Planning Commission’s relevance has not died yet, even though incumbent central government headed by Prime Minister Narendra Modi has dissolved the institution. The functioning of the Planning Commission can never be backdated, irrespective of whether the economic model followed is centralized and planned or a market economy. The reason given for the dissolving of the planning commission is that the institution suits in the Soviet styled centralized economy and not the market economy that characterizes the Indian economy in its current form. However, India is a federal state requiring shared vision and commitment in relation to the economic objectives and growth strategy involving not only the government’s role, but also catering the other economic agents. Without critical planning, India’s development strategy cannot mature and be effective.
The track record of the planning from the very onset in 1950 has been steady and effective. In the 30 year period, between 1950 and 1980, India’s GDP growth rate had been 3.5 percent on average. In 1980s, the growth rate had been 5.5 percent. During 1990s, it was 6.5 percent and in 2000s, it climbed to 7.6 percent. This shows a steady upward moving growth chart, for which, advises of the Planning Commission has been largely responsible. One of the principle concerns during the first 30 years of the Planning Commission was the food security, which cease to be a problem now. The poverty level has been brought down in a massive scale. The urban poverty level in 1973-74 has been 49 percent that was brought down to 25.7 percent in 2004-05. In the rural sector, the poverty level was 56.4 percent in 1973-74, being reduced to 28.3 percent in 2004-05. The social indicators also showed a marked improvement from the time of independence till date.
The interests of the state governments are almost always in loggerheads with the interest of the central government. In this sphere as well, the contribution of the Planning Commission has been indispensible. The Planning Commission ensured coordination of the economic activities between the center and the state. Even when the central government enters into a deal with foreign countries or international bodies, the development activities vested in the states can enter into a conflict in relation to international obligation. The coordinating mechanisms of the planning commission mitigate that risk. Thus, Planning Commission fosters greater benefits with respect to the economic activities taking place within the purview of globalization.
The argument that centralized planning is nonessential in market economies is fraught with wrong concerns. China has the best example of successfully shifting from a centralized economy to market economy. They made this transformation with the help of the Planning Commission. The Chinese model is an exemplar that should be followed by India, which it was doing efficiently with the help of the Indian Planning Commission. It is hard to understand the reason for dissolving the institution, except for political motives!