These plans were not of much practical importance. The process initiated under NPC formed the basis of Indian planning. The first five year plan commenced in 1950-51 (following the formation of planning commission in 1950 at one resolution of union cabinet, with the prime minister as chairman in order to formulate an integrated five year plan for economic and social development and to act as an advisory body of the central government).
The planning commission was to prepare a plan for most effective and balanced utilisation of country’s resources, which would initiate “a process of development and raise the living standards and open out to the people new opportunities for a varied and richer life”.
The working of the commission led to creation of an extra legal and extra constitutional body called National Development Council. The council was formed in 1952 as an adjunct to planning commission to associate states in the formulation of the plans.
The council was formed to “strengthen and mobilise the efforts and resources of the nation in support of plans; to promote common economic policies in all vital spheres and to ensure balanced and rapid development of all parts of the country,” and in particulars, are –
(a) To review the working of national plans from time to time.
(b) To recommend measures for the achievement of the aims and targets set out for national plan “(D. Basu Introduction to the constitution of India)”. Since 1967, Union Ministers and Chief Ministers and members of planning commission became members of the council.
For the underdeveloped countries planning for resource allocation and development is deemed essential for achieving a high growth rate and a high standard of living within shortest possible time as well as the effecting significant changes in social, economic and cultural life of the country. Gunar Mydral thinks quite rightly, “The whole complex ideology of planning, in all its manifestations, is essentially rationalist in approach and interventionist in conclusion”.
The free and unplanned economy lacks direction. The uncontrolled business activity bears the risk of unwarranted business fluctuations. A planned economy can tide over these crises.
The unplanned economy may not allocate economic resources in a socially desirable manner and does not increase social benefits, targets only short term objectives with the projects of limited purposes and absolute spirit of profit.
There are some projects which help to improve infrastructure facilities like power, transport, irrigation, health and education. They are capable of producing long term development providing forward and backward linkage effects.
An economy when starts the process of developments makes sizeable investment in public sector (as private sector is not always interested in this huge investment) and follow a planned investment pattern with a suitable strategy for development.
This investment and wide range of economic activities according to priorities is possible only in the planning system. Without planning process, investment is sporadic and discontinuous type may not be capable enough to streamline the production in a project which does not give immediate results.
The problems of underdeveloped economy make it imperative to launch planning to ensure balanced growth of industries and expansion of markets. Planning process being a hormonious one is supposed to give a sense of stability in the market.
This situation obviously gives a better environment of stability in the growth of economic variables. The stable and steady tendencies also make the system free from any fluctuations generating from international propagation of trade cycles.
While there were utter decline in economic variables during the period of great depression in 1930s, the soviet system was free from any major fluctuations while industrial west was in disarray.
According to many economists, planning should have a human face; it should aim at people’s welfare. It should not be dictated from top. The success of economic planning depends on various factors such as consistent policy of the government, internal peace and order, social security, peoples’ participation and cooperation, public enthusiasm, non-bureucratic attitude of the government in the implementation process. A well integrated national and a vibrant socio-economic life can be generated only if there is strong economic planning in the country.
Financial planning is an essential part of the planning process. In this process need for maintaining balance is very important. The plans should have both monetary and financial aspects. Apart from financial aspects a plan has physical aspects also.
They are related with physical targets. They are to be mutually related. Physical plan has to be framed considering the resource endowment, physical needs of economy and other economic realities.
Finance is generated by taxation, borrowing, deficit financing, foreign debt, and other forms of income, such as gift, aid, commission, interest, royalty.
The second five year plan document mentioned that “The essence of financial planning is to ensure that demand and supplies are matched in a manner which exploits physical potentialities as fully as possible without major and unplanned changes in price structure; The estimates of expenditure on various sectors are made a variety of hypothesis regarding the growth of national income, consumption, imports etc. to cover this outlay by taxation, savings and increase in cash. Financial part of the planning is concerned with financial provisions for carrying out physical programmes to meet the physical targets.”
Physical aspects of planning are related to various targets of the economy. Finance cannot be arranged properly unless we decide the sectoral targets. Financial planning is not complete without physical planning.
If financial arrangements are done, but there is lack of materials, physical resources, human resources, inadequate skill formation, lack of infrastructure and logistics there will be mismatch between physical and financial planning. Such a situation will lead to an imbalance, an inflationary spiral and a disequilibrium state of the economy.
Economic planning may be done both at micro as well as macro level. The national planning broad basing and encompassing all sectors for the growth of GDP and level of living as a whole may be considered as macro level planning while micro planning is confined to certain sectors of a specific place, area etc.
The micro level planning also includes decentralised planning, micro-level planning and also includes production or resource planning. But micro level planning needs to be coordinated with the perspective of national planning.
Planning in a country like India should be made with integrating top-to-bottom and bottom to top at all the levels of hierarchy and administrative structure. In the later type a more meaningful coordination will be required.
In this process local people, local institution and local governance have to be associated meet the local aspirations needs. This will give the general mass an opportunity to decide their fate at large and people work for their welfare from the base level. The decentralised planning can help to reconcile quite satisfactorily between limited resources and unlimited list of priorities that is required for development.
The local level or decentralised planning can help in making proper schemes for nutrition, primary health, and education, agriculture and village level industries. This will also ensure end use of resources and increase peoples’ awareness in nation building and institution building.
