Speaking from the Red Fort on Independence Day Prime Minister Mr. Narendra Modi announced that the Planning Commission will be abolished to be replaced by a new institution more in keeping with current times. According to media reports the new institution will be called the States Reform and Development Commission. The PM said:

“If we have to take India forward, then states will have to be taken forward. The importance of federal structure is more important today than it was 60 years ago…We will try very soon to set up a new institution in place of the Planning Commission.”

The PM said that soon a move will be initiated to start the process of change which might take some time to fructify. The Planning Commission formulates Five Year Plans which are approved by the government and which then set the nation’s economic policy.

The Five Year Plans and Annual Plans are formulated after Commission members consult central ministers and state governments. The Commission is an advisory body for the central government. The Commission is entrusted to assess all human, capital and technical resources available and then formulate plans for their optimal use to address economic and social priorities. This system was inspired by the Soviet Union model of centralized planning. Often decisions of the Commission invite criticism. Currently the Commission has been roundly criticized for overspending on renovating two blocks of toilets. It has also been condemned for declaring a low and unrealistic poverty threshold.

What shape will the proposed new institution take? It is likely that time bound plans may altogether be dispensed with. Instead indicative planning may be introduced that offers continuous guidelines on the basis of prevalent social and economic trends.

This idea is not new. Decades ago Swatantra Party leaders had suggested this as an alternative to Five Year Plans. According to the government the new institution will induct representatives from the states to offer suggestions which will make it more inclusive and federal in approach. Will it? Practically will it not be ultimately another body seeking approval of the central government? How will that ensure genuine federalism?

If the government seeks a federal approach to development it would be well advised to invoke Article 263 of the Constitution and establish in addition to the proposed new institution the Inter-State Council which has remained for six decades a neglected dead letter. The Article states that the President may at any time for public interest establish this Council which would intercede in disputes between states or between the centre and all states. It would also be charged with making “recommendations for the better coordination of policy and action with respect to the subject”. The suggestions of the new proposed institution could be debated and approved by the Inter-State Council. That would ensure more genuine federalism than by merely creating an advisory body which recruits members from states. If the PM really seeks a federal approach should he not also establish the Inter-State Council?