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The "New" Planning Commission

Mihir Shah ( was Member, Planning Commission from 2009 to 2014.

The body that is to replace the Planning Commission must build on the strengths of the existing one even as it addresses the many existing deficiencies.

Prime Minister Narendra Modi announced the demise of the Planning Commission from the ramparts of the Red Fort on Independence Day. As the nation debates the form and content of the institution to replace the Planning Commission, it may be useful to reflect on the immediate context that precipitated the disbanding, as also to reiterate certain functions of the Planning Commission that will need to be performed by its replacement. I will draw mainly, but not only, upon my five years as Member, Planning Commission during 2009-14.

Classifying Institutions

One way of classifying institutions is in terms of the balance between their potential positive power (PPP) and potential negative power (PNP). Potential positive power may be broadly understood to mean the capacity and power to enforce or facilitate positive change that would hasten the achievement of national goals. Potential negative power, on the other hand, refers to the capacity or power to obstruct, delay or derail positive reform, in cases where such reform threatens entrenched vested interests, status quo or business as usual.[1] The exercise of PNP is often a ruse to foster corrupt practices, but it can also be an exercise of wanton power for its own sake, reflecting a perverse sense of power-induced pleasure.

The two institutions with perhaps the highest quotient of both PPP and PNP in the government of India have, especially in recent years, been the Planning Commission and the Ministry of Finance. In my five years in the Planning Commission, I saw many instances of PNP and how this became a source of great resentment against the Planning Commission, both among state governments and central ministries. Of course, at times, the Planning Commission acted with sagacity in checking profligacy of funds and schemes. But there were many cases where in-principle approvals, investment clearances, grants-in-aid and other decisions appeared to smack of bureaucratic red tape, more than an application of mind motivated by the broader national interest and effectiveness of functioning. There were also visible vestiges of the old Stalinist command and control, inspector raj mindset.[2]

The Expenditure Finance Committee (EFC) meetings held to approve expenditure on new schemes typically saw the Planning Commission representatives play an obstructionist role, at times raising completely specious objections that revealed not merely non-application of mind but also lack of due diligence and requisite homework on their part. This led to huge delays in the passage, through the corridors of power, of many an innovative idea for reform of government. States too were displeased with their chief ministers having to go through the annual ritual of obtaining approval of their Annual Plans at Yojana Bhavan. An empty ritual it was, for neither did the Planning Commission have much to add in finances to the state’s Plan, even the well-meaning advice of the Planning Commission generally tended to be ignored because of the overall context of the Annual Plan “approval” meeting in which the advice was being given. It is clear that reaction to this unrelenting exercise of negative power has finally reached a crescendo, with the institution itself suffering a demise.

To my mind, it is this negativity that is the chief cause for the Prime Minister’s action, more than the oft-repeated notion that the Planning Commission had to go because it was a “socialist” vestige, an anachronism in the capitalist economy that is India today. Indeed, the role of the Planning Commission in India in recent decades has had nothing to do with keeping the commanding heights of the economy with the public sector. If anything, quite to the contrary, it has been a great proponent of the private sector and Public-Private Partnerships (PPPs). So in understanding its demise and anticipating the roles of its replacement, this ideological lens is not of much use.

Such a view, that has been expressed, not only by the right but also surprisingly by the left, in any case, overlooks the work of Yale political scientist David Cameron (1978) and Princeton economist Dani Rodrik, which decisively show that even advanced capitalist economies, virtually without exception, are characterised by massive and increasing role of government. As Rodrik (2012) suggests, developing strong markets and open economies requires more government, not less: “With very few exceptions, the more developed an economy, the greater the share of its resources that is consumed by the public sector. Governments are bigger and stronger not in the world’s poorest but in its most advanced economies. The correlation between government size and per capita income is remarkable tight. Rich countries have better functioning markets and larger governments when compared to poor ones.”[3] If we take today’s advanced economies and track the share of government expenditure in their economies over time, Rodrik finds a steadily rising trend from 11% in 1870, 20% in1920, 28% in 1960, 40% in 1975 to around 35-60% today. And the higher shares are found in more open economies because their citizens demand that governments compensate them against the risk which international economic forces expose them to.

Our view, therefore, is that to get a more concrete idea of the what the new institution must do, it would be much more useful to focus on the many positive roles that the Planning Commission played and which, perhaps, no other institution in India is in a position to perform.

Seven Key Roles

The key arena where the new institution must play its part is in mediating centre-state relations and pushing for a more devolved economy and polity in India. Given the enormous diversity of India in social, cultural, agro-ecological and economic terms, it becomes imperative to focus on the principle of subsidiarity. Every effort needs to be made to find location-specific solutions to problems, closest to where the problems exist. States must enjoy maximum flexibility in this respect and there must be mechanisms that facilitate learning across states. Despite all the exercise of negative power that I alluded to earlier, the new institution is in a great position to draw upon the very rich experience of the Planning Commission in each of these respects.

