Post-independence India has been a pioneer in establishing a cycle of five year national economic planning which spelt out a strategic approach to allocation of resources by the Central and State governments on various projects, including their execution and review by various governmental agencies. The five year planning process is managed by the Planning Commission. Starting in 1951, the five year planning process has so far seen eleven cycles, with the eleventh five-year plan (2007-2012) having just concluded. The economic planning process has been helpful for the Indian economic planners in the socialistic command economy regime that prevailed till 1992, the year of economic realization which ushered in massive increase in private and foreign investments. From a total budget of Rs 23,560 million that the first five year plan entailed, the plan budgets, central, states and union territories, steadily grew over the decades to reach Rs 36,447,180 million, constituting nearly 14 percent of GDP.
Despite the steady growth in the profile of financial investments under the economic planning process, the economic growth and infrastructure development have failed to lead the kind of quantitative and qualitative development that are required of India’s emergence as an economic superpower. One of the reasons could be the anxiety of the Planning Commission to view egalitarian issues through economic lenses and vice versa. In the eleventh plan document spanning 386 pages, only 11 pages were devoted for infrastructure development while thematic issues such as employment, social justice, innovation, technology, spatial development, regional imbalances, environment, climate change, governance, consumer protection and competition policy were covered in about 200 pages. This cannot be faulted per se; probably needs to be even welcomed as the Commission’s commitment to inclusive growth. Without getting biased by the current planning paradigm, however, we need to analyze why the economic planning process is yet to deliver resoundingly for India an assured measure of global competitiveness across the board and a quality of life that is sustainable even for indigent sections of the population.
The long project cycle
Economic planning for a country is not the same in scale or scope as strategic planning for a firm. It may be appropriate to visualize a firm’s transformation in five year cycles but it is probably inadequate to visualize an economy’s progress in five year cycles. The fundamental lacuna in India’s economic planning process relates to the incremental visualization in steps of five years. Some State governments have, in fact, been quick to recognize this and launch 10, 15 or 20 year visions. A durable framework for strategic economic development and asset creation can emerge only when the central and state plans are synchronized in a much longer time frame of at least 10 to 15 years at least. The strength of today’s developed world would lie in their development of infrastructure projects that would take a decade or two to build but would last several generational lifetimes. Whether it is the labyrinth of highly intricate and synchronized underground and on or over ground metro rail systems of Tokyo and London or the elaborate national and state highway systems of the USA, the ability to visualize breakthrough projects of benefit for future centuries is the hallmark of enlightened economic planning.
Given India’s aspirations, and potential, for emergence as the third largest economic power, planning cycles have to be reasonably long. This, coupled with the fact that public sector and infrastructure projects in India are beset by significant delays, dictates the need for planning with at least a 15 to 20 year planning horizon. It is not unusual in India for projects taken up under the aegis of a five year plan remain not only incomplete at the end of the five year plan but also found to be insufficient in the context of population and economic growth dynamics. Airport modernization in the four metropolitan cities is a classic example of development being too little in scale and scope and too late in completion, and necessitating in all cases the need to commence work on new airports. The advantage of a really long range planning framework is that economic projects which are to meet the requirements of future generations are conceived with appropriate scale and scope as well as investment, and understanding of the payback periods.
Incremental versus breakthrough
In economic planning of developing economies which requires allocation of scarce resources on a number of conflicting priorities across urban and rural spectra it is easy and even often compelling to spread resources on projects that meet pending needs, not even current needs. Incremental growth, which mostly is also inadequate often, is the usual prescription. The golden quadrilateral of highways is a good example of how long term planning can create economic assets useful for generations. Yet, when it comes to bullet trains not more than two inter-city sectors are being considered as opposed to the need for a national bullet train grid which could dramatically transform the social, industrial and economic connectivity in this vast nation. There are several areas which lend themselves to the incremental versus breakthrough dilemma, with ideal choices needing to be in favor of breakthrough development. Examples abound not only in infrastructure like roads, ports, airports, railways, airways, shipping and highways but also in social sectors such as healthcare, education, irrigation, public distribution and housing, to name a few.
