Indian Economy, 5th edition (19 page)

(i)
Planning should be evaluation-based, and

(ii)
‘long-term’ goals should be followed up besides the ‘short-term’ goals.

In the Indian content, the succeeding plans have been always commenced without the full evaluation of the preceding Plan. This was mainly due to following reasons:

(a)
Lack of a nodal body responsible for data collection at the national level;

(b)
Federal nature of polity made data collection full of delays and also due to higher dependence on the states; and

(c)
Speedier data delivery was not possible.

After the recommendations of the National Statistical Commission (Chaired by C. Rangarajan), 2000, the Government discussed to set up a nodal body for data collection at the pan-India level, cutting across federal hurdles. Computerisation is already being done for speedier data delivery. For the time being the Plans are launched on the basis of projected data (provisional, latest, etc.) which is almost near the real data. But once the above discussed arrangements are in place, Indian planning will be based on evaluation, undoubtedly. In the meantime, the ‘Quarterly Review’ and the ‘Performance Budgeting’ of the Union Budgets have brought in the evaluation element to a greater degree./

The First Plan had set long-term goals (for the coming 20 years) besides the short-term goals (for five years). But over the time, falling confidence in mobilising required resources and political uncertainties at the centre made it a convention to set only short-term targets of planning. This shortcoming seems to be done away with after the commencement of the Tenth Plan. The Plan did not go for setting long-term goals only but even did set monitorable targets for the Eleventh Plan, too.

Point should be noted here that the Government had been conscious about the need for perspective planning as a separate Division with the same name, which has been functioning in the Yojana Bhavan since the mid-1970s (
Planning Commission has 25 Divisions today
).

2. Failure in Promoting a Balanced Growth and Development

Indian planning is blamed for failing the objective of a regionally balanced growth and development. Though the Second Plan itself had noticed this fact, the measures taken were not sufficient or were short-sighted. Economic planning at the national level has proved to be a highly effective tool of promoting balanced growth. But in the Indian case it turned out to be the opposite.

To take care of the issue of balanced growth, the planning process has been using the right tools, i.e. allocating plan funds on a sectoral (primary, secondary and federal reasons) basis. But due to political reasons, enough discrepancies cropped up in the method of allocating funds to the states. At the theoretical level, the Governments knew the remedies but at practical levels politics dominated the planning process. Democratic immaturity and politicisation of the planning process is to be blamed for this.

Now things have changed for the better. The Government is following a two-pronged strategy to achieve the objective of a balanced growth and development in the country:

(i)
Backward regions today are prioritised in directing the Central Government investment (very much same since the 1950s) but a new beginning in the ‘differential development strategy’ has been made by the centre with the Tenth Plan. Under this strategy, the development constraints of the different states are to be tackled with a differentiation in the strategy. The more needy states get more funds and assistance from the centre for their planned development, cutting across the political party lines (it is seen today as a symbol of political maturity on the issues of economic development, at least).

(ii)
There is also a complementary strategy of the planning to address the matter of regional imbalance in the country. After the country started the process of economic reforms, the nature of planning was to incline more and more towards indicative planning. The economy was to be more and more dependent on private sector investment for its future development. And the private sector will be, naturally, more interested in investing in the regions which have better infrastructure support. Since the developed regions have better infrastructure they will attract the highest level of private investment which will again accelerate the process of imbalanced growth. To tackle this problem, the centre is promoting the states with lower infrastructure so that they can overcome the disadvantage. The process is slower but at least the Government is addressing the issue which is not less satisfying and there is no criticism to this strategy. Still balanced growth and development is going to be a great challenge for planning in India.

3. Highly Centralised Nature of Planning

Decentralising the process of planning has been a major goal of the Governments since the 1950s itself. But after Nehru, with every Plan we see greater tendency of centralisation in the planning process. Setting up of the NDC and the promoting the multilevel planning (MLP) did not serve much purpose in the direction. It has been among the criticised areas of the planning in India as the National Planning Committee as well as the First Plan itself had called for ‘democratic planning’ in the country.

By the mid-1980s, the mindset of the centre went for a change and the need for decentralised planning got proper attention. Finally, by early 1990s two constitutional Amendments (i.e the 73
rd
and the 74
th
) promoted the cause of decentralised planning by delegating constitutional powers to the local bodies. With this, a new era of planning began but still the planning of the local bodies is in the nascent stage due to lack of proper financial provisions for them. Once the financial provisions for them are evolved to the adequate level or the local bodies are given financial autonomy, the process of decentralised planning will surely get a new direction and meaning, as the experts believe.

In the meantime, the Tenth Plan emphasised upon a greater role for the states in the planning process. The Plan started a concerted effort to include the states’ participation in the national planning process. The Centre is today more concerned about the development constraints of the states and is trying to adequately support the
s
tate Plans to the extent it is possible. In return, the centre wants greater and transparent fiscal compliance from the states. This approach continued during the 11th Plan and so has been committed for the 12th Plan, too. After some time we may hope that this criticism of Indian planning will lose it’s ground.

