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Requiem for an
Institution:
The End of the Indian Planning
Commission
Bharat Punjabi, Mitu Sengupta, Richard M. Bird,
and Sanjay G. Reddy
IMFG
No. 5 / 2015
forum
About IMFG
The Institute on Municipal Finance and Governance (IMFG) is an academic research hub and non-
partisan think tank based in the Munk School of Global Affairs at the University of Toronto.
IMFG focuses on the fiscal health and governance challenges facing large cities and city-regions. Its
objective is to spark and inform public debate, and to engage the academic and policy communities
around important issues of municipal finance and governance. The Institute conducts original research
on issues facing cities in Canada and around the world; promotes high-level discussion among Canada’s
government, academic, corporate, and community leaders through conferences and roundtables;
and supports graduate and post-graduate students to build Canada’s cadre of municipal finance and
governance experts. It is the only institute in Canada that focuses solely on municipal finance issues in
large cities and city-regions.
IMFG is funded by the Province of Ontario, the City of Toronto, Avana Capital Corporation, and TD
Bank Group.
Acknowledgements
This Forum Paper is the result of an event called “The Sun Sets Over the Planning Commission: Where is
India Headed?” organized by Bharat Punjabi. He would like to acknowledge Alexander Sloman’s help in
transcribing this panel and his sincere appreciation to Enid Slack for her enthusiasm and encouragement.
He thanks Dilip Soman from the India Innovation Institute for co-organizing the panel on the Indian
Planning Commission at the Rotman School of Management, University of Toronto, as well as Ritu Birla
at the Centre for South Asian Studies for co-sponsoring this event. He would also like to thank Selena
Zhang, Dina Graser, and Richard Stren for their helpful comments on the text.
This paper does not necessarily reflect the views of IMFG, its partners, and funders of the session.
Any errors or misinterpretations rest with the authors.
Institute on Municipal Finance & Governance
Munk School of Global Affairs, University of Toronto
1 Devonshire Place
Toronto, Ontario, Canada M5S 3K7
e-mail contact: info.imfg@utoronto.ca
http://www.munkschool.utoronto.ca/imfg/
Series editors: Selena Zhang and Philippa Campsie
© Copyright held by authors
ISBN 978-0-7727-0950-9
The Secretariat Building in New Delhi houses the Cabinet Secretariat of the Central Government of India. (Photo: Laurie Jones)
Overview
The Indian Government’s decision to dissolve the
Central Planning Commission in August 2014 marks
an important watershed for India’s current government.
While the idea of economic planning had some of
its origins in the late colonial period, the Planning
Commission was set up in 1950 with the first national
five-year plan launched in 1951. Until the period of
economic liberalization that began in the early 1990s,
the Planning Commission prepared five-year plans and
controlled planned expenditure.
Historically, the Planning Commission’s mandate
had also laid the conceptual foundations for India’s
economic development model and the five-year plans
were its most important contributions. Though the
Planning Commission did not have a constitutional
or a statutory mandate, it had tremendous clout
because it managed transfers to the states on subjects
that were in the concurrent (joint centre and state) list
of the Constitution. As a consequence, the Planning
Commission had an important role in India.
This IMFG Forum paper brings together three
commentaries presented at an event called “The Sun
Sets Over the Planning Commission: Where is India’s
Economic Policy Headed?” co-sponsored by the Institute
on Municipal Finance and Governance, the Centre
for South Asian Studies at the Munk School of Global
Affairs, and the India Innovation Institute at the Rotman
School of Management, all at the University of Toronto.
The three contributions to this IMFG Forum paper
examine the pros and cons of the replacement of the
Planning Commission by the newly established National
Institution for Transforming India Aayog1
(NITI
Aayog, hereafter referred to simply as the NITI) and its
implications for India’s development policies.
Given that these are early days for the NITI, the
contributions to this Forum paper should be seen as
preliminary observations on its likely direction rather
than a definitive statement on its functioning. The
NITI’s website states that it has been set up as a think
tank that pursues policy research with the additional
objective of fostering cooperative federalism. For that
reason, the three authors to this forum strike a cautious
note about the future institutional direction of the NITI
and its likely role in the governance framework of a
rapidly evolving federal structure in India.
Bharat Punjabi
– 1 –
IMFG Forum
–2 –
A rather skeptical view comes from Mitu Sengupta,
who outlines both the NITI’s policy objectives and the
governance challenges it faces in a fast-changing federal
and democratic context. Sengupta presents a political
vignette of the relations between different branches of
government, couched in an analysis of the mandates
and responsibilities of various departments involved
in disbursing development funds to lower levels of
government in India. Sengupta’s chief concern is that the
replacement of the Planning Commission by the NITI
considerably enhances the power of the Prime Minister’s
Office in India. The Governing Council of the NITI,
which replaced the National Development Council of
the Planning Commission, has been given far less power,
so by default, this change would increase the power of
the Prime Minister’s Office and would be detrimental to
the federal spirit of India’s democratic institutions.
Richard Bird discusses how the NITI could affect
centre-state economic relations in India2
and the
implications for federalism and local governance.
He emphasizes the need to see through key but
unimplemented fiscal and governance reform measures
such as GST tax reform and changes in the system of
intergovernmental transfers. In particular, he advocates
implementing the 1992 constitutional amendment that
was intended to decentralize power to urban and rural
local self-government in India. He argues that both
effective decentralization and efficient management of
fiscal resources are essential if the Indian government’s
vision of competitive and co-operative federalism is to be
realized.
Bird’s advocacy for serious fiscal and governance
reform acquires special significance in light of the
Indian government’s recent initiative to renew the
country’s urban areas with the Smart Cities Mission.
India’s cities have faced decades of neglect, a prospect
that may not see a reversal if measures for much-needed
decentralization and the empowerment of India’s local
democratic institutions (municipalities and metropolitan
planning committees) are not implemented. Bird warns
that greater devolution at best remains a tentative
solution to uneven economic development, a sentiment
echoed by Sanjay Reddy.
Reddy provides a historical overview of the Planning
Commission’s role in ensuring balanced economic
development and managing centre-state relations
in India. He situates the origins of the Planning
Commission within the history of development
economics and more recent debates in Indian policy
circles. He outlines the importance of a central
coordinating mechanism to manage challenges with
interjurisdictional spillovers, such as climate change.
Reddy also highlights the risks of overreliance on
decentralized mechanisms in the sphere of federalism
by pointing to the pragmatic approach taken by policy
makers and politicians in China.
Overall, the three commentaries showcase the
governance challenges confronting the newly formed
NITI Aayog and central government in India. Mitu
Sengupta’s warning of the growing concentration of
powers in the Prime Minister’s Office reminds us of
the dilemmas facing modern parliamentary democratic
governments in a federal system. Richard Bird’s cautious
optimism about the future of the NITI and a new
federalism in India is tempered by his advocacy for
developing institutions to address regional economic
imbalances and the challenges of rapid urbanization.
Reddy’s historical perspective draws attention to the
tentative nature of the governance solutions that
intellectual tools from a discipline like economics can
offer.
All three contributions highlight the dilemmas that
researchers working on federalism face in democracies.
There are no permanent solutions to the problems of
national and subnational governance, simply second-best
answers in federal systems underwritten by constitutions.
Bharat Punjabi was IMFG’s Postdoctoral Fellow for
2014-2015.
Requiem for an Institution: The End of the Indian Planning Commission
– 3 –
From the
Planning
Commission to
the NITI Aayog:
An Agenda for Cooperative
Federalism?3
Mitu Sengupta
In contrast to the Planning Commission, which one
spokesperson for India’s ruling Bharatiya Janata Party
described as an “instrument of coercion,” it is promised
that state governments will be more influential in
the NITI Aayog (NITI), with their bottom-up input
genuinely valued.4
Indeed, one of the key justifications
for the creation of the NITI is that it will decentralize
power to state governments, thus complementing the
recommendation of the 14th Finance Commission that
a higher share of central tax revenues – a jump from 32
percent to 42 percent – be devolved to states.
The objective of decentralizing power received much
emphasis in the cabinet resolution that created the
NITI: “The one-size-fits-all approach, often inherent in
central planning, has the potential of creating needless
tensions and undermining the harmony needed for
national effort.” The resolution goes on to proclaim
that the NITI will represent “an important evolutionary
change from the past” and “will be replacing a centre-
to-state one-way flow of policy by a genuine and
continuing partnership with the states.”5
Additionally, the top two items in the NITI Aayog’s
list of objectives speak to the Modi government’s stated
intention to devolve power: (1) “to evolve a shared vision
of national development priorities, sectors and strategies
with the active involvement of States in the light of
national objectives,” and (2) “to foster cooperative
federalism through structured support initiatives and
mechanisms with the States on a continuing basis,
recognizing that strong States make a strong nation.”6
The prioritization of this issue is reflected on the
NITI’s website (http://niti.gov.in/). One of its main
pages is named “Cooperative Federalism” (the other is
“Knowledge Hub”).
The NITI seeks to achieve its objectives regarding
“cooperative federalism” through mechanisms that
appear to represent a significant shift from how centre-
state relations were conducted under the Planning
Commission. First, the National Development Council,
which was set up in 1952 by the government of India’s
first Prime Minister, Jawaharlal Nehru, has been
abolished and replaced by a Governing Council.
The National Development Council comprised the
Prime Minister, all Union cabinet ministers, Chief
Ministers of all states or their substitutes, representatives
of the Union Territories, and also the Members of the
Planning Commission. It was an advisory body to
the Planning Commission, although its advice was
not binding.
The Governing Council of the NITI is not very
different in terms of either composition or function:
it is also an advisory body, and its membership largely
mirrors that of the National Development Council.
The chief differences between the two bodies, it seems,
are (a) that the Governing Council will meet more
frequently than did the National Development Council,
and (b) that its work will be undergirded by that of
Regional Councils “formed to address specific issues
and contingencies impacting more than one state
or a region,”7
and also different “subgroups of Chief
Ministers” set up to address specific themes.8
At present,
three such subgroups are listed on the NITI’s website:
“Rationalization of Centrally Sponsored Schemes,”
“Skills Development,” and “Swachh Bharat Mission.”
Each subgroup consists of a different constellation
of Chief Ministers. There appears to be no particular
rationale as to why they were selected (in the future,
membership in subgroups will presumably be on a
rotational basis).
Before I offer a few cautionary notes about the Modi
government’s stated ideal of “cooperative federalism”
and the mechanisms in the NITI meant to attain it,
it is important to recognize many valid criticisms of
how centre-state relations were conducted under the
Planning Commission. As political scientist Baldev Raj
Nayar points out, economic planning in India evolved
in the context of a “single party dominant system,” in
which the Congress Party was in power at the centre and
in almost every state.9
Much has changed since then.
Regional parties now play a far more important role at
the centre (as part of coalition governments) and also in
the states.
IMFG Forum
– 4 –
Another recurrent complaint among critics of the
Planning Commission was that the aging institution
had not kept in step with tectonic shifts in the political
system. Many observers, aside from Bharatiya Janata
Party spokespersons, have indicated that relations
between the Planning Commission’s leadership and state
Chief Ministers had become strained over the years. A
former Member Secretary of the Planning Commission
delivered this cutting indictment: “States felt that they
were on the receiving end of a prescription, something
that was dictated to them. They never felt that they were
partners in a discussion.”10
While it is unlikely
that all states were
equally hostile to the
Planning Commission’s
interventions – given
that these were guided
by the goal of reducing
regional disparities
– affluent states had a pricklier relationship with the
institution. In their case, the charge that the Planning
Commission enforced unwanted “one-size-fits-all”
policies had merit. For example, Kerala Chief Minister
Oommen Chandy complained that schemes such as
“Beti Bachao” and “Jan Dhan Yojana”11
were of little
relevance to his state, as it had already achieved high
standards in these areas.12
Another legitimate criticism of centre-state relations
under the Planning Commission is that the interaction
of state Chief Ministers with the Planning Commission’s
leadership was limited to annual meetings of the
National Development Council, which, over the years,
became less regular – it has met only 57 times since
1952 – and also less productive. According to a former
advisor to the Planning Commission, Santosh Mehrotra,
“The NDC was not doing its role. It used to meet once
or twice a year. All that they would manage to achieve
in the course of a whole day was to read speeches…
there was precious little discussion…now there will be
regular meetings of the [NITI’s] governing body.”13
In
comparison, the NITI’s promise of multiple points of
contact, through Regional Councils and subgroups of
Chief Ministers, in addition to frequent meetings of the
Governing Council, is a welcome change indeed.
The shift from the Planning Commission to the
NITI is anchored in a more fundamental change that
bears the promise of restoring balance in the relationship
between the centre and the states. While the Planning
Commission had the power to allocate funds to
ministries and state governments, the NITI is merely
a “think tank” bereft of such powers. So, why was the
power to allocate funds – which was so central to the
Planning Commission’s identity and standing – not
transferred to the NITI?
