The year was 2001. Jeffrey Sachs had invited me to a seminar in Harvard, something to do with the Indian economy. As is customary with seminars, some overseas participants were invited to a dinner and I found myself seated next to John Kenneth Galbraith. I was overawed, at his reputation and at his height, even when he was seated.

Galbraith was 93 and his memory wasn’t what it used to be. I didn’t mention one of his standard books, but mentioned Ambassador’s Journal (1969) instead. He said he hadn’t read it and was somewhat surprised to be reminded he was its author. But he perked up at India being mentioned and told me a delightful anecdote.

The Planning Commission was set up by an executive resolution in 1950. I think Galbraith may have got the chronology somewhat wrong, since Milton Friedman’s memorandum to the government of India was written in 1955, when Friedman was a consultant with the finance ministry, and not the Planning Commission. Nevertheless, here is the Galbraith story.

Press US for Help

The Planning Commission having been set up, Prime Minister Jawaharlal Nehru wrote to President Dwight Eisenhower (the Kennedy-Galbraith era came later), requesting that an American economist be sent to aid the planning process. The US obliged by sending Milton Friedman.

It didn’t take long for Nehru to send a horrified letter to Eisenhower.

“We asked you for help in the planning process and you sent someone who doesn’t believe in planning. Please send someone else instead.” Or words to that effect. Galbraith turned up as a replacement.

Galbraith vs Galbraith

Galbraith travelled across the country and was disgusted at what he saw. In published print, he would later use the derogatory expression “postoffice socialism” after he returned to the US. But before that, he wrote a nasty confidential report and submitted it to the government. Having submitted the report, he started to travel around the country again, this time for pleasure rather than business.

In that day and age, this often meant being incommunicado. On his return to Delhi, he discovered a debate raging, at least within Parliament. The debate, circa 1956, was between Ashoka Mehta and Nehru, circa 1956. Mehta was then with the Praja Socialist Party. He would become deputy chairman of the Planning Commission and join the Congress later.

Galbraith hadn’t signed his name on the report. It was anonymous, so to speak. The report leaked and Mehta got hold of a copy. Nehru brandished the report and argued: we have a report by a famous American economist and it vindicates our policies. Ashoka Mehta brandished the report and argued: we have a report by another famous American economist and it demolishes your policies. Both read out selectively and neither realised it was the same report and the same economist.

Is this Galbraith anecdote true? I have no idea. I did find out that there was indeed such a debate between Nehru and Mehta. The story is so delightful and bizarre that it must be true. No one can cook up something like this. Not even Galbraith.

“The work of the Planning Commission will affect decisively the future welfare of the people in every sphere of national life. Its success will depend on the extent to which it enlists the association and cooperation of the people at all levels. The government of India, therefore, earnestly hopes that in carrying out its task, the commission will receive the maximum support and goodwill from all interests and, in particular, from industry and labour.” This is a quote from the March 15, 1950, Cabinet resolution that set up the commission.

Planning No More

This can be contrasted with the enormous negativity now associated with the Planning Commission (state governments about centrally-sponsored schemes, citizens about poverty lines and toilet renovation). That original resolution had almost all of its entire focus on planning. Planning, in its centralised sense, is dead. Its heyday was probably the Second Five-Year Plan (1951-56).

After that — barring a slight resurgence during the Fourth Plan (1969-74) — thanks to the advent of computers, it has been more of the same, the nth version of the same Plan. (Did you know the number of variables in Plan models was determined by the number of variables a computer program could handle?)

The Planning Commission may be dead, with the adjective consciously excised. But there are reasons one needs a replacement. First, something has to intermediate between the Union government and states, subsuming the National Development Council (NDC) and the interstate council.

Second, all finance ministries seek to slash deficits. This is done by cutting Plan and/or capital expenditure. Some entity has to exercise countervailing pressure as a voice of the state governments and social sector ministries. Third, some entity has to be a storehouse of data and improve its quality (subsuming the National Statistical Commission). Not all data originates outside the government system.

Fourth, someone has to devise incentive mechanisms for desired decentralising/devolving reforms. Humpty Dumpty received a un-birthday present. This Humpty Dumpty has fallen down. The Planning Commission is dead. But we still need an Un-planning Commission.