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Role of Planning: A Comment

A review of the role of planning should look at the possibility of expanding its role to municipalities, districts and panchayats rather than limiting it.

DISCUSSION

Quoting from the Tenth Plan, it is

Role of Planning: A Comment

pointed out, “the sectoral investment targets for the economy (in the plan) were worked out based on the targets of output Sharat Kumar growth and incremental capital-output ra-

A review of the role of planning should look at the possibility of expanding its role to municipalities, districts and panchayats rather than limiting it.

Sharat Kumar (drsharatkumar@yahoo.co.in) is with the department of public enterprises, Ministry of Heavy Industry and Public Enterprises, government of India, New Delhi.

T
he view inside a kaleidoscope is never the same every time it is turned. The Indian economy is just like that. In this context, it is legitimate to review the role of planning in India. At the outset, however, I may say that I am not in an agreement either with the observations of Joseph Stiglitz (who has been quoted in the “preface” to the article) or with the author, Amaresh Bagchi; in his article ‘Role of Planning and the Planning Commission in the New Indian Economy: Case for a Review’ (EPW, November 3, 2007). tios (ICORs), but the targets for the government’s sectoral investments were derived residually from the desired investment programme after estimating the likely pattern of private investment and assessing the likely investment by the states” (Tenth Plan, Vol I).

While the first part of the quotation forms the basis of “indicative planning” and investment targets have been set for the economy in successive plans based on the estimated savings/resources, the second part constitutes the basis of an investment pattern in the public sector. The role of the Planning Commission (in India) is

february 23, 2008 Economic & Political Weekly

EPW
DISCUSSION

quite eminent in regard to both these aspects. The different sectoral targets for investments are, moreover, the results of the efforts put in by the various steering committees/working groups comprising experts from all over the country. It is for this reason that A M Khusro considered the Planning Commission a “think tank”. The experts on the different working groups/steering committees work as “honorary members”, and not as consultants to the Planning Commission charging a fee. Based on the recommendations of the various expert groups, the commission is in a position to allocate judiciously the available resources for investment between the competing demands put forward by the various ministries/sectors.

Once the allocations have been decided upon in the five-year plan, it is operationalised through the annual plan discussions held in the Planning Commission. The finalised plan outlays subsequently find mention, for each ministry, in the expenditure budget of ministry of finance. All plan models are based on the assumptions of stable conditions. In reality, however, the economy is subject to fluctuations like a change in weather conditions, price fluctuations, etc. The initial decision vis-àvis the five-year plans may, therefore, have to be adjusted to these changes. Nonetheless, since plan allocations under the fiveyear plan are finalised consequent to obtaining the approval of the National Develop ment Council, the Parliament and the union cabinet, these are sacrosanct and have to be adhered to as far as possible. There is greater discipline and direction under the “plan expenditure” compared to the “non-plan expenditure”. Besides the first charge on the union budget by way of salaries, interest payment and subsidies, all other components of the nonplan expenditures are in the nature of meeting exigencies. While the review paper mentions about the limitation imposed on the budget consequent to fiscal responsibility and budget management, it overlooks the significant increase in gross tax revenue due to higher gross domestic product and industrial growth in the country.

The papers mentions V M Dandekar stating that he found fault in the planning process inasmuch as there was a

Economic & Political Weekly

EPW
february 23, 2008

duplication of jobs between the ministries and the Planning Commission. This is rather surprising, since in one of his other papers, he tells us that the Planning Commission performs the role of a “clearing house”. What he means by this is that while the initial proposals/schemes are formulated in the ministries, these are submitted to the Planning Commission for a “second opinion”. It is on the second opinion received from the Planning Commission that the government is doubly reassured of the merit of the case. The system has worked well and due to this reason the extant Government of India Business Rules has the proviso that any matter relating to plan outlays has to be referred to the Planning Commission.

Market Economy and Planning

Public sector outlay is not always for creating physical assets. Investment in human capital is primarily by way of revenue expenditure. Relevance of economic planning in the context of India is greater on account of the overwhelming poverty in the country that cannot be left to market forces. Amartya Sen in one of his recent interviews re-emphasised the importance of “public education” and “public health” facilities; not withstanding the role of the private sector. Most of these functions come under the state list under the Constitution of India; the government of India has been assisting the state governments in a big way through the centrally-sponsored schemes.

Economic planning has, moreover, been resorted to from time to time in the market economies of France, Japan, the Netherlands and UK, especially so after the second world war. It has also become one of the important vehicles of integration of Europe; mega infrastructure projects and devolution of funds to less developed regions is the hallmark of the European Commission.

The Planning Commission in India was set up as a replica of the Gosplan/state planning committee of Soviet Russia. According to Oscar Lange, Lenin envisaged Gosplan (set up in 1921) to replace the ministries that were considered a legacy of the feudal/capitalist past. Accordingly he constituted the Gosplan comprising subject divisions that were counterparts to diffe rent ministries, and the deputy chaiman of Gosplan was given the stature of a cabinet minister. The Gosplan was, however, supposed to maintain “arms length distance” from the ministries and be guided purely by the needs, that is, by projected demand and supply and transfers of resources from one section/region to another. Such a planning process, free from lobbies and vested interests, carried to its logical end questions the very relevance of “the state as a class”. In this respect, Lenin may be said to stand along with Adam Smith in ushering the withering away of “the state”.

The Planning Commission in India as it has evolved over the years is no more the exact replica of Gosplan. The ministries (including the ministries of finance), the Reserve Bank of India and the central statistical organisations have come to be regarded as the extended arms of the Planning Commission, at variance to the approach of keeping the ministries at arms length distance. The success achieved by India in achieving a high rate of growth in recent years and in reducing poverty in the country has been attributed by many to the Planning Commission. In regard to inequality of incomes as well, the record of India is far better than that of South Africa or China. In view of all these, there have been requests from different countries to help them set up Planning Commission in their countries! A review of role of planning, in the given situation, should look for scope of expanding its role to municipalities, districts and panchayats rather than limiting the role. This is, perhaps, the need of the hour in view of the unplanned growth that we see all around us.

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