[Revision] GS3: Economy-Planning, Budgeting, Resource mobilization & Farm subsidies

gs3 Planning Commission

[Revision] GS3: Economy-Planning, Budgeting, Resource mobilization & Farm subsidies

  1. Prologue
  2. [Block-1] Planning commission (PC) why replace?
    1. Modi’s NDRC
    2. Productivity commission
    3. SriKrishna’s FSLRC
    4. New Financial sector regulators
    5. PDMA Debt Management
    6. PJ Nayak Committee
  3. [Block-2] Budgeting reforms
    1. Bud1: FM 4 kharchaa-Paani
    2. Bud2: Feedback Loop
    3. Bud3: Curbing fiscal deficit
      1. FD1: Disinvestment Keypoints
      2. FD2: Fuel subsidies curbed
      3. FD2A: Diesel deregulation: benefits of
      4. FD2B: Modified DBT
      5. FD3: 10% cutdown in Non-plan Expenditure
  4. [Block-3] Banking sector
    1. B1: Why Monetary policy ineffective?
    2. B2: Urjit Patel’s reforms 4Monetary Policy
    3. B3: RajanBhai’s monetary policy
    4. B4:Jan-Dhan
    5. Nachiket Mor: financial inclusion
    6. Small Banks and Payment banks
  5. Misc.Short term reforms
  6. [Block-4] Farm subsidies, buffer-stock, PDS
    1. MSP, FCI, procurement
    2. Fertilizer Subsidy reforms
    3. Sugar pricing (Government intervention)
    4. National Food security Act (NFSA)

Prologue

Revision of selected topics for GS3 syllabus:

  1. Issues relating to planning, mobilization of resources
  2. Government Budgeting.
  3. Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System
gs3 Planning Commission

let’s begin from red circle no.1

Planning, budgeting and resource mobilization should be seen from three stage economic reforms. (as suggested by Economic survey)

Duration Focus Action
Long term
  • Administrative
  • legislative
  • regulatory reforms
  • Replacing Planning commission
  • setting up performance commission
  • Srikrishana’s FSLRC
Mid-term Budgeting
  • Feedback loop, performance based budgeting
  • Reducing fiscal deficit
  • Separate body for public debt  Management
Banking
  • Urjit monetary policy reform
  • Jan Dhan
  • Nachiket Small / payment banks
Short term Stroke of a pen @individual ministries MoEF reforms in 100 days.

[Block-1] Planning commission (PC) why replace?

Structure functions = read from M.Laxmikanth. Planning commission sucks because:

  1. Achieved >9% GDP growth-rate during 2005-07, thanks to American boom prior to sub-prime crisis, pretty much all nations of world experienced high growth. So 9% GDP did not come from Montek’s magic wand.
  2. Post sub-prime crisis, failed to evoke the “animal spirit” in Indian economy. GDP going down, inflation going up for 2008 to 2013.
  3. Reduced poverty by doctoring the BPL-line. Tendulkar line says 27 crore BPL, if we use Ranga line then 37 crore BPL. Planning commission brags reducing poverty line on Tendu’s parameters.
  4. Toothless body, can’t hold State/union/ministries/departments accountable for failing to achieve targets.
  5. Hopes that CAG =>Public accounts Committee will take care accountability part. But PAC too is pretty much toothless.
  6. Failed to implement land reforms. Faulty policies for MSME, industrialization, Factory-labour law problems we saw in GS2 MFG revision note.
  7. Office manned by Generalist IAS/IES with short tenure; panel members filled with academicians and jholachhap NGOs. Need subject specialists with international exposure like Rajanbhai.
  8. Designed CSS with One size fits all approach and a few extra crores to NE/J&K/Hill-states and LWE.
  9. But for long, it did not use pilot projects / sample testing / interaction with states.
  10. Hence, IAY, ICDS etc. programs failed to show tangible result despite pumping crores.
  11. Tried to bypass state Governments via NGO-funding, DRDA. Hence States unenthusiastic about implementing Central-schemes named after you know who.
  12. Only in 2013- reforms done like reducing # of CSS, 10% flexifund to states, direct transfer of money to state consolidated fun etc. But it’s too late.
  13. Shortcomings in planning commission => new bodies sprung up like PM’s economic advisory council, PM’s project monitering group and so on=> more brains=> more lack of coordination.
  14. Modi says planning commission (PC) is beyond fixing- just like Gotham city and Delhi city. Wants to replace it with a body similar to China’s National Development reform commission. (NDRC)
  15. Moily says NDRC good for China but not suitable for federal nation like India. Better restructure PC again by addressing above 13 bullets.

Modi’s NDRC

Modi wants to replace PC with a body like China’s NDRC. (or atlest experts say so). Let’s

Chinese NDRC doing following India present system
Makes macro-economic policy FM+RBI
Approves investment & construction projects CCI, FIPB and many other bodies @union and state level.
Energy & oil policy Oil ministry, DG Hydrocarbon
Looks after Poorer Western Provinces Separate ministry for NE Development
Parent: State council headed by President of China Headed by PM. Disinvestment in ONGC, CIL etc .

In short, Chinese NDRC controls pretty much everything, just like a communist unitary Government would want. Hence Moily’s criticism- NDRC unsuitable for Federal India.

Productivity commission

  • Problem in Environment laws so TSR Subramanium Committee, Problem in railway so Bibek Debroy Committee, problem in IPR so Prabah Sridevan Committee…..such piecemeal approach and firefighting must stop.
  • Economic survey says create a separate Statutory body called Productivity commission”.
  • To Review laws, regulations, processes continuously.
  • Publish report cards of each ministry and department.
  • Advanced economies have such bodies.

SriKrishna’s FSLRC

Recent scams and solutions taken
Sahara-scam SEBI ordinance
NSEL scam FMC shifted to FM
Saradha chitfund scam Plan to amend Chit fund act
  • Such piecemeal / firefighting approach => scamsters shift base from one sector to another, use technicalities and loopholes to get stay orders & escape.
  • Hence we need comprehensive reform in financial rector regulators.
  • 2011: Government setups Financial legislative reform commission under Justice BN Srikrishna.
  • Gave two type of reforms (1) non-legislative  (2) legislative

Legislative reforms:

  • Present: dozens of acts for banking, insurance, provided fund, forward market, NBFC etc.
  • Srikrishna says repeal them all, and enact a new law “Indian financial code”. (IFC)
  • IFC will be a single, unified financial law with precise objectives; clear-cut jurisdictions for fin.sector regulators with adequate checks and balances.

New Financial sector regulators

FSLRC financial sector regulators in India

Financial sector legislative reform commission (FSLRC) recommended this

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