As part of the continuing positive changes in pruning bureaucracy and streamlining of government agencies, the status and role of the Planning Commission (PC) looks set to change under PM Modi. Shortly after India gained independence from Britain in 1947 this institution was set up in March 1950 to replicate a Soviet-style command economy. The Commission's aims included setting targets on a 5-year basis to optimise scarce resources in a newly born country. The first PM of India, UK-educated Jawaharlal Nehru, adopted Britain's Fabian socialist economic policies. The PC survived for over 64 years because it grew in authority, with the Prime Minister of the day being its Chairman. Part of the PC's responsibility was to allocate central government funds to states and also sanction capital expenditure by New Delhi, which was deeply resented by many states and other government departments. The body has always laboriously compiled detailed five year plans, but these have rarely been complied with by the states. PM Modi, a critic of the PC, looks set to dilute its powers straight away, if not abolish it outright. He has left the post of Chairman vacant, has taken away the PC's authority to determine the federal government's capital expenditure, passing it to the finance ministry. And in a signal of things to come, the PC has for the first time been excluded from discussions to frame the national budget. The relevance of the PC in 2014 for a market-oriented economy are being questioned. The 1991 economic reforms dismantled the "license raj" and other restrictive controls and helped usher in a market oriented economy. A suggestion has been made to turn the PC into a "think tank" to look at long-term economic and development issues, away from short-term pressures faced by politicians. The move to abolish the PC will be a positive signal to investors domestically and overseas that India wants to have modern and relevant institutions for a modern India in the 21st century.

David Fuller's view

Here is the India Report.

When one reads this history, it is hardly surprising that India’s government policies have too often been chaotic.  All this is not changing and India’s development and prosperity should surge over the next five years.

Please note: I will be in Edinburgh on Thursday and Friday, conducting a private institutional seminar.