Arvind Virmani: Good Riddance, Planning Commission

The Planning Commission has outlived its utility, but what should replace that Nehruvian relic? Former Chief Economic Advisor Arvind Virmani has some suggestions

Prime Minister Narendra Modi told  the Nation in his Independence Day address that,  “we will replace the Planning Commission (PC) with a new institution having a new design and structure, a new body, a new soul, a new thinking, a new direction, a new faith towards forging a new direction to lead the country based on creative thinking, public-private partnership, optimum utilization of resources, utilization of youth power of the nation, to promote the aspirations of state governments seeking development, to empower the state governments and to empower the federal structure. Very shortly, we are about to move in a direction when this institute would be functioning in place of Planning Commission.”

The abolition of the Planning Commission means that there will be no national Five Year Plans, no annual plans related to it or flowing from it, and no meetings of Chief Ministers in Delhi to discuss “State Plans.”  Correspondingly there will be no ‘plan allocations’ or financial approvals (by the erstwhile PC or the new institution). The mandate of the National Development Council would have to be modified (perhaps) by replacing “Plan” by “Policies” and “Planning Commission” by something like Bharatiya Vikas Niti Sansthan (BVNS) or its English equivalent Indian Development Policy Institute (IDPI). The distinction between Plan and non-Plan expenditures will also disappear and needs to be replaced by the economic (functional) distinction between “consumption” and “investment” expenditure, with “repair and maintenance” of assets, included in the latter.  Its treatment as “revenue” expenditure in government budgets leads to neglect and deterioration of physical assets. By definition, “current” expenditures have a short, and “investment” a long time horizon.

The Finance Commission (FC), set up under the constitution, with a fresh set of members every five years, to recommend the division of tax revenues between center and states and Grants in Aid from the Center to the States, focusses on economic and social needs during the five years. Though “Grants in Aid” can cover “capital” grants, these are based on demands put forward by the states, comments by centre (with inputs from the Planning Commission), and any expert who wants to depose before the FC or is requested by the body to do so.  With the abolition of the PC, inputs based on systematic research and integrated analysis of long term issues and problems would be reduced or eliminated.

The ministries of government, including the Finance Ministry, are usually consumed by short term issues with a horizon of a few years and are looking for quick answers. They do not have the time or capacity for medium-to-long term thinking or for obtaining an input from a wide variety of relevant sources on a continuing basis.  The new institute is designed to fill this gap in government operation. Its experts can act as a bridge between government ministries and departments, and the new ideas and thinking across the country and World. Global experience shows that there is little or no transfer of new knowledge from universities, research institutions and scholars to government decision makers, unless there are experts within the government who can understand and appreciate new thinking and research and translate it into practical policy advice and programs.

 SCOPE

The new institute would combine three overlapping elements,

a) A National Think Tank that does ‘policy oriented’ research on important national issues,

b) Policy Planning: An organization for holistically examining central government’s objectives, goals, policies, institutions and programs, suggesting improvements and changes and doing “operational” planning  with respect to the central list and part of the concurrent list, that come under the purview of central ministries and departments. The Ministries would be required to give to IDPI all data required to fulfill this role.

c) Federal Forum for states to contribute to and gain from analysis of development goals and problems related to the states (state list and part of concurrent list handled by states) and solutions thereof.

Unlike the PC, which formally approved the detailed allocation of “Plan funds” on an annual basis, the BVNS/IDPI‘s recommendations would be advisory in nature.  This would provide to the PM a considered view independent from the parochial views of his ministries and departments. The formal financial allocation process would be undertaken by the Finance ministry, in the light of Finance Commission recommendations, “Grants in Aid” to states for investment, and the directions of the PM.

 MANDATE

The national mandate of the BVNS/IDPI could include;

Future Challenges and Opportunities

1. Analysis of economic, demographic, environmental, social and international trends and forecasting potential problems and opportunities, which will affect the nation or a group of states (over different time horizons ranging from four to twenty years).  Working out and disseminating potential solutions to problems and ways of exploiting new opportunities through appropriate policies, institutions, laws or other initiatives.

