In peril under India’s new PM, a vestige of Soviet-style planning

NEW DELHI, (Reuters) – Indian Prime Minister Narendra Modi never had a high opinion of the Planning Commission, an institutional vestige of the country’s attempts to mimic the Soviet command economy during the infancy of its independence more than half a century ago.

As leader of the industrial powerhouse state of Gujarat, he stunned buttoned-down members of the commission last year by turning up at a meeting with a video that accused them of high-handedness and hobbling states with one-size-fits-all policies.

Now, as prime minister of the country, he looks set to clip the central agency’s wings, or perhaps abandon it altogether.

It is the starkest symbol yet of Modi’s determination to junk the Fabian socialist-leaning economic policies set in train by the first prime minister of independent India, Jawaharlal Nehru.

In a signal that the end could be nigh for what has remained a sacred cow of policymaking despite many years of market-oriented economic reforms that began in the 1990s, a government-backed report last week suggested dismantling the Planning Commission and replacing it with a think tank.

Narendra Modi
Narendra Modi

“Since the Planning Commission has defied attempts to reform it to bring it in line with the needs of a modern economy and the trend of empowering the states, it is proposed that the Planning Commission be abolished,” the Independent Evaluation Office (IEO) said in a report.

A month into his premiership, Modi has already sidelined the body whose tome-like five-year plans are always laboriously crafted but rarely adhered to.

He has left the post of executive head of the commission vacant, and he has taken away its authority to determine the federal government’s capital expenditure, passing that to the finance ministry.

And, for the first time, the Commission has been excluded from discussions to frame the national budget, which is due to be presented on July 10.

A Planning Commission spokes-man declined to comment.

 

A “PARKING LOT” FOR CRONIES

 

The IEO’s proposal is likely to amplify voices, many of them in Modi’s Bharatiya Janata Party (BJP), that have questioned the relevance today of an agency created in 1950 to optimise scarce resources in a newly born nation.

Arun Shourie, an influential BJP member, derides the Planning Commission – set in a hulking New Delhi building with 500-600 employees – as a “parking lot” for political cronies and unwanted bureaucrats.

The commission’s defenders are no strangers to criticism.

In 2012, it was pilloried for spending some $50,000 to renovate two office toilets, and then it was lampooned for suggesting that citizens who consumed goods worth 27 rupees ($0.45) or more a day were not poor – in a country where millions struggle to survive on less than $2 a day.

The commission has remained resilient, however, largely because over the decades it emerged as a parallel cabinet with the prime minister of the day formally its head.

It also took on responsibility for allocating federal funds to states and sanctioning capital spending of the central government, which was deeply resented by states and various government departments.

“The states want a system which gives them a much greater flexibility to use these funds in a manner which suits their development (and) addresses their development challenges,” Ajay Chhibber, the author of the IEO report, told Reuters.

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