What must replace the Planning Commission

In finally ending the Commission’s long history, Prime Minister Narendra Modi has vindicated those who have been yearning for a decisive break from India’s Nehruvian socialist past.

An announcement of note in Prime Minister Narendra Modi’s Independence Day speech from the ramparts of Red Fort was the much-anticipated end of the Planning Commission.

A full 23 years after India ushered in reforms that reduced emphasis on central planning, the crucially important organisation of the statist era will finally be dismantled.

Both as signalling and as policy, this needs to be welcomed. It is true that the days are long gone in which it was unchallenged in deciding the regional distribution of government spending, and even of licences and quotas.

That period died in the 1990s. But it was far from powerless, even so.

The Planning Commission was set up by Jawaharlal Nehru in the high noon of socialist planning.

It has never had the legal footing of other bodies, set up merely by a resolution of the Union Cabinet in 1950.

Although chaired by the prime minister, the deputy chairman would have Cabinet rank.

But for much of the Nehru years it was run not by the deputy chairman but by the econometrician P C Mahalanobis, a man more than any other associated with the triumphs and the errors of Nehruvian economics.

In finally ending the Commission’s long history, Mr Modi has vindicated those who have been yearning for a decisive break from India’s Nehruvian socialist past.

It would, however, be premature to attribute deeper ideological motives to the prime minister’s announcement.

It is equally likely that Mr Modi, long an advocate of states’ rights, always saw the Planning Commission as an unwelcome interference in how states managed their business.

In fact, Finance Minister Arun Jaitley has said that this is what has guided the decision.

Mr Jaitley is quoted as saying at a function in Mumbai: “Why should the Centre tell states what needs to be done and not? Each state should be allowed to decide and plan how it intends to use the national resources.” "This is a welcome change of attitude.

"Under the United Progressive Alliance, far too much central money was tied up, and states were given too little leeway.

"This changed a little towards the end of the UPA’s tenure, in a reorganisation of centrally sponsored schemes.

"However, the deeper problem remained."

It is to be hoped that decentralisation lies at the heart of whatever will replace the Planning Commission.

There are justifiable concerns that, if all financial allocation powers are now shifted to the finance ministry, then the end of the Commission might be counter-productive -- states’ needs could, in fact, be addressed less.

This concern should be addressed.

And the body that replaces the Planning Commission should not be old wine in a new bottle, as this government has done with too many UPA schemes.

Reportedly, it will be called the National Development and Reform Commission, the name that China’s Planning Commission-equivalent was given after market reforms.

That body is a strategic planning think tank for Chinese government at all levels; it has 900 central civil servants, and thousands more at the provincial level.

This government has so far suffered from a lack of economic clarity and vision.

The new NDRC must seek to remedy that.

It must not become, as Bharatiya Janata Party leader Arun Shourie said of the old Commission, a 'parking lot' for political cronies and superannuated civil servants.

Image: Prime Minister Narendra Modi