There has been a national debate about the relevance of planning in the era of liberalization where the state controls and regulations are dismantled to a great extent andmarket forces are given larger role. (The investment of the government for the five year plans is also on decline). (The trend began in the 7th plan and strengthens into the Eleventh Plan).

It is true that the quantitative aspects of planning in terms of control over economy are being selectively phased out and the nature of planning process is undergoing a qualitative change. Planning is important for the following reasons in the era of liberalization

• In a federal democracy like ours, the principal task of planning is to evolve a shared vision among not only the federal units but also among other economic agents so that the efforts of all the actors become convergent towards the national priorities, the role of planning is to develop a common policy stance for center and states. Also, (the task of federal policy coordination is central to Indian Planning). For example, the need to invite foreign investment in infrastructure areas like power need center-state coordination as the necessary legislation and administrative changes involve both.
• While the growth process can be made the responsibility of the corporate sector to a greater degree, its direction and distribution are to be steered by planned public intervention so that regional imbalances are reduced and socio economic inequities are set right. For example, `directing the growth of the large industry into the backward areas and technology intensive areas to realize national goals.
• The nature of instruments available to planners in the implementation has changed. Quantitative controls have yielded place to qualitative ones .The planning process has to focus on the need for planning for policy.
• Planning at the grass roots level that is participatory is very crucial for improving the delivery systems and proper use of the resources. The role of the government is thus to facilitate participatory planning.
• Environmental priorities are a major concern of planning is necessary for the sectors like energy, communication, transport and so on as private sector needs to be guided into the national plan.
• In the era of globalization where corporates are not expected to plan beyond the growth of a particular unit, the (role of safeguarding national interest is that of planning by the State). For example, being subjected to various discriminative trade practices by EU, USA and so on, (the Indian farmers, manufacturers and exporters have to fight sophisticated battles in the WTO for which the legal services and information and building up bargaining power are best provided by the State).

Thus, planning continues to be relevant and ever more so for the following reasons

• Federal cooperation and coordination
• Equitable growth
• Environment friendly development
• Defending national interest in the age of globalization
• Inter-sectoral balance in growth

Changing Role of Planning institutions

From a highly centralized planning system, the Indian economy is gradually moving onwards indicative planning where hard planning is no longer undertaken. The role of the Planning Commission accordingly changes. The Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities of nation. It works out sectoral targets and provides promotional stimulus to the economy to grow in the desired direction.

Planning Commission plays an integrative role in evolving a national plan in critical areas of human and economic development. In the social sector, Planning Commission helps in schemes which require coordination and synergy like rural health, drinking water, rural energy needs, literacy and environment protection.

When planning in a vast federal country like India involves multiplicity of agencies, a high powered body like the PC can help in evolution of an integrated approach for better results atmuch lower costs.

In our transitional economy, Planning Commission attempts to play a systems change role and provide consultancy within the Government for developing better systems). It has to ensure smooth management of the change and help in creating a culture of high productivity and efficiency in the Government.

In order to spread the gains of experience more widely, Planning Commission also plays an information dissemination role.

With the emergence of severe constraints on available budgetary resources, the resource allocation system between the States and Ministries of the Central Government is under strain. This requires the Planning Commission to play a mediatory and facilitating role, keeping in view the best interest of all concerned. The recent NitiAyog[1] also indicates the changing role of planning in India.

PLANNING UNDER NITI AAYOG

The Government of India has established NitiAyog as a “Think Tank” which has no power to impose policies. By establishing NitiAyog the government wants to be an “enabler” and leaves the impetus to provide a platform for cooperative and competitive federalism to the newly established body. India was probably the first non-Communist country which went for central planning. Starting with the Harrod-DomarModel  and later statistics of Mahalanobis model, the planning commission set out sector- specific output and investment targets. It was strong enough to have a final say on resource allocation. For the last few decades, funds were simply tied to not only successful but also failed schemes because vested interests demanded their continuation. There was an increasingly frustration in the states but they had to yield to the arrogant fund controlling body. Most underdeveloped states including the North East had to suffer due to the dogged prescription of one-size-fits-all schemes by the planning commission. The NitiAyog seeks to give up the one size fits all prescriptions for a huge country like India with lots of vertical and horizontal imbalances. Whether it would be able to carve out its unique place in today’s time, is yet to be seen. Planning Commission was an advisory body, and so is Niti Aayog. But the key difference between them is that while the former had powers to allocate funds to ministries and states; this function will be now of finance ministry.

