Economic Planning

ECONOMIC PLANNING

To prepare for INDIAN ECONOMY  for any competitive exam, aspirants have to know about  Economic Planning.  It gives an idea of all the important topics for the IAS Exam and the Economy syllabus (GS-II). Important Economic Planning terms are important from Economy perspectives in the UPSC exam. IAS aspirants should thoroughly understand their meaning and application, as questions can be asked from this static portion of the IAS Syllabus in both the UPSC Prelims and the UPSC Mains exams.

Planning is the process through which Govt. prepares a list of socio-economic problems e.g. mass poverty, inequality, low productivity in agriculture, lack of industrial and infrastructural development etc.; and then Govt. sets goals/targets/plans to fix these problems.

 

Note: We have dealt with Economic planning elaborately in Indian Economy – Before and After Independence chapter. Here we will discuss planning viz-a-viz NITI Aayog briefly.

Limitations Planning Commission:

  • Achieved about 9% GDP growth-rate during 2005-07, thanks to American boom prior to Subprime crisis. But almost all nations including Pakistan had experienced high growth in that era. So 9% GDP did not come from PC’s magic wand.
  • Post-Subprime crisis: GDP-fell while food-inflation &NPA rose during 2008-13. PC couldn’t fix it.
  • PC was a toothless body, couldn’t punish any government organizations if targets failed.
  • Failed to implement land reforms, labour laws.
  • PC designed Government schemes with ‘One Size Fits’ all approach and a few extra crores to NE, J&K, Hill-states and LWE-affected states. But for long, PC did not use pilot projects / sample testing / interaction with states. So, Indira Awas Yojana (IAY), ICDS- child development scheme etc. programs failed to show tangible result despite pumping crores of rupees over the decades.
  • PC tried to bypass State Governments by designing schemes that directly funded to NGO & private agencies. So, non-Congress states became unenthusiastic about implementing Central Schemes.
  • Only in 2013, PC attempted to undo its mistakes by reducing number of Centrally sponsored schemes (CSS), Performance based funding to States etc. But it was too little, too late.
  • PC’s shortcomings resulted in creation of new bodies like PM’s Project Monitoring Group, PM’s Economic Advisory Council (PM-EAC), Group of Ministers (GoM) committees This all resulted into more lack of coordination. So, Govt. felt PC is a beyond repairs & replaced it with NITI Ayog.

 

Q. How are the principles followed by the NITI Aayog different from those followed by the erstwhile Planning Commission in India? (GSM3-2018)

 

Functions: Planning Commission Vs NITI Aayog

  • While Finance commission (a constitutional body under Art. 280) is responsible for the tax- devolution from Union to states, these two non-constitutional bodies look/looked after →

 

Planning Commission NITI Aayog
Prepared the Five-Year Plans of India

 

NITI has given responsibility to draft:

·         Three Year Action Agenda (2017-20).

·         Seven Year Strategy Document.

·         Fifteen Year Vision Document (2017-32). 2018: drafted Strategy for New India @ 75 covering the period 2017 to 2022-23.

How much money should union give to each state for implementation of centrally sponsored schemes (CSS)?

 

How much money should union give to the five year plans of the state governments?

 

PC would answer these questions using Gadgil Mukherjee formula (designed in 8TH FYP)- based on population, per capita income, special problems etc. of a state.

 

NITI doesn’t decide how much money should be given to each state. That component is decided by the Finance Commission (tax devolution and grants) and Finance Ministry (Allocations for schemes).

 

NITI primarily serves as the think tank, helps in policy design.

 

Helps in monitoring schemes’ implementation through its dashboard e.g. ‘School Education Quality Index’, ‘SDG India Index’, ‘Digital Transformation Index’ etc.

 

 

NITI: Initiatives

Darpan Portal

 

·         2017 onwards: NGO register here, get unique ID – apply for grants under various govt schemes.
Aspirational District Programme

 

·         2018 onwards: to rapidly transform 115 backward districts on 49 key performance indicators (KPIs) related to Health,  Nutrition, Education, Agriculture, Water Resources, Financial Inclusion, Skill Development, Infrastructure etc.

·         Their progress is monitored using NITI online dashboard called ‘Champions of Change’.

