Although a majority of State chief ministers have supported Prime Minister Narendra Modi’s bid to wind up the Planning Commission, a consensus has failed to emerge. Partisan politics was responsible for this to some extent, but there was a core issue between the Centre and the States that remained unaddressed — resource allocation. The objections raised were not so much about the need for planning per se , but rather to do with the largely unilateral setting of priorities, and more importantly, the allocation of resources towards achieving the set goals. There is little quarrel with the broad goals of the planning process itself — of creating physical infrastructure and improving human and social development indicators. The germane issue is about the micromanagement of the decision-making process, where questions of what, how much, by when and where such capacity is created, is decided at the central level. This clearly flies in the face of the federal structure envisaged in the Constitution, and reduces both the States and the central ministries to mere implementers.

Clearly, such Soviet-style centralised planning and resource allocation is irrelevant in a liberalised market economy, where private investment is the key driver and States compete with each other to attract such investments. Besides, half a century of ‘planned development’ has not been effective in ironing out developmental inequalities, and it stands to reason that different States will have different needs and priorities at any given point of time. So, while a Bihar might feel that creating power generation capacity and building connectivity might be its top priorities, a developed City-State like Delhi might want to focus on building better social infrastructure. A one-size-fits-all approach is simply unworkable, something Finance Minister Arun Jaitley himself acknowledged after the meeting. It is, therefore, no surprise that most State chief ministers want the powers of the Planning Commission to be transferred to the Inter-States Council.

That this has not already happened is because States want not just responsibility, but power as well. While what share States get of central revenue receipts has been decided by the Finance Commission, the actual allocation was largely controlled by the Planning Commission, with the resources channelled through the Union Budget, which is under the control of the Centre. Past governments have been reluctant to let go of this power, which is one of the reasons why the Union Budget occupies the larger than life space that it does in the Indian economy. The need of the hour is to work out a reasonable and workable compromise. After all, the government at the Centre is elected on the basis of its vision for the country it presents to the electorate, and it is only reasonable that it has both the policy-making as well as the financial muscle to deliver on that vision. At the same time, the Centre also needs to remember that governments at the State level are also elected and needs to walk the talk on an empowered federal structure.

comment COMMENT NOW