Suggestions to replace the Planning Commission:

Planning apparatus; new and old- Modern Thinking

1950-2014

The Planning Commission came into being on 15 March 1950. The then Prime Minister of India, Pandit Jawaharlal Nehru, became its Chairman in his capacity as Prime Minister of India and there was a Vice Chairman who was the full fledged executive who looked after the affairs of the body and linked it with different developmental apparatus.

Planning Commission was the body which looked after the thought process concerning Plans, Schemes, receiving inputs and delivery mechanism. We are in the midst of the 12th Plan (2012-17).

Many discussions have taken place for and on behalf of the Commission. Many prominent philosophies, economic thinkers and philosophers have given shape to the idea of the Common Planning body. It is the sphinx of development. Economic philosophy, economic policy, planning model which ushered in various reforms in the last six decades stand in its name.

15 th August, 2014

On the 68th Independence Day, speaking from the ramparts of the Red Fort, our Prime Minister, said that we want to evolve a new vibrant Planning Commission. On what shape the new institution would replace the Planning Commission would be based on public discussion with the peers, people, and experts. He envisaged the proposed institution as one that caters to the aspirations of the 21st century India and strengthens the participation of the States. He added: India can move forward if states prosper. Within a short period, we will replace the planning commission 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 toward forging a new direction to lead the country 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.

Prelude:

Planning Commission was never created as a permanent body. It has neither the constitutional status nor statutory recognition. Its existence and role is never recognized in the Constitution, nor was it made into a constitutional body. Why? Was it deliberate or accidental? It meant that the body was designed, conceived, and adopted as an ancillary body which was to function for a limited

period of time and then fade. All Plans are time-bound, all developmental activities has a time-line, and all developmental plans have a time frame. Each five year plan was evolved with a particular special specific purpose in view. The first five year plan was Farmer centric (Green Revolution). Second Plan designed by Prof Manolobis was industrial centric, etc.

All that the Planning Commission had was a body which should necessarily have a soul, and had a full-filling agenda, which was in its theme, and approval by the National Development Council, which was a conclave with the Prime Minister as the head, with union economic ministries and state chief ministers as constituents which approved the Plans prepared by the Plan body. This was approved by the Cabinet, and Year-on-Year allotments were made to states by the centre, which were part and parcel of the budget which was presented by the Union Finance Minister to Parliament.

The allocations to states, were based on Article 275 of the Indian constitution ( grants-in-aid of the revenue of a state, recommendation of the Finance Commission), Article 280 (Finance Commission which gave recommendations of revenue sharing between centre and states in conformity with article 275 of the Indian Constitution) and Article 282 . Article 282 stipulates the Expenditure defrayable by the Union or a State out of its revenues The Union or a State may make any grants for any public purpose, notwithstanding that the purpose is not one with respect to which Parliament or the Legislature of the State, as the case may be, may make laws.

Planning Commission in the Indian context was only a source for providing the Government with materials and Plan documents so that they can have a paper to discuss the contours of the Plan which had central, state and union territories which needed to have a desired corpus to put in action their desired projects or schemes in a planned manner.

Thinking on the new body constituents:

If, we replace the members of the Planning Commission with a task force of 8 members, of which 4 shall be fixed and 4 rotating, we have adopted the policy of the Planning body, which we have discarded and the soul is refreshed by a task force, which consist of individual opinion, thinkers, who have different views, different backgrounds, but the same philosophy in drawing up a model for India-which in principle will have all the draw-backs of the present body plus have the same unaccountable authority to design a Plan without accountability. A new body with the old soul in the body. Will it articulate the goal of building upon India’s unique distinguishable character ships to create a plan which will create emotional attachment of our people to such a designed Developmental model?

