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Goodbye Planning Commission!
Tue, 19 Aug Pre-Open

The Prime Minister's maiden Independence Day Speech has scripted history fortifying array of issues concerning the socio-economic health of the nation. One such point that stood out off Modi's speech was the scrapping of the Planning Commission. While the relevance of the Commission has been questioned since early 1990s, this is the first time in independent India that the government has vowed to revamp it.

The Planning Commission is an institution in the Government of India, which formulates India's Five-Year Plans, among other functions. It is located at Yojana Bhawan, New Delhi. It was established in accordance with article 39 of the constitution which is a part of directive principles of state policy.

While planning is advisable, what made the incumbent government abolish it? Well, that's not truly surprising. Firstly, know that Planning Commission entails private investment and not public investment. And more importantly, the functioning of the Commission no longer coincides with the objective for which it was set up. And the primary reason for the same has been the centralization of powers and lack of autonomy to the constituent units of the Commission. The Planning Commission does not have structural involvement of the state governments in the management of the economy. Apparently, it works in isolation. The state authorities flock to the Yojana Bhawan every year to bargain for money for development and to seek freedom of decision to spend the same. Pathetic, isn't it? Moreover, the realms of five-year plan documents lack quality. They are even cut-paste sections from earlier plans!

Essentially, the country needs a body that will take report of where the country stands on various developmental indicators, sound alarms when necessary and suggest what kind of action is required. Monitoring macro-economic developments and suggesting the ways to meet up challenges should be the core functioning of a planning body. It should address the pressing issues by studying the cause-effects and initiate creative solutions. The body should closely work with the state authorities and establish a strong financial relationship between the centre and the states. Moreover, there is also the need for regular scrutiny of the impact of laws. While the bills are passed across ministries, the process is lengthy and inconclusive. The body can perhaps audit public investment proposals too. This would also question the relevance and the implementation of the proposals. Such a multi-disciplinary expert body can certainly provide valuable inputs. And eventually can continue to play a dominant role in the development of the economy. Hence, that builds up a strong case for shutting down the Planning commission we believe.

All this is easier said than done. But like they say a journey of a thousand miles begins with a single step. And the first step is always the hardest. Well the government has initiated the drive to scrap the old model and to launch a constructive program. So, the foundation towards transformation has been laid. Now the execution matters the most. The Planning Commission in its new avatar should adopt a multi-disciplinary approach, have the expertise in place and should be truly federal. That should be the stance to adopt as India ushers into a new era. And we will continue to update our subscribers with the latest developments on regular basis right here.

Do you think the government has moved decisively by scrapping the planning commission? Do share your views on the Equitymaster Club.

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