Financial Daily from THE HINDU group of publications
Monday, Sep 09, 2002
Columns - Vision 2020
Vision 2020 The importance of planning
P. V. Indiresan
THE Prime Minister asked for 8 per cent growth, and the Planning Commission agreed. Now the Commission is having second thoughts. One suspects that these days planners are having nightmares rather than dreams. They suffer from two kinds of doubts: One, is such a high rate of growth possible? Two, is that desirable either? The short answers are: Yes! Eight per cent growth is possible but not probable. Such growth is also desirable but only when it sustains good environment, and reduces economic disparities too.
Intellectuals, they are convinced that the Tenth Plan is stillborn, and cynically talk of writing its obituary. Such critics of planning fail to observe that successful governments, even those like that of the US, plan even more than we do. Few of them have cared to stop and wonder why New York City roads are as precisely geometrical as they are.
Back in 1892, when New York was no more than a small town, the planners of that city planned roads for possible expansion in the distant future, and froze the pattern of roads and streets, determined even their widths, and reserved space for them in perpetuity.
A few years later, they installed mass rail transport for commuters. They planned so generously that to this day New York operates quite efficiently, and enjoys the fruits of that plan laid over a hundred years ago.
In other words, we have committed two kinds of mistakes: One, we planned in excessive detail. Two, we neglected to check that no act of omission and commission will choke future growth. As a corrective for past mistakes, we are talking these days of a bottom-up approach. The bottom we are considering is that of administration, ideally Panchayat Raj. However, at the real bottom, there are people not administrations, not even local ones. Catering to the political demands of faction-ridden local administrations and Panchayats is not the same as meeting the needs and wants of people. That is the critical flaw of our bottoms-up approach.
A plan for the people may be defined as one that will maximise the supply efficiency of all that people need and want. Private Final Consumption Expenditure (PFCE) is one indicator of what people want. Household investment in physical assets is another. A people's plan will aim to maximise the supply of both these. Even though markets are better equipped to provide them far better than governments, the latter are needed to regulate markets, and to remove impediments to the smooth operation of markets. Regulation is in the domain of administration. Checking that no impediments will emerge at any time is the task of planners.
If this approach is accepted, the ultimate PFCE (and household physical investment) that India is likely to reach should first be estimated. For instance, due to physical constraints, India may never attain the extravagant consumption levels of the West. Instead, its per capita income will probably saturate at the world average of today four-five times the current level on a Purchasing Power Parity basis. If efficiently distributed that would be adequate to raise Human Development Index close to 0.9, which is good enough.
In its wake, that order of development will bring substantial changes in the pattern of PFCE. In general, the share of food will decrease substantially but that of household durables would increase. People would take more holidays and spend more on entertainment. A guesstimate of what PFCE would be like when India's per capita income increases 4-5 times may be obtained by looking at the pattern of PFCE in countries that have already reached that standard of living.
Whether India attains that much prosperity or more, and how fast it will do so, will depend on how smoothly production can be raised. In turn, that depends on the quality and quantity of infrastructure at each and every moment.
Even momentary bottlenecks can do much harm both to the rate of growth and to its quality. That is, public investment in infrastructure should at all times remain ahead of private expansion of both PFCE and investment in housing. In this respect, roads, land for construction, and energy are particularly crucial.
Health services (including supply of drinking water), and education too are important. It is the duty of planners to check that these elements of infrastructure are in place before demand picks up, that their supply always remains comfortably above peak demand.
Investment in education, water supply, health services, power supply and even roads may wait till demand looms on the horizon. In their case, it would be enough to be ahead of peak demand by a couple of years.
However, space for these services will have be to set apart here and now in anticipation of demand that may materialise only 50/100 years hence. That is what New York did, and we did not, and are not even thinking of doing so. If we do not set apart space today for the roads, housing, parks and playgrounds that may be demanded a hundred years hence, it may become impossible to establish those facilities in required quantity and quality when people actually demand them. For instance, New York planned the Central Park long years ago. If it had not, it would have been like Chennai with no recreation space at all. Neither New York nor Chennai can add playgrounds any more.
New Yorkers planned for future space without waiting for the market to give its signals. They did not plan steel mills, which they left to the dictates of the market. We have done the opposite. We planned steel mills without waiting for the market to develop; we made no room for future needs of roads and recreation but left that to market demand. That has been the cardinal mistake in our planning.
India is expected to stabilise at a population of about 1.7 billion of which the urban share may be as high as 1.4 billion.
A wise planner will reserve enough space for that degree of urban expansion, for roads to interconnect urban centres, and even space for streets and playgrounds. If that is not done today, that will definitely become impossible tomorrow. At any rate that will become so expensive that growth will be choked.
Delhi has more cars than Chennai, Kolkata and Mumbai put together. That is not because Delhi is richer than the other three cities taken together but because it has more and wider roads than the others. Delhi supports a much larger market for vehicles, and the employment that goes with them, than other cities do because, only because, for all its faults, the Delhi Development Authority has a clear road plan; the other cities have no such ideas.
None of the other cities can ever support vehicle population as well as Delhi because it is too late for them to expand their roads. To that extent, those cities are doomed never to grow as well as Delhi has done.
Even if it is argued that expansion of car population is of doubtful value, those cities can never offer the physical quality of life that Delhi will offer with its wide roads and extensive gardens.
In other words, plans need not be made for nuts and bolts but they are essential to prevent future bottlenecks, particularly in the urban areas. Even though cities cannot be forced to develop exactly as planned, if enough cushion for the future needs of urban space is created now itself, the economy will grow smooth and fast. The converse also is true: Without adequate room for expansion of urban space as also highways and urban streets, development will be disorderly and tardy.
Because we have overlooked this basic need of planning, both urban and rural growth has become chaotic, corrupt, and inefficient. Our development has become an environmental disaster with slums erupting all over and most roads choked beyond repair. Further, it has retarded the rate of economic growth too.
Fortunately, there is even now some scope to rectify past mistakes. For instance, it is not too late to reserve enough space for streets and open spaces of a future city of, say, 300,000 population, in each and every rural development block.
Similarly, plans for inter-city roads can be laid. Once that is done, that space for both cities and for their inter-connection should be preserved in perpetuity, and with even greater strictness than the way forests are even now protected (at least in theory). Much of that space may not be needed ever, but future generations will bless our planners if they do so now itself.
It was pointed at the outset that rapid growth is desirable only when it sustains good environment, and reduces economic disparities.
Apart from being an essential prerequisite for maximising growth rate, long range pre-planning of space will ensure that both conditions will be met.
The Plan is dead! Long live the Plan!
(The author is a former Director of IIT Madras.)
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