Unplanned Plan

Why has Budget retained Plan spending distinction?

On the first day of 2015, the government fulfilled its promise to terminate the Planning Commission. In its stead, it created the National Institution for Transforming India (NITI) Aayog, which it said would have a distinctly different orientation and mandate. One implication of the overall stance on planning, of which the institutional role was only one component, was that a long-standing distinction between Plan and non-Plan expenditure would be dispensed with. In fact, this action had most recently been recommended a few years ago by a committee chaired by C Rangarajan. The recommendation was not implemented by the previous government, but the formal end of the Planning Commission led many people to believe that this government would follow up by ending the distinction. But the Union Budget for 2015-16 did not do this. In fact, it not only retained the distinction, it actually increased the government's budgetary support to the central Plan by 37 per cent over the previous year's levels. This came soon after the announcement that the new institution would carry out a mid-term appraisal of the 12th Five-Year Plan, which runs from 2012 to 2017, which had been a traditional activity for the erstwhile Planning Commission. So what exactly is going on? Is the economy really going to be rid of the accoutrements of planning, as the government has promised? Or are the changes, as many sceptical observers are suggesting, merely old wine in new bottles?

The perceived obsolescence of the process embodied in the Planning Commission does not obviate the need for planning itself. When finances are concerned, particularly in the case of capital expenditure, which requires commitments over a period of time, it is critical to efficient spending. Resources have to be available to meet those commitments, as well as to ensure maintenance once the assets are put into operation. There are many situations in which the efficiency of some investments depends on others being made. The absence of planning could lead to a lack of synchronisation and, consequently, the inefficient use of capital. So the abandonment of the Planning Commission process does not imply the end of planning as an activity. However, to the extent that the distinction between Plan and non-Plan expenditure is a reflection of that process, keeping it going suggests that the government is finding it difficult to dispense with the legacy of the process. If money is going to be spent according to the Plan, then like it or not, the Plan is shaping the government's agenda. This lends credence to the Congress party's charge that the government is largely following its predecessor's course, after having trashed it during the election campaign. Also, if the new institution is not the custodian of the process, why is it carrying out a review and who will monitor the deployment of Plan funds provided in the recent Budget?

The government needs to deal with this clutter and confusion as soon as possible. It must announce a road map to end the distinction between Plan and non-Plan, preferably by the next Budget. It must also ensure that its enhanced commitments to capital spending are closely and credibly monitored by a neutral party within the government. If this is to be the NITI Aayog, then it must be given the appropriate powers and resources.