Did you listen to the Independence Day speech that Prime Minister Narendra Modi delivered from the Red Fort in New Delhi last Friday? He spoke on a variety of topics. There was one announcement in particular that has received a lot of attention. The Prime Minister spoke about how it’s time to do away with the Planning Commission.
No doubt you have learnt about how and why the Planning Commission was set up through lessons in the history of independent India. But here’s a recap.
Once India won independence from the British, the country’s leaders realised there was an enormous amount of development work that needed to be done across several sections of the economy. So they set up a Planning Commission which would chart the goals that the government needed to achieve at the end of every five years. This was the start of India’s five-year plans, a practice which continues to this day. These plans would cover everything from how much grain must be produced, which industries the country must focus on, how much money needed to be invested and where all our produced goods should be sold.
Socialist modelThere was another reason why the Planning Commission was created. Independent India’s first leaders, not least among them being our first Prime Minister Jawaharlal Nehru, were influenced by and believed in a socialist model of economics. Socialism, by definition, is a system where the government very closely oversees every aspect of the economy. It believes in common ownership of natural resources, a co-operative model of doing business and a planned system of production. Creating the Planning Commission, which set out not just production targets (‘India should produce 20 million tonnes of rice this year, 23 million next year’ etc) but also decided how much each sector received by way of allocation of government funds. All this fell perfectly with Nehru’s ideas of how a country should be run.
Mixed economyHowever, we have come a long way from the days of government control over industry. India now has what is called a ‘mixed economy’, where the free markets and the forces of demand and supply are allowed to decide what should be produced in what quantity. At the same time, the government enforces the rules of the game, ensuring that there is enough healthy competition in industry and the gains of economic development are redistributed to ensure that the poor are helped as well.
So the question of whether the Planning Commission is relevant any longer has been around for quite a while now. The former Congress-led UPA government wanted to keep the Planning Commission but change its functions so that it would oversee reforms in the economy instead of setting production and fund allocation targets. It was, however, unable to accomplish any of these changes.
Prime Minister Modi said, in his speech, that the Commission needs to be dismantled altogether and that a new think-tank that will advise on how to regulate industry, on fixing government finances and encouraging economic reforms.
The think-tank is meant to provide the ‘big picture’ for the country’s future. Follow the news this week to see how all this turns out.