In my years at the Planning Commission, I saw innumerable instances of the exercise of this positive power. I believe there are at least seven broad areas in which the Planning Commission played an extremely positive role: one, pioneering an inclusive planning process; two, facilitating and mainstreaming reform; three, pushing decentralized planning forward by emphasising the principle of subsidiarity in recognition of the deep diversity of India; four, rationalizing the centrally sponsored schemes and introducing greater flexibility within them; five, being the spokesperson of the states at the centre; six, co-ordinating across, if not breaking down departmental silos within the Government of India as also arbitrating disputes by taking a more long-term and holistic view of issues; and seven, providing an independent evaluation and critique of government programmes and policies. Each of these roles will need to be taken over by the new institution replacing the Planning Commission.

Inclusive Planning

The Twelfth Plan process saw a completely unprecedented architecture of plan formulation. For the first time in the history of the Planning Commission, the 12 working groups on water, rural development and panchayati raj were chaired by eminent experts from outside government and included the best minds and practitioners from across central and state governments, academia, research institutions, industry, civil society, and panchayati raj institutions. It was clearly recognised that all wisdom does not reside within government and that the best plans, programmes and policies could be made only with the active involvement of those outside government. This was not mere tokenism in the name of participation. Final decisions were made by these inclusive working groups. For me, the true indicator of the success of this process was that even though none of the players involved were fully happy with the final outcome, something truly path-breaking was achieved. This only reflected the spirit of compromise that is a hallmark of good governance, as a hard-fought consensus was thrashed out among the members and the chair and co-chair, who was in each case the senior-most official of the concerned department. Each side was compelled to give up their own pet fundamentalisms in the interests of forging a consensus. The result was a series of landmark proposals that constitute a paradigm shift in water management in India, including the first-ever National Aquifer Management Programme, a new approach to incentivise de-bureaucratisation of large irrigation projects and irrigation management transfer to increase water use efficiency, a new integrated approach to rural drinking water and sanitation, a proposal to regularly audit the industrial water footprint and a new “room-for-the-river” approach to flood management.

Facilitating and Mainstreaming Reforms by States

Almost all the innovations listed above were drawn from best practices pioneered by state governments, who have led the reform process in our country in recent years. The specific role of the Planning Commission was to enable the mainstreaming, across the length and breadth of the country, of something that was initially attempted only in one state or even a part of the state. I was fortunate to have been able to build on many such initiatives. The National Aquifer Management Programme, for example, emerged from the extraordinary effort of a million farmers in Andhra Pradesh, who showed how sustainable management of groundwater was possible once farmers understood the nature of their aquifers. Despite the fact that India is the most groundwater dependent country in the world (leaving China way behind) with around 30 million groundwater structures (wells and tubewells), we have still not mapped our aquifers at a scale that enables their sustainable management by the primary stakeholders.

It was the Planning Commission that helped the Ministry of Water Resources develop a national programme that will enable aquifers all over India to be mapped for the first time ever at a scale that will make it possible for them to be sustainably managed. Another such initiative in which I was involved is the mainstreaming of Gujarat’s greatly successful Jyotigram (separation of power feeders) scheme that has already made a dramatic impact on the power situation in states like Madhya Pradesh.

Promoting Devolution

A key role played by the Planning Commission over the years has been to promote the cause of decentralized planning. In the Twelfth Plan period, this culminated in the creation of a new centrally sponsored scheme called the Rajiv Gandhi Panchayat Sashaktikaran Abhiyan (RGPSA). The RGPSA is based on the conviction that panchayati raj institutions (PRIs) in India have suffered in the absence of professional human resource support. This is perhaps the single most important change I was part of during the 12th Plan, although few among economic and political commentators seem even remotely aware of it. Building upon an offer by the Ministry of Rural Development (MoRD), the Planning Commission was able to carve out a massive increase in the allocation for the Ministry of Panchayati Raj through a mere 1% reduction in the allocation of the MoRD, which saw great merit in strengthening PRIs for improving the quality of implementation of its own programmes.

Another blow in favour of devolution and strengthening PRIs, initiated by the Planning Commission, was the exercise to restructure the Backward Regions Grant Fund (BRGF), the most important development programme providing untied funds to PRIs. The exercise was about moving the BRGF to the sub-district level because it is no longer meaningful to understand backwardness in India at the district level, with many “advanced” districts enclosing pockets of intense backwardness within them and many “backward” districts, containing very advanced sub-districts. By focusing on sub-districts we would be able to zero in on the truly backward regions of India.[4]

Greater Flexibility in Schemes

A major complaint of states over the years has been the great inflexibility of centrally sponsored schemes (CSSs) and the rigid guidelines imposed upon them by central ministries. We must begin by stating that contrary to popular belief the Planning Commission hardly plays any discretionary function as far as fund flows to states are concerned. This flow mainly takes place through CSSs but these are controlled by the central ministries. We believe a certain number of CSSs are required for the achievement of basic national goals like health, education, sanitation, nutrition and drinking water. But there is a legitimate concern about the proliferation of CSSs.

