#dnaEdit: The Planning Commission's coming demise is the end of an era

What was largely in the air for the last two and half months has been confirmed by the Prime Minister in his Independence Day speech

The Planning Commission, one of the most visible symbols of India’s establishment since the early days of Independence, will be scrapped and replaced with a new institution.

For some, this is a break from the past — the Nehruvian past. The Planning Commission was no doubt inspired by the experiment of planned development of Soviet Russia.

Pandit Nehru, a Fabian socialist of the 1930s vintage, had eagerly accepted the intellectual appeal of directing the economy in a planned manner towards a socialistic goal. It was born in the days when planned approach to economic management was thought to be a far better way than the apparent anarchy of the market place. Intellectual stalwarts of the day were involved in the exercise. Respect and recognition for Indian planning reached a high when Prasanta Chandra Mahalanobis requested by Nehru to lend a hand, formulated the Second Five Year Plan. Eminent economists Oskar Lange and Mikhail Kalecki visited Indian Statistical Institute, the cerebral heart of Indian planning in mid-1950s, to engage with India’s planned development experiment. A young Milton Friedman, who later rose to iconic status and was one of the first economics Nobel laureate, visiting India in those days found Indian planning “too mathematical”. Two other great Indian economists, Sukhamoy Chakraborty and Jagdish Bhagwati were intimately connected with the Planning Commission at various stages in their career.

What had economic planning achieved in those early years? Planning for development amidst severe constraints. Three concerns were at the forefront of planning: severe shortage of foreign exchange which compelled general budgets to treat the foreign exchange gap separately from overall resources gap, there was also severe food shortage coupled with prices rising frequently. Industrialisation, in that context, had to concentrate on import substitution. The Second Plan’s strategy for developing an indigenous capital goods industry was the planning Commission’s response to handling this complicated situation.

Successive Prime Ministers had appreciated the role that planning had played in its time. But times have since changed. Modi stated that a new institution would have to be set up based on “creative thinking”. And what will that creative thinking revolve around? The central government is no longer the driving force of the economy. The government would have to provide an enabling environment in which the private sector would bring in risk capital for investment. There would have to be public-private partnership in its true sense.

Contemporary India is much more federal in nature than before. The states are far important players as partners in progress. A new national development and reforms commission must nurture and help evolve this new and emerging reality. The Prime Minister, along with chief ministers, must be the core team for taking this process forward.

Planning Commission was premised on the pre-eminence of the Union government. The states, including their chief ministers had to line up before the Planning commission to get their plans sanctioned and funds allocated. The Commission, in a way, still propelled the course of regional investment. But the changing Centre-state equations had made redundant the physical planning of the past. Consequently, the Planning Commission became a place for rehabilitating those who couldn’t be accommodated elsewhere. This was surely not the way the Planning Commission was originally envisaged. The need for change was best articulated by none other than the Commission’s erstwhile deputy chairman, Montek Singh Ahluwalia. In this context, the Prime Minister’s radical move to dismantle an outmoded insignia, is indeed welcome.