Planning matrics:

The Planner has become a victim of planning; his own creation has overwhelmed him. Planning is so large, planner cannot encompass its dimensions. Planning complex planners cannot keep pace with it. Planning protrudes in so many directions, the planner no longer discern its shape. He may be an Economist, political scientist, sociologist, architect or philosopher. Yet the essence of his called planning escapes him. He finds it everywhere in general and nowhere in particular. That is why planning is so elusive. The concept of Planning stands, if actors and societies who stand to benefit do not vibe before the Plan is conceived. They do not like the Plan; it does not suit them. Why they want such a Plan? Planners conditions the way they perceive their social problems and it guides them to their choice solutions. Their understanding of planning helps them to choose the questions they ask and the answers they find. They evaluate their experiences including their attempt to plan in certain ways than other. The difficulties they experience in society are related to their understanding of the mechanism of planning. They believe, the knowledge they are equipped with, will enable them to solve its problems.

Men think through long. They can hardly conceive phenomena their words cannot explain! The ways in which men think about planning affect how they act just as their attempts to plan affect how they think about it. The problems they have with the word mirror their problems with the world.

Planners begin by attempting to transform their envorionment and end by being absorbed into it. The pattern of failure is most evident in poor countries of the world where glittering performance is replaced by discouraging preference. Nor, despite high economic growth results, different rich countries like France or Japan do not follow the Plans which have been drawn up or make good of them when they do. Planning has failed everywhere it has been tried.

Reasonable man plans ahead future evils by anticipating them. Obtain a desirable future by working toward it in the present. Nothing seems reasonable than planning. This is where the problem begins, for if planning is reason, reaonsbale people must be for it? A reasonable author addressing a reasonable reader cannot be opposed to reason. Is it irrational to dissent from this position?

One good question deserves another. Can it be rational to fail? If anybody can do the best, the Planner can but still shall not succeed. Failures of planning are not peripheral or accidental but integral to its very nature. Suppose, Planning as presently constituted cannot work in an environment in which it’s supposed to function. Is it irrational to entertain such hypnosis? Or is it irrational to pursue any hypothesis that does not configure the rational nature of planning, then you are about to read on irrational essay. Everybody feels compelled to redefine its concept.

Confusion resulting from this semantic tower of Babel impinges on the practice of Planning. Can we evaluate a phenomenon when there is little agreement about what it is? Can one say, good or bad or in between when there are no accepted criteria for determining degrees of success or failure? Judgment of the performance of planning rests upon the nature of expectation it arouses. These expectations naturally vary with the definition one adopts. If Planning is designed to make goals consistent on paper, one would judge it quite differently than if its purpose is actually to achieve social goals in the future.

Planning is the attempt to control the consequences of our actions. The more consequences we control, the more we have succeeded in Planning. Planning is the ability to control future by current acts. Present may be reluctant to give birth to the future. Man can attempt; he can fail. I can fail. You can fail. We are humans.

Planning for Economic Development:

Suggestions:

1. Creation of a new ministry (Cabinet) “Ministry of National Development & Planning” by creating a new Ministry in the present Central Government headed by Shri Naendra Modi

2. Creation of Indian Planners Association under Sec 25 of the Companies Act (amended),2013 which would have an all-India structure, state characteristics, jurisdiction, in the Private sector [This will be like Federation of Indian Export Organizations where Government would also nominate representatives], and the body will be partially funded by the Central Government. This body having all-India character, and a body having eminent thinkers, planners, architects, economists, strategists, sociologists, philosophers, will submit strategies, methods of economic development, planning and come out with an Economic Development Tool Box. The body will have nominees from the Ministry of National Development & Planning and state representatives at the state level. It will be an independent body recognized by the Government of India.

3. Ministry of National Development & Planning will have the following important departments:Economic Development and PlanningEconomic Development Plans and Elements departmentComprehensive Economic Development strategyEconomic Data, collection, Data Dissemination

4. We need to formulate after designing a Bill, the “Indian Growth Management Act” which will emphasise country wide co-ordination of economic development. Planning economic development is the cardinal element of a Growth management comprehensive Plan. The requirement for an economic development element becomes paramount for uniform growth of all round uniform development with state funds (to be provided using Article 282,280 read with Article 275 of the Indian Constitution) so that there is no confusion on the central funding for the state plans. Jurisdiction

needed to be provided for spending funds, creation of assets, for to cover the economic element of a comprehensive Plan. Local government plan to be integrated with the strategic action and the Plan to embrace downtown areas. Accountability will rest with the recipients of the plan funds who need to picture progress which is presently absent under the Planning Commission.