It is high time now that the planning process of the nation tries including the mass participation. The
Economic Survey 2011-12
rightly devotes a section to dwell into contracts and how the
civil society
and citizens play a key role in fostering economic growth.
“Honesty, punctuality, the propensity to keep promises, the attitude towards corruption are matters shaped in great part by norms and social beliefs and the behaviour patterns can become habitual. Moreover, in a democracy like India, what can be done by government depends in great measure on how ordinary people think and what people believe in,”
it says. The Survey further adds that the
civil society
has been campaigning to put in place new institutions, such as the Lokpal Act, to ensure the quality of service and bring about transparency through steps such as auction of natural resources while the government has either been slow or resisted several changes
101
.

4. Lop-sided Employment Strategy

Planning in India has been tilted heavily in favour of ‘capital intensive’ industries, especially from the second Plan onwards. Such industries in the public sector could not generate enough employment. In place of it India should have gone in for the ‘labour-intensive’ industries. In the era of economic reforms, the attitude changed and the planning process is promoting the agriculture sector with an emphasis on agri-industries and agro-exports to create more gainful and quality employment opportunities. The earlier emphasis on ‘wage-employment’ has shifted towards ‘self-employment’ to do away with the lop-sided employment strategy of the past.

5. Excessive Emphasis on the PSUs

Indian planning emphasised on the public sector undertakings (PSUs) for the right reasons but in the wrong way and for a considerably long period. And, for a considerably longer period of time the loss-making PSUs were carried on. The state’s monopolies in certain areas continued over such a long period that too in losses that there came a demand-supply gap in the major goods and services produced by the PSUs. Though very conducive policy changes were effected after the country started reform processes, the hangover of the past is still looming large. Several reforms in the PSUs as well as a more liberal approach towards the private sector with market reforms are needed to phase out the discrepancies created by the over emphasis on the PSUs.

6. Agriculture Overshadowed by the Industry

Promoting the cause of faster industrialisation over time became so dear to the planning process that the agriculture sector got badly over-shadowed. Though the Plans were highlighting or prioritising agriculture, the industrial sector and the PSUs were glorified in such a way that time and resources both were scarce for the agriculture sector. Such a policy always created a situation of food insecurity (even today) for the country and the masses who depended upon agriculture for their livelihood and income (still it is 58.2 per cent)
102
could never increase their purchasing power to a level that the economy could reverse the situation of ‘market failure’. In India, even today, industrial growth is badly dependent on agricultural growth.

The Tenth Plan recognises agriculture as the ‘core element’ of development. This is a welcome ideological change in the strategy of planning. Now the industries can sustain themselves but the laggard agriculture sector needs some special care and promotion from the Government, so that the masses who earn their livelihood from agriculture can benefit out of the WTO-promoted globalisation. The agriculture sector is in emergent need of attention, otherwise, the process of globalisation is going to be ineffective in benefitting the masses.

7. Faulty Industrial Location Policy

There are time-tested theories of ‘industrial location’ considering the nearness of raw materials, market, cheaper labour, better transportation and communication, etc. But the Plans always prioritised setting up new industrial units (i.e. the PSUs) in the backward regions of the country which falsify the theories of industrial location. The Government needs to develop all industrial infrastructures besides setting up certain PSUs. As the PSUs require skilled labour force, the regions failed to gain any employment from the PSUs too. The Government still continues with the same policy of setting up industries, but now the new PSUs are hardly set up in traditional areas.

8. Wrong Financial Strategy

Mobilising resources to support the highly capital-intensive Plans (courtsey the PSUs) has always been a challenge for the Government. To support the Plans, no stones were left unturned namely, going for a highly complex and liberal tax structure, nationalising the banks, etc. Ultimately, tax evasion, the menace of parallel economy and lesser and lesser capital for the private sector were the bane of India. Expansion of subsidies, salaries and the interest burden every year gave an upward push to the non-plan expenditure leading to scarcity of funds to support the plan expenditure (i.e the developmental expenses).

In the era of reforms, the Governments started giving attention to the financial strategy of supporting the plans in the right way. Besides, tax reforms, the financial reforms, as well as fiscal consolidation have been given proper care in recent years.

9. Politicisation of the Planning Process

In a democratic political system, almost every issue of socio-political importance is influenced by politics. It is more correct in the case of lesser matured democracies. The same stands true for the process of planning in our country. Greater and greater politicisation of the planning process culminated in such a design that at times economic planning served the opposite purpose. For example, we know that planning is a tool for promoting regionally balanced growth but in India in the process of serving vested political interests of the Centre, it resulted into promoting an imbalanced growth.

In the recent years governments have tried to address the major criticism of planning in India. More such constructive steps with better results are expected in future. More aware and better informed citizens will lead to better and better planning in future.

There has been a general anger among the sections of society regarding the coalition politics, scams, etc. in recent years. The
Economic Survey 2011-12
rightly
blames coalition politics
and the
federal structure
for tardy decision making in several areas - from oil subsidy to tax reforms, FDI in retail and free movement of foodgrains. Almost everyone outside the government blamed it for
policy paralysis
. The Survey notes it as an area of concern.
The Survey notes that
politicians
and
policymakers
can set the ball rolling by acting as
role models
but it also cited the poor record on enforcement of contract to argue that people’s attitude needs to change.
“In these everyday situations (such as hiring a cab or a painter) it is cumbersome to bring in the state and the law courts. Here the main guarantor has to be people’s personal integrity and trustworthiness,”
it says. The statement comes from a government that has been battling a spate of
corruption scandals
- ranging from those in the telecom sector to Commonwealth Games and criticism over poor governance standards and inability to push through critical decisions
103
.