A salient criticism of the Planning Commission,
from its very early years, was that it was competing with
or undermining the authority of other government
agencies, such as the Ministry of Finance and the
Finance Commission, or that it was replicating their
functions, leading to inefficiency. Nayar recounts that,
over the years, the
Planning Commission’s
role of allocating funds
“became a source of
considerable heartburn
with several successive
Finance Commissions”
because it seemed
to undermine the
Finance Commission’s constitutionally mandated role
of dividing national revenues between the centre and
states at five-year intervals. In the eyes of some critics,
Nayar suggests, “the [Planning Commission] seemed to
be on a relentless expansion, in the process turning itself
into a replica of the national government, staffed by a
huge and stodgy bureaucracy that encroached on the
legitimate jurisdiction of other agencies.”14
Misgivings about the Planning Commission
seemed to intensify, especially after the liberalizing
reforms of 1991. In 2011, a high-level committee
chaired by former Governor of the Reserve Bank of
India, C. Rangarajan, released a report recommending
reforms that would reorient the roles of the Ministry
of Finance and the Planning Commission.15
The report
envisioned the Finance Ministry as the primary agency
for allocating resources, and the Planning Commission’s
transformation into an advisory body that would
try to keep spending in line with the development
priorities of the government. Though not explicitly
stated, it suggested “taking away the function of Plan
funds disbursal away from the [Planning Commission]
and vesting it entirely in the Ministry of Finance, in
effect transforming the [Planning Commission] into
essentially a think-tank body without any say in the
allocation of funds.”16
When viewed against this background, it seems
evident that the NITI’s creation was influenced by
the Rangarajan committee report and other similar
A recurrent complaint about the Planning
Commission was that the aging institution
had not kept in step with tectonic shifts in
the political system.
Requiem for an Institution: The End of the Indian Planning Commission
– 5 –
and the centre, these manifold interfaces will probably
also undercut the ability of states to negotiate with the
central government on united platforms or to develop
a common voice on issues. Fragmentation may become
the order of the day.
Even if the Governing Council will meet more
frequently than did the National Development Council,
not all Chief Ministers will meet every time, and it
is the Prime Minister who will decide on the list of
participants. It seems that the Prime Minister will also
select the members
of every Regional
Council, subgroup, and
taskforce (if they are
selected on the basis of
“rotation,” but it is not
clear what order will
be followed, or why).
It is quite possible that
the Prime Minister will
pick favoured Chief Ministers for the most important
subgroups and taskforces. If the Planning Commission’s
relationship with state governments often “smacked of
dispensing patronage,”19
the preliminaries for much the
same exist in the NITI. It does not bode well, moreover,
that complaints have already arisen about meetings of
the taskforces being conducted “like seminars.”20
There are other indications that the Modi
government is not as enthusiastic about empowering
states, which is at the heart of cooperative federalism,
as it claims to be. Take, for example, Bharatiya Janata
Party spokesman Aman Sinha’s statement that the
NITI’s purpose is to “bring about a uniformity of policy
throughout the country”; the Ministry of Commerce’s
stated aim to “name and shame” states that do not
comply with the centre’s directives on improving the
“ease of doing business”21
; and the Modi government’s
persistent emphasis on “national security,” which even
makes an appearance in the NITI’s constitution. Thus,
a broader view of the Modi government’s priorities in
the realm of economic policy suggests that its intention
is to force greater market discipline on states, pushing
them to compete with each other to attract private
investment. Such compulsions from the centre may turn
out to work against the professed goal of enhancing the
voice and autonomy of states.
Another development that may turn out to be a
centralizing impulse is the transfer of the erstwhile
Planning Commission’s fund allocation powers to the
critiques of the Planning Commission – Nayar provides
an excellent overview17
– whose main concern was
to reduce the institutional footprint of the Planning
Commission and re-scale its relationship not only with
other Union ministries, but also with states. One might
argue, in fact, that the NITI is a weaker institution
than the Planning Commission by design: it lacks the
power to dictate policy to state governments. Yet while
all of these changes make for a good foundation for the
flourishing of “cooperative federalism,” there is reason
for withholding optimism.
One cause for
worry is that the NITI’s
Governing Council
and its supporting
architecture of Regional
Councils, ministerial
subgroups, taskforces,
and so on, will enlarge
the power of the Prime
Minister rather than that of state governments. This may
happen in a number of ways. For instance, whereas the
National Development Council was formally distinct
from the Planning Commission, and was designed to be
a check on the Planning Commission, the Governing
Council is an integral part of the NITI and thus falls
under the authority of its Chairman, the Prime Minister.
This is a vital difference.
The National Development Council may have
met infrequently and lost relevance over the years, but
it had power and authority in its own right, and an
institutional mandate for registering the voice of state
governments. It also provided an opportunity for all
state Chief Ministers to convene at one site, which
had certain advantages. As economist Prabhat Patnaik
notes: “Though not a constitutional body, [the National
Development Council] had a commanding presence,
where the states, deriving strength from one another,
made a definite impact. Since its decisions, which
included the ultimate approval of plans, were taken
through a consensus, the centre was often forced to yield
on certain matters… The elimination of the NDC is a
major blow to the power of the states.”18
While the powers and responsibilities of the
Governing Council are still not clear, it has neither the
stature nor the distinct institutional mandate of the
National Development Council. Furthermore, while
the Governing Council’s various subgroups will lead
to a proliferation of points of contact between states
The NITI is a weaker institution than the
Planning Commission by design: it lacks
the power to dictate policy to state
governments.
IMFG Forum
– 6 –
Finance Ministry. One might argue that the real purpose
of this impending realignment is to enhance the power
of the executive government and Prime Minister, not
the states. As suggested by an article in Bureaucracy
Today, a popular magazine among Indian civil servants,
the abolition of the Planning Commission means that
a significant check on the Finance Ministry’s power has
been eliminated: “Earlier, the Planning Commission was
the only body that lobbied with the Finance Ministry to
protect the Plan expenditure… Since the NITI Aayog
does not have that role assigned to it, no one will do that
lobbying… The Finance Ministry will be free to slash
Plan expenditure and annual budgetary support to the
Plan.”22
It should be a source of immense concern, indeed,
that the NITI – notwithstanding all rhetoric to the
contrary – will be used to advance the executive
government’s policy agenda above and beyond
everything else. This danger came into clearer view
when its Governing Council was convened to discuss a
controversial land acquisition bill while it was still under
review by a Joint Parliamentary Committee. Various
members of the Committee accused the government
of trying to pressure Chief Ministers into acquiescing
to the draft law, and of attempting to influence the
Committee’s deliberations through the back door.23
The move seemed to backfire, however, when nearly a
dozen Chief Ministers, from states ruled by opposition
parties, failed to appear for the meeting, reportedly
because they were “antagonized” by its declared agenda.
This event led to speculation that the Modi government
and its creation, the NITI Aayog, lack not only a
genuine commitment to the noble ideal of “cooperative
federalism,” but also the wherewithal, in terms of
resources and political influence, to realize it. One can
only hope that this is not the case.
Mitu Sengupta is Associate Professor in the Department of
Politics and Public Administration at Ryerson University.
Requiem for an Institution: The End of the Indian Planning Commission
– 7 –
Federalism and
Fiscal Reform in
India:
The Possible Role of the
NITI Aayog24
Richard M. Bird
I was asked to discuss whether the abolition of the
Planning Commission and the creation of the NITI
Aayog (NITI) is a move towards cooperative federalism
in India. Faced with such a question, perhaps the best I
can do as one who knows a little, but not much, about
India is to repeat what Zhou Enlai reportedly said when
asked what he thought of the outcome of the French
Revolution of 1789: it is too soon to say.25
India is a huge
and regionally
diverse country
with a population
of over a billion, 18
national languages
with 2,000 dialects,
numerous ethnic
and religious groups
fragmented into many sects, castes, and subcastes, and
a political structure with more than three dozen states
and territories and over half a million rural panchayats
and urban local bodies. Given this diversity, the
organizational structure bequeathed by the British and
the upheaval associated with the creation of Pakistan, it
is not surprising that India was initially established as
a federation. What has perhaps been more surprising
has been the extent to which India’s federal system,
while not easy for outsiders to understand, has not only
proved to be sustainable, but also to have allowed the
country to be managed fairly well – of course with some
ups and downs – for more than 60 years.
The recent creation of the NITI may mark a turning
point in some respects: but in what direction? The
abolition of the Planning Commission – an inherently
centralizing body – combined with the acceptance of the
14th Finance Commission’s recommendation to increase
the share of central taxes allocated to the states clearly
appears to shift the balance of fiscal power downward to
some extent.26
However, although the NITI is headed
by the Prime Minister and stuffed full of ministers, its
role is explicitly advisory rather than executive and it has
no say in allocating central revenues to the states as the
Planning Commission did, so it is not easy to determine
how the new system will actually work over time.
Prime Minister Modi stated that one important
role of NITI was to foster “cooperative, competitive
federalism” between states to improve governance and
to encourage them to work together with the federal
government to promote growth, employment, and
investment.27
Unfortunately, since neither cooperative
nor competitive federalism are clear and precise
concepts, combining the two does little to clarify
matters. At the moment, perhaps all one can say is
that it remains unknown and perhaps unknowable
whether Indian federalism will indeed become more
cooperative – in the sense, for example, that both centre
and states will operate
relatively independently
but nonetheless work
together towards such
common objectives as
expanding employment
and growth. It is equally
unclear whether it may
at the same time become
more competitive – in the sense, for instance, that
different states will compete with each other in terms
both of how well they do things and perhaps also to
some extent in what things they do.
To an economist, one conclusion does seem
clear, however. Given the great differences in needs,
opportunities, and capacities between states – let alone
the much greater differences to be found within India’s
enormous range of local governments – if the pendulum
does swing toward fostering “competitiveness” in
order to improve national growth, one result will
almost certainly be increased divergence in regional
growth rates and patterns. In order for a politically
sustainable “cooperative competitive” federation to
be built, a critical requirement is thus likely to be an
intergovernmental fiscal system that would enable
the poorer states to provide at least basic service levels
without holding back the better-performing states.
At the moment, it remains unknown and
perhaps unknowable whether Indian
federalism will become more cooperative
and competitive.
IMFG Forum
– 8 –
Increasing growth while simultaneously ensuring
that those living in lagging areas are not left behind
is a difficult problem in any country, let alone one as
complex as India. A more decentralized federal structure
may be both politically necessary and potentially
economically effective. But if such a system is to be
sustainable, it also requires a strong central government
capable of developing and implementing policies to
support and sustain not only national development
(including the provision of adequate service levels
throughout the country), but also cooperation between
rich and poor regions. No country finds it easy to attain
and maintain the tricky
balance between central
and state levels as well
as between rich and
poor states, and it will
certainly not be simple
in a diverse country like
India.
Although India’s federal system has done a
surprisingly good job in many ways in the face of great
pressures over the last half century or so, it clearly still
has many great problems, including:
• A complex and often ineffective
intergovernmental finance system consisting
of a confusing and often conflicting overlay
of Planning Commission grants, Finance
Commission allocation of a large share
of central revenue, central government
conditional grants, and a variety of implicit
transfers, all of which are largely financed by…
• An array of distortionary and often poorly
administered taxes (as well as overlapping and
confusing regulations) at all levels, with the
result being…
• An often unsatisfactory governance structure
marred by weak and unclear accountability (as
well as corruption) in many areas.
It is not surprising that, as many Indian scholars
have documented extensively over the years, almost
everything the public sector does could be done better,
producing better results more efficiently and effectively.28
Although the new government will undoubtedly
be pressed to do much about many things for many
reasons, if it hopes to turn the ship of state in a new
direction in the near future, it will have to focus its
efforts on only a few key points. In the fiscal area, where
my main expertise – and only real knowledge of India
– lies, three such points appear to deserve special and
urgent attention.
The first, and in many ways, the most immediately
pressing is on the tax side, particularly with respect to
the GST (Goods and Services Tax) – or, more properly
to the GSTs, both federal and state, that are currently
coming closer to full implementation in India.29
Some
key design issues must
still be resolved with
respect to the GST (and
may not prove all that
simple to do), but the
main problem with this
important tax reform
– a reform critical both
for financial stability
and for improved federalism – is not how to design it,
but how to implement it.
Much more attention needs to be paid to
improving tax administration at both the state and
central levels. At the central level, high priority should
be given to implementing many of the generally
sensible recommendations made by the recent Tax
Administration Reform Commission.30
This task will
be difficult, requiring substantial managerial effort and
political support. However, even more effort – little
of which has yet been evident – is needed to develop
and support better state tax administrations, especially
in some of the larger (and often relatively poor) states.
