Explained: Public planner govt found out of place in private age

Aug 19 2014, 11:17 IST
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SummaryPM Narendra Modi has announced Planning Commission will be replaced with new institution.

Prime Minister Narendra Modi has announced that the Planning Commission will be replaced with a new institution. A look at the role it has played over its 64 years:

What was the Planning Commission all about?

It was set up through a government resolution in 1950, with a view to giving the public sector a commanding role in the economy, an objective based on a Soviet-style centrally controlled model. The Planning Commission was tasked with formulating Five Year Plans for policymakers.

Who were its members?

It has always been chaired by the prime minister, starting with Jawaharlal Nehru. Its deputy chairman has often been a government appointee who holds the rank of a cabinet minister and is a permanent invitee to union cabinet meetings. Deputy chiefs have included Gulzarilal Nanda, V T Krishnamachari, C Subramaniam, P N Haksar, Manmohan Singh, Pranab Mukherjee, K C Pant, Jaswant Singh, Madhu Dandavate, Mohan Dharia and R K Hegde. The last deputy chairman was Montek Singh Ahluwalia.

How did it go about its role?

It drafted 12 Five Year Plans. In the first six FYPs, the commission stuck to the original focus of strengthening the public sector, for which it recommended massive investment in basic and heavy industries. But since the Ninth Plan starting 1997, the emphasis on the public sector became less pronounced. The liberalisation of the economy and the dismantling of the licence-permit raj in the early nineties led to the emergence of the private sector, with investments pouring in and the investors seeking bolder decisions.

What changed for the Planning Commission?

It found its mandate being challenged. Its model for development through FYPs was frequently questioned on the ground that these no longer worked in a changing global economic landscape. Also, the states began to seek a freer hand on their spend as the plan panel was deciding their financial allocations and they were tasked with implementing projects decided in New Delhi. And because the planning body had no right to enforce the allocations, the states didn’t feel obliged to execute the works. On several occasions, the government had to face ministries upset by the commission’s interference.

What led to the dismantling?

Previous prime minister Manmohan Singh, too, had conceded there was a pressing need to restructure the commission. He had told its top brass on May 1 it needed to reinvent itself for the open and liberalised economy with a greater reliance on market mechanisms. Prime Minister Narendra Modi,

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