A better plan, this

The announcement of Niti Aayog to replace the six-decade-old Planning Commission could not have taken many by surprise. It was made clear within days of the Narendra Modi government assuming power that the Planning Commission, a vestige of the pre-reform, dirigisme days, would be wound up. In fact, the idea of an overhaul had gained ground during the last days of the UPA, with former prime minister Manmohan Singh pushing for such an exercise. So, it is a trifle disappointing that the New Year Day statement does not go beyond spelling out the broad contours. Even so, it indicates a welcome break from entrenched customs of the past. It seems that the practice of drawing up voluminous five-year Plans will be discontinued. Their targets and projections are often rendered irrelevant in a dynamic, market-driven, globalised world. The Aayog is expected to focus more on making policy than transferring funds to States, with the Finance Commission calling the shots with regards to the latter, as should indeed be the case. Niti Aayog’s governing council, run by chief ministers can, in tandem with the Finance Commission, prepare the ground for rule-based, as against discretionary, resource transfers. The governing council can play a crucial role in achieving ‘unity in diversity’ as it were, in policymaking, ironing out inexplicable anomalies that have made India such a difficult place to do business in. The rest of the statement consists of generalities on which there can be no disagreement, but no discussion either, in the absence of details. As such, it’s merely a call for policies that leave entrepreneurs, women, youth and other ordinary folks better off; in other words, a repackaging of UPA’s inclusive development rhetoric.

While doing away with five-year Plans, the new body should focus on the microeconomics of specific sectors. There is a clear lack of information on this count, which has led to industry over-reaching itself in sectors such as coal, power, roads and aviation, and banks making wrong judgment calls. While allowing market forces to play out, exaggerated boom and bust cycles are best avoided. In the absence of a credible, independent database, investors are guided by unreliable projections of analysts and market makers. In the licence era, the Bureau of Industrial Costs and Prices was a repository of industry-specific information. Such an information base is sorely needed today. Niti Aayog can work in tandem with the Competition Commission, the Reserve Bank and 3P India (a body that aims to put public-private partnerships back on track) on this front.

The body, rightly informed by the principle of the government being an “enabler rather than provider of first and last resort”, has other messes to sort out. One is the baseless distinction between Plan and non-Plan expenditure, which has led to all sorts of distortions in resource transfers. Second, it should restructure centrally sponsored schemes in order to restore the fiscal space of the States. The paternalism of the Planning Commission has outlived its time. Niti Aayog must live up to its name of handing out an even deal to all.

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