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19 August, 2014

Modi reform on the way

BRP Bhaskar
Gulf Today

Prime Minister Narendra Modi, whom critics have accused of continuing with the policies and programmes of the previous administration, announced last week a step towards changing the way the government functions. The Planning Commission, set up by the first prime minister, Jawaharlal Nehru, 64 years ago, will be wound up, he said.

Nehru was an admirer of socialist planning since his visit to the Soviet Union in 1927 on the tenth anniversary of the October Revolution. He established the Commission to draw up perspective plans for economic development.

He envisaged a socialistic pattern of society in which the public sector will occupy the commanding heights of the economy. The Commission’s task was to formulate five-year plans with this end in view. Under successive prime ministers it produced 12 such plans, and the last of them is now in the process of implementation.

Since the Commission was a brainchild of Nehru, some have interpreted Modi’s decision to do away with it as part of the process of burying his legacy, the main political asset of the Congress Party which was in power for most of the years of Independence.

During this year’s parliamentary elections Modi had campaigned for a Congress-free India. His lieutenant, Amit Shah, who was recently elected president of the Bharatiya Janata Party, has adopted the same slogan for the upcoming Assembly elections in some states.

The fact is that planning in India predates Nehru’s days as prime minister. As Congress President, Subhas Chandra Bose set up a national planning committee in 1938 to formulate a plan for establishment of industries after the country gained freedom. A group of economists and industrialists made another non-official effort in the same direction in 1944. In the last years of colonial rule, the British established a planning board to rebuild the war-ravaged economy.

From the second plan onwards, the Planning Commission followed an economic model developed by internationally reputed statistician PC Mahalanobis, who laid emphasis on industrialisation with key areas under state control. Market reforms of the era of globalisation rendered that model irrelevant. 

The United Progressive Alliance government, which pushed globalisation during the past 10 years, recognised the need to reform the Commission in the light of new realities. It set up an Independent Evaluation Office (IEO) attached to the Commission to initiate the process. However, there was not much change.

Montek Singh Ahluwalia, who ran the Commission under Manmohan Singh, made it a laughing stock by fixing the poverty line at the abysmally low level of a monthly consumption of Rs859.60 in urban areas and Rs672.80 in rural areas. He also came under criticism for spending Rs3.5 million on renovation of toilets in the Commission’s headquarters.

Justifying the decision to scrap the Commission and go in for a new institution, Modi said, “Sometimes it costs a lot to repair an old house. It gives us no satisfaction and we have a feeling that it is better to construct a new house.”

The IEO, in a report submitted to Modi in June, immediately after he took office, had recommended abolition of the Commission. It suggested that a think tank be created in its place to advise the states on developmental plans. Modi has not indicated what the shape of the new body will be. Some media reports have suggested that he has in mind something like China’s National Development and Reforms Council.

But China, which started revamping its Planning Commission in 1998, still does not have an institution which its rulers consider satisfactory. The NDRC is a leviathan with 30,000 bureaucrats spread across the country. The new leadership of the Communist Party of China is reportedly planning to clip its wings.

According to some other reports, the think tank will consist of eight members, of whom five will be central ministers or serving or former state chief ministers and the remaining three will be drawn from industry.

The crucial issue is not the size and composition of the body but the procedures it will follow. In all likelihood, the Finance Ministry will take over the task of fixing annual outlays of state plans and providing the requisite funds. This may not be conducive to strengthening of federalism, which Modi has mentioned as a key element of his developmental policy, along with optimum use of the country’s young population and promotion of the public-private partnership.-- Gulf Today, Sharjah, August19, 2014.

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