Making 'Un-Planning' Commission - Is it a Viable Proposition?

Bibek Debroy’s piece in The Economic Times, mentioned an unheard term - ‘un-planning' - while contesting the relevance of planning in India. This ‘un-planning’ commission, according to him, would be the replacement of the existing Planning Commission with a different nomenclature – However, he supplied no further details, about how this new institution would function.

Thus one could reckon that he too lacks information - if not the understanding - about the new think tank, in which he will probably have some major say. Debroy has been assessing governments since their early days – from UPA -I at the centre, JD (U) in Bihar, TMC in West Bengal and now to the new BJP government at the Centre. Nothing is really unusual about it.

But Indian polity is evidently in the midst of a tectonic shift, where the government is planning policy bereft of the fixed intellectual convictions of a select few, and the scheduled, fleeting cheers by related stakeholders. So, this process of ‘disillusionment’ is likely to stick amongst policy experts, who consistently spend their time and energy in channelising the interface between politics and economics – and that too in hope reciprocation from the power the seats of power.

In his piece, Debroy has articulated that the Planning Commission lost its shine soon after the 2nd Plan – even someone who is not a blind believer in the free-market - will not hold exception to this. Indeed it is true, Planning Commission turned sharply pro-Congress after the 2nd Plan and even more so in 1970’s. The aggressive control the it inadvertently had over the government and its functioning severely attacked its autonomy.

Hence, not only did the irrational annual plan discussions and the misuse of entitlements by the established cohort of cliques survive, they thrived. Moreover, what made matters worse for the Planning Commission were the falling standards of research inputs, relying too much on studies from questionable sources and being unable to competitively come to terms with the realities faced by the implementing ministries.

Somewhere along this process, the federal spirit suffered the most, and any exercise aimed at introspection disappeared from the central government. Although, now when the Planning Commission is supposed to be replaced with a new institution, which is predicted to possess a higher propensity to support the economic reforms – it would be worthwhile would be for the new government at the Centre to remember that 'planning', per se, cannot ever be irrelevant for any set of systems.

Hence, scrapping the institution merely for the sake of scrapping it hardly makes any sense. What would be the best policy correction, however, is to restructure it in tandem with the requirements of the present and the future, and to ensure that the overhaul retrieves the transparency and the efficiency losses. The UPA-I&II miserably failed in even acknowledging the ills of the Planning Commission, let alone making any effort in improving its working.

That being said, the new government has a fair opportunity to make the improve the Planning Commission by introducing some much needed changes related to the states, funds allocations, and its internal working mechanism. But instead imbibing those changes, which would have made it accountable to the ‘federal spirit’ – the decision of simply removing it does not bode well beyond enthusing momentous cheers for ‘name change’ and letting the opportunity of a ‘spirit change’ pass.

It is intriguing that so far the new institution, as it stands proposed, is not supported by any important details within the public domain (although the speculative news stories of the leading dailies are making rounds and being proved wrong simultaneously). The Planning Commission was moulded to define our economic goals in post-independence India. Except in odd patches, all it did was try and align the political goals with the social and economic aspirations of a new India.

The intent behind making Planning Commission prominent was not mala fide and with an alarming increase in income disparities, which continues to grow – it would be of grave concern if an institution such as itself ceases to exist altogether.

Through all one may gather about the new institution through public sources – this one will differ in functioning with the existing secondary and tertiary national planning processes which were aimed at handling the plan process and funding between the finance ministry and various other ministries, and between the centre and the states.

Most likely, the new body will have no overseeing authority to evaluate the quality of programme implementation and hold consultations with the government to ideate on the same. So, contrary to generic criticism, the fact is that the Planning Commission, while having the right to mediate between the centre and the state, is notionally not against the federal structure of the country.

Wherever it faltered, the blame was erroneously attributed to its structure and it would have been much better if the practices under the aegis of the central government and other stakeholders had been brought under due scrutiny.

The level of performance varies and is influenced by many factors and if the new institution in the offing can set things right, there is no reason why the Planning Commission cannot be rebuilt. Simply pronouncing capital punishment for a few wrongs should not be confused with the idea of justice.

If the central government is really serious about strengthening the federal structure and empowering states – then it should first make space for wider consultations on crucial issues like this. Simply relying on new media and discussing a policy issue as serious as this in open forum could be seen as anything, but a practical step.

The concept of maximum governance is praiseworthy but only if it also optimizes the government, as the government has to continue playing its essential role.

In the past, we have seen the names of our metropolitan cities change in the pursuit of tempering significant historical realities and respecting legacies. By scrapping the Planning Commission in one go, it seems one more such mistake is going to be committed in India's policy spectrum.
-Atul K Thakur
Email: summertickets@gmail.com
(Published in INCLUSION)

Tragedies of budgetary show

As finance minister of union cabinet, Pranab Mukherjee forgot to elaborate about the much awaited 12th five year plan during his budget speech in parliament, which is aimed to strive for “more financial inclusion”. Instead, he chosen a horrific quote from foregone Shakespearian drama “Helmet” that “being cruel to be kind” in quite dramatic fashion…moreover, his exuberant declamation of Indian cinema’s centenary year with service tax holiday for a year was among the height of deviant financial planning of the economy that was waiting for a slew of measures for retrieving its desired tune!

