Adieu, Plan panel!

Scrapping of Planning Commission in its present form can be fine. But, abandoning planning process can prove to be disastrous for India’s economic growth and development

Adieu, Planning Commission! This is the fashion of the day. The Narendra Modi government in its frantic bid to bury the Nehruvian legacy is determined to give Planning Commission a go-by. The criticism is simple. In a market economy, when the State is retreating from the economy, where is the relevance for planning? It is true Planning Commission targets are often amiss. The process adopted by the Commission to allocate plan grants often flouted the principles of fiscal federalism. Its methodology to evaluate poverty estimates turned out to be obnoxious calculations. Does all this mean there is no relevance for planning in Indian economy? Can we afford to throw out the baby with the bath water? Planned intervention by the State is considered to be detrimental to the task of making entrepreneurial ‘animal spirits’ flourish.

It’s certainly right. In the name of planning, the centralised command economy stifled private initiative. But, it is equally true that unbridled and unregulated private economy led to unprecedented cronyism. Effective planning can be a deterrent to such private capture of public resources. Planning should not be allowed to kill private dynamism. In the era of liberalization, planning should be indicative in nature. Indian economy faces a severe infrastructural deficit. It requires a trillion dollar investment in infrastructure, which is vital for industrialisation. The domestic private sector lacks the capacity to provide such huge investment which has long gestation period for returns.

Therefore, massive public investment is to be channelised in a planned manner to develop transport, power, pipelines, fibre optics, etc. especially in unserved and underserved areas. Amartya Sen theorised that inequalities are the root cause of poverty. India suffers from multiple divides. Planning is an effective instrument to bridge these inequalities. Experience of even advanced market economies reveals that market-led growth trajectory is often hit by market failures. Such failures retard growth by creating recessionary trends in the economy. State has to intervene where market fails. Such intervention ranges from welfare state to stimulus packages. The unbridled privatisation puts profits over people, adversely affecting the interests of consumers, labour and environment. In fact, in a mixed economy, public and private economies can coexist, each building upon the other’s strengths and filling the gaps due to each other’s failures. But, all this requires a planned coordination.

India is one of the fastest growing economies. But, the UN Development Programme (UNDP) Human Development Reports reveal the abominable state of India.. Strong public intervention is vital for social and human development. This is evident from the experience of many nations with diverse economic policy like Japan, Korea, China, Sri Lanka, Jamaica etc. Amartya Sen effectively presents this in his work, “India: Economic Development and Social Opportunity”. Scrapping of Planning Commission in its present form can be fine. But, abandoning planning process can prove to be disastrous for India’s economic growth and development.