5. When planning for economic development, the goal is to create and maintain a strong, vibrant local economy. Local economic development is the core of the development programme, and a large part of a region’s overall economic development plan. Strategy involves state government’s direct participation and co-ordination. The Economic development Plan provides a comprehensive overview of the economy, sets policy direction for economic growth, identifies strategies, programmes, projects, to improve the economy in its totality. First, general background information on economic development, planning need to be worked out and sample economic development plans need to be prepared with the state level members of the Indian Planners Association.

6. There will also be a Ministry of Talents, with a minister of state in independent charge, which will give emphasis for creative talent development, talent pool, re-invite persons who have cultivated a high degree of talent abroad and look after the concept of skill development. It will have a budgetary allocation of Rs 500 Cr as corpus.

Annexure- “A”

A paper on Models of Economic Growth summarised

Classical Model of Economic Growth

Every nation strives after development.  Economic progress is an essential component, but it is not the only component.  Economic development is not purely an economic phenomenon.  In an ultimate sense, it must encompass more than the material and financial side of people’s lives. Economic development should therefore be perceived as a multidimensional process involving the reorganization and reorientation of entire economic and social systems. In addition to improvements in incomes and output, it typically involves radical changes in institutional, social, and administrative structures.  Finally, although development is usually defined in a national context, its widespread realization may necessitate fundamental modification of the international economic and social system as well.

Theories and patterns of structural change uses modern economic theory and statistical analysis in an attempt to portray the internal process of structural change that a “typical ”developing country must undergo if it is to succeed in generating and sustaining a process of rapid economic growth.

Structural-change theory focuses on the mechanism by which under-developed economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanised, and more industrially diverse manufacturing and service economy.  It employs the tools of neo-classical price and resource allocation theory and modern econometrics to describe how this transformation process takes place.  Two well-known representative examples of the structural-change approach are the ‘two-sector surplus labour’ theoretical model of Sir W. Arthur Lewis, and the ‘patterns of development’ empirical analysis of Hollis B. Chenery and his co-authors.

Rostow’s Stages of Growth :  The stages-of-growth model of development is taken by most of the newly independent countries.  According to Walt W. Rostow doctrine, the transition from underdevelopment to development can be described in terms of a series of steps or stages through which all countries must proceed.  According to Rostow, it is possible to identify all societies, in their economic dimensions, as lying within one of five categories:

The traditional society, The pre-conditions to take-off into self-sustaining growth, The take-off, The drive to maturity, and The age of high mass-consumption.

Rostow also clarified that these stages are not merely a way of generalising certain factual observations about the sequence of development of modern societies.  He argued that the advanced countries had all passed the stage of take-off into self-sustaining growth and the under-developed countries that were still in either the traditional society or the pre-conditions stage.  One of the principal strategies of development necessary for any take-off was the mobilisation of domestic and foreign saving in order to generate sufficient investment to accelerate economic growth.

(b)   Harrod-Domar Model :  This model, developed independently by RF Harrod and ED Domar in the l930s, suggests savings provide the funds which are borrowed for investment purposes.

The model suggests that the economy's rate of growth depends on:

the level of saving the productivity of investment i.e. the capital output ratio

For example, if $10 worth of capital equipment produces each $1 of annual output, a capital-output ratio of 10 to 1 exists. A 3 to 1 capital-output ratio indicates that only $3 of capital is required to produce each $1 of output annually.

The Harrod-Domar model was developed to help analyse the business cycle. However, it was later adapted to 'explain' economic growth.

Structural-change theory :

Following economic growth model represents the structural-change theory:

Lewis Theory of Development :  It is one of the best-known early theoretical models of economic development that focused on the structural transformation of a primarily subsistence economy was that formulated by Noble-prize winner Sir W. Arthur Lewis in the mid 1950s.  His theory was later modified by his followers.  The Lewis two-sector economy model became the general theory of the development process in surplus-labour Third-World nations during most of the 1960s and 1970s.  In the Lewis model, the underdeveloped economy consists of two sectors:

A traditional, overpopulated rural subsistence sector characterised by zero-marginal labour productivity.  Lewis classify this as ‘surplus-labour’ in the sense that it can be withdrawn from the agricultural sector without any loss of output, and

A high, productivity modern urban industrial sector into which labour from the subsistence sector is gradually transferred.

