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Shankar Acharya: The National Development Policy Commission

What should replace the Planning Commission?

Shankar Acharya 

Shankar Acharya

Ever since the prime minister announced the demise of the Planning Commission (PC) from the ramparts of the Red Fort last month, the commentariat has been busy speculating about and pronouncing on the shape of the of the new institution to take its place. I feel duty-bound to offer some thoughts. My focus will be entirely on the new body, not on the erstwhile PC. All I will say on the latter is that I am broadly sympathetic to the fairly widespread view (see, for example, C Rangarajan in The Hindu of August 28, 2014) that the PC's roles of financial resource allocation, project appraisal/evaluation and acting as a secretariat to the National Development Council can, and should be, transferred to other organs of the government, such as ministries and the Finance Commission. Its role of preparing medium-term blueprints (plans) for national economic and social development needs to be seriously recast before inclusion in the mandate of the successor institution.

So what should the new institution do? How should it be staffed? How should it be empowered? What should it be called?


Much of the commentary thus far has assumed that the new body should be some sort of government "think tank" or "think tank plus". Well, yes, may ... except the connotation of "think tank" to many people is of a research organisation primarily charged with undertaking basic or applied research, with the latter sometimes feeding into policy. My discomfort with this is that government organs in India too often dismiss think tanks (and their output) as "academic", in the sense of not practically useful. I believe the intention here is much more about having a policy-focused organisation, which is charged with advising government (initially central, later including states that seek advice) on key policies of national economic and social development. Of course, to be credible and useful such policy advice has to be analytically sound, research-based and cognizant of the real political economy. It should be backed by a good deal of "creative thinking", to use the prime minister's phrase.

It would be unrealistic to expect the new institution to be able to credibly advise on all big issues in national development right away. Where should it start? My suggestion would be to initially build analytical/advisory capacity in four or five key priority areas indicated below.

International economic analysis: We live in a fast-changing world, where shifts in economic power, trade, technology and capital flows are often quite swift, with serious implications for India's development potential, possibilities, constraints and policies. Yet no single place in the current government structure is well-equipped to assess these developments, draw out the implications for India and advise on appropriate national policy. The new institution is the right home.

Employment and labour markets: Creating many more half-decent jobs for the 10 million plus new entrants to the labour force each year must surely constitute the primary development challenge for India today. Labour-using economic development is the surest path to more "inclusion" in our society, a path we have yet to find. The new institution should accord primary attention to understanding the primary constraints to employment-intensive development in today's India and then propagate the policy reforms required to lift these constraints.

Energy and environment: As we know from a daily reading of newspapers, India faces major and complex issues in energy production, pricing, demand management, coordination/planning across sub-sectors (coal, hydro, oil and gas, nuclear, electricity, and solar and other non-conventional sources) and the associated issues relating to environmental impact and conservation. These issues need sustained, high-quality analysis to yield good policies to develop the country's varied energy supplies to meet the growing demand.

Transport and communication: Similarly, the domain of transport and communication development cuts across various sectors (such as railways, roads, ports, shipping, inland waterways, air transport, telecommunication and information technology) and ministerial responsibilities. Here, too, medium- and long-range forward thinking is critical to develop the right kind of development strategies and to foster appropriate regulatory and policy frameworks. As in the case of energy/environment, this set of issues needs urgent and continuous analytical attention, which the new institution should aim to provide.

Water, sanitation and public health: Issues of water scarcity and mismanagement are becoming serious constraints to both rural and urban development. Water is linked to many things, including the long festering problems of inadequate sanitation and sewerage, which are at last receiving serious attention, especially since they are closely linked to basic issues of public health. Again, because of the cross-sectoral (and cross-ministerial) nature of these problems, the new institution would do well to focus on this area early in its evolution.

What about a name?
Names are important. Here's by suggestion: National Development Policy Commission (NDPC). That should make clear that the new institution is national, it's about development, and, crucially, it's about actual government policy ... that it's not just a think tank producing research papers only a few read. Of course, a name is no guarantee of a vibrant and effective future.

Organisation and staffing
If the new NDPC is to get off to a good start, two things are absolutely essential. It must have strong prime ministerial support, and it must be equipped with high-quality staff. As in the case of the erstwhile PC, the prime minister should chair the NDPC, with a well-empowered, Cabinet-level deputy, who really runs the institution. Will that be enough to ensure that the rest of the government pays attention to the policy papers and advice offered by the NDPC, especially in the absence of the PC's allocative functions? That is an open question. There are ways of increasing the chances for getting governmental attention: such as by requiring Cabinet discussion and decision on the policy papers prepared by the NDPC; or by requiring that all Cabinet notes in the NDPC's designated (and gradually evolving) areas of focus/expertise should only reach the Cabinet after inclusion of the NDPC's comments.

The effectiveness of the NDPC will depend crucially on the quality of its policy advice. And the best chance of ensuring high-quality advice is to staff the organisation with high-quality people, whether economists, technologists or various domain experts. Ergo, the NDPC must have highly flexible recruitment rules, which allow engagement of high-quality analysts for several years or a few months as required. Their number need not be large. It must also have a generous consultancy/research budget that allows it to readily farm out necessary, specialised studies to existing think tanks and non-government experts. It must not become a convenient parking spot for various "surplus" government cadres.

Beyond all this, the NDPC's success (or failure) will depend on luck and the unknowable trajectory of events and people that actually make history.

The author is honorary professor at ICRIER and former chief economic adviser to the government. These views are his own

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First Published: Wed, September 10 2014. 21:50 IST