Speech of Shri Manohar Lal, Chief Minister, Haryana delivered at the meeting of Chief Ministers with the Prime Minister of India December 7, 2014, 7 Race Course, New Delhi 1-11-2014
Hon’ble Prime Minister and my fellow Chief Ministers !
- 1. As you are aware, the Planning Commission of India was set up in 1950 essentially as a forum representing the Government of India, to formulate economic growth targets, goals and strategies for the country and for formulating Five year plans to achieve these goals. In the historical context of the 1950s, probably the need for an institution like the Planning Commission was appropriately felt. However, after about 64 years of existence, it is felt that the Planning Commission has not been able to fully assist India in attaining its true growth potential. India has not achieved the rates of economic growth that countries in South East and Far East Asia have achieved in the same period. The Commission’s success in reducing poverty significantly, in addressing inter-regional and inter personal inequalities, in creating the environment for a world class competitive industrial sector, in creating a favourable balance of payment situation has been somewhat limited.
- 2. I would like to begin by complementing the Hon’ble Prime Minister for taking this visionary step to strengthen India’s federal structure by addressing the needs of the States. In this fast changing world, change has become the only constant. Our institutions must evolve to cater to the changing demands of the country and its people. I fully support the Hon’ble Prime Minister’s vision of a cooperative federal structure for growth that will empower the States to achieve their developmental aspirations with rejuvenated vigour and enthusiasm. It shall also enable all the States to optimally utilize their resources to leverage India to its rightful place in the global arena.
- 3. Further, we must recognize that in essence, while charting out strategies for sectoral growth, the Planning Commission has over the years barely taken cognisance of the changing role of the private sector in the economy, the global imperatives and the fact that States are becoming growth engines on their own, attracting foreign investments besides creating fresh employment opportunities. The Commission appeared unwilling to accept that the needs of States at different levels of economic and social development will differ. Thus, individual State initiatives to take on the developmental challenges were not encouraged to flower.
- 4. The Commission has thus over the years encouraged the growth of a highly rarified structure of fiscal governance viz-a-viz the States. The scope of individual States to negotiate with the Planning Commission and through it with the Government of India has become very limited over the years. Further, the regressive resource allocation methods adopted by the Planning Commission have placed a premium on under-development. The central funds are allocated on the basis of poverty indicators that the more developed States like Haryana no longer meet. While conceptualizing the Centrally Sponsored Schemes (CSS), the Commission has not permitted decentralized flexibility to the States for target setting and resource allocation, to allow for the optimal utilization of the allocated resources.
- 5. Even though it operates as the Secretariat of the National Development Council, the voice of States in general and of individual States in particular in the growth context have hardly been heard over the years by the Commission. As you are aware, about fifteen per cent of the Union Budget is allocated to the States by the Planning Commission on the basis of what is known as the Gadgil-Mukherjee formula. This is about 59% of the central plan funds, the balance 41% of central plan funds are allocated for CSS. The conditionalities that go with the CSS provide hardly any flexibility to meet the local needs. This results in States either confirming to a uniform eligibility and strategic posture or losing the resource allocation. This mechanism of the CSS does not allow the possibility of different strategies for social and economic growth, especially for States that are at different benchmark levels. Also such allocation hinders growth in areas which are ripe for it, and expects a common and very average performance from all States.
- 6. What do we need instead? We need a forum that is better able to represent the States, while not treating the States as homogenous, but by recognizing the different planes of economic and social growth they are at, and by allowing them to be represented and heard in this forum. To achieve this objective, I support the proposed Council of Chief Ministers with the Hon’ble Prime Minister as its Chairman. This forum should encourage debate and articulation of long and medium goals for each sector of the economy. It should also be a forum for coordination among States for issues of National importance like water, energy and sustainable living, and for promotion of mega infrastructure projects of strategic importance. This should also facilitate resolution of inter State differences. I agree fully that this Council should look at pursuing key futuristic and flagship initiatives like Swachh Bharat Mission and Make in India that have potential for national and social transformation. To support this forum, I also propose a smaller permanent Committee. This Committee should deliberate upon the subjects on the agenda of the Council and do the ground work for defining the goals, the sectoral targets and the achievable indicators. This Committee may have members from the Government of India and rotational representation from all States. The issues finalized in this Committee should be placed in the Council of Chief Ministers for adoption. I further propose that the States be classified into homogeneous groups on the basis of their socio-economic indicators, their future needs and available resources. For example, the less developed states, the arid zone states, the north eastern States; the marine states could be the basis of classification. One State from each of the 5-6 groups created shall then get representation on the smaller Committee. These groups of States shall internally formulate their short, medium and long term developmental needs through discussion. The representative State from each group shall reflect the priorities and needs of its group in the Committee that will do the groundwork for the goal setting and reviewing process.