The Planning Commission has played a stellar role in rationalizing the number of CSSs, most recently through the work of the BK Chaturvedi Committee. The work of the committee involved a process of widespread consultations with the concerned ministries, States and other relevant stakeholders. This led to a drastic reduction in the number of schemes, which many still regard as inadequate but they overlook the fact that the Planning Commission has always pushed hard for their reduction. The difficulty has been that finally it had to go by the consensus possible with the ministries very keen to retain their pet projects.

Even more significant has been the contribution of the Planning Commission in introducing significant flexibility in the guidelines of CSSs. Once again the process involved extensive consultations with the States, as also with the best civil society implementers in India. This has led to changes in the MGNREGA guidelines, accepting suggestions of states for activities suited to their conditions, as also works that enable synergy with agriculture in view of the widespread (even if false, in view of the Planning Commission) complaint about the adverse impact of MGNREGA on small and marginal farmers.

The guidelines for sanitation were also modified to allow States to use location-specific designs as per their ecological conditions. The guidelines for the drinking water programme were tweaked to promote devolution on the basis of a Management Devolution Index, which summarises the extent and quality of devolution in drinking water management systems across states. Over and above all these CSS specific changes, the Planning Commission introduced the concept of a “flexi-fund” that would enable states to undertake innovative projects across CSS silos.

Spokesperson for the States

The new institution set up to replace the Planning Commission must continue to play this kind of role in support of the states in their hard negotiations with central ministries. When the Chief Minister of Madhya Pradesh went on a fast, raising a series of legitimate grievances of the state with the centre, the Prime Minister asked me, as member-in-charge of Madhya Pradesh, to work with all concerned Central ministries to hammer out an amicable solution. This was done in record time, to the satisfaction of the aggrieved chief minister. Similarly, at the request of the Chief Minister of Punjab, I chaired a high-level expert group on waterlogging in Punjab. The group, consisting of the nation’s best experts on the subject, conducted a thorough investigation of the problem, in close partnership with the state government, and came out with a package of solutions, which was generously supported by the Government of India. Similar roles were played by other members in other contexts, which illustrate how the Planning Commission can be an effective mediator and problem-solver for States, rather than their tormentor.

Breaking Departmental Silos

Water is perhaps the sector that suffers the most from being broken down into departmental silos. The Twelfth Plan has described it as “hydro-schizophrenia”, where the left hand of drinking water does not know what the right hand of irrigation is doing. The Plan document diagnoses the emerging crisis of drinking water and so-called “slipped-back habitations” as emerging from the fact that the same source that was providing drinking water to the habitation was also being used for irrigation, a much larger guzzler of water. Again, the fact that drinking water and sanitation were being run as separate programmes meant that often there was no water in sanitary facilities and, in other instances, the drinking water suffered bacterial pollution. All of these kinds of issues were typically tackled by the Planning Commission by modifying programme guidelines and seeking to bring greater convergence in action.

Independent Critique and Evaluation

This has been one of the most well-established roles of the Planning Commission over the years. Given its unique position of being, in a sense, both inside and outside government, the evaluations and critiques the Planning Commission proffered of government programmes and policies, has had a more than academic value and has often led to positive reforms in implementation. The Planning Commission has drawn upon the best expertise available within academia to play this role. The quality of these exercises has, however, not always been up to the desired level and the new institution being set up must do better in this regard. A crucial element that needs change is the ability to hire the best available talent and being able to network with the best institutions, which would give this exercise real credibility. This also makes it essential for there to be such expertise available in-house so that it can draw in whatever resources required, both from among academics and practitioners.


The new institution that replaces the Planning Commission will need to play each one of these crucial roles. However, it is also important that the negative roles of the Planning Commission, such as approving the Annual Plans of the states, should be done away with. The so-called “regulatory” role of being able to veto EFC notes must also be eliminated. Each one of the positive functions we have described earlier implies a think-tank role. But these functions cannot be performed by just any other toothless think-tank. Their effective performance demands that the institution be empowered in a way that enables it to make a difference at the cutting edge of implementation. Otherwise the “new” Planning Commission, whatever it may be named, will be reduced to a shadow of its former self.



[1] Please note how carefully we have stated our case here for not all “negative” power is necessarily negative. There are instances where the exercise of negative power can have positive outcomes for society or the environment.

[2] The finance ministry, on the other hand, appeared to display an increasingly intrusive tendency, at times even dictating to ministries how they should allocate funds across their own programmes.

[3] As Rodrik says elsewhere, “Markets need to be embedded in institutions of collective deliberation and social choice” /2014/01/04/paradox-of-globalisation/.

[4] While the UPA II government failed to carry this proposal through, we are heartened to note a mention of this restructuring in the Budget speech of the current Finance Minister.


David R. Cameron (1978): ‘The Expansion of the Public Economy: A Comparative Analysis,” American Political Science Review
Dani Rodrik (2012): The Globalisation Paradox: Why Global Markets, Democracy and States Can’t Coexist, Oxford University Press, p.16. 



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