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Comrade Montek Singh Ahluwalia?

May 02, 2007 16:30 IST

Set up as early as in 1950 by a mere resolution of the Government of India, it is virtually the mother of all departments within the government. Yet it is without any Constitutional mandate.

It encourages accountability as a matter of principle in the functioning of the government. Yet it is virtually unaccountable.

It directs, oversees and advices various central ministries. Yet its contribution has never been at the centre of any public debate. It prescribes performance for others. Yet for approximately six decades, its performance has never been analysed.

It mandates market-oriented economics for others. Yet it retains a monopoly on what it does. It encourages, nay, even accepts decentralisation as a solution for mis-governance in India. Yet it symbolises centralisation and, with it, all that is wrong within the country. It employs the best of economists. Yet, its brand of economics is suspect.

Yes, I am indeed referring Planning Commission of India.

Instead of successfully planning, it has been a classical case of a planned failure. A vestige of our unsuccessful romance with socialism, it is an anachronism in modern times, as much as it is a grim reminder of our incomplete tryst with destiny.

Want to hear it from the horse's mouth? Well, the following are excerpts from an interview of the Hon'ble Minister of Finance P Chidambaram with Daniel Yergin and Joseph Stanislaw, authors of the bestseller The Commanding Heights, on how State planning and socialism have been a failure in India:

'Interviewer: How important was Soviet-style central planning to the old Indian economy?

PC: The government of the day was greatly influenced by Soviet central planning. It appeared to be an alternative model. We were fascinated by the idea that everybody can share in the prosperity and wealth, and that poverty would be abolished, and that the state can provide virtually everything to all the people. This was an idea which seemed to have fascinated that generation.

Interviewer: And you're implying that it failed?

PC: Obviously. It failed miserably in India. For the first 30 years the average growth rate of our GDP was barely 3.5 per cent, and if you account for a population rise of about 2.3 per cent or so, the per capita growth rate was barely 1.2 per cent.

Interviewer: That's really dismal.

PC: It was pretty dismal growth, and that is why there was such massive poverty in India.

Interviewer: One of the phrases that people always say is that the [Permit Raj] was more interested in redistributing wealth than creating it.

PC: Well, at least if wealth had grown in leaps and bounds, the redistribution could have been welcomed. But as I told you, the GDP was growing at the miserable rate of 3.5 percent a year.

Interviewer: So they were redistributing poverty?

PC: There was very, very little to redistribute. It is at this point one needs to distinguish between the institution (Planning Commission) that propelled and sustained the idea (Socialism). However, what is inexplicable is despite the "stated" death of the idea in India, the institution that governed the idea, continues to survive. Crucially, the question that needs to be answered is what rationalises the existence of this institution?'

The idea is completely discredited, yet the institution survives!

It may be noted that much of the relevance of planning, diminished already by its overwhelming failure, has been further diluted in the post-liberalisation period with the tremendous growth of our private sector.

Further, the relative reduction of the public sector, constrained as it were by the resource crunch of the State and Central governments, has meant a smaller role for governments. Consequently, there is no functional need for planning or Planning Commission.

In fact, the recently published 11th Five-Year Plan approach paper of the Planning Commission itself quantifies the irrelevance of State planning in these times. Despite the fact that it expects approximately 70 per cent of the total investments required in the 11th Plan period to be funded by the private sector, the Planning Commission continues to 'plan' for the balance 30 per cent.

Crucially, it assumes that it can influence the investment decision of the 70 per cent through its investment of 30 per cent and hence implicitly justifies its existence.

But the crucial question remains unanswered -- if socialism is indeed dead and if we indeed have accepted market economics -- what rationalises the existence of Planning Commission even today? Despite the apparent shift in our approach -- from State planning to market economics -- the Planning Commission as an institution survives with all its grandeur, pomp and glory as if nothing has changed in India.

Such clear contradiction, incongruity and conflict could perhaps exist only in India.

But more is to follow and the paradox does not end here. By early nineties, thanks to the foreign exchange crisis, we adopted the New Economic Policies (NEP). The advent of the NEP was interpreted as an alternative to socialism. And one of the architects of the new economic liberalisation programme of the government was Montek Singh Ahluwalia, so much so that he virtually remains the poster boy of the liberalisation process.

Despite all this, it may be recalled that after the United Progressive Alliance government took over in 2004, this architect of the reforms process was paradoxically appointed as the Deputy Chairman of the Planning Commission, the very institution whose ideology stands discredited today. Confusion, duplicity and confusion, thy name is Government of India.

Or is there something more to it than meet the eye?

All of us are socialists, aren't we?

Readers would have guessed by now that Ahluwalia is not the object of this piece. Neither is Planning Commission. In fact, the Planning Commission is a mere reference point to this discussion. Take the Planning Commission and substitute it with some other department of the government, and we could end up with similar analysis.

Obviously, the real issue is the obsession of our political class with Socialism. We are under the false sense of belief that socialism as an idea has been jettisoned in India, yet the word continues to 'disfigure' the Indian Constitution through its presence in the Preamble.

What compounds the issue is the fact that a political party cannot register itself with the Election Commission even now, unless it swears allegiance to Socialism! Thus, in effect, political parties, whatever be their economic belief and ideology are forcibly wedded to socialism under a mandate of law and that, by extension, makes us all votaries of socialism. And we Indians simply do not have a choice.

Readers may recall that in 1976, the Preamble to the Constitution of India was amended and the word 'Socialist' was inserted. This amendment was adopted during the infamous Emergency under the then prime minister Indira Gandhi.

Nevertheless, no government since then had the conviction in market economics to remedy the issue. Subsequently, based on this amendment, Parliament amended the Representation of the People Act. Accordingly, a new section was added -- Section 29(A) -- that stipulates, among other things, that a political party seeking registration should swear allegiance to the principles of Socialism.

In fact, no major political party has even challenged this in a court of law. Rather, their silence is an eloquent proof of their socialist mindsets.

To conclude, contrary to the popular belief that it has been completely jettisoned, one needs to comprehend the fact that Socialism is currently in temporary retreat. State power and its influence can never be understated or underestimated. The manner in which it has even gone about dealing with likes of Ahluwalia is indeed disconcerting.

As a case in point, he has even suggested increased State intervention even at the cost of higher budgetary deficits to deal with our social sector and infrastructure deficits. That this comes from a man who taught us the virtue of fiscal prudence is indeed bewildering to say the least.

Even James Hacker in Yes, Minister was not as much house-trained by Humphrey Appleby as impeccably as Ahluwalia has been in this short period of time. The metamorphosis of the liberal Ahluwalia to Comrade Ahuwalia, in the past decade, provides conclusive evidence.

One is naturally worried at these developments. Should markets fail, Socialism, as an idea would gain instant currency. After all, the Constitution mandates Socialism, isn't it? In fact, the manner in which the liberalisation process has been deliberately designed, sequenced and handled by our polity and tacitly supported by our bureaucracy seems to precisely aim at discrediting market economics at the earliest.

Put more bluntly, it is the revenge of the defeated. This time around 'planning' seems to be successful. The jobless growth witnessed in recent years, the abysmal state of our social and farm sector, the handling our World Trade Organisation negotiations, the replacement of public monopoly with private monopoly, the refusal to divest and the increasing inequality are instances that demonstrate how badly we are handling our reforms process.

Market economics, Indian style, is merely a Trojan horse to facilitate the return of Socialism.

Also read: Without quota, every caste would be a forward caste

The author is a Chennai-based Chartered Accountant. He can be contacted at

M R Venkatesh