Monday was a fascinating introduction to the Indian political system. After sitting in a Parliament session and meeting with the Prime Minister of Tribal Affairs, we had a wonderful meeting with Sindushree Khullar, Secretary of the Planning Commission. The Planning Commission is responsible for creating the five year plan budget and the allocation of resources to various industries and regions.
Overview: The Planning Commission was set up by a Resolution of the Government of India in 1950. The impetus to form the commission originated from the objective to raise the standard of living by leveraging the resources available in India. Efficiently taking advantage of the resources would create jobs and accelerate the Indian economy and export industry. Specifically, the Planning Commission is responsible for assessing the resources available in India preparing plans to efficiently utilize the resources, and prioritizing where and how these resources are allocated. The Planning Commission accomplishes these goals by publishing Five Year Plans. Currently, the twelfth five year plan document has been placed before the National Development Council for discussion on December 27th.
Areas of Focus: Historically, the planning system was highly centralized and government-run. During the liberalization of India in 1991/92, the Planning Commission went through significant change as it had to navigate issues brought by the new open economy like import/export industry and foreign direct investment. The Commission has evolved tremendously and today it takes a holistic approach to budgeting and planning by bringing together industry experts and leaders from over 30 different sectors. Some examples include Rural Development, Health, Infrastructure, Decentralized planning, Panchayati Raj and Special Area Program, Environment & Forests (Including Climate Change), and Financial Resources.
Major Challenges: Themain challenges the Secretary discussed were bringing the current account deficit to a reasonable level, increasing foreign direct investment, and reforming the tax system. At a state level, public service delivery, health, and education are the major issues. The Secretary describes her job as an “Essay in Persuasion”. She lamented the fact that it takes at least one year to get just about anything approved. With so many worthy causes, her main challenge is prioritizing and funneling limited resources appropriately. The last year has been especially tough for India as the world economy continues to recover from the financial crisis in 2008. India’s current account deficit has increased as the demand for Indian goods and services decreased. The Secretary emphasized the importance of private sector investment and strategies to help foreign countries feel comfortable and excited about investing in India. For example, $1 trillion is needed to improve India’s infrastructure, and the Secretary estimates that 50% of these funds should come from the private sector.
The Secretary said she is “hopeful” about India’s future. She feels the Indian economy has bottomed and reemphasized that tax reform and deficit reduction are key to garnering funds to support these important initiatives. Our group came away extremely impressed with the human capital at the Planning Commission, but the issues are incredibly overwhelming and it is difficult to see a clear path to generating the necessary funds in the near term. We share the sentiments of the Secretary and are hopeful and optimistic for the country over the long term.