct and independent area of governance necessary to attain the constitutional mandate as discussed above and the challenges of the developed economies and as such can not be merged into implementation and left to respective departments or local bodies.
Formation of Planning policies for achieving the growth and the constitutional mandate is a very specialized responsibility and therefore needs a dedicated and wholesome approach.
It was planning that rescued America from the Great Depression. It was the Marshall Plan that rebuilt the completely devastated economies of Western Europe after Second World War. Similarly, it was the Ministry of International Trade and Industry, the Japanese version of the Planning Commission that ‘planned’ and scripted the spectacular resurgence of Japan as a global economic power from the debris of Second World War. South Korea was a harshly exploited colony of Japan for the first-half of the 20th century. Since late 1950s, it was the ‘planned’ encouragement and incentives given to chaebols like Samsung and LG that made South Korea a developed nation and join the fabled G-8 club as a paid-up member. And, it is systematic and effective ‘planning’ that has transformed country like China from a pathetically poor agrarian economy during the 1970s to a global economic powerhouse that now boldly challenges the formidable might and clout of the United States.
With all the above lessons, some very old, some from recent past the Planning Commission which was set up in 1950 has been discharging the functions of planning the various Five year plans of the Government of India, the various issues concerning budget allocation of scarce resources of amongst the growth and development needs and has been assisting in setting out the road map and structure of the new emerging development opportunities particularly the Public Private Participation of development and growth.
The question isn’t whether the Planning Commission should be an advisory and a guiding light or even whether it should be allowed in the decision making rules in various departments to oversee and ensure compliance of either the various departmental projects of India or even the recommendations of the Planning Commission of India. The question is whether our MPs, our television anchors and our RTI activists are asking the commission enough questions!
References and Additional Thinking
Public Administration Law, M.P. Jain, Universal Publication 1999, Vol.2. Edition-3;
N.C. Jain Report on Restructuring of Planning Commission on 26.06.2000;
www.financialexpress.com;
Handbook of Public Administration- Jack Robin, Gerarld Miler;
Montek Singh Ahluwalia, Deputy Chairman of Planning Commission Interview with India Knowledge@ Wharton, Published November 1, 2007;
(The views expressed in the write-up are personal and do not re?ect the official policy or position of the organization.)
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