Current Goals and Problems

2. Definition of national and states goals (development, growth, employment opportunities, poverty elimination, public health, basic education and skills) in operational terms, analyzing current national, regional and state problems and searching for approaches and methods that have succeeded in achieving goals most efficiently (in India or in other countries). The analysis would relate to policies, institutions or programs and the most effective mix of government, private and non-profit and NGOs (including public-private partnerships).  Disseminating “best practices” to states and red flagging methods and approaches that have failed.

Past Review and Learning

3. Reviewing and analyzing central and state institutions, policies, programs and projects and analyzing the reasons for their successes and failures.  Drawing lessons for the future and devising ways to improve current and future programs and projects.

Optimal Resource Use

4. Policies and institutional structure for the optimal use of natural resources (land, minerals, water, energy) and human resources (job skills and education, public health).  Policies and institutional structure to promote efficient and effective use of capital resources (domestic and foreign, government, market and NGOs).  The institute on Public Private Partnership, “3P India” proposed in the budget, could be a part of the BVNS/IDPI or an affiliated institute.

Federal Spirit

5. Interact with states governments and experts working on state issues, with a view to identifying problems that they are seeking answers for. Searching for solutions from other states, and even discovering global best practices. Working with states to adapt,operationalize these solutions. For this purpose it could carry out case studies or pilot projects in states.  Seek the active participation of states to meet national development goals. Devising mechanisms and institutional structures to stimulate and sustain states’ active participation on a continuing basis.

Advisory Bodies and Mission Groups

The institute would set up a number of Advisory Boards on complex issues like climate change or issues that require detailed knowledge or expertise such as legal ambiguities in tax laws, PPPs or supply contracts which require continuous interaction. The institute could also appoint task specific advisory committees (defining the parameters of a “smart city”, propagating specific policy conclusions).

The new institute should immediately set up the following groups for translating the PM’s vision, as suggested in the BJP manifesto and the subsequent statements of the government into concrete policies, institutional changes and programs.

1. Digital India Group

This group would prepare a vision, an integrated Plan and related polices for extending the broadband network to every corner of the country and using it to provide e-gram, e-governance solutions,

e-education, e-skilling, e-public health, e-medicine, and  e –commerce related to agriculture and so on.

2. Swach Bharat Group

This group would prepare national approach to sewage, sanitation, public toilets, water pollution and the creation of a solid waste disposal and a waste treatment and disposal grids. It would prepare a plan for creating a clean India with the participation of all citizens.

3. Smart Cities, 100 Cities Group

Smart cities could create jobs and employment opportunities, promote efficient use of energy and water, land use planning to minimize transport costs and traffic congestion, integration of public transport, cycling and walking. These are cost efficient ways of using technology in a lower middle income country with a population of 1.2 billion. It would also address the issue of why India has slums instead of rental housing for low income people (as in developed countries) and how to change this.

4. Ease of Doing Business Group

This group would document the jungle of controls that hamper business and commercial activity and job and employment creation. It would develop comprehensive strategies, legal, regulatory, administrative and political, for cutting oppressive controls and identify detailed action at every level.

5. National Water Grid

This would cover issues of connectivity of rivers, depletion of underground aquifers, spatial agricultural policies for optimal use and conservation of water, supply of clean drinking water to all citizens; use of flood plains of monsoon fed and seasonal rivers to store and supply drinking water; supply and pricing of water for

commercial and industrial use; use of waterways for internal transport and cross border transport and to transit to neighbouring countries.

6. Sagar Mala Project Group

Major and minor ports should be used to promote, international and national trade and commerce, to reduce transport costs and energy used in transport.  This group can also help in economic integration of all

coastal areas as well as the coast with the hinterland through integrated road-rail-river connectivity.

7. Public Security Group

This group could re-examine all aspects related to public safety security of citizens, particularly that of women and Children in a changing social context of greater mobility. It could work out legal, judicial, police and other related administrative reforms.