Strategic disinvestment

 

NITI Aayog suggested strategic disinvestment of more than 30 sick and loss making CPSEs such as Air India, Pawan Hans Helicopter, Scooters India etc.
POSHAN Abhiyaan

 

·         Ministry of Women and Child Development (MWCD) is implementing POSHAN Abhiyaan to make India malnutrition free India by 2022 with focus on pregnant women, mothers and children.

·         NITI Vice-Chairman is the head of POSHAN Abhiyaan’s National Council.

Bills and policies

 

Since its inception NITI Aayog has:

·         Helped framing various policies on Energy, Mineral etc.

·         Helped framing various bills, Model Acts on Agricultural Land Leasing, Livestock Selling etc.

Agriculture

 

NITI helped revamping the MSP by suggesting price deficiency payments (under PM-AASHA), & revamping fertilizer subsidies through DBT mechanism to fertilizer companies.
SDG

 

For Sustainable Development Goals:

·         NITI developed SDG India Index to monitor our progress in 17 SDG goals.

·         NITI suggested Govt. to focus on methanol / biofuel based economy for reducing the fuel bill by around 30% by 2030.

CSS

 

NITI helped developing Output Outcome Monitoring Framework to monitor the implementation of Govt schemes.
Seminars

 

NITI regularly organizes seminars, workshops, conferences for idea exchange with industries and academicians. PC was ‘closed / introvert body’ in terms of interaction with others.
Startups

 

NITI runs Atal Innovation Mission (AIM): grant of upto INR 10 crores to setup Atal Incubation Centres incubators. à AIM also started “Mentor India” program, wherein experts from industry provide mentorship to students in Atal incubator labs. SETU to help start ups.
Digital Age

 

NITI developing National Program on Artificial Intelligence.

 

It is evident that NITI’s approach is more modernised, forward-looking, less bureaucratic and less status-quo oriented than the erstwhile Planning Commission. With such initiatives, NITI Ayog is playing a pivotal role for economic growth, human development and good governance in India.

 

Prime Minister’s Economic Advisory Council:

  • PM-EAC is just like PC and NITI, this is also neither constitutional nor statutory body.
  • Started in the 2000s to give advice on economic issues to the Prime Minister.
  • After PM Manmohan Singh’s term finished (2014), PM Modi did not reconstitute it for a while. But in 2017, our growth rate decreased in the aftermath of demonetisation and GST, so opposition parties & critics were making lot of hue and cry about PM’s faulty economic policies. In that atmosphere, PM Modi again reconstituted this Economic Advisory Council (2017-Sept).
  • Composition: Economist Bibek Debroy (as Chairman) & other notable full time and part time members, Total 7 persons.
  • NITI provides administrative and secretarial support to PM- EAC. PMEAC has suggested to government to:
  1. Set up a GST Council like body on public expenditure
  2. Reduce the number of GST slabs.
  3. Reduce the Direct Taxes to boost the demand & economy.

 

PRAGATI:

  • 2015: Pro-Active Governance and Timely Implementation (PRAGATI) is a web platform under Prime Minister’s Office (PMO) for Monitoring scheme implementations.
  • Addressing common man’s grievances related to tax refunds, EPFO claims etc.
  • PM uses this digital platform for monthly video conferencing with ministries & departments in Union, and Chief Secretaries in States.

 

eSamikSha

 

·         2014: PM Modi launched web portal under Cabinet Secretariat.

·         After the Ministers and officials meet PM → decisions or follow up actions are monitored through this portal.

·         If an IAS is sitting on a file, this webportal allows PM / Cabinet Secretary to digitally ask that IAS to explain the delay or expedite the decision- making.

Project Monitoring Group (PMG)

 

·         2013: PM Manmohan formed it under Cabinet Secretariat for fast tracking the approval / implementation of various public sector, private sector and PPP Projects.

·         They also operate a webportal ‘e-Nivesh Monitor’ for investment / business proposals.

Investment Commission

 

·         2004-09: Under Ratan Tata to make recommendations to the government on policies and procedures to facilitate investment.

·         2016 Government thought to revive it but faded topic.