Getting GST administration right at both the central
and state levels is the key not only to improving tax
administration in general, but also to establishing a firm
fiscal and federal foundation on which to build a better
country.
Second, even if India’s revenue structure can be
strengthened, it is also important that governments
at all levels spend more effectively and efficiently
than they now do. Although many aspects of India’s
budgeting and expenditure systems could be improved,
perhaps the most immediate task, given that about
half of central revenues now flow to the states, is to
ensure that the right amounts flow in the right way to
the right recipients. Close attention needs to be paid
Although India’s federal system has done
a surprisingly good job in the face of great
pressures in the last half century, it clearly
still has many great problems.
Requiem for an Institution: The End of the Indian Planning Commission
– 9 –
– are in urban areas.31
Improving the capacity – fiscal,
physical, and human – of the larger urban areas
to finance and manage growth, perhaps up to and
including the development of city-state regions in large
metropolitan areas, is an issue that deserves far more
serious political attention and support than it seems to
have received to date from either the central or – for
obvious political reasons – state governments.
In the face of continuing international and national
pressures on the new government to do something
about everything for everyone, it will not be easy to
focus on such mundane but critical matters as those
just mentioned. If one result emerging from the current
discussion of the NITI Aayog and fiscal federalism in
India is that more attention is paid to such unexciting,
complex, and difficult matters, then the NITI Aayog
may indeed turn out to mark a positive step on the
road towards unleashing India’s potential to grow and
develop. But only time will tell.
Richard M. Bird is Senior Fellow at the Institute on
Municipal Finance and Governance, and Professor
Emeritus in the Department of Economics at the Joseph
L. Rotman School of Management, University of Toronto.
to establishing and implementing a well-structured
intergovernmental transfer system to replace the
existing hodgepodge of central-state explicit and
implicit transfers. A good framework was laid out in
the recent report of the 14th Finance Commission, but
a comprehensive effort is needed to extend and update
that work. Cleaning up the messy central conditional
grants, as the government has already indicated will be
done, is a good way to start, but it is a long way from
doing the whole job.
Finally, the 1992 constitutional amendments that
substantially enhanced the role of local governments
should be taken more seriously than has yet been the
case. Many Indians still live in rural areas, and there is
much that can and should be done to improve their lives
and ensure that their children are healthier and better
educated. However, the more successful such efforts are,
the more likely it will be that rural people will move to
urban areas, where there are already huge problems in
local governance and finance.
India is urbanizing rapidly, and is likely to continue
to do so over the next few decades. As the report
of the High Powered Expert Committee on Urban
Infrastructure and Services has shown, the most critical
local governance and finance problems – and the most
important opportunities for change and improvement
IMFG Forum
– 10 –
Planning is Dead.
Long Live
Planning!
Sanjay G. Reddy32
The Prestige of Planning in India and the World
It is easy to forget that the project of planning was
something that captured the imagination of the Indian
and world public for more than a generation. Indian
planning generated tremendous interest because it
represented a project of transforming a poor agrarian
country through democratic means, in what was hoped
might be a short period of time, into a country that was
more prosperous and would be better able to provide for
the well-being of its people.33
The widespread acceptance of the project of planned
development in India resulted in part from its larger
prestige in the world at the time of India’s independence.
One source of this prestige was the perception that
there had been successful planning experiences in other
countries, especially the Soviet Union.34
The role of
planning in capitalist countries was given significant
impetus by the importance assigned to centralized
administration during the Second World War in most
countries. A planned economy was also assumed by
many to make less likely the seemingly irrational results
produced by an “anarchy of capital” during the Great
Depression, or at least to offer a hope of moderating
the fluctuations of a capitalist economy. Even Joseph
Schumpeter, who cast a critical eye on such claims, saw
the increasing role of bureaucracy as a permanent fixture
of economies.
The development economist Arthur Lewis wrote
The Principles of Economic Planning in the 1940s, for
the Fabian society in the U.K.35
The book assessed
arguments for and against the use of a planning
apparatus in a project of democratic economic
management and transformation. Harold Laski and
others who influenced a generation of developing
country leaders, scholars, and managers, were notable
enthusiasts for this endeavour.36
The French planning
apparatus established after the Second World War
represented perhaps the most comprehensive such
project in a capitalist country, although other countries
(notably the Netherlands) also put in place some of the
mechanisms and rhetoric of planning.
The Indian adoption of planned development took
place therefore in a global context. If there was a mistake
involved, it was a widespread one. Of course, planning
in India was also taken to contrast with the lack of
intentional development serving the Indian people in
the colonial context, shaped as it was by an uneven
playing field between British and Indian interests. For
this reason, even Indian capitalists accepted the need
for some variety of planning (evinced most famously by
what came to be called the Bombay Plan37
).
Planning, Technocracy, and Democracy
Ashwani Saith has recently written about the Cambridge
economist Joan Robinson and her relationships to
India and China, respectively.38
Robinson’s view was
that there was a broad democratic experiment taking
place in China, whereas her view of India’s development
path was that it was much too technocratic, and as a
result, ultimately reflected elite political preferences as
to what should or should not be done (for instance, in
reference to the redistribution of assets such as land) or
the management of production generally. Although her
view of China was undoubtedly naïve, her perspective
on India had elements of insight.
Indian economists such as Sukhamoy Chakravarty
enjoyed great prestige because of their technical
knowledge of mathematical models concerning how
to bring about a staged transformation of the country.
Their ideas provided part of the intellectual background
for the bureaucracy-dominated economy that came
to be known as the “license-permit Raj,”39
which had
rather greater attractiveness in theory than it did in
practice. Chakravarty and others came to understand
the importance of politics in determining the efficacy of
economic plans, even if they did not know fully how to
cope with the problem.40
The enthusiasts for the recent abolition of the
Planning Commission have come from a rather different
point of view from that of Joan Robinson, but they have
in common with her the view that it proved more of an
impediment than an aid to development.
Although there were certainly very good reasons
to criticize India’s development performance for long
Requiem for an Institution: The End of the Indian Planning Commission
– 11 –
phases, to view the Planning Commission as having
been synonymous with misguided state interventionism
and excessive top-down controls is too narrow a
perspective, as it both neglects the substantial debates
which happened within the Planning Commission and
the possibilities for reforming its role to work better
with a decentralized market-oriented economy, without
abolishing it outright.
One can view the shift from the Planning
Commission to the NITI Aayog as a rebranding
exercise, but it is not merely that. The Planning
Commission’s role and responsibility in India, including
having overarching influence over so-called plan
expenditures (a major component of the government of
India’s investment program) and over a number of other
associated decisions, is part of what has been rejected
by those who favour more decentralized and market-
oriented paths. Indeed, this role has been contested for
some time.41
The Planning
Commission was
intended to provide a
systemic view of the
development process
as well as to be an
important decision-
making centre. Its abolition will inevitably mean that
such powers will shift away from the NITI Aayog,
which expressly disavows certain prior roles, particularly
centralized expenditure planning.
There is reason for concern that in India, the
transition being implemented will lead mainly to
certain powers being vested elsewhere, in particular in
the Ministry of Finance or in the financial markets,
which are even less transparent and less accountable.
One of the NITI Aayog’s stated aims is to give the
prerogative to India’s states to take development
measures in a decentralized and entrepreneurial fashion.
This rebalancing of roles cements a shift toward a
regime of competition among states to gain the favour
of the private sector.42
Whether the democratic aspect
of Indian public decision-making on matters of
development is augmented will depend on whether
greater freedom for the states to determine priorities can
be asserted in the presence of this imperative.
A Systemic View?
There is a need for a systemic view of the development
process. The planning process in India was not intended
to involve only top-down decision-making, but rather
to provide for a process of conveying information and
project proposals in both directions between central and
state governments. Although the concept of “cooperative
federalism,” in which state and central governments
play a balanced role, has been trumpeted in relation to
the NITI Aayog, there were elements of such an idea
in the framework of the Planning Commission too,
unavoidable due to the distribution of prerogatives in
the Indian constitution. The role of the states could
have been expanded without altogether abolishing the
Planning Commission, in particular as a centre for
monitoring and coordination.
Advocates of the NITI Aayog have argued that it
will shift power to the states by sharing and aggregating
information on decisions
and lessons derived
from the states or by
coordinating central
and state governments’
actions. The extent to
which it will in fact
bring about such a shift
remains to be seen, but there is a requirement, in some
contexts pressing, for coordination.
There are spillovers in the consequences and
actions taken by individual units. In the past, in the
earlier frame of comprehensive government planning
for development, the strategy of import-substituting
industrialization was very much conceived of in terms
of the rationing of scarce resources by the central
government and its authorities, which would determine
how to best use those resources, whether foreign
exchange, domestic savings, or human resources. Such
a view has diminished appeal. However, there are
spillovers in the consequences of actions across time,
across states or regions, and across sectors, and it can be
important to take into account the interdependencies
that result.
One obvious case involves climate change. India
may not yet have a sufficiently coherent policy with
One can view the shift from the Planning
Commission to the NITI Aayog as a
rebranding exercise, but it is not merely that.
IMFG Forum
– 12 –
respect to climate change and, in particular, how to
transform the Indian economy so that fewer pollutants
are emitted (in contrast perhaps to China, which despite
its status as a major emitter, has taken some steps in that
direction). This is a matter of vital interest for India,
as it is going to be on the “receiving end” of climate
change, for instance, because of the delicate nature of
the monsoon, on which hundreds of millions of people
depend.
Gilbert Rist refers to the current moment in which
development is thought of in terms of the development
goals (such as the Millennium Development Goals and
now the Sustainable Development Goals) as being a
period in which development is “in shreds” due to the
thematic balkanization of concerns which it represents.43
In this approach, everyone’s agenda is referred to but
there is no systematic conception of what development
as a concept means, let
alone a reference to how
these goals are to be
achieved. There are goals,
but there are no plans.
Rather, there is a fond
hope that the aggregation
of decentralized actions
will bring about
comprehensively desirable
results.
An illustration of the inattention to systemic
considerations and its consequences is provided by the
reported approach of the NITI Aayog to the raging
debate in India on poverty estimates. This has become
a highly politicized subject. Whereas in the past India
was thought of as having some of the best-defined and
estimated poverty statistics for a developing country,
today there is a free-for-all; two different government-
constituted committees have been unable to bring any
real order to the debate. Media reports suggest that
the NITI Aayog now proposes to do without poverty
estimates altogether, although there is the possibility
that they will be generated in the future by a different
government agency. It is difficult to conceive how
a comprehensive view of the development process
can emerge without statistics on poverty. It is hard to
rationalize such a decision except on the view that it
is sufficient to focus on growth since all other good
things are assumed, axiomatically, to follow from
it. The impression given is of a willingness to “fly
blind” because of the authority accorded to certain
preconceived ideas over evidence-based analysis.
From Decision-Making Body to Think-Tank?
Was the abolition of the Planning Commission
inevitable as a result of market-oriented reforms? The
impetus for the abolition of the Planning Commission’s
role in resource allocation decisions, which had become
increasingly formal, had been growing. Accordingly, the
decision to eliminate the institution altogether rather
than change its role appears to have been decided upon
because of the powerful rhetorical signal it sent of an
intended change in direction. However, a number of
elements of the supposed substantive contrast appear
overblown. In particular, the idea that the NITI Aayog
will be a “think tank” presents much less of a contrast
to the Planning Commission than it might seem, given
the latter’s long and
distinguished history
of collaboration with
thinkers of diverse
stripes and its provision
of a setting for debates,
often of a very forceful
kind, between different
points of view.
Debates taking place
under the aegis of the Planning Commission over the
future of the Indian economy concerned basic issues
of economic direction relating to the role of markets,
private enterprise, and free trade. The parties to these
debates included eminent economists such as Milton
Friedman and Joan Robinson.44
The idea that the new
“think tank” will replace an operational entity acting
on the basis of a preconceived ideology is difficult
to sustain.
The Centres of Power
It will be interesting to observe whether, and in
what ways, power shifts among levels and branches
of government, as well as between government and
the private sector, due to the adoption of a more
“presidential” style of government and pro-business
policies. It is certainly a matter of good sense and
responsibility to define a budget and ensure that
expenditures are in accordance with intentions
and circumstances. There are often, however, other
agendas pursued by the guardians of fiscal probity,
An illustration of the inattention to systemic
considerations is provided by the reported
approach of the NITI Aayog to poverty
estimates.
Requiem for an Institution: The End of the Indian Planning Commission
– 13 –
who are typically preoccupied with short-run financial
considerations rather than with developing a sufficiently
sizable and coherent investment program for long-term
development.45
In recent years, the Planning Commission in India
came much closer to promoting an agenda that favoured
private-sector and financial interests than had been the
case in the past.46
Eliminating its role in expenditure
determination and orienting it toward ideas creation
and sharing could have been accomplished without
eliminating it altogether as a centre of gravity within the
governmental constellation. There is a need to anticipate
and analyze the effects of alternative investment or
policy choices within a democracy, for which there must
be some institutional site.47
Does China Offer an Example?