- 7. The Council of Chief Ministers should have a permanent secretariat with representatives from the States, the Government of India, and it should co-opt subject/area experts from the private sector, academia and think tanks on need basis. The strategy of this Council should be to define long term national goals for each sector and thus define the national expectations for the growth of each sector. Once these are defined, the States would be allowed to determine individual approaches to attain these goals based on their level of development and the available resource.
- 8. While the Five Year Plans have provided a pan India approach to development which allowed for a defined and a disciplined flow of central funds to States, this discipline has not taken into account the fact that States at different levels of economic and social development have different needs. As mentioned earlier this inflexible approach adopted in the Plan schemes has placed a premium on under-development and has not incentivized growth initiatives taken by the more developed States.
- 9. Haryana proposes that in the future Central Plan Assistance should be automatic and on an annual basis for the identified national goals. The individual States should be given the freedom to choose the optional path/ strategy/eligibility criteria for achieving the set national objectives in the time frame defined by the national forum. This freedom to formulate need based strategies shall not only encourage innovation in the State governance, it may allow for path breaking new State initiatives, especially in the social sectors, and in long gestation project implementation.
- 10. As the future Central Plan Assistance is proposed to be released automatically each year to all States for the national goals identified by the forum, the ritual of annual plan approval may be discontinued. I am further suggesting that future devolution of the Central Plan Assistance should be on a formula different from the Gadgil-Mukherjee formula. The present classification of public expenditure into plan and non plan expenditure also needs to be modified. Thus, the Central Plan Assistance should continue as an automatic general transfer and the CSS funds should be released as sector specific grants. The micro planning and strategizing for individual schemes should be left to the States. The broad parameters for spending should be provided to the States at the time of the sectoral allocation of funds. The expected annual and long term outcomes must also be defined. Thereafter, the national forum should hold State-wise sectoral reviews of the progress as indicated in the schematic design of States.
- 11. I believe that while the States should be given the freedom to innovate, a national review mechanism is essential. I propose that the forum should put in place a mechanism to review the progress with the States against the set goals. A regular impact assessment for this fund utilization is also suggested. This shall allow for an independent evaluation and for course corrections, where required. I further believe that the new forum should not attempt to locate all specialties under its employment but should encourage strategic collaboration with reputed research organizations and experts.
- 12. It is observed that Five Year Plans have often stopped the funding of large projects after the Five year plan period, thereafter placing the burden of these projects on the State exchequer. It is proposed that for infrastructure projects with long gestation periods, the plan period should be on a Five year or 10 year review cycle depending upon the likely date of completion and commissioning. The annual deliverables for such long term funding would however need to be defined for each sector and for each tenor of projects to be implemented across States. I am also proposing annual reviews for such long term funding with outside experts being part of the review mechanism in order to ensure a global perspective.
- 13. The proposed Innovation and Knowledge Hub is an excellent idea. This shall naturally become the repository of best practices across States besides becoming a resource for providing global trends and identifying global opportunities. I expect that this Think Tank shall provide sectoral expertise on critical issues like Energy, Social sector development strategies, areas for industrial growth, Skilling and Employment creation. It shall incentivize technology adoption, besides assisting States in change management. The role of the Hub as a facilitator of development will encourage interactive and need based planning by States. The Hub can draw upon the national and international expertise of developmental and technical domain specialists who would provide advice based on the requirements of each State. Haryana shall use this high quality resource to seek inputs on ways to leverage its competitive advantages to transform itself into the best developed State in India.
- 14. I conclude by stating that Haryana looks forward to actively participating in the new forum and to contributing its very best efforts to Team India’s national development agenda.
- Thank you.