The new economic policy (NEP) envisages rapid industrialisation with modernisation aimed at attaining faster GDP growth. The key conditions introduced by NEP for this kind of industrialisation and growth are:
Substitution of the market and private enterprise for planning and public sector leadership in industry.
Orientation towards exports production in place of import substitution.
Removing the capital goods bias in resource allocation and allowing the market to allocate resources.
The NEP finds its origin in the rise of neo-liberalism during the 1980s and 1990s, which emphasizes economic decision-making by the market and limits the role of the state to rule-setting and contract enforcement.
The thrust of the NEP is to create a more competitive environment to improve the system’s productivity and efficiency.
This is to be achieved by removing barriers to entry and restrictions on the growth of firms. While the industrial policy seeks to foster greater domestic competition, the trade policy aims to improve international competitiveness while maintaining protection through tariffs.
Competitiveness implies:
The private sector is being granted a larger role, with some areas previously reserved for the public sector now open to private participation. The public sector will still play a dominant role but must compete with private enterprises, fostering improved functioning through competition.
The NEP does not diminish the role of the State or the public sector.
The government retains primary responsibility for developing physical infrastructure such as irrigation, energy, transport, and communication, and social infrastructure sectors including literacy, health, population control, and environment.
It will continue to initiate and administer special programs for the poor and disadvantaged since growth alone will not address their problems. However, public sector investment must become more focused with a clearly defined role.
Recent plans have identified principles guiding public sector investment:
Planning in India must balance the changing roles of government and market to ensure better growth through greater efficiency. The key roles of economic planning include:
Planning in India is increasingly indicative, providing broad economic direction rather than detailed control. The benefits include:
Successful indicative planning demands new expertise and organisational structures beyond current capacities. This includes:
Indicative planning is also described as non-centralised, weak, and non-directive planning that coordinates effective intervention to overcome market limitations.
The Planning Commission may have its role and functions redefined, but it must retain the stature it deserves as a major instrument for federal resources transfer and the development process.
It should operate as a federal agency, maintaining neutrality between the Centre and States, adopting a professional approach free from political influence. The National Development Council (NDC) must convene regularly, endorsing the plan strategy and overseeing periodic monitoring of economic performance.
The Commission serves as an allocational body, focusing on areas like infrastructure and environment, while also promoting the private sector. This necessitates active involvement in promotional activities.
Sectoral investment planning remains crucial in bridging gaps where individuals and entrepreneurs struggle to identify opportunities or anticipate challenges.
The planning process must assess development resources and propose sustainable augmentation methods. Since planning covers the entire nation, these strategies involve governments at all levels and other societal sections.
A key task is to identify emerging vulnerabilities and recommend measures. While detailed policies lie with ministries or states, broad directions should come from the planning system to prevent short-run fixes that may harm the economy.
There is a necessity for a robust monitoring authority to regulate economic variables and prevent resource wastage. Priority setting in resource use and expenditure is a fundamental responsibility of the Planning Commission.
The Planning Commission must engage in long-range planning, exploring alternative scenarios in vital sectors such as energy, telecommunications, transport, social sectors, and technology.
Programmes under the “new post-Washington Consensus reforms” need coordination and sequencing, maintaining inter-sectoral and inter-temporal consistency, transparency, accountability, and public debate.
The Commission must focus on “planning for policies,” acting as a bridge between states, the Centre, ministries, and departments. It is the link between present and future development, serving as the nodal agency for policy planning.
A study suggests the Planning Commission could function as a Fund for Public Investment (FPI) for both Centre and States. Like a development bank, it would provide long-term finance domestically and abroad, appraising project feasibility, economic and social returns, and borrower soundness.
The planning system may be broadened to include business enterprises, as seen in France. This inclusion would incorporate private sector views, making plan projections more influential on private production decisions.