The National Development Council (NDC) of China
has been an explicit reference point for the proponents
of the NITI Aayog. However, there are major
differences. There is nothing comparable to China’s
NDC in India and it is hard to see how there could be
without significant changes to the structure of India’s
democratic polity. The current Prime Minister’s call to
“Make in India” and the Governor of the Reserve Bank
of India’s appeal to “Make for India” both implicitly
involve a call to emulate China, because India’s growth
pattern has not been centred on manufacturing and has
not greatly generated employment.
China has developed successfully while adopting
eclectic policies (“Capitalism or Socialism with Chinese
Characteristics”) and having no evident governing
theory. This approach contrasts with the perspective of
those promoting the NITI Aayog, which seems rather
more committed to a highly particular theory. The focus
of the government is on attracting private investment
flows to the country and in generating an encouraging
atmosphere for private investment generally. This
emphasis leads to the discourse of “sound finance,”
of “getting out of the way,” and of “enabling” such
investment by providing required permits, facilitating
access to land, or other means.
Much as these ideas have an important role to play,
this focus leads to inattention to many of the other
important considerations that ought to be present in
defining and executing a development strategy. The
role of the Planning Commission was precisely to
bring in the range of relevant concerns and to ensure
their place in the long-term economic strategy of the
country. Having an eye toward the coherence of policies
and their cumulative effects remains relevant, even in
a development strategy that gives a central role to the
market. Are we presented with old wine in new bottles?
We can hope. Better this than throwing away the old
wine altogether.
Sanjay G. Reddy is Associate Professor of Economics at the
New School for Social Research.
IMFG Forum
– 14 –
Endnotes
1 Aayog is a Hindi expression meaning “policy think-tank.”
2 Throughout this paper, the authors have used the term “centre-
state relations” in the Indian context to refer to what may be
analogous to federal-provincial relations in the Canadian context.
3 For a longer analysis of the implications of the end of the
Planning Commission by the same author, see: “Modi Planning:
What the NITI Aayog Suggests about the Aspirations and Practices
of the Modi Government,” CSAS South Asia: Journal of South Asian
Studies, vol. 38, no. 4 (Dec. 2015).
4 See Aman Sinha’s segment in “NITI Aayog: Rejig or
Repackaging, The Newshour Debate,” Times Now TV
(Jan. 1, 2015), retrieved from: https://www.youtube.com/
watch?v=Xwd6G8YiNgs, accessed June 22, 2015.
5 Press Information Bureau, Government of India, “Government
constitutes National Institution for Transforming India (NITI)
Aayog,” January 1, 2015, retrieved from: http://pib.nic.in/newsite/
PrintRelease.aspx?relid=114268
6 Cabinet Secretariat Resolution No. 511/2/1/2015, The Gazette of
India: Extraordinary. Retrieved from: http://niti.gov.in/mgov_file/
cabinet-resolution_EN.pdf, accessed November 4, 2015.
7 Ibid.
8 See the NITI Aayog’s website, retrieved from: http://niti.gov.in/
content/subgroup_constitution.php, accessed July 30, 2015.
9 B.R. Nayar, “Continuity and Change in Economic Planning,”
in B.R. Nayar (ed.), Globalization and India’s Economic Integration
(Washington D.C.: Georgetown University Press, 2014), p. 71.
10 See Sudha Pillai’s segment in “Macros with Mythili: NITI
Aayog Replaces Planning Commission,” Economic Times TV
(Jan. 17, 2015), retrieved from: https://www.youtube.com/
watch?v=jmbb7rfnCWg, accessed June 12, 2015.
11 Beti Bachao, Beti Padhao (Save Girl Child, Educate Girl Child)
is a Government of India scheme to improve the well-being of girl
children. The Jan Dhan Yojana (People Money Scheme) is another
Government of India program aimed at improving poor people’s
access to financial services.
12 “NITI Aayog: States for Greater Devolution of Funds,” The
Hindu, Feb. 9, 2015, retrieved from: http://www.thehindu.
com/news/national/niti-aayog-states-demand-greater-financial-
devolution-flexibility/article6871254.ece, accessed July 2, 2015.
13 See Mehrotra’s segment in “NITI Aayog: Rejig or Repackaging:
The Newshour Debate,” Times Now TV (Jan. 1, 2015), retrieved
from: https://www.youtube.com/watch?v=Xwd6G8YiNgs, accessed
June 22, 2015.
14 B.R. Nayar, “Economic Planning after Economic Liberalization:
Between Planning Commission and Think-Tank NITI, 1995–
2005,” in Sylvie Guichard and Santosh Mehrotra (eds.), What’s the
Plan? The Postcolonial State and the Planning Commission in India
(Routledge Press, forthcoming), p. 23.
15 “Government expert panel suggests an overhaul of budgetary
process,” Economic Times, Sept. 2, 2011, retrieved from:
http://articles.economictimes.indiatimes.com/2011-09-02/
news/30105997_1_planning-commission-finance-ministry-union-
budget, accessed June 23, 2015.
16 B.R. Nayar, Economic Planning after Economic Liberalization,
forthcoming, p. 27.
17 B. R. Nayar, Continuity and Change in Economic Planning, 2014,
pp. 73–80.
18 Prabhat Patnaik, “From the Planning Commission to the NITI
Aayog,” Economic and Political Weekly, vol. 50, no. 4 (Jan. 24,
2015), pp. 10–12.
19 M. Govinda Rao, “Role and Functions of NITI Aayog,”
Economic and Political Weekly, vol. 50, no. 4 (Jan. 24, 2015), p. 13.
20 See “After his very warm welcome, NITI Aayog’s Vice Chairman
Arvind Panagariya out in the cold,” Indian Express (June 11, 2015),
retrieved from: http://indianexpress.com/article/india/india-others/
after-his-very-warm-welcome-niti-aayogs-vice-chairman-arvind-
panagariya-out-in-the-cold/, accessed July 2, 2015.
21 The Ministry of Commerce intends to improve India’s ranking
on the World Bank’s index of “Doing Business,” retrieved from:
http://www.doingbusiness.org/rankings. The Secretary for the
Department of Industrial Policy and Promotion, Amitabh Kant,
declared that the centre would “name and shame” states that failed
to cooperate. See Nayanima Basu, “States to come under DIPP
watch on ease of doing business,” Business Standard, May 19, 2015,
retrieved from: http://www.business-standard.com/article/economy-
policy/states-to-come-under-dipp-watch-on-ease-of-doing-
business-115051900043_1.html, accessed June 5, 2015.
22 “Transforming India,” Bureaucracy Today, Jan. 16–31, 2015,
p. 30.
23 “Land Bill: House panel slams PM for raising matter in NITI
Aayog,” The Hindu, Jul. 17, 2015, retrieved from: http://www.
thehindu.com/news/national/land-bill-house-panel-slams-pm-for-
raising-matter-at-niti-aayog/article7431385.ece, accessed July 28,
2015.
24 Revision of remarks originally prepared for Panel Discussion
on “The NITI Aayog: Moving Toward Cooperative Federalism in
India?” held at Rotman School of Management, Toronto, April 27,
2015.
Requiem for an Institution: The End of the Indian Planning Commission
– 15 –
25 Both the question and the answer may, it seems, have been
related to the (then recent) French riots of 1968, rather than
the 1789 revolution (retrieved from: http://www.historytoday.
com/blog/news-blog/dean-nicholas/zhou-enlais-famous-saying-
debunked). But why ruin a good quip with facts?
26 Report of the Fourteenth Finance Commission, retrieved from:
http://finmin.nic.in/14fincomm/14thFinanceCommission.htm.
27 As reported by the BBC News in “Indian media: PM Modi seeks
‘cooperative federalism’,” http://www.bbc.com/news/world-asia-
india-31274460.
28 See, for example, the well-known book by Arvind Panagariya,
India: The Emerging Giant (New York: Oxford University Press,
2008). Panagariya has been named as first vice-chairman of the
NITI Aayog. See also the almost contemporaneous examination of
fiscal federalism in India by M. Govinda Rao and Nirvikar Singh,
The Political Economy of Federalism in India (New York: Oxford
University Press, 2006).
29 A brief summary of the evolution of the GST in India may be
found in R. Bird, “Below the Salt: Decentralizing Value-Added
Taxes,” in Ehtisham Ahmad and Georgio Brosio (eds.), Handbook
of Multilateral Finance (Cheltenham UK: Edward Elgar, 2015), pp.
291–333.
30 See Government of India, Ministry of Finance website, retrieved
from: http://finmin.nic.in/the_ministry/dept_revenue/tarc_report.asp.
31 Report of the High Powered Expert Committee on Urban
Infrastructure and Services (New Delhi, 2011). See also I.J.
Ahluwalia, R. Kanbur and P.K. Mohanty (eds.), Urbanisation in
India (New Delhi: Sage, 2014).
32 The author would like to thank Bharat Punjabi for the invitation
to the important symposium at the University of Toronto which
gave rise to this comment and for his sustained and stimulating
conversation on this subject and others.
33 The representation of Indian planning in popular media –
including children’s books – testifies to this. See, for example, C.
and G. Louden, Rain in the Winds: A Story of India (New York:
Charles Scribner’s Sons, 1953) or S. Dhar, This India (New Delhi:
Publications Division, Ministry of Information and Broadcasting,
Govt. of India, 1973).
34 Most people today do not think of the Soviet Union as a great
developmental success, but it was thought of as such by many at the
time, and its example as a result reverberated around the world –
including seemingly capitalist countries of considerable and growing
means such as the United States. (This was evident for instance in
the Progressive Party platform of 1948, which stated that “Public
ownership of these levers will enable the people to plan the use of
their productive resources so as to develop the limitless potential of
modem technology and to create a true American Commonwealth
free from poverty and insecurity.”) Well into the 1970s, the Soviet
experience continued to be presented as one of successful planned
development. For a discussion of such arguments see, for example,
M. Dobb, M., Economic Growth and Underdeveloped Countries
(New York: International Publishers, 1963), and A. Nove, The
Soviet Economic System (London: Allen and Unwin, 1977).
35 W. A. Lewis, The Principles of Economic Planning (London: Allen
 Unwin, 1949).
36 See, for example, H. Laski, Reflections on the Revolution of Our
Time (New York: The Viking Press, 1943).
37 P. Thakurdos et al., Memorandum Outlining a Plan of Economic
Development for India (Harmondsworth: Penguin, 1944).
38 A. Saith, “Joan Robinson and Indian Planning: An Awkward
Relationship,” Development and Change, vol. 39 (2008), pp.
1115–1134.
39 That is, the regime of licences and regulations governing
economic activity in India between 1947 and 1991.
40 See, for example, P. Bardhan, The Political Economy of
Development in India (Oxford: Basil Blackwell, 1984); S.
Chakravarty, Development Planning: The Indian Experience
(Oxford: Clarendon Press, 1987); S. Chakravarty, “M. Kalecki
and Development Economics,” in Selected Economic Writings
(New Delhi: Oxford University Press, 1993), pp. 234–246; P.S.
Jha, India: A Political Economy of Stagnation (New Delhi: Oxford
University Press, 1980); K.N. Raj, “The Politics and Economics of
Intermediate Regimes,” Economic and Political Weekly, vol. 8, no. 27
(1973), pp. 1189–1198.
41 See, for example, H. Singh and P. Singh, Indian Administration
(New Delhi: Pearson Education, 2011), on the historical debate
on the determination of the respective roles of the Planning
Commission and the Finance Commission.
42 See, for example, J. Sachs, A. Varshney, and N. Bajpai, “The
Politics and Economics of India’s Reforms: An Introduction” in
J. Sachs, A. Varshney, and N. Bajpai (eds.), India in the Era of
Economic Reforms (Oxford University Press, 1999).
43 G. Rist, The History of Development: From Western Origins to
Global Faith, third edition (London: Zed Books, 2008).
44 See, for example, A.K. Dasgupta (ed.), Trade Theory and
Commercial Policy in Relation to Underdeveloped Countries (New
York: Asia Publishing House, 1965), D. Engerman, “West Meets
East: The Center for International Studies and Indian Economic
Development,” in D. Engerman et al. (eds.), Staging Growth:
Modernization, Development and the Global Cold War (Amherst:
University of Massachusetts Press, 2003); L.H. White, The Clash of
Economic Ideas: The Great Policy Debates and Experiments of the Last
Hundred Years (Cambridge: Cambridge University Press, 2012).
45 See P. Sen, “In Lieu of the Planning Commission: Part IV,”
Ideas for India blog, Sept. 30, 2014, retrieved from: http://www.
ideasforindia.in/article.aspx?article_id=351.
