Understanding the functioning of the Planning Commission

This note is targeted at queries which arise while we conduct our courses with MPs on topics related to Economics, Budget and Governance.

India follows the 5-year Plan model and the Planning Commission is vested with the responsibility of formulating these plans.

   1. What is the Planning Commission and who are the members?

   2. How does it function? For example, how are allocations determined?

   3. What are the common criticisms of its functioning?

Requested By- A first time MP from Tamil Nadu

Due date: March 20, 2008

Response

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                                                                   THE PLANNING COMMISSION OF INDIA

INTRODUCTION 

The Planning Commission of India is the premier governmental body in India that oversees economic development. The Planning Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community. Jawaharlal Nehru was the first Chairman of the Planning Commission.

The prime minister is the chairman of the Planning Commission, but the Commission is actually run by the deputy chairman (who enjoys the rank of Cabinet minister or minister of state, depending on his years in public life; for instance, K C Pant, deputy chairman during the NDA government, had the rank of Cabinet minister; Dr Montek Singh Ahluwalia too enjoys the status of a Cabinet minister), and members of the Commission.

Historical Development

FUNCTIONS

The Planning Commission's functions as outlined by the government's 1950 resolution are:

• To make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nation's requirement.
• To formulate a plan for the most effective and balanced utilisation of country's resources.
• To define the stages, on a determination of priorities, in which the plan should be carried out and propose the allocation of resources for the due completion of each stage.
• To indicate the factors that tend to retard economic development.
• To determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the plan.
• To determine the nature of the machinery that will be necessary for securing the successful implementation of each stage of the plan in all its aspects.
• To appraise from time to time the progress achieved in the execution of each stage of the plan and recommend the adjustments of policy and measures that such appraisal may show to be necessary.
• To make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it, or on a consideration of prevailing economic conditions, current policies, measures and development programmes or on an examination of such specific problems as may be referred to it for advice by central or state governments.

What are its other functions?

From a highly centralised planning system, the Indian economy is gradually moving towards indicative planning where the Planning Commission concerns itself with the building of a long-term strategic vision of the future and decide on priorities of nation.  It works out sectoral targets and provides promotional stimulus to the economy to grow in the desired direction. The Planning Commission plays an integrative role in the development of a holistic approach to the policy formulation in critical areas of human and economic development. In the social sector, schemes that require coordination and synthesis like rural health, drinking water, rural energy needs, literacy and environment protection have yet to be subjected to coordinated policy formulation. It has led to multiplicity of agencies. An integrated approach can lead to better results at much lower costs. The Planning Commission functions through several divisions, each headed by a senior officer.

What does the Planning Commission focus on?

The Commission concentrates on maximising output by using our limited resources well. Instead of looking for mere increase in Plan outlays, the effort is to look for an increase in the efficiency of utilisation of the allocations being made. With the emergence of severe constraints on available budgetary resources, the resource allocation system between the states and Union ministries is under strain.

This requires the Commission to play a mediatory and facilitating role, keeping in view the best interest of all concerned. It has to ensure smooth management of change and help in creating a culture of high productivity and efficiency in government. The key to efficient utilisation of resources lies in the creation of appropriate self-managed organisations at all levels. In this area, the Planning Commission attempts to play a systems change role and provide consultancy within the government for developing better systems. In order to spread the gains of experience more widely, the Planning Commission also disseminates information.

ORGANIZATION

Fiscal Review Council

EVOLVING ROLE AND CONTEXT

CENTRE-STATE TRANSFERS

FORMULAE for Distributing State Plan Assistance

CRITICISMS 

Transfer System

Five Year Plan

Divisions in the Planning Commission