Niti Aayog is essentially a think tank and a truly advisory body. Other differences are as follows:

• The role of states in the planning commission era was limited. The states annually needed to interact with the planning commission to get their annual plan approved. They had some limited function in the National Development Council. Since NitiAyog has all chief ministers of states and administrators of UT in its Governing Council, it is obvious that states are expected to have greater role and say in planning/ implementation of policies.
• The top down approach is reversed in NitiAyog. It will develop mechanisms to formulate credible plans to the village level and aggregate these progressively at higher levels of government.
• The provision of regional council is there in NitiAyog to address local / regional development issues.
• One of the new functions of NitiAyog is to address the need of the National Security in the economic strategy. How this is to be done – is yet to be watched.
• While the planning commission formed Central Plans, NitiAyog will not formulate them anymore. It has been vested with the responsibility of evaluating the implementation of programmes. In this way, while NitiAyog retains the advisory and monitoring functions of the Planning commission, the function of framing Plans and allocating funds for Plan assisted schemes has been taken away.

The governing council, which has all chief ministers of states and administrators of the Union Territories sounds much like the National Development Council.

Aims and Objectives of Niti Ayog

NITI Aayog is essentially an advisory body that seeks to provide critical directional and strategic inputs across spectrum of key elements of policy to the centre as well as states. It also seeks to put an end to the slow and tardy implementation of the policy by fostering inter-ministry, inter-state and centre-state coordination. Strong states make a strong nation, is the core idea; and the Ayog will foster cooperative federalism by evolving a shared vision of national development priorities. It has been envisaged to follow the bottom-top development approach whereby, it would develop mechanisms to formulate credible plans to the village level and aggregate these progressively at higher levels of government.

• It would also pay attention to the weaker sections of the society that may not have benefitted from economic progress.
• It would create a knowledge, innovation and entrepreneurial support system via a community of national and international experts, practitioners and partners.
• It would serve as a platform for resolution of inter-sectoral and inter-departmental issues in order to accelerate the implementation of the development agenda.
• It will also monitor and evaluate the implementation of programmes, and focus on technology upgradation and capacity building.

Composition of NITI Ayog

Chairperson -Prime Minister

Governing Council – Its members are Chief Ministers and Administrators of the Union Territories

Regional Councils -These would be created as per need and its members would be chief ministers and administrators of UTs of respective regions.

Vice-Chairperson – The Vice-chairperson of the NitiAyog will be appointed by Prime Minister. The first Vice-Chairperson of NitiAyog is Arvind Panagariya.

Further, the NitiAyog has full time members (number unspecified), part time members (maximum 2, these would be scholars from universities and research institutions), Ex-officio members (maximum 4, these are ministers from Union Council of Ministers), Special Invitees (appointed by PM for fixed tenure. Finally, there is a Chief Executive Officer (CEO) of the NitiAyog, who is appointed by Prime Minister and has a rank similar to Secretary to the Government of India. Current CEO was named on January 10 (SindhushreeKhullar ). The secretariat will be established if deemed necessary.

Evidence-informed policymaking is an approach that aims to integrate the best available scientific evidence into the design of public policies. Central and state governments make hundreds of policy decisions, small and big, every day that have an impact on millions of lives. Many of the policy questions have been rigorously researched, and controlled trials are conducted in order to assess the impact, leading to valuable insights into which policies work, which don’t and why. But not all of this research finds its way into government policies. This is often because we lack a unifying mechanism within government that can synthesise a diverse array of scientific evidence, from India and other developing countries, and provide coherent recommendations for policymakers. This is also why a centrally located government think tank like the NITI Aayog, which can command the necessary resources and attention, is well placed to play this role.