IMFG Forum
– 16 –
46 This is also true for other entities, such as the Reserve Bank of
India, the central bank, which has recently been pursuing greater
independence and the adoption of inflation targeting as a policy
– at the very moment that this policy has become much more
controversial in the rest of the world because of the recognition of
the role such policies may have played in asset price inflation prior
to the crash of 2008, and the consequent advocacy of the need
for central banks to be involved in “macro-prudential regulation”
and to take asset market fragility as an explicit concern. One
of the lessons that appears to have been learned from the 2008
crisis around the world is that one has to have a more modulated
approach to central bank independence and goals, but this message
does not appear to have been much heard in India.
47 In the Netherlands, the Bureau for Economic Policy Analysis
(known in Dutch as the Central Planning Bureau, although
it has never actually undertaken central planning) was formed
in 1945 with Jan Tinbergen as its founding director and most
important early figure. Every time there is a general election, the
Bureau produces detailed estimates of the cost of major political
parties’ programs to contribute to the democratic debate in the
country. Recently, a Dutch economist said to me that “progressive”
economists of the Netherlands are sometimes critical of the Bureau’s
approach because it uses only one model, which some believe
restricts the range of plausible assumptions that would be better
represented with more model diversity. It is noteworthy that that
one of the Bureau’s assigned roles is to inform democratic debate in
the country.
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forumpaper_5_punjabi_sengupta_bird_reddy

  • 1. Requiem for an Institution: The End of the Indian Planning Commission Bharat Punjabi, Mitu Sengupta, Richard M. Bird, and Sanjay G. Reddy IMFG No. 5 / 2015 forum
  • 2. About IMFG The Institute on Municipal Finance and Governance (IMFG) is an academic research hub and non- partisan think tank based in the Munk School of Global Affairs at the University of Toronto. IMFG focuses on the fiscal health and governance challenges facing large cities and city-regions. Its objective is to spark and inform public debate, and to engage the academic and policy communities around important issues of municipal finance and governance. The Institute conducts original research on issues facing cities in Canada and around the world; promotes high-level discussion among Canada’s government, academic, corporate, and community leaders through conferences and roundtables; and supports graduate and post-graduate students to build Canada’s cadre of municipal finance and governance experts. It is the only institute in Canada that focuses solely on municipal finance issues in large cities and city-regions. IMFG is funded by the Province of Ontario, the City of Toronto, Avana Capital Corporation, and TD Bank Group. Acknowledgements This Forum Paper is the result of an event called “The Sun Sets Over the Planning Commission: Where is India Headed?” organized by Bharat Punjabi. He would like to acknowledge Alexander Sloman’s help in transcribing this panel and his sincere appreciation to Enid Slack for her enthusiasm and encouragement. He thanks Dilip Soman from the India Innovation Institute for co-organizing the panel on the Indian Planning Commission at the Rotman School of Management, University of Toronto, as well as Ritu Birla at the Centre for South Asian Studies for co-sponsoring this event. He would also like to thank Selena Zhang, Dina Graser, and Richard Stren for their helpful comments on the text. This paper does not necessarily reflect the views of IMFG, its partners, and funders of the session. Any errors or misinterpretations rest with the authors. Institute on Municipal Finance & Governance Munk School of Global Affairs, University of Toronto 1 Devonshire Place Toronto, Ontario, Canada M5S 3K7 e-mail contact: info.imfg@utoronto.ca http://www.munkschool.utoronto.ca/imfg/ Series editors: Selena Zhang and Philippa Campsie © Copyright held by authors ISBN 978-0-7727-0950-9
  • 3. The Secretariat Building in New Delhi houses the Cabinet Secretariat of the Central Government of India. (Photo: Laurie Jones) Overview The Indian Government’s decision to dissolve the Central Planning Commission in August 2014 marks an important watershed for India’s current government. While the idea of economic planning had some of its origins in the late colonial period, the Planning Commission was set up in 1950 with the first national five-year plan launched in 1951. Until the period of economic liberalization that began in the early 1990s, the Planning Commission prepared five-year plans and controlled planned expenditure. Historically, the Planning Commission’s mandate had also laid the conceptual foundations for India’s economic development model and the five-year plans were its most important contributions. Though the Planning Commission did not have a constitutional or a statutory mandate, it had tremendous clout because it managed transfers to the states on subjects that were in the concurrent (joint centre and state) list of the Constitution. As a consequence, the Planning Commission had an important role in India. This IMFG Forum paper brings together three commentaries presented at an event called “The Sun Sets Over the Planning Commission: Where is India’s Economic Policy Headed?” co-sponsored by the Institute on Municipal Finance and Governance, the Centre for South Asian Studies at the Munk School of Global Affairs, and the India Innovation Institute at the Rotman School of Management, all at the University of Toronto. The three contributions to this IMFG Forum paper examine the pros and cons of the replacement of the Planning Commission by the newly established National Institution for Transforming India Aayog1 (NITI Aayog, hereafter referred to simply as the NITI) and its implications for India’s development policies. Given that these are early days for the NITI, the contributions to this Forum paper should be seen as preliminary observations on its likely direction rather than a definitive statement on its functioning. The NITI’s website states that it has been set up as a think tank that pursues policy research with the additional objective of fostering cooperative federalism. For that reason, the three authors to this forum strike a cautious note about the future institutional direction of the NITI and its likely role in the governance framework of a rapidly evolving federal structure in India. Bharat Punjabi – 1 –
  • 4. IMFG Forum –2 – A rather skeptical view comes from Mitu Sengupta, who outlines both the NITI’s policy objectives and the governance challenges it faces in a fast-changing federal and democratic context. Sengupta presents a political vignette of the relations between different branches of government, couched in an analysis of the mandates and responsibilities of various departments involved in disbursing development funds to lower levels of government in India. Sengupta’s chief concern is that the replacement of the Planning Commission by the NITI considerably enhances the power of the Prime Minister’s Office in India. The Governing Council of the NITI, which replaced the National Development Council of the Planning Commission, has been given far less power, so by default, this change would increase the power of the Prime Minister’s Office and would be detrimental to the federal spirit of India’s democratic institutions. Richard Bird discusses how the NITI could affect centre-state economic relations in India2 and the implications for federalism and local governance. He emphasizes the need to see through key but unimplemented fiscal and governance reform measures such as GST tax reform and changes in the system of intergovernmental transfers. In particular, he advocates implementing the 1992 constitutional amendment that was intended to decentralize power to urban and rural local self-government in India. He argues that both effective decentralization and efficient management of fiscal resources are essential if the Indian government’s vision of competitive and co-operative federalism is to be realized. Bird’s advocacy for serious fiscal and governance reform acquires special significance in light of the Indian government’s recent initiative to renew the country’s urban areas with the Smart Cities Mission. India’s cities have faced decades of neglect, a prospect that may not see a reversal if measures for much-needed decentralization and the empowerment of India’s local democratic institutions (municipalities and metropolitan planning committees) are not implemented. Bird warns that greater devolution at best remains a tentative solution to uneven economic development, a sentiment echoed by Sanjay Reddy. Reddy provides a historical overview of the Planning Commission’s role in ensuring balanced economic development and managing centre-state relations in India. He situates the origins of the Planning Commission within the history of development economics and more recent debates in Indian policy circles. He outlines the importance of a central coordinating mechanism to manage challenges with interjurisdictional spillovers, such as climate change. Reddy also highlights the risks of overreliance on decentralized mechanisms in the sphere of federalism by pointing to the pragmatic approach taken by policy makers and politicians in China. Overall, the three commentaries showcase the governance challenges confronting the newly formed NITI Aayog and central government in India. Mitu Sengupta’s warning of the growing concentration of powers in the Prime Minister’s Office reminds us of the dilemmas facing modern parliamentary democratic governments in a federal system. Richard Bird’s cautious optimism about the future of the NITI and a new federalism in India is tempered by his advocacy for developing institutions to address regional economic imbalances and the challenges of rapid urbanization. Reddy’s historical perspective draws attention to the tentative nature of the governance solutions that intellectual tools from a discipline like economics can offer. All three contributions highlight the dilemmas that researchers working on federalism face in democracies. There are no permanent solutions to the problems of national and subnational governance, simply second-best answers in federal systems underwritten by constitutions. Bharat Punjabi was IMFG’s Postdoctoral Fellow for 2014-2015.
  • 5. Requiem for an Institution: The End of the Indian Planning Commission – 3 – From the Planning Commission to the NITI Aayog: An Agenda for Cooperative Federalism?3 Mitu Sengupta In contrast to the Planning Commission, which one spokesperson for India’s ruling Bharatiya Janata Party described as an “instrument of coercion,” it is promised that state governments will be more influential in the NITI Aayog (NITI), with their bottom-up input genuinely valued.4 Indeed, one of the key justifications for the creation of the NITI is that it will decentralize power to state governments, thus complementing the recommendation of the 14th Finance Commission that a higher share of central tax revenues – a jump from 32 percent to 42 percent – be devolved to states. The objective of decentralizing power received much emphasis in the cabinet resolution that created the NITI: “The one-size-fits-all approach, often inherent in central planning, has the potential of creating needless tensions and undermining the harmony needed for national effort.” The resolution goes on to proclaim that the NITI will represent “an important evolutionary change from the past” and “will be replacing a centre- to-state one-way flow of policy by a genuine and continuing partnership with the states.”5 Additionally, the top two items in the NITI Aayog’s list of objectives speak to the Modi government’s stated intention to devolve power: (1) “to evolve a shared vision of national development priorities, sectors and strategies with the active involvement of States in the light of national objectives,” and (2) “to foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuing basis, recognizing that strong States make a strong nation.”6 The prioritization of this issue is reflected on the NITI’s website (http://niti.gov.in/). One of its main pages is named “Cooperative Federalism” (the other is “Knowledge Hub”). The NITI seeks to achieve its objectives regarding “cooperative federalism” through mechanisms that appear to represent a significant shift from how centre- state relations were conducted under the Planning Commission. First, the National Development Council, which was set up in 1952 by the government of India’s first Prime Minister, Jawaharlal Nehru, has been abolished and replaced by a Governing Council. The National Development Council comprised the Prime Minister, all Union cabinet ministers, Chief Ministers of all states or their substitutes, representatives of the Union Territories, and also the Members of the Planning Commission. It was an advisory body to the Planning Commission, although its advice was not binding. The Governing Council of the NITI is not very different in terms of either composition or function: it is also an advisory body, and its membership largely mirrors that of the National Development Council. The chief differences between the two bodies, it seems, are (a) that the Governing Council will meet more frequently than did the National Development Council, and (b) that its work will be undergirded by that of Regional Councils “formed to address specific issues and contingencies impacting more than one state or a region,”7 and also different “subgroups of Chief Ministers” set up to address specific themes.8 At present, three such subgroups are listed on the NITI’s website: “Rationalization of Centrally Sponsored Schemes,” “Skills Development,” and “Swachh Bharat Mission.” Each subgroup consists of a different constellation of Chief Ministers. There appears to be no particular rationale as to why they were selected (in the future, membership in subgroups will presumably be on a rotational basis). Before I offer a few cautionary notes about the Modi government’s stated ideal of “cooperative federalism” and the mechanisms in the NITI meant to attain it, it is important to recognize many valid criticisms of how centre-state relations were conducted under the Planning Commission. As political scientist Baldev Raj Nayar points out, economic planning in India evolved in the context of a “single party dominant system,” in which the Congress Party was in power at the centre and in almost every state.9 Much has changed since then. Regional parties now play a far more important role at the centre (as part of coalition governments) and also in the states.
