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Business Commentary/Ashok Mitra

Stop this well-planned mischief!

India being busy with its Kargil watch, the Planning Commission thinks this is the time to return to economic authoritarianism.

Ripley's wonders are not yet quite defunct. That moribund body, the Indian Planning Commission, has suddenly sprung into news.

Liberalisation has made an ass of the concept of economic coordination under the stewardship of a central authority. Forget the halcyon days of P C Mahalanobis, whatever limited initiatives the Planning Commission was allowed in the decades immediately following Independence have now been snuffed out by the Ministry of Finance.

The commission was in fact an oddity from its very beginning. It was charged with the responsibility of reaching an objective judgment on processes to optimise the country's economic and social development and assign priorities for observation by both the Centre and the states.

This theoretical framework was a non-starter, since the commission got constituted as a regular department of the Union government. The commission's working head, the deputy chairman, was more often than not, a member of the Union Cabinet. Even otherwise, things were so arranged that she/he was a permanent invitee to meetings of the Union Cabinet. The notion of a Planning Commission, equidistant from the Centre and the states and reaching independent decisions on the contents and contours of Five Years Plans, was unceremoniously buried.

Things have worsened with the onset of liberalisation. In the more recent years, the commission has functioned as a lugubrious sarkari agency, doing minor routine chores. Its major residual activity has been to decide the size of state annual plans and the magnitude of plan assistance to be advanced to each state, 70 per cent as loan and 30 per cent as grants.

The inter se allocation of plan assistance was in terms of a formula enunciated way back in 1968 when D R Gadgil was the deputy chairman of the commission. The formula has been revised a number of times but the primary stress has been to earmark funds after taking into account the level of under-development at one end and capacity to raise resources and execute projects at the other.

Few took the Planning Commission seriously. In any case, plan allocations were a mere ritual, for overall resources available to the states have tended invariably to fall short of what was needed to reach the assigned plan targets.

The principal reason for disparate development among the states has actually been the inability of the poorer states to garner adequate resources while the better-off states enjoyed the advantage of a strong resource base. The retrograde decision to channel proportionately larger funds from Central sources, such as the public financial institutions, to the better performing states has rendered the situation worse.

For a majority of the states, the shortage of resources has led to a large-scale diversion by state government of plan funds for non-plan purposes. Pundits occupying Planning Commission cubicles in New Delhi, having little touch with the country's ground reality, have written long notes deploring such conduct on the part of the states. Their pedantry has been laughed away.

Every dog, however, will have its day, or thinks it will have. A caretaker government is having an unusually long tenure because of the Election Commission's reluctance to hold the Lok Sabha polls during the rainy season.

The Pakistan administration has been most co-operative and its probings in Kargil have enabled the caretaker regime to create the verisimilitude of a war-like ambience. Each of the established political parties, fearful of losing votes in case there is the faintest suspicion that it is a shade less patriotic than the rest, has joined the orgy of war hysteria. Life is seemingly no longer worth living for any political party, unless the neighbouring country is given a bloody nose.

Meanwhile, taking advantage of the prevailing confusion, the authorities temporarily ensconced in power in New Delhi are playing an altogether mischievous role. Even the half-dead Planning Commission is back in harness. In a circular to all state governments under the dateline of May 26 last, the commission has chosen to imagine itself as the czar imperial extraordinary. Block plan assistance as per the Gadgil formula -- this circular has informed the states -- is being suspended; instead, from now on, the Planning Commission will recommended plan assistance on project-to-project basis.

This will be a throwback to the pre-1968 format, which the states disliked immensely since it reduced flexibility of state plans and led to increasing centralisation of development programmes.

The states had fought tooth and nail against such over-centralisation. As a result, a more relaxed framework of Centre-state economic relations had emerged in the more recent period.

Every dog, however, suffers from the illusion that its day has arrived. The Planning Commission perhaps surmised that each and everybody is apparently agog over Kargil, this was the time to turn the tables on the states and bring back the climate of economic authoritarianism that was the hallmark of the Indira Gandhi days.

The Gadgil formula, the commission says, is off. It proposes to set up in its place a fund for Central assistance "linked to specific projects" and "on the basis of certain laid down criteria and performance parameters". Mind you, this diktat has been issued suo moto without even perfunctory consultations with the state governments. It has not been placed before the National Development Council for its concurrence either.

The motivation behind such a major change in the modality of Central plan assistance is a couple of complaints alleging diversion of funds for other purposes by some states and "non-performance" by some other states.

These are again suo moto judgments reached by the commission. Going by the contents of the circular, it does not show the least interest in delving into the causes which contribute to aggravated financial difficulties experienced by the states, forcing them to divert funds from one head to another.

The advisers in the Planning Commission in charge of the different states was supposedly act commissars from now on. They, the circular says, will decide whether monthly releases of Central plan assistance have been properly utilised by the respective states. If these civil servants think otherwise, assistance to the states will be summarily cut off.

The effrontery of a caretaker regime has without question crossed the accepted bounds of decency. For fun's sake, one could raise one query: whether the Planning Commission would dare to enforce a similar regimen of fiscal discipline for plan projects sponsored by the Central ministries?

Never mind, there is no dearth of black humour though. The Planning Commission has ventured to remind the states in the aforementioned circular that additional resources provided to them as plan assistance till now were akin to an act of charity on the part of the Centre, for such assistance is not "constitutionally mandated". The commission itself, someone might point out to it, has no constitutional mandate either: it was set up by a government resolution and it can be packed off into oblivion any time, any day.

The Union government, as it exists at present, has a caretaker existence; its Planning Commission is equally of a caretaker nature. If these entities do not respect the boundary conditions they are expected to follow, an appropriate constitutional authority has to tell them, please, this far and no further. The president, it is to be hoped, will take note of the mischief that is afoot and will order the annulment of the commission's circular.

Ashok Mitra

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