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New body set to replace Planning Commission

Prime Minister Narendra Modi on Friday said he would scrap the 64-year-old Planning Commission and replace it with a new institution to address India’s economic needs and strengthen its federal structure.

Officials said the new body would have eight members – three from industry and the rest comprising former or existing chief ministers and Cabinet ministers. Likely to be called the National Development Reforms Commission, it might be housed in Yojana Bhawan, office of the Planning Commission. An 80-page document on the role of the body had been prepared, officials said. This might also pave the way for shifting the allocation of Plan funds to the finance ministry.

“Sometimes, it becomes necessary to repair a house. It costs a lot of money but it does not give us satisfaction. Then, we feel it is better to make a new house. We will very soon set up a new institution in place of the Planning Commission,” Modi said in his Independence Day address at Red Fort.

He said the country needed an institution for creative thinking on optimally using India’s young population. “The country has to push the public-private partnership model and strengthen federalism,” he added.

The Planning Commission was set up in March 1950 by Jawaharlal Nehru, India’s first prime minister, to promote a rapid rise in the standard of living by efficiently exploiting resources, increasing production and offering employment opportunities to all.

Its abolition and replacement with a new body does not require legislative changes, as the Planning Commission was set up by an executive order. The commission’s demise follows two decades of India’s pro-market reforms, after turning away from a socialist command economy.

N C Saxena, former member-secretary of the commission, said the role Modi saw for the commission was already being performed by it. “The previous Planning Commission had Montek Singh Ahluwalia as deputy chairman; it had representation from industry in Arun Maira, the scientific community in K Kasturirangan and an academic in Abhijit Sen,” he pointed out.

There had to be clarity on whether the new body would have the power to allocate Plan funds, Saxena said. “If it retains that power, the suggested change will be old wine in a new bottle,” he said, adding if its allocation powers were scrapped, the new body would be just another think tank. “There are think tanks like the one talked about by the prime minister in Bangladesh, Pakistan and Nepal. None of them has worked. The fear is unless the think tank has eligible people, it might become another body of experts.”

Ajay Chhibber, director-general of the Independent Evaluation Office attached with the Planning Commission, said, “This signals a major shift in India’s economic and planning process.” In June, Chhibber’s office had recommended scrapping the Planning Commission and replacing it with a think tank.

“The Planning Commission is a hindrance to India’s development. It is not easy to reform such a large ossified body and it would be better to replace it with a new institution to assist states with ideas, to provide long-term thinking and to help reforms,” Chhibber had said in his assessment report to Modi.

Calling it a control commission, the Independent Evaluation Office said the Plan panel exceeded its authority, particularly in the allocation of funds to state governments. It suggested this role be handed over to the Finance Commission, while the finance ministry could allocate resources among central ministries.

“I am glad the prime minister heeded our advice. The Plan allocation function of the commission should be handed over to the finance ministry, as also those related to Centre-state funds,” Chhibber said.

  • 1950: Centre constitutes the Planning Commission
  • 1951: First five-year Plan launched
  • 1966-1969: Three annual plans launched, due to India-Pakistan conflict, successive years of drought, etc
  • 1969: Fourth Plan launched
  • 1992: Eighth Plan launched, after structural adjustments in policies
  • 1997: Ninth Plan launched; emphasis on public sector became less pronounced and the panel’s role became more indicative
  • 2014: PM Modi announces Planning Commission will be replaced by a new body


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