  • 6. IMFG Forum – 4 – Another recurrent complaint among critics of the Planning Commission was that the aging institution had not kept in step with tectonic shifts in the political system. Many observers, aside from Bharatiya Janata Party spokespersons, have indicated that relations between the Planning Commission’s leadership and state Chief Ministers had become strained over the years. A former Member Secretary of the Planning Commission delivered this cutting indictment: “States felt that they were on the receiving end of a prescription, something that was dictated to them. They never felt that they were partners in a discussion.”10 While it is unlikely that all states were equally hostile to the Planning Commission’s interventions – given that these were guided by the goal of reducing regional disparities – affluent states had a pricklier relationship with the institution. In their case, the charge that the Planning Commission enforced unwanted “one-size-fits-all” policies had merit. For example, Kerala Chief Minister Oommen Chandy complained that schemes such as “Beti Bachao” and “Jan Dhan Yojana”11 were of little relevance to his state, as it had already achieved high standards in these areas.12 Another legitimate criticism of centre-state relations under the Planning Commission is that the interaction of state Chief Ministers with the Planning Commission’s leadership was limited to annual meetings of the National Development Council, which, over the years, became less regular – it has met only 57 times since 1952 – and also less productive. According to a former advisor to the Planning Commission, Santosh Mehrotra, “The NDC was not doing its role. It used to meet once or twice a year. All that they would manage to achieve in the course of a whole day was to read speeches… there was precious little discussion…now there will be regular meetings of the [NITI’s] governing body.”13 In comparison, the NITI’s promise of multiple points of contact, through Regional Councils and subgroups of Chief Ministers, in addition to frequent meetings of the Governing Council, is a welcome change indeed. The shift from the Planning Commission to the NITI is anchored in a more fundamental change that bears the promise of restoring balance in the relationship between the centre and the states. While the Planning Commission had the power to allocate funds to ministries and state governments, the NITI is merely a “think tank” bereft of such powers. So, why was the power to allocate funds – which was so central to the Planning Commission’s identity and standing – not transferred to the NITI? A salient criticism of the Planning Commission, from its very early years, was that it was competing with or undermining the authority of other government agencies, such as the Ministry of Finance and the Finance Commission, or that it was replicating their functions, leading to inefficiency. Nayar recounts that, over the years, the Planning Commission’s role of allocating funds “became a source of considerable heartburn with several successive Finance Commissions” because it seemed to undermine the Finance Commission’s constitutionally mandated role of dividing national revenues between the centre and states at five-year intervals. In the eyes of some critics, Nayar suggests, “the [Planning Commission] seemed to be on a relentless expansion, in the process turning itself into a replica of the national government, staffed by a huge and stodgy bureaucracy that encroached on the legitimate jurisdiction of other agencies.”14 Misgivings about the Planning Commission seemed to intensify, especially after the liberalizing reforms of 1991. In 2011, a high-level committee chaired by former Governor of the Reserve Bank of India, C. Rangarajan, released a report recommending reforms that would reorient the roles of the Ministry of Finance and the Planning Commission.15 The report envisioned the Finance Ministry as the primary agency for allocating resources, and the Planning Commission’s transformation into an advisory body that would try to keep spending in line with the development priorities of the government. Though not explicitly stated, it suggested “taking away the function of Plan funds disbursal away from the [Planning Commission] and vesting it entirely in the Ministry of Finance, in effect transforming the [Planning Commission] into essentially a think-tank body without any say in the allocation of funds.”16 When viewed against this background, it seems evident that the NITI’s creation was influenced by the Rangarajan committee report and other similar A recurrent complaint about the Planning Commission was that the aging institution had not kept in step with tectonic shifts in the political system.
  • 7. Requiem for an Institution: The End of the Indian Planning Commission – 5 – and the centre, these manifold interfaces will probably also undercut the ability of states to negotiate with the central government on united platforms or to develop a common voice on issues. Fragmentation may become the order of the day. Even if the Governing Council will meet more frequently than did the National Development Council, not all Chief Ministers will meet every time, and it is the Prime Minister who will decide on the list of participants. It seems that the Prime Minister will also select the members of every Regional Council, subgroup, and taskforce (if they are selected on the basis of “rotation,” but it is not clear what order will be followed, or why). It is quite possible that the Prime Minister will pick favoured Chief Ministers for the most important subgroups and taskforces. If the Planning Commission’s relationship with state governments often “smacked of dispensing patronage,”19 the preliminaries for much the same exist in the NITI. It does not bode well, moreover, that complaints have already arisen about meetings of the taskforces being conducted “like seminars.”20 There are other indications that the Modi government is not as enthusiastic about empowering states, which is at the heart of cooperative federalism, as it claims to be. Take, for example, Bharatiya Janata Party spokesman Aman Sinha’s statement that the NITI’s purpose is to “bring about a uniformity of policy throughout the country”; the Ministry of Commerce’s stated aim to “name and shame” states that do not comply with the centre’s directives on improving the “ease of doing business”21 ; and the Modi government’s persistent emphasis on “national security,” which even makes an appearance in the NITI’s constitution. Thus, a broader view of the Modi government’s priorities in the realm of economic policy suggests that its intention is to force greater market discipline on states, pushing them to compete with each other to attract private investment. Such compulsions from the centre may turn out to work against the professed goal of enhancing the voice and autonomy of states. Another development that may turn out to be a centralizing impulse is the transfer of the erstwhile Planning Commission’s fund allocation powers to the critiques of the Planning Commission – Nayar provides an excellent overview17 – whose main concern was to reduce the institutional footprint of the Planning Commission and re-scale its relationship not only with other Union ministries, but also with states. One might argue, in fact, that the NITI is a weaker institution than the Planning Commission by design: it lacks the power to dictate policy to state governments. Yet while all of these changes make for a good foundation for the flourishing of “cooperative federalism,” there is reason for withholding optimism. One cause for worry is that the NITI’s Governing Council and its supporting architecture of Regional Councils, ministerial subgroups, taskforces, and so on, will enlarge the power of the Prime Minister rather than that of state governments. This may happen in a number of ways. For instance, whereas the National Development Council was formally distinct from the Planning Commission, and was designed to be a check on the Planning Commission, the Governing Council is an integral part of the NITI and thus falls under the authority of its Chairman, the Prime Minister. This is a vital difference. The National Development Council may have met infrequently and lost relevance over the years, but it had power and authority in its own right, and an institutional mandate for registering the voice of state governments. It also provided an opportunity for all state Chief Ministers to convene at one site, which had certain advantages. As economist Prabhat Patnaik notes: “Though not a constitutional body, [the National Development Council] had a commanding presence, where the states, deriving strength from one another, made a definite impact. Since its decisions, which included the ultimate approval of plans, were taken through a consensus, the centre was often forced to yield on certain matters… The elimination of the NDC is a major blow to the power of the states.”18 While the powers and responsibilities of the Governing Council are still not clear, it has neither the stature nor the distinct institutional mandate of the National Development Council. Furthermore, while the Governing Council’s various subgroups will lead to a proliferation of points of contact between states The NITI is a weaker institution than the Planning Commission by design: it lacks the power to dictate policy to state governments.
  • 8. IMFG Forum – 6 – Finance Ministry. One might argue that the real purpose of this impending realignment is to enhance the power of the executive government and Prime Minister, not the states. As suggested by an article in Bureaucracy Today, a popular magazine among Indian civil servants, the abolition of the Planning Commission means that a significant check on the Finance Ministry’s power has been eliminated: “Earlier, the Planning Commission was the only body that lobbied with the Finance Ministry to protect the Plan expenditure… Since the NITI Aayog does not have that role assigned to it, no one will do that lobbying… The Finance Ministry will be free to slash Plan expenditure and annual budgetary support to the Plan.”22 It should be a source of immense concern, indeed, that the NITI – notwithstanding all rhetoric to the contrary – will be used to advance the executive government’s policy agenda above and beyond everything else. This danger came into clearer view when its Governing Council was convened to discuss a controversial land acquisition bill while it was still under review by a Joint Parliamentary Committee. Various members of the Committee accused the government of trying to pressure Chief Ministers into acquiescing to the draft law, and of attempting to influence the Committee’s deliberations through the back door.23 The move seemed to backfire, however, when nearly a dozen Chief Ministers, from states ruled by opposition parties, failed to appear for the meeting, reportedly because they were “antagonized” by its declared agenda. This event led to speculation that the Modi government and its creation, the NITI Aayog, lack not only a genuine commitment to the noble ideal of “cooperative federalism,” but also the wherewithal, in terms of resources and political influence, to realize it. One can only hope that this is not the case. Mitu Sengupta is Associate Professor in the Department of Politics and Public Administration at Ryerson University.
  • 9. Requiem for an Institution: The End of the Indian Planning Commission – 7 – Federalism and Fiscal Reform in India: The Possible Role of the NITI Aayog24 Richard M. Bird I was asked to discuss whether the abolition of the Planning Commission and the creation of the NITI Aayog (NITI) is a move towards cooperative federalism in India. Faced with such a question, perhaps the best I can do as one who knows a little, but not much, about India is to repeat what Zhou Enlai reportedly said when asked what he thought of the outcome of the French Revolution of 1789: it is too soon to say.25 India is a huge and regionally diverse country with a population of over a billion, 18 national languages with 2,000 dialects, numerous ethnic and religious groups fragmented into many sects, castes, and subcastes, and a political structure with more than three dozen states and territories and over half a million rural panchayats and urban local bodies. Given this diversity, the organizational structure bequeathed by the British and the upheaval associated with the creation of Pakistan, it is not surprising that India was initially established as a federation. What has perhaps been more surprising has been the extent to which India’s federal system, while not easy for outsiders to understand, has not only proved to be sustainable, but also to have allowed the country to be managed fairly well – of course with some ups and downs – for more than 60 years. The recent creation of the NITI may mark a turning point in some respects: but in what direction? The abolition of the Planning Commission – an inherently centralizing body – combined with the acceptance of the 14th Finance Commission’s recommendation to increase the share of central taxes allocated to the states clearly appears to shift the balance of fiscal power downward to some extent.26 However, although the NITI is headed by the Prime Minister and stuffed full of ministers, its role is explicitly advisory rather than executive and it has no say in allocating central revenues to the states as the Planning Commission did, so it is not easy to determine how the new system will actually work over time. Prime Minister Modi stated that one important role of NITI was to foster “cooperative, competitive federalism” between states to improve governance and to encourage them to work together with the federal government to promote growth, employment, and investment.27 Unfortunately, since neither cooperative nor competitive federalism are clear and precise concepts, combining the two does little to clarify matters. At the moment, perhaps all one can say is that it remains unknown and perhaps unknowable whether Indian federalism will indeed become more cooperative – in the sense, for example, that both centre and states will operate relatively independently but nonetheless work together towards such common objectives as expanding employment and growth. It is equally unclear whether it may at the same time become more competitive – in the sense, for instance, that different states will compete with each other in terms both of how well they do things and perhaps also to some extent in what things they do. To an economist, one conclusion does seem clear, however. Given the great differences in needs, opportunities, and capacities between states – let alone the much greater differences to be found within India’s enormous range of local governments – if the pendulum does swing toward fostering “competitiveness” in order to improve national growth, one result will almost certainly be increased divergence in regional growth rates and patterns. In order for a politically sustainable “cooperative competitive” federation to be built, a critical requirement is thus likely to be an intergovernmental fiscal system that would enable the poorer states to provide at least basic service levels without holding back the better-performing states. At the moment, it remains unknown and perhaps unknowable whether Indian federalism will become more cooperative and competitive.
  • 10. IMFG Forum – 8 – Increasing growth while simultaneously ensuring that those living in lagging areas are not left behind is a difficult problem in any country, let alone one as complex as India. A more decentralized federal structure may be both politically necessary and potentially economically effective. But if such a system is to be sustainable, it also requires a strong central government capable of developing and implementing policies to support and sustain not only national development (including the provision of adequate service levels throughout the country), but also cooperation between rich and poor regions. No country finds it easy to attain and maintain the tricky balance between central and state levels as well as between rich and poor states, and it will certainly not be simple in a diverse country like India. Although India’s federal system has done a surprisingly good job in many ways in the face of great pressures over the last half century or so, it clearly still has many great problems, including: • A complex and often ineffective intergovernmental finance system consisting of a confusing and often conflicting overlay of Planning Commission grants, Finance Commission allocation of a large share of central revenue, central government conditional grants, and a variety of implicit transfers, all of which are largely financed by… • An array of distortionary and often poorly administered taxes (as well as overlapping and confusing regulations) at all levels, with the result being… • An often unsatisfactory governance structure marred by weak and unclear accountability (as well as corruption) in many areas. It is not surprising that, as many Indian scholars have documented extensively over the years, almost everything the public sector does could be done better, producing better results more efficiently and effectively.28 Although the new government will undoubtedly be pressed to do much about many things for many reasons, if it hopes to turn the ship of state in a new direction in the near future, it will have to focus its efforts on only a few key points. In the fiscal area, where my main expertise – and only real knowledge of India – lies, three such points appear to deserve special and urgent attention. The first, and in many ways, the most immediately pressing is on the tax side, particularly with respect to the GST (Goods and Services Tax) – or, more properly to the GSTs, both federal and state, that are currently coming closer to full implementation in India.29 Some key design issues must still be resolved with respect to the GST (and may not prove all that simple to do), but the main problem with this important tax reform – a reform critical both for financial stability and for improved federalism – is not how to design it, but how to implement it. Much more attention needs to be paid to improving tax administration at both the state and central levels. At the central level, high priority should be given to implementing many of the generally sensible recommendations made by the recent Tax Administration Reform Commission.30 This task will be difficult, requiring substantial managerial effort and political support. However, even more effort – little of which has yet been evident – is needed to develop and support better state tax administrations, especially in some of the larger (and often relatively poor) states. Getting GST administration right at both the central and state levels is the key not only to improving tax administration in general, but also to establishing a firm fiscal and federal foundation on which to build a better country. Second, even if India’s revenue structure can be strengthened, it is also important that governments at all levels spend more effectively and efficiently than they now do. Although many aspects of India’s budgeting and expenditure systems could be improved, perhaps the most immediate task, given that about half of central revenues now flow to the states, is to ensure that the right amounts flow in the right way to the right recipients. Close attention needs to be paid Although India’s federal system has done a surprisingly good job in the face of great pressures in the last half century, it clearly still has many great problems.