The primary focus of the model is on both the process of labour transfer and the growth of output and employment in the modern sector.  Both labour transfer and modern-sector employment growth are brought about by output expansion in that sector.

Patterns of Development: The patterns of development analysis of structural change focuses on the sequential process through which the economic, industrial and institutional structure of an underdeveloped economy is transformed over time to permit new industries to replace traditional agriculture as the engine of economic growth.

In addition to the accumulation of capital both physical and human, a set of interrelated changes in the economic structure of a country are required for the transition from a traditional economic system to a modern one.

These structural changes involve virtually all economic functions, including the transformation of production and changes in the composition of consumer demand, international trade and resource use as well as changes in socio-economic factors such as urbanisation, and the growth and distribution of a country’s population.

False-Paradigm Model :  The second and less radical international-dependence approach to development, the false-paradigm model, attributes underdevelopment to faulty and inappropriate advice provided by well-meaning but often uninformed, biased, and ethnocentric international ‘expert’ advisers from developed-country assistance agencies and multinational donor organizations. These experts offer sophisticated concepts, elegant theoretical structures, and complex econometric models of development those often lead to inappropriate or incorrect policies. Because of institutional factors such as the central and remarkably resilient role of traditional social structures (i.e., tribe, caste, class, etc.), the highly unequal

ownership of land and other property rights, the disproportionate control by local elites over domestic and international financial assets, and the very unequal access to credit, these policies, based as they often are on mainstream, Lewis-type surplus labour or Chenery-type structural-change models, in many cases merely serve the vested interests of existing power groups, both domestic and international.

(This is what happened in India many a times)

Free-Market Analysis :  Free-market analysis argues that markets alone are efficient if:

Product markets provide the best signals for investments in new activities,

Labour markets respond to these new industries in appropriate ways,

Producers know best what to produce and how to produce it efficiently, and

Product and factor prices reflect accurate scarcity values of goods and resources.

Under free-market, competition is effective not necessarily perfect.  Technology is freely available and nearly costless to absorb.  Information is correct and nearly costless to obtain.

Market-Friendly Approach: The third approach is market-friendly approach, which is the most recent variant on the neoclassical counterrevolution.  It is associated principally with the writings of the World Bank and its economists, many of whom were more in the free-market and public-choice camps during the 1980s.  This approach recognizes that there are many imperfections in LDC product and factor markets and that government do have a key role to play in facilitating the operation of markets through ‘non-selective’ (market-friendly) interventions — for example, by investing in physical and social infrastructure, health care facilities, and educational institutions and by providing a suitable climate for private enterprise

[The author of this note has prepared a comprehensive Plan for revitalizing and rejuvenating the Coir industry with an outlay of Rs 243 Cr in the 11 th Five Year Plan. The central assistance component in this project is Rs 99 Cr (40%). This project is the flag-ship scheme of the Coir Board which is under implementation as “REMOTE Scheme” in the 11th and 12th Five Year Plans, and the only independent Scheme ever promoted by Coir Board. The author single-handedly is responsible for the design, evolution, and convincing the Plan body of the viability of the Scheme. The author has written three books which has been published, compiled and edited two volumes of Indo- US Trade Directory, Coir Export Manual, Coconut Export Manual, and is contributor to many newspapers, and periodicals on economic related topics. He has 45 years of experience in the Foreign Trade having associated himself with Cochin Chamber of Commerce, Confederation of Indian Industry, Indo-American

Chamber of Commerce, Tirupur Exporters Association, Coir Board, Coconut Board, and Price Waterhouse Ltd. His articles were published in the first-ever Malayalam encyclopedia Viswa Vijnana Kosham as well.]

A V RamanathanExport Consultant4/149 A, NandanamMadappikavu, Tattamangalam 678 102 (Kerala)9847404372/04923227211

@@@@@@@@@@@@@