NITI Ayog and Evidence based policy making

NITI Aayog is mandated to work towards furthering cooperative federalism. It can also promote evidence based policy making by ensuring that a policy innovation from any state, regardless of the party in power, gets due attention and becomes a template for other states as long as it is backed by rigorous scientific evidence. In policy areas where evidence is scarce, the NITI Aayog can actively promote collaborations between policymakers and researchers by funding and rigorously testing policy innovations at the pilot stage, before recommending them for scale. This comes from a realisation that despite decades of effort in designing and implementing anti-poverty programmes, there is little consensus on the most effective strategies for improving the lives of the poor. Reflecting this thought, the World Development Report 2015, the flagship report of the World Bank, focuses on mind, society and behaviour and makes a strong case for the application of behavioural science in development.

Challenges

To achieve this in practice will require the NITI Aayog to overcome two key challenges:

1. accessing high-quality researchers in multiple disciplines who can partner with policymakers, and
2. creating a willingness among policymakers to learn from evidence instead of relying solely on intuitions or ideologies.

Learning from Tamil Nadu

In fact, the state of Tamil Nadu has already taken a step in this direction. In 2014, the government of Tamil Nadu entered into a partnership with the Abdul Latif Jameel Poverty Action Lab (J-PAL) to institutionalize the use of evidence in policymaking by rigorously evaluating innovative programmes before they are scaled up, strengthening monitoring systems and enhancing the officials’ capacity to generate and use data. In perhaps a first for any state government in India, the Tamil Nadu government also set up an Innovation Fund, with an annual allocation of Rs. 150 crore, through which any government agency can access resources for pilot innovation programmes through a competitive process.

THE RISE AND FALL OF PLANNING COMMISSION

Planning Commission was set up by a Government of India Resolution in 1950 as an advisory and specialized institution. It was charged with the responsibility to formulate a strategy of development for independent India in a long-term perspective and for making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilization of resources and determining priorities.  Its first chairman, as we all know was Jawaharlal Nehru.

The constitutional provision that was kept in mind while creating the planning commission was that the Economic & Social planning is an item of Concurrent list and creation of such body will strengthen the roots of Centre-State Cooperation and Indian federalism. Later in 1952, the National Development Council was established as an advisory body to the Planning Commission.

The planning commission emerged as an intellectual hub with distinguished scholars and economists as its members. It was such as a respectable body, that it became a role model for planning commissions and boards of many developing countries in those times.

Fall of Planning Commission

Gradually, both planning as well as planning commission lost rationale. It actually began from 1960s, when successive droughts and poor harvests led the government to abandon planning for an interregnum of three years (plan holiday). These plan holidays were early signals of decline of planning commission. Slowly and steadily, the administrative fiat eroded its role and the spirit with which its original writer Nehru had launched it, was never revived later.

Due to administrative fiat, it was transformed into a government department without any proper function or mandate. Its functions collided with Finance Commission as well as Finance Ministry. A few examples are:

• Its role of serving as an intermediate between the centre and state continued, but collided with Finance Commission, which recommended on statutory transfers.
• Its role on non-discretionary transfers was almost nothing as there was a Gadgil Formula in place.
• Its role on residual discretionary allocation of resources to states was in effect nothing, because this is being done by the finance ministry.

However, despite no legal or constitutional backing, planning commission \continued to preside over the allocation of central funds meant for the “Plan” both for the centre and the states.  There was a one way flow of policy and for the state governments, the practice of requiring them to come to Delhi for their “plan approval” every year also continued. But, the focus was shifted to crisis management and academic exercises rather. If there is any other notable work of planning commission in recent times, it has been various committees and the ritual of preparing five-year plan documents, mid-term reviews etc. A few nice ideas that have been incubated in the planning commission include Direct Benefit Transfer, Financial Inclusion and Banking Correspondent models etc.  The other specific factors that led to lost of its relevance are as follows:

Globalization, Liberalization and Privatization

When the planning commission was launched, India was on the path of Nehru’s socialistic economy. Today, India is largely a market driven economy where three fourths of investments flow from the private sector. The planning in a largely market-driven economy cannot be similar to an economy that is heavily controlled by the state. Thus, there was a need of shift in the focus of planning in current times in comparison to the past.