  • 11. Requiem for an Institution: The End of the Indian Planning Commission – 9 – – are in urban areas.31 Improving the capacity – fiscal, physical, and human – of the larger urban areas to finance and manage growth, perhaps up to and including the development of city-state regions in large metropolitan areas, is an issue that deserves far more serious political attention and support than it seems to have received to date from either the central or – for obvious political reasons – state governments. In the face of continuing international and national pressures on the new government to do something about everything for everyone, it will not be easy to focus on such mundane but critical matters as those just mentioned. If one result emerging from the current discussion of the NITI Aayog and fiscal federalism in India is that more attention is paid to such unexciting, complex, and difficult matters, then the NITI Aayog may indeed turn out to mark a positive step on the road towards unleashing India’s potential to grow and develop. But only time will tell. Richard M. Bird is Senior Fellow at the Institute on Municipal Finance and Governance, and Professor Emeritus in the Department of Economics at the Joseph L. Rotman School of Management, University of Toronto. to establishing and implementing a well-structured intergovernmental transfer system to replace the existing hodgepodge of central-state explicit and implicit transfers. A good framework was laid out in the recent report of the 14th Finance Commission, but a comprehensive effort is needed to extend and update that work. Cleaning up the messy central conditional grants, as the government has already indicated will be done, is a good way to start, but it is a long way from doing the whole job. Finally, the 1992 constitutional amendments that substantially enhanced the role of local governments should be taken more seriously than has yet been the case. Many Indians still live in rural areas, and there is much that can and should be done to improve their lives and ensure that their children are healthier and better educated. However, the more successful such efforts are, the more likely it will be that rural people will move to urban areas, where there are already huge problems in local governance and finance. India is urbanizing rapidly, and is likely to continue to do so over the next few decades. As the report of the High Powered Expert Committee on Urban Infrastructure and Services has shown, the most critical local governance and finance problems – and the most important opportunities for change and improvement
  • 12. IMFG Forum – 10 – Planning is Dead. Long Live Planning! Sanjay G. Reddy32 The Prestige of Planning in India and the World It is easy to forget that the project of planning was something that captured the imagination of the Indian and world public for more than a generation. Indian planning generated tremendous interest because it represented a project of transforming a poor agrarian country through democratic means, in what was hoped might be a short period of time, into a country that was more prosperous and would be better able to provide for the well-being of its people.33 The widespread acceptance of the project of planned development in India resulted in part from its larger prestige in the world at the time of India’s independence. One source of this prestige was the perception that there had been successful planning experiences in other countries, especially the Soviet Union.34 The role of planning in capitalist countries was given significant impetus by the importance assigned to centralized administration during the Second World War in most countries. A planned economy was also assumed by many to make less likely the seemingly irrational results produced by an “anarchy of capital” during the Great Depression, or at least to offer a hope of moderating the fluctuations of a capitalist economy. Even Joseph Schumpeter, who cast a critical eye on such claims, saw the increasing role of bureaucracy as a permanent fixture of economies. The development economist Arthur Lewis wrote The Principles of Economic Planning in the 1940s, for the Fabian society in the U.K.35 The book assessed arguments for and against the use of a planning apparatus in a project of democratic economic management and transformation. Harold Laski and others who influenced a generation of developing country leaders, scholars, and managers, were notable enthusiasts for this endeavour.36 The French planning apparatus established after the Second World War represented perhaps the most comprehensive such project in a capitalist country, although other countries (notably the Netherlands) also put in place some of the mechanisms and rhetoric of planning. The Indian adoption of planned development took place therefore in a global context. If there was a mistake involved, it was a widespread one. Of course, planning in India was also taken to contrast with the lack of intentional development serving the Indian people in the colonial context, shaped as it was by an uneven playing field between British and Indian interests. For this reason, even Indian capitalists accepted the need for some variety of planning (evinced most famously by what came to be called the Bombay Plan37 ). Planning, Technocracy, and Democracy Ashwani Saith has recently written about the Cambridge economist Joan Robinson and her relationships to India and China, respectively.38 Robinson’s view was that there was a broad democratic experiment taking place in China, whereas her view of India’s development path was that it was much too technocratic, and as a result, ultimately reflected elite political preferences as to what should or should not be done (for instance, in reference to the redistribution of assets such as land) or the management of production generally. Although her view of China was undoubtedly naïve, her perspective on India had elements of insight. Indian economists such as Sukhamoy Chakravarty enjoyed great prestige because of their technical knowledge of mathematical models concerning how to bring about a staged transformation of the country. Their ideas provided part of the intellectual background for the bureaucracy-dominated economy that came to be known as the “license-permit Raj,”39 which had rather greater attractiveness in theory than it did in practice. Chakravarty and others came to understand the importance of politics in determining the efficacy of economic plans, even if they did not know fully how to cope with the problem.40 The enthusiasts for the recent abolition of the Planning Commission have come from a rather different point of view from that of Joan Robinson, but they have in common with her the view that it proved more of an impediment than an aid to development. Although there were certainly very good reasons to criticize India’s development performance for long
  • 13. Requiem for an Institution: The End of the Indian Planning Commission – 11 – phases, to view the Planning Commission as having been synonymous with misguided state interventionism and excessive top-down controls is too narrow a perspective, as it both neglects the substantial debates which happened within the Planning Commission and the possibilities for reforming its role to work better with a decentralized market-oriented economy, without abolishing it outright. One can view the shift from the Planning Commission to the NITI Aayog as a rebranding exercise, but it is not merely that. The Planning Commission’s role and responsibility in India, including having overarching influence over so-called plan expenditures (a major component of the government of India’s investment program) and over a number of other associated decisions, is part of what has been rejected by those who favour more decentralized and market- oriented paths. Indeed, this role has been contested for some time.41 The Planning Commission was intended to provide a systemic view of the development process as well as to be an important decision- making centre. Its abolition will inevitably mean that such powers will shift away from the NITI Aayog, which expressly disavows certain prior roles, particularly centralized expenditure planning. There is reason for concern that in India, the transition being implemented will lead mainly to certain powers being vested elsewhere, in particular in the Ministry of Finance or in the financial markets, which are even less transparent and less accountable. One of the NITI Aayog’s stated aims is to give the prerogative to India’s states to take development measures in a decentralized and entrepreneurial fashion. This rebalancing of roles cements a shift toward a regime of competition among states to gain the favour of the private sector.42 Whether the democratic aspect of Indian public decision-making on matters of development is augmented will depend on whether greater freedom for the states to determine priorities can be asserted in the presence of this imperative. A Systemic View? There is a need for a systemic view of the development process. The planning process in India was not intended to involve only top-down decision-making, but rather to provide for a process of conveying information and project proposals in both directions between central and state governments. Although the concept of “cooperative federalism,” in which state and central governments play a balanced role, has been trumpeted in relation to the NITI Aayog, there were elements of such an idea in the framework of the Planning Commission too, unavoidable due to the distribution of prerogatives in the Indian constitution. The role of the states could have been expanded without altogether abolishing the Planning Commission, in particular as a centre for monitoring and coordination. Advocates of the NITI Aayog have argued that it will shift power to the states by sharing and aggregating information on decisions and lessons derived from the states or by coordinating central and state governments’ actions. The extent to which it will in fact bring about such a shift remains to be seen, but there is a requirement, in some contexts pressing, for coordination. There are spillovers in the consequences and actions taken by individual units. In the past, in the earlier frame of comprehensive government planning for development, the strategy of import-substituting industrialization was very much conceived of in terms of the rationing of scarce resources by the central government and its authorities, which would determine how to best use those resources, whether foreign exchange, domestic savings, or human resources. Such a view has diminished appeal. However, there are spillovers in the consequences of actions across time, across states or regions, and across sectors, and it can be important to take into account the interdependencies that result. One obvious case involves climate change. India may not yet have a sufficiently coherent policy with One can view the shift from the Planning Commission to the NITI Aayog as a rebranding exercise, but it is not merely that.
  • 14. IMFG Forum – 12 – respect to climate change and, in particular, how to transform the Indian economy so that fewer pollutants are emitted (in contrast perhaps to China, which despite its status as a major emitter, has taken some steps in that direction). This is a matter of vital interest for India, as it is going to be on the “receiving end” of climate change, for instance, because of the delicate nature of the monsoon, on which hundreds of millions of people depend. Gilbert Rist refers to the current moment in which development is thought of in terms of the development goals (such as the Millennium Development Goals and now the Sustainable Development Goals) as being a period in which development is “in shreds” due to the thematic balkanization of concerns which it represents.43 In this approach, everyone’s agenda is referred to but there is no systematic conception of what development as a concept means, let alone a reference to how these goals are to be achieved. There are goals, but there are no plans. Rather, there is a fond hope that the aggregation of decentralized actions will bring about comprehensively desirable results. An illustration of the inattention to systemic considerations and its consequences is provided by the reported approach of the NITI Aayog to the raging debate in India on poverty estimates. This has become a highly politicized subject. Whereas in the past India was thought of as having some of the best-defined and estimated poverty statistics for a developing country, today there is a free-for-all; two different government- constituted committees have been unable to bring any real order to the debate. Media reports suggest that the NITI Aayog now proposes to do without poverty estimates altogether, although there is the possibility that they will be generated in the future by a different government agency. It is difficult to conceive how a comprehensive view of the development process can emerge without statistics on poverty. It is hard to rationalize such a decision except on the view that it is sufficient to focus on growth since all other good things are assumed, axiomatically, to follow from it. The impression given is of a willingness to “fly blind” because of the authority accorded to certain preconceived ideas over evidence-based analysis. From Decision-Making Body to Think-Tank? Was the abolition of the Planning Commission inevitable as a result of market-oriented reforms? The impetus for the abolition of the Planning Commission’s role in resource allocation decisions, which had become increasingly formal, had been growing. Accordingly, the decision to eliminate the institution altogether rather than change its role appears to have been decided upon because of the powerful rhetorical signal it sent of an intended change in direction. However, a number of elements of the supposed substantive contrast appear overblown. In particular, the idea that the NITI Aayog will be a “think tank” presents much less of a contrast to the Planning Commission than it might seem, given the latter’s long and distinguished history of collaboration with thinkers of diverse stripes and its provision of a setting for debates, often of a very forceful kind, between different points of view. Debates taking place under the aegis of the Planning Commission over the future of the Indian economy concerned basic issues of economic direction relating to the role of markets, private enterprise, and free trade. The parties to these debates included eminent economists such as Milton Friedman and Joan Robinson.44 The idea that the new “think tank” will replace an operational entity acting on the basis of a preconceived ideology is difficult to sustain. The Centres of Power It will be interesting to observe whether, and in what ways, power shifts among levels and branches of government, as well as between government and the private sector, due to the adoption of a more “presidential” style of government and pro-business policies. It is certainly a matter of good sense and responsibility to define a budget and ensure that expenditures are in accordance with intentions and circumstances. There are often, however, other agendas pursued by the guardians of fiscal probity, An illustration of the inattention to systemic considerations is provided by the reported approach of the NITI Aayog to poverty estimates.
  • 15. Requiem for an Institution: The End of the Indian Planning Commission – 13 – who are typically preoccupied with short-run financial considerations rather than with developing a sufficiently sizable and coherent investment program for long-term development.45 In recent years, the Planning Commission in India came much closer to promoting an agenda that favoured private-sector and financial interests than had been the case in the past.46 Eliminating its role in expenditure determination and orienting it toward ideas creation and sharing could have been accomplished without eliminating it altogether as a centre of gravity within the governmental constellation. There is a need to anticipate and analyze the effects of alternative investment or policy choices within a democracy, for which there must be some institutional site.47 Does China Offer an Example? The National Development Council (NDC) of China has been an explicit reference point for the proponents of the NITI Aayog. However, there are major differences. There is nothing comparable to China’s NDC in India and it is hard to see how there could be without significant changes to the structure of India’s democratic polity. The current Prime Minister’s call to “Make in India” and the Governor of the Reserve Bank of India’s appeal to “Make for India” both implicitly involve a call to emulate China, because India’s growth pattern has not been centred on manufacturing and has not greatly generated employment. China has developed successfully while adopting eclectic policies (“Capitalism or Socialism with Chinese Characteristics”) and having no evident governing theory. This approach contrasts with the perspective of those promoting the NITI Aayog, which seems rather more committed to a highly particular theory. The focus of the government is on attracting private investment flows to the country and in generating an encouraging atmosphere for private investment generally. This emphasis leads to the discourse of “sound finance,” of “getting out of the way,” and of “enabling” such investment by providing required permits, facilitating access to land, or other means. Much as these ideas have an important role to play, this focus leads to inattention to many of the other important considerations that ought to be present in defining and executing a development strategy. The role of the Planning Commission was precisely to bring in the range of relevant concerns and to ensure their place in the long-term economic strategy of the country. Having an eye toward the coherence of policies and their cumulative effects remains relevant, even in a development strategy that gives a central role to the market. Are we presented with old wine in new bottles? We can hope. Better this than throwing away the old wine altogether. Sanjay G. Reddy is Associate Professor of Economics at the New School for Social Research.
