Plan for the Commission

We can debate endlessly about whether growth and investment in the last two years prepared the ground for 8 per cent growth in the Tenth Five Year Plan period, or not. The more important question to be debated is whether it is meaningful to continue to talk about growth targets for five year plans at all. Investment in the public sector, input-output analysis and detailed commodity wise targets which characterised Soviet style planning are no longer practised, even in Russia. Russia stopped taking planning seriously in the 8217;90s, while we still continue to faithfully carry on that legacy, living under the illusion that the government and Planning Commission can set growth targets for five years.

Today, the Indian economy is a market economy witnessing business cycles, where investment decisions of the government may influence private decisions, but no longer play the deciding role. International cycles, commodity price movements such as the movement of oil prices, international financial market movements in interest rates and exchange rates, the movement of foreign capital, and of course many domestic factors 8212; like the monsoon 8212; influence investment decisions. It is time that India woke up to this reality and stopped this exercise of five year plan targets, so reminiscent of the Soviet Gosplan. This does not mean that the country does not need economic policy. The Planning Commission agenda, such as the revamp of regulatory mechanisms and bodies, is exactly what growth in a market economy needs. The excellent team at the Planning Commission is reminiscent of the American president8217;s Council of Economic Advisors, a team of professionals working in the long run interests of the economy. The question is what can be the role envisaged for this team?

The current role of the Planning Commission is primarily in running centrally sponsored schemes and allotting money to the states and districts to do this. There is no doubt that Yojana Bhavan8217;s new team can do this job better than anyone else. However, it would be a pity if its mandate remained limited to this. The notion and design of plan expenditure is inconsistent with the sound delivery of public services that the country badly needs. Local governments are in the best position to judge local needs, choose the best technology and effectively exercise control. Thre is a need to put an end to all central schemes. Other than disbanding the Planning Commission as an institution which has outlived its role, this should be its five year target. It will also fit better with the agenda of the CMP which focuses not on growth, but on the human face.