If Jaswant Singh has his way, we might have a three-year Plan—and a host of other changes
SURPRISING but true. The most exciting session at the Economic Editors Conference in the capital some days ago was the one on the somnolent, cobweb-ridden Planning Commission. In a series of announcements, Planning Commission deputy chairman Jaswant Singh, better known as the prime minister's foreign policy consigliere, did all that he could to shake off the dust from the institution as old as independent India and put it back under the arc lights.
About time too. In the past six months—Singh's appointment came through on March 21—little has happened in Yojana Bhavan, the Commission headquarters. Apart from the proposal to restructure the Commission, which Singh had floated in June and which is pending before the Cabinet, the excision of full-time executive members on the panel, and the recent appointment of former finance secretary Mon-tek Singh Ahluwalia to the Commission. Right now, despite the sturdy bureaucracy peppering Yojana Bhavan, the Commission sports a lean, mean look with four members—chairman and PM A.B. Vajpayee, deputy chairman Singh, member secretary S.R. Hashim and member Ahluwalia.
On September 17, Singh stormed the dour Shastri Bhavan conference room by announcing that the Commission will have to broaden its responsibilities "in an era of nuclear diplomacy". It will now look at foreign policy initiatives connected with the economy, like trade in currency and movement of capital—presumably what was being handled so far by the Finance Ministry's Department of Economic Affairs—and India's relations with the global financial institutions like the IMF and the World Bank.
But Singh's ambitious plans to freshen up the Commission mean the house that P.C. Mahalanobis and his peers built is furiously trying to reinvent itself in the reform era. A fact that Singh acknowledged by saying that he was open to changing the periodicity of the plan to three-year or two-year instead of the standard five-year, as the current plan was out of tune with the tenure of state governments and finance commissions.
Is it then time to sing a requiem for the "Plan" as we know it? Actually, the requiem may not be very out of place. Few may be aware that there's no Plan currently in operation, although the annual Plan talks of the states are progressing and, according to Singh, will be over by autumn. The Ninth Plan (1997-2002) was scheduled to be switched on in May 1997; it wasn't. Thanks to two changes of government and various conflicting theories and interests, the Ninth Plan document isn't ready. And it may be quite a while before it gets the green signal.
Here's why. The Approach Paper to the Ninth Plan, a voluminous set of two documents, was ready in March 1997. But the UF went through a survival problem and ultimately fell, leading to general elections and the installation of the BJP government. The current government will obviously want some changes in the Plan document. Right now, such changes are being discussed and will be incorporated only at a full Commission meeting, yet to happen.
Once the Commission approves the draft plan, it will go to the Cabinet, which may take up to two months to submit its stamp and more if it wants changes. After the document comes back from the Cabinet, it will go to the National Development Council, which is a body represented by all states. NDC approval is what makes the Plan a reality. NDC, which hasn't met this year, takes a four weeks' advance notice to be convened, and has full authority to send back the draft plan. One chapter in the Eighth Plan, for instance, had to be rewritten due to the CPI(M)'s insistence. Says Pranab Sen, advisor in the Commission: "India isn't a centrally planned economy, it's never been one. It's a federally planned economy."
As a result, even assuming the draft plan document meets with few hurdles in its journey towards reality, the Ninth Plan cannot become operational before the new fis-cal year. By which time, two years of its tenure will have gone by. Making it the first "three-year" five-year Plan in India's economic history. Unless of course it's revali-dated or the government changes yet again.
DOES that mean planning is now only "an exercise in wishful thinking"? This is what the BJP had called the Approach Paper when it was presented in Parliament last year. Commission sources disagree. Says Sen: "To think that India doesn't need planning in a liberalised environment is like saying since you already have a company why do you need corporate planning? That's idiotic. Almost every country, including the US, has an economic advisory council (EAC) that works like our Planning Commission."
Which India also has right now, even though it has yet to hold a single meeting—many carp that it was just a hasty reaction to Prof Jagdish Bhagwati's advice to rope in intellectuals/economists. So won't these two have overlapping functions? No, says Ahluwalia who's also on the EAC. "The Commission is a body of experts but the council will advise the PM on some ad hoc issues that may come up from time to time and which may be important at that time," he explains.
The key reason for the lack of identity and an ideal role for the Commission is endemic. It came about through a Cabinet directive and isn't a statutory body. It can only make suggestions to the government, not make them abide by its advice. "It's assumed," says Sen, "that as the Plan is a document approved by Parliament, it's legally binding. It's not. The Plan called for an import duty cut but couldn't make the finance ministry do it." In comparison, in strongly-planned Netherlands, the government must explain why it wants to override a decision taken by planners.
The other not-so-concrete reason is the dwindling legitimacy of the prime minister as the omnipotent government. Since the heyday of Nehru and Indira Gandhi, prime ministers, who are also chairmen of the commission, have neither enjoyed supreme command of the economy nor believed in long-term planning. The decline of planning started with the Narasimha Rao government and continues, though briefly resurrected by the Deve Gowda government.
In fact, as Sen and Ahluwalia emphasise, in a liberalised environment the role of an advisory body may have become more important. For one, only a long-term planner can minimise the frictions and tradeoffs resulting from development. For instance, in pursuing growth, often social sectors and environment concerns are a casualty. The other more important reason for the Commission's survival is the states. With increasing liberalisation and federalism, only the Commission can tally the states' needs with the Centre's.
When planning started, it was more important to maximise savings and investment and find crucial resources. That's what the first and second Plans looked at. The towering, technology-driven ONGC was born due to the oil shock of the '70s, which highlighted the need for self-reliance. Carrying on in a similar vein, say Commission sources, the draft Ninth Plan will focus on the global economy and trade, the current demand recession, and the supply gaps. Apart from the five special thrust areas of the current government, in tandem with the BJP's national agenda—food, physical infrastructure, social sectors, water policy and infotech.
For instance, without assuming as in the past that government money would automatically flow into areas lacking sufficient private investment, the Ninth Plan highlights the gaps/ excesses in investment in various sectors (see table). In electricity, Rs 1,76,600 crore is needed up to 2002 to meet current demand, in manufacturing there's a gap of Rs 67,700 crore. The money has to be found, either from private sector, or from foreign investment, or through a reorientation of credit policy. But more importantly, through disinvestment.
Ironically, as more time lapses, such long-term estimates become meaningless. The Ninth Plan takes into account the impact of sanctions, though not overtly, but by the time it's approved, sanctions may have been diluted. And Singh's grand idea to make power flow towards Yojana Bhavan may remain, like the Ninth Plan, on paper.