Neoliberal spirit

Print edition : September 19, 2014

Union Finance Minister Arun Jaitley holding a pre-Budget meeting with representatives of industry and trade in New Delhi on June 6. Significantly, the Planning Commission was not involved in the making of the Modi government's first budget. Photo: Kamal Narang

The Independent Evaluation Office, set up by the previous government to evaluate key Central schemes, goes to the extent of examining the role of the Planning Commission itself and recommending its abolition.

THE process of scrutinising the Planning Commission’s relevance began during the United Progressive Alliance (UPA) regime, with the setting up of the Independent Evaluation Office (IEO). It was initially tasked by the Prime Minister to independently evaluate key schemes and flagship programmes of the government. Instead, the IEO set about examining the role of the Planning Commission itself and subsequently came out with the startling recommendation that it be abolished as it had no relevance in the changed economic-political scenario.

Part of the recommendations made by Ajay Chhibber, Director General (DG) of the IEO, who submitted the report to Prime Minister Narendra Modi on June 23, reads thus:

“Since the Planning Commission has defied attempts to bring it in line with the needs of a modern economy and the trend of empowering the States, it is proposed that the Planning Commission be abolished. It is recommended that the Planning Commission’s role as an allocator of resources to the States should be taken up by the Finance Commission and the allocation of resources amongst the Central Ministries should be carried out by the Finance Ministry. It is also proposed that the role of the Planning Commission as a think tank of the government be carried out by a specialised body staffed by experts with domain knowledge. This is in contrast to the Planning Commission which is manned by generalist bureaucrats who currently comprise the vast majority of its staff.”

The recommendations raised a storm in the corridors of Yojana Bhawan, the imposing colonial building in the heart of New Delhi housing the Planning Commission. “Who is he to say that the Planning Commission be abolished? He is a novice who does not know what he is talking about. If somebody stands up tomorrow and says that the Reserve Bank of India should be abolished, will the government do that?” said a senior bureaucrat in the Deputy Chairman’s office, which has been lying vacant since the change of government at the Centre, to Frontline shortly after the contents of the report were known. Significantly, in an ominous signal of the shape of things to come, which the Planning Commission officials refused to acknowledge, the budget exercise this year was done without involving the Planning Commission.

The IEO and the significance of its report

It is important to understand what the IEO is and why its recommendations have acquired so much significance for the Prime Minister to announce the demise of an age-old institution. The IEO was set up by the UPA government in 2010, through a Cabinet decision, to:

• Help improve the effectiveness of government policies and programmes by assessing their impact and outcome.

• Set guidelines and the methodology for all evaluations done by various departments and agencies and encourage a culture of openness and learning in government systems.

• Bring the best in international evaluated evidence in development practice and knowledge to India and learn from others’ successes and mistakes.

The institution of the IEO was perhaps the result of a belated realisation by the UPA government that its flagship schemes and programmes were not yielding desired results. Even though the Cabinet decided to form the IEO, it took three years for the institution to be established fully and it was only in August 2013 that a DG was appointed. The full-fledged office of the IEO could be started only in February 2014, when the actual work began. The DG of the IEO has been accorded the status of a Minister of State and he enjoys a tenure of three years, extendable to five years. The IEO has the freedom to conduct independent evaluation of any programme which has access to public funding or implicit or explicit guarantees from the government. It also has the authority to make its findings public without any interference from the government.

The IEO’s report recommended that the Planning Commission be abolished and a think tank be formed, staffed by experts from different knowledge domains, and that the current work of the Planning Commission be done by already existing agencies mandated to do those particular tasks.

As per these recommendations:

• The Finance Commission should be tasked with allocating centrally collected funds to the Central government and the State governments.

• A Department of Planning should be created in the Finance Ministry to apportion funds amongst various Central Ministries for their capital expenses.

• A Reform and Solutions Commission should be established to act as a think tank of the government which is answerable to Parliament, replacing the Planning Commission.

The Planning Commission was set up in March 1950 through a Cabinet decision. The IEO report says that it was created at a time when there was an absence of adequate coordination and sufficient information about the availability of resources because of the specific circumstances existing then. The country had just gained Independence; existing geographical boundaries had been abolished and new States had been created; there were pressures on the economy as a result of the Second World War and the displacement of millions of people; and there was a huge dislocation of the supply of essential raw materials, which had put the country under pressure. “The Planning Commission was created in response to the unique challenges faced by a nascent democracy and a fledgling economy. It conceived a top-down approach to planning that envisaged a dynamic Central government building up the economic and social order of weak States… in keeping with Nehruvian socialism which envisaged a largely planned economy with the Central government responsible for a dominant portion of investment in the economy.”

The report further says that since the Planning Commission was chaired initially by Jawaharlal Nehru, a man with democratic legitimacy and nationwide moral authority in the aftermath of the Independence movement, and also because all the States were led by Chief Ministers of the Congress party, concerns about impinging on the rights of the States and diluting the federal structure of the country did not arise then.

The report further says: “But India has undergone a political and economic transformation since 1950. A Planning Commission responsible only to the Prime Minister no longer enjoys the legitimacy that it had during the turbulent times when it was created.” Now, concerns regarding federalism, Constitutional impropriety, accountability, and human resources and organisational structure have come up, the report says, adding, “The bureaucratic inertia of the organisation has stymied several attempts at reforms and it is reasonable to assume that it will stymie others…. A bold and radical step is required. It is recommended that the Planning Commission be abolished and its staff returned to their parent cadres.”

Past efforts at reform

The IEO report becomes significant because it has succeeded in doing what past efforts had failed to do. This is not the first time that efforts at reforming the Commission have been made. C.G. Somaiah, former Member-Secretary, has written about how an exasperated Rajiv Gandhi had once called the Planning Commission a “bunch of jokers” in 1985 as he wanted the Commission to think and plan big: plan for big airfields, speedy trains, shopping malls, big centres of excellence.

Instead, the Commission was stuck on the argument of rural deprivation. Manmohan Singh was the Deputy Chairman of the Planning Commission then and Somaiah writes that it took Rajiv Gandhi a lot of time to convince an upset Manmohan Singh not to resign. Interestingly, when Manmohan Singh became the Prime Minister, he asked Montek Singh Ahluwalia (in his second tenure) to examine the role of the Planning Commission and recommend reforms. Ahluwalia, then Deputy Chairman of the Commission, responded, “We have yet to come to a satisfactory operational modality.” Before that, Manmohan Singh had asked the then-member Arun Maira to informally work out how the Commission could be reformed. Maira interviewed 19 eminent persons and the unanimous verdict then was that the Commission was totally out of sync with the 21st century. Incidentally, former Finance Minister P. Chidambaram had also once described the Planning Commission as being “too unwieldy”.

Several experts agreed with the IEO report that the time had come for the Planning Commission to either reinvent itself or become irrelevant. “The time has definitely come for a revamping of the Planning Commission. It is no longer relevant in today’s context. At the most, it should confine itself to monitoring the implementation of different government schemes and plans and advise the government on formulating long-term development plans,” said Dr N.C. Saxena, former member of the Planning Commission, reacting to the IEO report.

Since Narendra Modi’s views on the Planning Commission were not a secret (as Gujarat Chief Minister, he had once shocked many by accusing the Planning Commission members of being highhanded and adopting a regressive “one size fits all” approach towards the States), it was a foregone conclusion that the IEO report would certainly be the catalyst for drastic changes. It was not a surprise, then, when the Prime Minister declared from the ramparts of the Red Fort that the time had come to dismantle the “old house and build a new structure in its place.”

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