Writing Off the Planning Commission Without a Plan

Published: August 19, 2014 17:54 IST
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(Anush Kapadia is a lecturer on political economy at City University in London)

The Planning Commission, that symbol of benign Nehruvian technocracy, is to be junked. We have been asked by the new PM, aping AAP, to come up with ideas for a replacement institution.

At the same time, the PM aims to give the nation a big push towards manufacturing with his 1950s-sounding jingle, "Zero-Defect, Zero-Effect." If this effort is to be meaningful, any reinvented Planning Commission will have to be more than a glorified think tank inside government, as recently suggested by a widely-cited, government-backed report. If he is to take manufacturing seriously, Modi will have to take industrial planning seriously.

Peering through the haze of the government's scattershot pronouncements so far, its one big theme might be economic nationalism, almost a swadeshi mercantilism.

Ironically, if we are to take this idea seriously, the new regime will need to install much of the same institutional armature that the Nehruvian state tried, and failed, to successfully establish, especially some sort of industrial planning function.

Downsizing the Planning Commission to an American-derived Council of Economic Advisers, basically a back-office for the executive staffed with brand-name economists, will not get us there in the absence of a real industrial planning institution.

That the PM is calling for an ideas factory is a tacit admission that his regime is light on them. But this is hardly the failing of the new regime alone. The Planning Commission was supposed to be the distillation of our collective effort to think ourselves out of our unique historical predicament: to industrialize an agrarian economy that was, and is, a robust democracy.

The Commission's disintegration over the years into a mutant hybrid of the Finance Commission, the Soviet Gosplan, and a standard-issue Delhi think tank is therefore a collective intellectual and political failing.

Yet there is one idea that is coming out of the new regime, in circulation since the beginning of the year, that threatens to erupt into a doctrine. This is Import Substitution Industrialization, raised both in the budget and the PM's Independence Day speech.

This is the idea that transformative, inclusive growth requires us to make things at home rather than buy from abroad. Now, of course, Modi would never name this policy as such, because import-substitution is firmly associated with Nehruvian socialism. Instead, Modi has consistently set import-substitution in his emerging idiom of economic nationalism.

This is consistent with the Sangh's ideological roots in swadeshi (self-reliance, not just khadi) and its political base among small business. Just so, import-substitution was mentioned twice in the recent speech: first in the context of small industries and then electronic goods: "If we move ahead with the dream of 'digital India' to manufacture electronic goods and become self-reliant at least there, how big can be the benefit for the treasury!"

Great idea, only that Chidambaram said it about a year ago when we were on the brink of a balance of payments crisis: "Why are we importing electronic goods that are made by Indian engineers abroad?"

But how exactly is this switch to swadeshi electronics or anything else actually going to come about? There is only one route in the economic history of the world by which imports have been successfully substituted by local manufactures, namely planned industrial policy.

Import-substitution, that old development chestnut, is going to need a clear vision for which industries to hothouse, how to engender skill formation, how to transfer technology, how to finance, what period to finance, when to remove subsidies, the power to give and withdraw support, and so on. These are the sinews of the sort of muscular economic nationalism that Modi seems to be articulating.

In short, the laudable dream of manufacturing in India is going to need decisive industrial policy from some empowered office of the state. Making in India means planning in India.

The fracas over the WTO has already given us a clue that Modi is not a straightforward liberalizer, and here again we have a sense of his emerging economic vision. This is Chinese-style swadeshi, making things at home to build capacity and save foreign exchange.

Ironically, this proto-vision is going to need an unencumbered, politically-empowered office within government to execute it. We used to call that the Planning Commission. Whatever we now call it, we have to get it working.

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