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Why planning died in India

November 19, 2014, 3:17 PM IST

Sanjeev Ahluwalia in Opinion India | India | TOI

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So what shall the post-plan India look like?

Will we veer away from the soaring flyovers; highways straight as Arjuns arrow; high rise apartments and carefully zoned
areas, typical of planned development and turn instead towards the squiggly, irregular lines so dear to the foreign tourist, of
charming, little, oriental streets; buildings leaning precariously into each other; roads not wide enough to turn around a
decent sized car; gloomy, shaded rooms looking inwards onto resplendent, inner courtyards with shops, factories, homes,
schools and hospitals all thrown higgledy-piggledy together in the best tradition of organic growth fueled by private money?
Unlikely, because even the most ancient, known, Indian city-Mohenjo Daro- built in the 25th century BC was based on a
rectilinear street grid (now in Pakistan) and is completely at variance with the more recent, albeit charmingly romantic,
memories of traditional Indian living.
If the ancient past was at variance with recent memories the present is rapidly evolving. Indian values and needs are changing
in response to the open economy framework adopted since 1991 and the associated diffusion of technology, competition and
choice. The change is so rapid that formal institutions have yet to catch up.
Neither our laws, nor our judiciary caters to the frustration of young Indians with the plethora of limiting, formal traditions.
Take for instance, the case of gays, lesbians and trans-genders. Our law demonises them. But most Indians are easy about
adapting to them in the same way hands-off manner as they good naturedly, accept foreign customs, like opening doors for
women ( a custom rapidly becoming extinct in the West); as a quaint sub text of life.
Cross religion marriages is another example. It is not the norm but is generally accepted if neither family objects. Young India
takes to anything modern with a vengeance. Hafiz Contractors lurid architecture; skin fit jeans; soppy friends style TV serials;
head banging, electronic music, offensively fast food and horribly over-priced lounges.
Aspirational India likes multi-lane highways, fast bikes, week-end car holidays, fourteen hour work days, nuclear families, steel
and glass buildings, swanky airports; e-commerce and want rapid change, within their lifetime.
The rapid economic growth associated with these aspirations has usually been scaled up, to encompass the middle class, only by
planned investments and heavily regulated economies, as in East Asia. The downside has been rapid grow in pockets of
affluence; carefully screened off; insulated from the sordid reality of the poor. Planning to skillfully create a bubble of affluence,
access into which is carefully monitored for those make the bubble real but who are excluded from the bubble, except as
service providers.
But if plans and rules cater only to the rich does it really matter if we stop planning? Even if a random approach is adopted for
public investment management there is a 50% chance that investments will benefit the rich and the poor equitably. In contrast,
the impact assessment of planned programs for the poor does not have a better hit rate so who cares?
For starters, let us recognize that the death of planning is not new. It died a quarter of a century ago when the Berlin Wall fell in
1989.
First, the planned share of private sector in investment has been increasing with every plan and was at 50% of total investment
in the last plan. So irrespective of how much money the government invests, so long as the private sector meets its targets we
could hit at least 50% of the growth target so long as the government ensures a facilitating investment environment.
Second, public investment spend comprises just 21% of total public expenditure every year. The rest goes towards meeting the
existing recurrent liabilities of interest (33%) salaries (8%) and other operating expenditure just to feed the public beast.
Rather than increasing public investment by increasing taxes, far better to leave the surplus with private actors and encourage
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them to invest.
Third, of the 21% which is available for public investment there is no easy way of knowing how much needs to go for funding
completion of ongoing projects and what then is the residual fiscal space for new projects. It is telling that even the Union
Government budget documents are not transparent about this important distinction in resource allocation.
The suspicion is that if Fiscal Deficit targets are to be achieved there is very limited fiscal space for new projects. A careful
inventory of approved but unfinanced projects could reveal a project stock as high as investment spending over the next five
years. This is not new and explains why the practice has been to spend on new projects by starving existing ones, so as to please
the largest number of political constituencies.
Remember that incomplete road outside your window which rakes up columns of dust every time a motorcycle zips by? Well
the reason why the engineers, you curse daily, are taking so long to complete it, is that money for a road or any other project is
not allocated and frozen at the time the project is approved. Allocations lapse at the end of the year and fresh allocations made
against which cash is released piece meal, depending on the relative power of conflicting political constituencies.
Fourth, planning died because planners did not reciprocate the faith put in them by citizens. They gold plated projects
(Common Wealth Games); they failed to anticipate technological change and innovation (Public Transportation) and thereby
created huge stockpiles of inefficient and unsustainable assets, financed by public debt.
PM Modi probably knows this and consequently is no hurry to devise a new planning set up. Of course every government wants
to leave its footprint encrusted in projects. The Modi government is no different, if one is to judge from the bouquet of
projects hurriedly announced and allocated notional amounts in the 2014 post-election budget.
The only hope this time around, is that there may be more emphasis on creating a facilitating environment and encouraging the
private sector to invest rather than using public funds to determine the future.
The test case will be defence production. If the government can get the domestic and foreign private sector to invest in make
in India, against buy back assurances, we shall be starting on an even keel. Nothing much there for the poor to cheer, except
some trickle down in construction and services, but at least the middle class can look forward to more jobs and better wages.
DISCLAIMER : Views expressed above are the author's own.

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Author
Sanjeev Ahluwalia
Sanjeev S. Ahluwalia is an independent consultant in economic regulation; governance; institutional development; energy and infrastructure.
He is currentl. . .
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