The decentralised planning addresses the local needs in an effective manner due to identification of specific problems and socio-economic needs in each area.
This process of development also helps the people who are beyond the scope of planning and commercial nexus. The soil, topography and agro- climatic realities vary from area to area.
The local level planning help to give unique opportunity to streamline the process of developmental planning by providing a specific flexible approach in the growth process. These also reduce social tension, extend the participatory process of people in the development, and strengthen the base of democracy.
The success of decentralised planning depends upon a strong political will and effective planning machinery. There is no ground of nepotism, partisan spirit, partiality in the process of decentralised planning and implementation of socio-economic programmes.
Experiences of various states suggest that, there is nepotism and partiality in the implementation of planning process. But this implementation requires a neutral approach so that greatest good of greatest numbers can be ensured. Sometimes many decisions have been taken with a view to benefitting party functionaries who are ruling.
This type of mindset all over the country has sent wrong signal for the functioning Panchyati Raj Administration. In many states adequate delegation of authority was not possible due to red-tapism. The implementation in many cases was benefiting vested interests, contrary to the principles of democratic planning.
A country which has an inequitable structure, in respect of distribution of wealth, ownership of land, distribution of available water, forest resources require true spirit of community participation in the development process. The environmental and forest resources should come under community management and entire local community should be vigilant of the proper management of environment.
Since finance is a problem for all the local level institution so proper taxes can be imposed from the beneficiaries of assets like users of road and water. Toll tax may be imposed for bridges, culverts for maintenance.
A principle of financial self-reliance should work in the functioning of these institutions. Otherwise asset creating process will not be self-sustaining and self-perpetuating.
The village panchayat was a local body since the British days, but Panchayat had to work under government control. When Indian leaders pressed for more autonomy British government decided to give more powers for Panchayats and municipalities.
After India got freedom in the constitution (Art 40) it was stated “The state shall take steps to organise village panchayats and endow on them with such powers and authority as may be necessary to enable them function as units of self-government.” But not much effort was envisaged on the part of governments notwithstanding the Directive of Art 40.
It was considered necessary by Prime Minister Mr. Rajiv Gandhi to reorganise these local bodies by inserting specific provisions in the constitution itself on the basis of which the Legislatures of various states might enact adequate laws according to the guidelines provided by constitutional provisions. This idea culminated into passing of constitution. 73rd and 74th Amendments Act, 1992 which inserted Parts IX and IX A in the constitution Parts IX relates with Panchayats IX A relates to Municipalities.
The new amendments incorporate provisions election of peoples representatives in the local bodies in same manner as is state and union level, reservation of seats for women, a separate Election Commission to conduct election, a Finance Commission to ensure financial viability.
The Amendments provide the provisions by which state legislatures will enact laws which will define details as powers and functions of various organs and other functionaries. Panchayat is a three tier system (a) The village level (b) District level (c) Body standing between village and district level, where states having population more than 20 lakhs.
In all Panchayats l/3rd of total number of seats to be reserved for women.
Every Panchayat shall continue for five year from date of its first meeting. The 73rd amendment also provides for a Panchayat Finance Commission which will recommend distribution of financial resources between state and Panchayats collected from taxes, duties tolls and fees. (6) Which taxes, tolls, fees may be assigned to the Panchayats.
The state legislature can confer right to self government to prepare plans for items like (29 Nos) land improvement, minor irrigation, animal, husbandry, fisheries, education, women, child development etc.
The 11th schedule of constitution distributes power between state Legislature and Panchayati Raj Institution as the 7th Sch. distributes between centre and states.
As far as Muncipalities are concerned the constitution provides power in part IXA. There are some provisions which are similar to those contained in part IX such as finance commissions, reservation of seats for women, SC/ST Election Commission etc.
Municipalities are of three types:
(a) Nagar Panchayat (for a transitional area),
(b) Municipal Council for a small urban area
(c) Municipal Corporation for a larger urban area.
The members of the municipality would generally be elected by direct election. A municipality may be represented by members having special knowledge of municipal administration, members of Loksabha, State Assembly and Rajya Sabha. For one or more words with a population of three lakh or more it would be obligatory for every municipality to form ward committees.
There will be compulsory reservation for 1/3 of seats for women. There will be reservation for SC/ ST members, as per part – IX of the constitution. Every municipality will be elected for Five Years.
The 74th Amendment provides that a Municipality member must be of 21 years, Legislatures of state confers power and authority to be enabling the municipalities to function as institution of self government.
Municipalities are given powers to prepare plan local development, social justice. There is 12th schedule of the constitution which gives power to the municipalities on urban planning, regulation of land use, roads and bridges, water supply, public health, fire services, urban forestry, slums etc.
The 74th Amendment lies down that every state should constitute two committees:
(a) At the district level there will be district planning committee
(b) In every metropolitan area there will be a metropolitan planning committee.
The district committee shall prepare and forward development plan to State Government. Metropolitan planning committee is to prepare for metropolitan area of the state. “The finance commission shall make special provision for financial arrangements and make special arrangements needed to augment the consolidated fund of the state to supplement the resources of the municipalities in the state on the basis of recommendations made by state Finance Commission” (D. Basu, Introduction to the Constitution of India, Wadhwa, Nagpur).
Inspite of the constitutional provisions (73rd and 74th Amendment) many states have not made adequate arrangement for proper arrangements for decentralised planning.