Unfortunately that remained complete amiss and further counterpoints overshadowed the all prominent expectations were attached to this budget. For year 2012-13, GDP has projected at 7.6%, fiscal deficit-5.1% and subsidy to 1.9%, which is completely irrational from the fiscal discipline point of view and constitutional mandate of this country as it would be toughest to expect that these figures would substantially lowered the government’s borrowing in next few years. This economics from planning commission and finance ministry is very questionable, as they never have even second thought in prioritizing the beleaguered IT industry by allowing UDI, headed by Nandan Nilekani to be black pearl with incessant flow of many billion dollars every year in their favour and leaving aside the masses adrift from the dividend of state.

So there should be no surprise, have if the new definition will term “subsidy” as the biggest threat to the imaginative blooming economy which produced a Vijay Mallaya for few years with all notoriety of insane wealth! Further showing the overview of economy, finance minister has set the target of Rs 30,000 crore for disinvestment of PSUs, which is quite amateurish and shocking-even after the worst performance of stake selling of these state run companies few months back, the morale should have been never so weak. Instead rushing for sordid professional expertise, as Monetk Singh Ahulwalia often relies over before taking sides on major policy matters from the ghost house of socialism-Planning commission; a simple thought would be rather more convincing-why this unexpected undermining of one’s own assets?

Here the basic notion “good sale is always good” should be in the state of mind seeing the impressive consumerist size of Indian economy which allows a $2billion house (own by Mukesh Ambani whose literal meaning is too ambitious to live alone in its surroundings) and 56% urban slums in the same city, which for only few months and only by few, once seen as the potential global finance hub. That never happened alas! For a more pragmatic shift, the crucial policy circles must draw a line-between progressivism and reform, I am sure even the performing corporate besides the common men would chose earlier as it would allow them to be close of a sustainable model rather maligning with very ambiguous web of “reform” which is itself needed a new dossier of reform very sooner than later.

Under the regime of confused state, this year, no big announcements have made. Infact, announcements have no culture to be backed by the timeline in India, so even the tall promises of allowing few more private banks as promised by the last budget is still in the ideation of hibernation state. Another major component of financial sector-Insurance has given tough time with increased services tax and no touch of much needed regulatory changes. Mutual funds industry had long back have heard off regulatory eulogy, so it’s no longer an exciting domain like its peers Private Equity or Venture Capital Funds which are breathing existential crisis more acute than a fish out of water!

Although a sycophant scheme, Rajiv Gandhi Equity Scheme with allowing income tax deduction of 50% to new retail investors, who will invest up to RS50,000 directly in equity and whose annual income is below Rs10lakh would boost the temptations for legalized gambling rather invoking the confidence of retail investors who have lost too much in the recent past. Even in overall ambit of financial businesses, it would be very tough in the days ahead to draw back the retailers to the business as they used to be till year 2010. Only the bond market has gained, if say in monosyllabic mode-Rs 60,000 crore worth of tax free infrastructure bond from financial institutions would carve some niche here, even though for a temporary period.

Regional Rural Banks, which are doing fabulously fine, were hardly needed any new financial infusion, rather their unification and making them on all counts at par with the PSBs were sincerely expected for bridging the gap of rural financing and making an unique financial institution of strength. So, unusual touches of exotic “reform” simply abstaining financial sector to get on cheering spree. The gain indeed shifted to infrastructure and slumbering bond market, where allocations under Rural Infrastructure Development Funds (RIDF), increased to Rs20,000 crore from preceding year’s Rs18, 000 crore.

Further for addressing the warehousing shortage in the country, an amount of Rs 5,000 crore earmarked from the above allocation exclusively for creating warehousing facilities under RIDF. Under 12th five year plan, $12 billion dollar would be spend on infrastructure and this will be done on Public Private Partnership basis, so more of commercially exciting time is awaiting ahead than the real infrastructural development. Taxation remained disappointing with increase in service tax and excise duty by 2% which will have very adverse effects on the price rise…slight cut of .25%in Security Transaction Tax(STT)is hardly suffice, so is true with the token increase of initial income tax slab by Rs20,000 to 2lakh.

Adding retrospective claws in checking the tax evasion is completely erroneous, as the timely practices of existing laws are quite suffice to handle the Vodafone like situation where the loss of $2billion dollars has suffered by the exchequer. Other bizarre targets are the fuel and fertilizer subsidies which have larger binding over the agrarian classes, could create a big survival crisis among the majority of peoples involved in primary sector. Rationalisation of diesel/LPG s would not be entirely wrong but it should be come only with giving ample room for targeted subsidies to weaker sections. Albeit in broader framework, it’s interesting to know, that the government is not loosing much by oil imports with excessive revenue that coming through the existing importing duties, here too chances are alive of big correction for letting breather to an average oil consumer.