Shortcoming in the planning process: Why Planning Commission was abolished?

The planning process in India, particularly after liberalization, has become erratic due to an array of reasons some of which are as follows:

Firstly, it is focused on theoretical tools such as sophisticated mathematical models. These models did not work on ground because they were based on input/output coefficients that are highly aggregative. This was mainly due to data problems.

Secondly, the planning documents generally resulted in duplication of the jobs of central ministries and the states by setting up parallel divisions in planning commission itself.

Thirdly, during the successive plan periods, the targeted goals were compromised in most arbitrary way. This was mainly because of the faulty budgeting resulting in absence of annualized break-up of targets set in the plan.

Fourthly, the multiyear budgeting in our country has its own problems. The rationale behind multiyear budgeting is that different programmes have different time spans. For example, Bharat Nirman was launched for four-year period 2005-09, while JNNURM was launched for seven years beginning 2006. However, five years is a too long a period and almost every plan immediately started dwindling after its launch. It could be more logical if a plan could be prepared for 3 years timeframe and fourth and fifth years would be set as tentative plans. Further, the five year plans were not in sync with the annual budgeting exercise. In the absence of a budget system that helps a five year plan get implemented annually, the five year planning remained at best as an academic exercise.

Fifthly, the plan/non-plan distinction in government expenditures has lost its relevance and needs to go.

Sixthly, the dwindling flow of central assistance for state plans and the cessation of on-lending to the states by the centre the system of Annual Plan approval with the states has lost its significance and needs to be done away with.

Finally, the system of transfers from the centre needs to be reformed.

Lost credibility of the planning commission

Successive governments have used the planning commission as a parking lot for decent placement for the favourable officers and academics, who could not be accommodated anywhere else as its members. Its credibility was lost due to its theoretical reports and data-mining which generally did not stand correct on ground.

In words of finance minister Arun Jaitley, the Planning Commission wasuseful in a command economy structure, which is not relevant today.  India is a diversified country and its states are in various phases of economic development along with their own strengths and weaknesses. Planning commission used “one size fits all” approach and imposed policies on states and tied allocation of funds with projects it approved. In contrast, the government has established NitiAyog as a “Think Tank” which has no power to impose policies.

Achievements of Planning

In the last about 60 years since India became a Republic, the National Income has increasedmany times. Today, (India is the third largest economy in Asia) with about $1.4 trillion GDP after China and Japan; is the 11th largest economy in the world). (India is the fourth largest in the world as measured by purchasing power parity (PPP)), with a gross domestic product (GDP) of about $4 trillion- USA, China, Japan, India. In the face of global recession, India posted 6.7% rate of growth in 2008-09 and 7.6% in 2009-10 and (is the second fastest growing major economy after China)The first half of 2010- 1 saw the growth rate at 8.9%.

Poverty dropped to about 20% of the population- the criterion used is monthly consumption of goods valued less than Rs. 211.30 per capita for rural areas and Rs. 454.11 for urban areas (2006) Social indicators improved e though there is a long way to go- IMR,MMR, literacy, disease eradication etc. The industrial infrastructure is relatively strong - cement, steel .fertilizers, chemicals, etc Agricultural growth is also gaining momentum with food grains production at 233 mt in 2010. (Forex reserves are $300 b (January 2011) which) is a dramatic turnaround from 1991 when we had a billion dollars.

More than 1.7 lakh MW of power capacity is installed by the end of 2010 India has emerged as a back office if the world and its prowess in software is growing.

India ranks fourteenth worldwide in factory output. India ranks fifteenth worldwide in services output). There has been considerable expansion of higher, education. At the time of Independence there were 20 universities and 591 colleges, while today, there are almost 500 universities and 21,000 colleges. Literacy levels are 75% (2010).

The failures

• Poverty still plagues about 360 million (Tendulkar committee)
• Inflation on CPI and food inflation are rising relentlessly hurting the poor-. 14.4% is the food inflation I December 2010.
• Unemployment is high
• Regional imbalances are intensifying
• Malnutrition haunts about half the children in India.