Macroeconomics

In lieu of the Planning Commission: Part II

  • Blog Post Date19 September, 2014
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Chandrajit Banerjee

Confederation of Indian Industry

cb@cii.in

In this post, Chandrajit Banerjee - Director General, Confederation of Indian Industry (CII) - provides his perspective on some of the issues involved in replacing the Planning Commission. In his view, Five Year Plans can be dispensed with, while the function of fund allocation across levels of government and ministries can be undertaken by the Ministry of Finance. He suggests having a group of private sector advisors that can provide feedback to the new body.

In his address to the nation, from the ramparts of the Red Fort on India´s 68th Independence Day, Prime Minister Modi announced his government´s decision to abolish the Planning Commission:

“I believe that when Planning Commission was constituted, it was done on the basis of the circumstances and the needs of those times…but the prevalent situation in the country is different, global scenario has also changed, governments are no longer the centre of economic activities, the scope of such activities has broadened... therefore within a short period, we will replace the planning commission with a new institution having a new design and structure, a new body, a new soul, a new thinking, a new direction, a new faith towards forging a new direction to lead the country based on creative thinking, public-private partnership, optimum utilization of resources, utilization of youth power of the nation, to promote the aspirations of state governments seeking development, to empower the state governments and to empower the federal structure.”

The Planning Commission performed the following functions;

  1. Preparation of the Plan Document
  2. Allocation of funds between: (a) states and centre; and (b) central ministries
  3. Appraisal of all expenditures of the central ministries
  4. Mediating between states and central government
  5. Providing independent opinion on all project/ programme proposals of central ministries
  6. Monitoring progress of central government schemes
  7. Mediating between central ministries on issues of a crosscutting nature

In view of the above;

Q. Which of these functions are obsolete and could be dispensed with, and why?

The concept of a Five Year Plan is becoming obsolete, given that the State is now less involved in economic activities and it is difficult to achieve targets set five years in advance. At the same time, there is a need for formulating a strategic vision for the direction in which the country needs to move. In view of this, I believe function (a) can be dispensed with. Others need to continue but may or may not be performed by the new institution.

Q. Of the functions which need to continue to be performed which should be retained in the new institution and which can be located in other existing bodies? Reasons may please be provided.

Function (b) that pertains to allocation of funds can be performed by the Finance Ministry, which is already responsible for allocating the bulk of funds. Other functions can be subsumed by the new institution.

Q. Are there other (new) functions that should be performed by the new institution? Please specify with reasons.

The new institution can broadly perform the following functions:

  • Formulation of a strategic vision for the country – working out agenda for reforms and providing expert advice, support and guidance to the central government.
  • Designing social and economic policies and projects and providing feedback to the government – suggesting policies based on research, monitoring impact of policies and preparing outcome reports, etc. This would subsume function (c) and (e) above.
  • Monitoring and implementation of projects – assist in implementing high-impact national and strategic policies and projects, capacity building of states, etc. This would subsume function (d), (f) and (g) above.
  • Research and data – Tracking key social and economic development parameters.

Q. In order to perform the functions envisaged for the new institution, what should be its legal position, character and structure?

The new institution should be under the Prime Minister’s Office (PMO) so that it is empowered to implement its decisions. It should have clear objectives such as employment creation, investment generation and social development, which should be monitored on a regular basis.

Q. What should be the composition and staffing of the new institution?

The organisation can be composed of two kinds of staff:

  1. Experts (including macroeconomists as well as sector specialists) who will set out the reforms to be implemented and the goals to be achieved in a particular area.
  2. Professionals who can work with the central, state and local governments to facilitate implementation.

Finally, there should a group of private sector advisors who will then give feedback to the experts on how the system is working at the ground level and whether the desired changes have been achieved.

This is the second part of the series "In lieu of the Planning Commission", as part of which we are presenting views of experts from various stakeholder groups - academia, private sector, media, government and civil society - on some of the issues involved in replacing the Planning Commission of India.

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