The Hindu Business Line : Planning for funds

Almost every Five Year Plan in recent memory has been a rather painless exercise in resource gathering with the Planning Commission assuming that the government will pick up the tab for the allocations under various heads of development that it would have devised. Most disagreements with the planning agency have focused on development strategies, with debates raging about the efficacy of the trickle-down theory of planning. Not any more.

For the first time, a critique of the Eleventh Plan focuses on the manner of funding and comes from within the government itself. Historically, the Plan panel would plan and the Finance Ministry would fund it with budgetary allocations and borrowings. In effect the treasury accommodated the Planning panel; today, differences have crept up between the Commission and the Finance Ministry on the extent to which the government should fund the Eleventh Plan because the Centre's priorities have shifted. Under the Fiscal Responsibility and Budget Management Act, the Government has to monitor the manner and the extent to which government borrows, spends and incurs a growing debt burden, reflected in its fiscal deficit. The Planning Commission would like North Block's fiscal agenda postponed for two years of the Plan.

The latest round in the debate comes from the Finance Minister which has stuck to his guns on the FRBM goals. He has advised the Plan panel to accept the fact of resource constraints and fashion its priorities for development. There is merit in this because the Commission has traditionally tried to be as comprehensive as possible under the assumption that funds were unlimited. The Finance Minister reminds it that they are not. The second part of his advise is to look for alternative sources of funding for a reworked priority agenda and generate the rest from public-private partnerships or even the private sector. It would be tempting to treat the differences between the Planning Commission Deputy Chairman and the Finance Minister as a personality clash, so common in coalition governments. But their differences reflect differing viewpoints on the skewed pattern of growth and the best means of combating it. To make matters worse, policymakers have to work under the assumption that vast areas of the economy will not attract, or not be conducive to, private investments. Demands on the government, therefore, mount; for instance, Pay Commission awards whose repercussions, the Finance Minister holds, have not been factored into its assumptions of available resources.

The debate refocuses attention on two essential concerns of planning. The first is to find additional resources than already committed, from outside the realm of government not simply because of fiscal prudence but to ensure greater accountability for every rupee spent. Second, to put in place an independent apex authority with grassroots level public-private partnerships tracking Plan schemes; these would go a long way in ensuring timeliness of appraisal and completion of projects. Policymakers must discover innovative and effective means of Plan financing. Policy differences must work to this resolution.