Book contents
- Frontmatter
- Contents
- List of Figures
- List of Tables
- List of Abbreviations
- 1 Planning for a 21st Century India
- Part I Origins: Ideas and Ideology
- 2 From Economists to Historians: Studying the Planning Commission, 1950–2014
- 3 The Long Road to Indian Economic Planning (until 1950)
- 4 Ideas and Origins of the Planning Commission in India
- Part II Changes and Continuity: Development and Adaptation of Planning and the Planning Commission
- 5 The Planning Commission and Education
- 6 Addressing Agrarian Distress: Sops versus Development
- 7 Economic Planning after Economic Liberalization: Between Planning Commission and Think Tank NITI, 1991–2015
- 8 Planning Commission: Obiter Dictum
- 9 On a Revived Planning Commission
- Part III Planning Beyond the Planning Commission
- 10 Make in India
- 11 Manufacturing: The Cornerstone of a Planning Strategy for the 21st Century
- 12 Fiscal Planning to Sustain Growth and Poverty Reduction
- 13 Plan, but Do Not Over-plan: Lessons for NITI Aayog
- 14 Why Does India Need a Central Planning Institution in the 21st Century?
- Notes on Contributors
- Index
- References
12 - Fiscal Planning to Sustain Growth and Poverty Reduction
Published online by Cambridge University Press: 04 April 2020
- Frontmatter
- Contents
- List of Figures
- List of Tables
- List of Abbreviations
- 1 Planning for a 21st Century India
- Part I Origins: Ideas and Ideology
- 2 From Economists to Historians: Studying the Planning Commission, 1950–2014
- 3 The Long Road to Indian Economic Planning (until 1950)
- 4 Ideas and Origins of the Planning Commission in India
- Part II Changes and Continuity: Development and Adaptation of Planning and the Planning Commission
- 5 The Planning Commission and Education
- 6 Addressing Agrarian Distress: Sops versus Development
- 7 Economic Planning after Economic Liberalization: Between Planning Commission and Think Tank NITI, 1991–2015
- 8 Planning Commission: Obiter Dictum
- 9 On a Revived Planning Commission
- Part III Planning Beyond the Planning Commission
- 10 Make in India
- 11 Manufacturing: The Cornerstone of a Planning Strategy for the 21st Century
- 12 Fiscal Planning to Sustain Growth and Poverty Reduction
- 13 Plan, but Do Not Over-plan: Lessons for NITI Aayog
- 14 Why Does India Need a Central Planning Institution in the 21st Century?
- Notes on Contributors
- Index
- References
Summary
A major argument of this book is that India is at a critical juncture of its development journey, with just over two decades remaining for its demographic dividend to run out. If India is to realize this dividend, it is critical that growth is not volatile, which it has been since the economic reforms began. One of the reasons why growth is not sustained is that investment has itself been volatile, both public and private investment. Investment to gross domestic product (GDP) after rising consistently from 2003 to 2008 has fallen since then over the next 10 years.
This chapter argues that an important reason for this situation arising is the absence of long-term fiscal planning, both at the central and state government levels. In accordance with the basic Keynesian notion that public investment should draw in private investment, it is essential that public investment is sustained. However, if government consumption tends to rise (whether it is due to interest payments on past debt, salaries, or subsidies), then public investment will be adversely impacted. Hence, we argue that there is a strong case for long-term fiscal planning for the economy, which means a medium-term expenditure framework (MTEF). This dimension of the planning function was neglected, especially since the 1970s, and even in the 21st century this situation has not changed.
In addition, this chapter argues that disbanding the Planning Commission and ending any financial role for the National Institution for Transforming India (NITI) has weakened the planning function, which India's growing inter-state divergence on growth/human development performance cannot afford. The Planning Commission had acquired an extremely critical role since economic reforms began in financing human capital formation at the state level. This role has been compromised by eliminating any financial resources for NITI.
This short chapter is organized as follows. The first section discusses the need for fiscal planning which would include an MTEF. But not only does India not have an MTEF, but it has been consistently characterized by the adverse consequences of fiscal deficits, which have been typical of government budgeting. It also examines how government consumption has been a major source of persistent deficits, which must be controlled. Government consumption is undermining public investment, which is critical to sustained GDP growth.
- Type
- Chapter
- Information
- Planning in the 20th Century and BeyondIndia's Planning Commission and the NITI Aayog, pp. 244 - 263Publisher: Cambridge University PressPrint publication year: 2020
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