Breakthrough development requires, fundamentally, modeling of future population and demographic trends and economic parameters that can support the GDP growth targets in time spans ranging from ten to twenty years. In the healthcare sector, for example, the current network of government run general hospitals would be grossly inadequate when the rapid extension of metropolitan areas is factored in. Breakthrough development would require not only doubling or trebling of bed capacity in the existing general hospitals but also potentially setting up of at least four new general hospitals in each of the northern, southern, eastern and western peripheries of each expanding city. Similarly, each of the economic and social infrastructure sectors requires breakthrough concepts. In the infrastructure area, projects must be set up to lead economic and social development. In the field of ports, for example, it could be setting up of a port for every 200 kilometers of coastline. In the field of education, for example, it could be a Kendriya Vidyalaya in each town, an institute of higher research in each state and as many IITs and IIMs as there are states of India.
Breakthrough is a mindset
Breakthrough is essentially a matter of mindset. I can recall a day two decades ago when I was asked to mention, as a strategic planner, what I would do to reverse the low market share position in truck segment of my firm. I said that the firm should offer air-conditioned factory built cabs. Obviously, the suggestion was received with shock given the reluctance of the firm to be able to offer even a front-end structure. Today, twenty years later, most truck majors are willing to offer fully-built trucks with air-conditioned cabs as a competitive offering. In a similar manner Volvo rewrote the nature of inter-city passenger transport diligently over two decades through its high performance buses. These are just two examples of how proactive and innovative mindset would advance progress through breakthrough concepts. Planners, in terms of choices, may simply wonder at the amazing progress of Tokyo, Shanghai or Dubai but conclude it as inappropriate for India, or create our own tapestry of Chinese type urban development and Japanese type rural development. Whichever route is taken, it is the passion and commitment of the decision makers to progress that determines how differentiated the future would be.
An essential component of the breakthrough mindset relates to the deployment of advanced technology and innovative ways of execution. India has been a pioneer in the use of electronic voting machines in the highly spread-out national and state elections, at a global level even compared to advanced nations. India has been implementing a project of ensuring a UID to all of its 1.3 billion plus population, which are no mean examples of deploying technology. This progressive mindset with interconnectivity across all regions and sectors needs to be deployed in all aspects of infrastructure. Given the will, superior technology with lower costs can be achieved by India. The CEO of Renault-Nissan, for example, had gone on record that he had come to establish car manufacturing plant in India not merely for market but more for the capability of engineers to design and engineer modern projects at lower costs. This competitiveness should be applicable to a host of sectors as well. There should be a technology planning cell as part of the planning commission infrastructure in India to be able to integrate technology in national projects.
Collaboration is the key
Epoch-making transformation needs total alignment in the national setting. It is not sufficient to conceive of individual projects and hope that they would deliver as uncoordinated initiatives by Central or State governments and in public sector or private sector. Spatial planning, connectivity planning, services requirements analysis, and infrastructure development must be undertaken as a prior condition of any development. If political and regional differences are overcome asset creation of the best standards can take place to cater to the needs of current and future generations. Collaboration should also include arrangements with foreign governments and entities to bring the best of technologies and processes as well as expertise to India. Policies related to induction of the best of technologies in uncovered sectors such as airways, retail, insurance, and several other infrastructure sectors need to be formulated.
Moving from incremental growth to breakthrough development requires all-round collaboration amongst all stake holders. The first step is to move from a five year planning concept to a fifteen year (if not a twenty year) planning concept and also expand planning commission as a collaborating body of all stakeholders, central and state governments with expert support from public and private sector corporations and linkages with new technologies and expertise of whatever origin, not found but required in India. In doing so, however, the dilemma would be the classic choice between centralization and decentralization of planning. From the perspectives of the big picture visualization, strategic direction, center-state coordination, integration of technologies, resource mobilization and allocation, external collaborations, definition of strategic projects and thematic goals centralization is required. From the perspective of state level value propositions, detailing of projects and their execution, people and skill development, leading social infrastructure and customizing various initiatives to the specific needs of the individual states, decentralization would be required.
Posted by Dr CB Rao on July 8, 2012