  • 16. IMFG Forum – 14 – Endnotes 1 Aayog is a Hindi expression meaning “policy think-tank.” 2 Throughout this paper, the authors have used the term “centre- state relations” in the Indian context to refer to what may be analogous to federal-provincial relations in the Canadian context. 3 For a longer analysis of the implications of the end of the Planning Commission by the same author, see: “Modi Planning: What the NITI Aayog Suggests about the Aspirations and Practices of the Modi Government,” CSAS South Asia: Journal of South Asian Studies, vol. 38, no. 4 (Dec. 2015). 4 See Aman Sinha’s segment in “NITI Aayog: Rejig or Repackaging, The Newshour Debate,” Times Now TV (Jan. 1, 2015), retrieved from: https://www.youtube.com/ watch?v=Xwd6G8YiNgs, accessed June 22, 2015. 5 Press Information Bureau, Government of India, “Government constitutes National Institution for Transforming India (NITI) Aayog,” January 1, 2015, retrieved from: http://pib.nic.in/newsite/ PrintRelease.aspx?relid=114268 6 Cabinet Secretariat Resolution No. 511/2/1/2015, The Gazette of India: Extraordinary. Retrieved from: http://niti.gov.in/mgov_file/ cabinet-resolution_EN.pdf, accessed November 4, 2015. 7 Ibid. 8 See the NITI Aayog’s website, retrieved from: http://niti.gov.in/ content/subgroup_constitution.php, accessed July 30, 2015. 9 B.R. Nayar, “Continuity and Change in Economic Planning,” in B.R. Nayar (ed.), Globalization and India’s Economic Integration (Washington D.C.: Georgetown University Press, 2014), p. 71. 10 See Sudha Pillai’s segment in “Macros with Mythili: NITI Aayog Replaces Planning Commission,” Economic Times TV (Jan. 17, 2015), retrieved from: https://www.youtube.com/ watch?v=jmbb7rfnCWg, accessed June 12, 2015. 11 Beti Bachao, Beti Padhao (Save Girl Child, Educate Girl Child) is a Government of India scheme to improve the well-being of girl children. The Jan Dhan Yojana (People Money Scheme) is another Government of India program aimed at improving poor people’s access to financial services. 12 “NITI Aayog: States for Greater Devolution of Funds,” The Hindu, Feb. 9, 2015, retrieved from: http://www.thehindu. com/news/national/niti-aayog-states-demand-greater-financial- devolution-flexibility/article6871254.ece, accessed July 2, 2015. 13 See Mehrotra’s segment in “NITI Aayog: Rejig or Repackaging: The Newshour Debate,” Times Now TV (Jan. 1, 2015), retrieved from: https://www.youtube.com/watch?v=Xwd6G8YiNgs, accessed June 22, 2015. 14 B.R. Nayar, “Economic Planning after Economic Liberalization: Between Planning Commission and Think-Tank NITI, 1995– 2005,” in Sylvie Guichard and Santosh Mehrotra (eds.), What’s the Plan? The Postcolonial State and the Planning Commission in India (Routledge Press, forthcoming), p. 23. 15 “Government expert panel suggests an overhaul of budgetary process,” Economic Times, Sept. 2, 2011, retrieved from: http://articles.economictimes.indiatimes.com/2011-09-02/ news/30105997_1_planning-commission-finance-ministry-union- budget, accessed June 23, 2015. 16 B.R. Nayar, Economic Planning after Economic Liberalization, forthcoming, p. 27. 17 B. R. Nayar, Continuity and Change in Economic Planning, 2014, pp. 73–80. 18 Prabhat Patnaik, “From the Planning Commission to the NITI Aayog,” Economic and Political Weekly, vol. 50, no. 4 (Jan. 24, 2015), pp. 10–12. 19 M. Govinda Rao, “Role and Functions of NITI Aayog,” Economic and Political Weekly, vol. 50, no. 4 (Jan. 24, 2015), p. 13. 20 See “After his very warm welcome, NITI Aayog’s Vice Chairman Arvind Panagariya out in the cold,” Indian Express (June 11, 2015), retrieved from: http://indianexpress.com/article/india/india-others/ after-his-very-warm-welcome-niti-aayogs-vice-chairman-arvind- panagariya-out-in-the-cold/, accessed July 2, 2015. 21 The Ministry of Commerce intends to improve India’s ranking on the World Bank’s index of “Doing Business,” retrieved from: http://www.doingbusiness.org/rankings. The Secretary for the Department of Industrial Policy and Promotion, Amitabh Kant, declared that the centre would “name and shame” states that failed to cooperate. See Nayanima Basu, “States to come under DIPP watch on ease of doing business,” Business Standard, May 19, 2015, retrieved from: http://www.business-standard.com/article/economy- policy/states-to-come-under-dipp-watch-on-ease-of-doing- business-115051900043_1.html, accessed June 5, 2015. 22 “Transforming India,” Bureaucracy Today, Jan. 16–31, 2015, p. 30. 23 “Land Bill: House panel slams PM for raising matter in NITI Aayog,” The Hindu, Jul. 17, 2015, retrieved from: http://www. thehindu.com/news/national/land-bill-house-panel-slams-pm-for- raising-matter-at-niti-aayog/article7431385.ece, accessed July 28, 2015. 24 Revision of remarks originally prepared for Panel Discussion on “The NITI Aayog: Moving Toward Cooperative Federalism in India?” held at Rotman School of Management, Toronto, April 27, 2015.
  • 17. Requiem for an Institution: The End of the Indian Planning Commission – 15 – 25 Both the question and the answer may, it seems, have been related to the (then recent) French riots of 1968, rather than the 1789 revolution (retrieved from: http://www.historytoday. com/blog/news-blog/dean-nicholas/zhou-enlais-famous-saying- debunked). But why ruin a good quip with facts? 26 Report of the Fourteenth Finance Commission, retrieved from: http://finmin.nic.in/14fincomm/14thFinanceCommission.htm. 27 As reported by the BBC News in “Indian media: PM Modi seeks ‘cooperative federalism’,” http://www.bbc.com/news/world-asia- india-31274460. 28 See, for example, the well-known book by Arvind Panagariya, India: The Emerging Giant (New York: Oxford University Press, 2008). Panagariya has been named as first vice-chairman of the NITI Aayog. See also the almost contemporaneous examination of fiscal federalism in India by M. Govinda Rao and Nirvikar Singh, The Political Economy of Federalism in India (New York: Oxford University Press, 2006). 29 A brief summary of the evolution of the GST in India may be found in R. Bird, “Below the Salt: Decentralizing Value-Added Taxes,” in Ehtisham Ahmad and Georgio Brosio (eds.), Handbook of Multilateral Finance (Cheltenham UK: Edward Elgar, 2015), pp. 291–333. 30 See Government of India, Ministry of Finance website, retrieved from: http://finmin.nic.in/the_ministry/dept_revenue/tarc_report.asp. 31 Report of the High Powered Expert Committee on Urban Infrastructure and Services (New Delhi, 2011). See also I.J. Ahluwalia, R. Kanbur and P.K. Mohanty (eds.), Urbanisation in India (New Delhi: Sage, 2014). 32 The author would like to thank Bharat Punjabi for the invitation to the important symposium at the University of Toronto which gave rise to this comment and for his sustained and stimulating conversation on this subject and others. 33 The representation of Indian planning in popular media – including children’s books – testifies to this. See, for example, C. and G. Louden, Rain in the Winds: A Story of India (New York: Charles Scribner’s Sons, 1953) or S. Dhar, This India (New Delhi: Publications Division, Ministry of Information and Broadcasting, Govt. of India, 1973). 34 Most people today do not think of the Soviet Union as a great developmental success, but it was thought of as such by many at the time, and its example as a result reverberated around the world – including seemingly capitalist countries of considerable and growing means such as the United States. (This was evident for instance in the Progressive Party platform of 1948, which stated that “Public ownership of these levers will enable the people to plan the use of their productive resources so as to develop the limitless potential of modem technology and to create a true American Commonwealth free from poverty and insecurity.”) Well into the 1970s, the Soviet experience continued to be presented as one of successful planned development. For a discussion of such arguments see, for example, M. Dobb, M., Economic Growth and Underdeveloped Countries (New York: International Publishers, 1963), and A. Nove, The Soviet Economic System (London: Allen and Unwin, 1977). 35 W. A. Lewis, The Principles of Economic Planning (London: Allen Unwin, 1949). 36 See, for example, H. Laski, Reflections on the Revolution of Our Time (New York: The Viking Press, 1943). 37 P. Thakurdos et al., Memorandum Outlining a Plan of Economic Development for India (Harmondsworth: Penguin, 1944). 38 A. Saith, “Joan Robinson and Indian Planning: An Awkward Relationship,” Development and Change, vol. 39 (2008), pp. 1115–1134. 39 That is, the regime of licences and regulations governing economic activity in India between 1947 and 1991. 40 See, for example, P. Bardhan, The Political Economy of Development in India (Oxford: Basil Blackwell, 1984); S. Chakravarty, Development Planning: The Indian Experience (Oxford: Clarendon Press, 1987); S. Chakravarty, “M. Kalecki and Development Economics,” in Selected Economic Writings (New Delhi: Oxford University Press, 1993), pp. 234–246; P.S. Jha, India: A Political Economy of Stagnation (New Delhi: Oxford University Press, 1980); K.N. Raj, “The Politics and Economics of Intermediate Regimes,” Economic and Political Weekly, vol. 8, no. 27 (1973), pp. 1189–1198. 41 See, for example, H. Singh and P. Singh, Indian Administration (New Delhi: Pearson Education, 2011), on the historical debate on the determination of the respective roles of the Planning Commission and the Finance Commission. 42 See, for example, J. Sachs, A. Varshney, and N. Bajpai, “The Politics and Economics of India’s Reforms: An Introduction” in J. Sachs, A. Varshney, and N. Bajpai (eds.), India in the Era of Economic Reforms (Oxford University Press, 1999). 43 G. Rist, The History of Development: From Western Origins to Global Faith, third edition (London: Zed Books, 2008). 44 See, for example, A.K. Dasgupta (ed.), Trade Theory and Commercial Policy in Relation to Underdeveloped Countries (New York: Asia Publishing House, 1965), D. Engerman, “West Meets East: The Center for International Studies and Indian Economic Development,” in D. Engerman et al. (eds.), Staging Growth: Modernization, Development and the Global Cold War (Amherst: University of Massachusetts Press, 2003); L.H. White, The Clash of Economic Ideas: The Great Policy Debates and Experiments of the Last Hundred Years (Cambridge: Cambridge University Press, 2012). 45 See P. Sen, “In Lieu of the Planning Commission: Part IV,” Ideas for India blog, Sept. 30, 2014, retrieved from: http://www. ideasforindia.in/article.aspx?article_id=351.
  • 18. IMFG Forum – 16 – 46 This is also true for other entities, such as the Reserve Bank of India, the central bank, which has recently been pursuing greater independence and the adoption of inflation targeting as a policy – at the very moment that this policy has become much more controversial in the rest of the world because of the recognition of the role such policies may have played in asset price inflation prior to the crash of 2008, and the consequent advocacy of the need for central banks to be involved in “macro-prudential regulation” and to take asset market fragility as an explicit concern. One of the lessons that appears to have been learned from the 2008 crisis around the world is that one has to have a more modulated approach to central bank independence and goals, but this message does not appear to have been much heard in India. 47 In the Netherlands, the Bureau for Economic Policy Analysis (known in Dutch as the Central Planning Bureau, although it has never actually undertaken central planning) was formed in 1945 with Jan Tinbergen as its founding director and most important early figure. Every time there is a general election, the Bureau produces detailed estimates of the cost of major political parties’ programs to contribute to the democratic debate in the country. Recently, a Dutch economist said to me that “progressive” economists of the Netherlands are sometimes critical of the Bureau’s approach because it uses only one model, which some believe restricts the range of plausible assumptions that would be better represented with more model diversity. It is noteworthy that that one of the Bureau’s assigned roles is to inform democratic debate in the country.