Social sectors, which constitute the pivotal roles in equitable growth, have suffered immensely by the consistent flaws in policy orientation and bad execution of ongoing flagship programmes, which is cause of grave concern. The severe human development deficits confronting India in various sectors require a major stepping up of public provisioning for inclusive development; but that would require the government to adopt progressive policies in policy framework and execution. Ironically whose chances appears very feeble as par now. On different social sectors, India has only 7%allocation of its total GDP unlike the OECD countries average that is totally stark.

This year, total allocation on Rural Development has fallen to Rs 73, 175 crore from Rs 74,100 crore last year. Decline of total outlay on MGNREGS to Rs33,000 crore from Rs40,000 is utterly shocking though it also shows the changed polity of UPA-II which is no longer rural centric even symbolically. The marginal rise in allocations for Ajeevika (National Rural Livelihood Mission) to Rs3915 crore from 2681.3 crore, Indira Awas Yojna to Rs11075 crore from Rs10,000 crore and PMGSY to Rs18172crore from Rs17412.5crore can be only said the tip of iceberg against the real needs.

As proportion of total expenditure from the Union budget, share of agriculture has fallen from 11.21 to 9.3%. Though total outlay for the Department of Agriculture and Cooperation has been marked by an increase of 18%to Rs17,123 from Rs20,208 crore but again this tokenism is too little. Additional provisioning for Bringing Green Revolution to Eastern India (BGREI) to Rs1000 crore from Rs400crore is somehow satisfying but slashing on corp insurance to Rs1136crore from Rs3135crore shows the classic case of black comedy. Rest, target of credit flow to farmers to Rs5.75lakh crore from Rs4.75lakh crore will only encourage the targeted segments, if the compliance of Priority Sector Lendings would be made hard fast, but there is no such assurance supporting this change.

Its proven that per capita food consumption is declining in India, in this scenario declined provisioning to Rs 1,79,554 crore from Rs 2,08, 503crore is the cruelest act from a government claims to stand for marginalised classes. Public Distribution System (PDS) stood with Rs75,000crore allocation and many populist burdens like universal distribution of rice/wheat, the extra pressure of lowered petroleum subsidy to Rs43,580 crore from Rs 68,481crore will make life more difficult for rural inhabitants based on local incomes. A very much related theme, climate change found no sincere attention in entire budget document however, economic surveys have added a separate chapter on climate change but without any overt working guidelines.

The total magnitude of the gender budget has declined to 5.8% from 5.9% and allocations for the Ministry of Women and Child Development has increased to Rs18,500crore from Rs16,100crore, which is too short from anticipated enhancement. Budgetary allocation on children have grew up modestly to 4.8%from 4.6% last year-in total spending on child specific schemes have set out on Rs71,028.11crore. Allocations on ICDS and ICPS have marginally stepped up though both the amount and execution of schemes are in worrying conditions.

Health still accounts only2.31% of total GDP, many plans for new hospitals, urban health care on the line of NRHM will be in bad state grappling with no extra allocations. NRHM got 15% hike toRs20,822crore from Rs 18,115crore but overall financing public health couldn't merely be an act of tokenism, that has missed in consideration. Allocation on water and sanitation has moved up to Rs14,005.2crore from Rs11,005.2crore, rural drinking and sanitation have given priorities, which is only half good. Budgetary spending on education has increased to 4.97% from 4.65%-but allocation for SSA has gone up by just Rs21,000crore to Rs25,555 crore, which is discouraging, similar are the cases of primary, middle or even higher level of educational plans.

Allocation under Scheduled Caste sub plan has increased to Rs37,113.03crore from Rs31,434.46 crore and for Schedule Tribal sub plan, allocation has increased to Rs 21710.11 crore from Rs18,466.23crore-though most of the genuine demands related to their welfare were rejected. Though “minorities” found no mention in budget but a slight hike in allocation came to Rs3135crore from Rs 2750 crore...disabled people got no or very feeble specified assistance through this budget.

MSME Sector-
In this budget, it's well to see basic custom duty coming down to 2.5%from earlier exorbitant6% on specified parts and machinery components. To setting up a Rs5,000crore India Opportunities Venture Fund with SIDBI is a right step but the real question of financial access is related with the cooperation of banks at bottom level, where is need of greater changes. Mention of two newly created MSMEs exchanges and MSMEs being called as "building blocks" of our economy by the finance minister in his budget speech was symbolically appreciable for this hitherto marginalised segment of industry.

Though it would have better, if the procurement policy for micro&small enterprises would have broaden to private sector along with the proposed change for CPSE to make a minimum of 20%of their annual purchases from MSEs.-of this, four business deals will be earmarked for procurement from MSE owned by SC/ST enterprises.
At the moment of political and financial adverseness, there was much expectation attached with this budget, which is completely shattered now as neither market nor the mass sentiments seems uplifted even in tint after the all statistical deliverance. So, it would be right, if we will still believe more in our edge of “economies of scale” rather on statistical commentary of budget. After twenty years of liberalisation, India is lagging behind in spirit rather in fundamentals…that’s the cause of maximum worries!

(Courtesy-Centre for Budget and Governance Accountability (CBGA) - a New Delhi based research organisation for some of the data’s used in this piece)

Atul Kumar Thakur
March 23, 2012, Friday, New Delhi
Email: summertickets@gmail.com