CPGRAMS

 

·         2007: Personnel Ministry → Department of Administrative Reforms & Public Grievances (DARPG) launched the portal Centralized Public Grievance Redress And Monitoring System (CPGRAMS)

·          Any citizens can file complaint against any Central Ministries/Departments/Organisations for Corruption, Nepotism, harassment, mismanagement, absenteeism, Delay in providing services etc. They also launched a mobile app ‘My Grievance’.

 

MoSPI:

Ministry of Statistics and Programme Implementation (MOSPI)’s administrative head is called ‘Secretary & Chief Statistician of India’ usually, Indian Statistical Service officer recruited by UPSC. MoSPI consists of:

 

  1. National Statistical Office (NSO):
    1. Central Statistics Office (CSO): computation of GDP, GSDP, IIP, ASI, CPI (Rural, Urban, All India) and Economic Census (6th was done in 2013);
    2. National Sample Survey Office (NSSO): data collection for various socio-economic indicators, Annual Survey of Industries (ASI), Rural-urban prices and other data required for CSO’s calculations.
    3. 2019-June, MoSPI merged CSO+NSSO henceforth it will be called National Statistical Office (NSO) only. it will be headed by Chief statistician of India-cum-Secretary of MoSPI. (Earlier, C Rangarajan’s National Statistical Commission in 2005 had recommended this CSO+NSSO Merger). Further, MoSPI also planning to setup a National-Level Data Warehouse: It’ll act as a central repository of all the statistical data collected various ministries, and provide big data analytics.

 

  1. Programme Implementation wing:

a. Member of Parliament Local Area Development Scheme (MPLADS-1993): In this each MP can suggest development works worth ₹ 5 crore per year in his constituency.

    1. Twenty Point Programme (2006) to measure performance of various schemes related to poverty alleviation, employment generation, housing, education, health, etc.
    2. Infrastructure Monitoring and Project Monitoring.

 

National Statistical Commission:

  • Setup in 2005 in MOSPI by Cabinet resolution based on recommendations of C. Rangarajan Committee. So, neither constitutional nor statutory.
  • Structure: 1 part time chairman, 4 part time members + NITI Secretary is ex-officio member, 6 people in total. Chief Statistician of India serves as ‘Secretary’ to this commission.
  • Functions: It replaced the erstwhile Governing council of the NSSO. So, basically the nodal body designing the standards of data collection- data publication, coordination among the different agencies involved.

 

Controversy with NSC:

In 2019, two members resigned citing “Over the months, we have been feeling that we were not been taken seriously and being side-lined by the government. NSC had approved the Employment Survey 2017-18 but it’s not yet released.” Critics allege this Employment survey shows jobs fell after demonetization / GST so Modi did not want data released.

 

If this type of data manipulation & window-dressing is continued then eventually:

  • International organisations will lose confidence in India’s data collection methodologies. They will not believe fully, even if the Indian economy is growing really.
  • Large sized economy has to contribute more money to IMF & in return gets more voting rights in IMF board (e.g. USA). But, if IMF loses confidence in our data collection methodologies, they may not increase our quota, even if we become an economic superpower.
  • International credit rating agencies such as Standard & Poor’s (S&P), Moody’s, and Fitch Group will give poor ratings to Indian G-Sec and corporate bonds – Foreign investors will feel shy about investing in India or they will demand higher interest rates.

 

To install faith in official statistical data, Government is doing following:

  1. Draft National Statistical Commission (NSC) Bill 2019 to give statutory status to National Statistical Commission, so it may work more independently.
  2. Draft new National Policy on Official Statistics.
  3. In 2019, MOSPI setup a new SCES Committee.

 

Standing Committee on Economic Statistics (SCES):

  • Setup in 2019, To improve the quality of data, MoSPI setup a Standing Committee on Economic Statistics (SCES) with 27 members + 1 Chairman (Ex- Chief Statistician Pranab Sen) à total 28 persons.
  • This new SCES Committee subsumes previous 4 Standing Committees on:
    1. Labour force statistics,
    2. Industrial statistics,
    3. Services sector and
    4. Unincorporated sector enterprises.
  • SCES will review the existing framework/methodology/data collection for IIP, periodic labour force survey, economic census etc.

 

  • Chairman Pronab Sen suggested that:
    • Government should announce a specific calendar that on ‘x’ date of each month or quarter, ‘y’ Macroeconomic indicator data will be released.
    • This way critiques will have more confidence in the data released by the Government.
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