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Prime Minister Narendra Modi announced on Friday that the government would replace the Planning Commission with a new body, bringing the curtains down on the 64-year old institution founded on the former Soviet Union's command-style development model.
“We will replace the Planning Commission with a new institution having a new design and structure, a new body, a new soul, a new thinking, a new direction,” Modi said in his first Independence Day speech as the country’s Prime Minister.
Modi said the new, yet undefined institution, will forge a “new direction to lead the country based on creative thinking, public-private partnership, optimum utilisation of resources, utilisation of youth power of the nation, to promote the aspirations of state governments seeking development, to empower the state governments and to empower the federal structure”.
The announcement, which came during Modi’s Independence Day address, ends weeks of speculation over the future of what was once India’s premier policy making body but has increasingly weakened since India switched from a socialist-style economy to embrace market-opening polices in the early 1990s.
Also read: Highlights of PM Modi's I-Day speech
India’s first Prime Minister Jawaharlal Nehru, inspired by the Gosplan-aided industrialisation of the Soviet Union, set up the Planning Commission in 1950. The dominant view at the time, drawn from Fabian socialism, backed the need for state-led planned industrialisation and development.
For the first eight Plans, the emphasis was on a growing public sector with massive public investments in basic and heavy industries.
The commission, housed at Yojana Bhawan a few hundred yards away from Parliament House, emerged as the government’s primary go-to think-tank for policy prescriptions. Former Prime Minister Manmohan Singh as well as President Pranab Mukherjee both served as the Planning Commission's deputy chairperson, the body's topmost executive. The prime minister is the chairperson of the commission.
The commission has been headless since the last deputy chairman, Montek Singh Ahluwalia, and his panel of members resigned after Modi came to power, ousting the UPA government in elections held in April-May this year.
But the commission came under increased scrutiny in recent years, with many experts questioning its role in a market-economy model where private enterprises are the primary growth engines.
"Since the Planning Commission has defied attempts to reform it to bring it in line with the needs of a modern economy and the trend of empowering the states, it is proposed that the Planning Commission be abolished," a report of the government-appointed Independent Evaluation Office (IEO) had said, asking the government to replace the commission with a new Reforms and Solutions Commission.
“Very shortly, we are about to move in a direction when this institute would be functioning in place of Planning Commission,” Modi said.
Modi did not specify details about the new body’s likely structure, but there was speculation it would be modelled on China’s National Development and Reform Commission. The Prime Minister could head the new commission with representatives from states and industry as members.
In the new structure, the finance ministry will likely take the final call on the annual gross budgetary support for various central schemes, as well states’ annual plans, which until last year was decided by the Planning Commission.
He didn’t name the new body, but a television channel reported that it would be called the National Development and Reforms Commission.
Full coverage: Modi at Red Fort