Column: Chinese planning lessons for Modi

Updated: Aug 21 2014, 07:14am hrs
The National Development Reforms Commission (NDRC) in China seems to have influenced Indian Prime Minister Narendra Modis decision to replace the Planning Commission with a similar body. Before such an entity is up and running, it is useful to take a closer look at the influencing agency itself.

The NDRC in China replaced the State Planning Commission from 2003. It has since functioned as a macroeconomic management agency, reporting directly to the Chinese State Council. The Commission performs a huge array of functions across twenty-six departments. In this respect, it is almost as large and diverse as Indias Planning Commission that has thirty-one departments.

The NDRC is organised into departments reflecting strategic priorities of the Chinese government such as regional economy, rural economy, climate change, fiscal and financial affairs, laws and regulations, policy studies and economic reforms. While some of these reflect the sectoral priorities of the Indian Planning Commission too, the NDRC has much greater thrust on industry and investment, which is evident from its divisions on industry, basic industry, hi-tech industry, fixed asset investment and foreign capital and overseas investment. Along with industry and investment, the NDRC is equally focused on regional development through the departments of regional economy, western region and northeastern region. Resource conservation and climate change are its other major priority. Unlike Indias Planning Commission, it has a specific division on prices.

Interestingly, the NDRC does not focus on health and education, at least not through separate divisions. Nor does it, in any way, act as an interface between the Centre and the provinces, as the Planning Commission does. But it has extensive review and approval powers, particularly for industrial investment proposals.

Apart from the obviously larger focus on industry, investment, macroeconomic policies (including reforms) and emerging issues (climate change, regional disparities), the NDRC China has three major functions. All these three functions set it apart from the Planning Commission.

First, the NDRC is the key agency in deciding the countrys strategic policies on natural resources. The National Energy Administration (NEA) is located in the NDRC. The NEA not only formulates energy development plans and policies, it also contributes substantively to R&D activities in the energy sector as well as taking the lead in fixing energy pricing and finance. The NDRC also manages Chinas strategic petroleum reserves. In addition to energy, the State Grain Administration in the NDRC prepares policies for long-term macro-management of grains in the Chinese economy including grain storage, procurement, distribution, and pricing, as well as administering quality standards. The third resource management role of the NDRC is in formulating policies for mobilizing strategic material resources for China.

The second function of the NDRC, larger and more exhaustive than the plan panels, is in its international cooperation agenda. The NDRC has the responsibility of working on not only institutional foreign collaborations, but also fostering economic diplomacy by guiding Chinese embassies on various economic matters and providing the economic perspective on foreign affairs. This unique and under-discussed role of the NDRC makes it a critical actor in Chinas global commercial diplomacy.

Finally, the NDRC acts as a bridge between macroeconomic policies and their effective communication to the top brass of the Communist Party of China (CPC). This is done through the NDRCs leadership team comprising the chairperson, seven vice-chairpersons (including five minister-level appointees), senior supervisory commissioner, members, secretary general and deputy secretary generals. Other than the leadership, the NDRC has total staff strength of around 900.

Over the little more than ten years that it has been around, the NDRC has assumed enormous control over the Chinese economy. Widely touted as Chinas economic policy factory, the NDRC is the countrys most powerful economic agency with the authority to have almost the last word on macroeconomic policies and economic reforms. Almost because, Chinas top decision-making authoritythe Central Politburo Standing Committee of the CPCincluding the Chinese President and the Premier, has the final say on policies. But the strong integration between the CPCs top leadership and that of the NDRC has entrenched the strategic influence of the Commission.

The NDRCs enormous clout has had its downsides. The new Chinese leadership, under President Xi Jinping and Premier Li Keqiang, has actively encouraged internal reforms for the NDRC, to cut its review and approval authority and increasing the policy content. Clearly, the Commission has outgrown its mandate. Rather than encouraging growth of market behaviour, it was retarding it through an overarching regulatory sweep.

Indias effort to establish an alternative to the plan panel has a few lessons to pick up from the Chinese experience. The first is in the degree of strategic and functional importance of the agency. The NDRCs importance, in this regard, has been massive. Granting similar authority to the Indian body would imply making it more powerful than most ministries, probably second only to the PMO. Without such power, however, it might just become an advisory body with notional significance such as the Economic Advisory Councils to the Prime Minister.

The second important decision would be in fixing the ambit of the agency. It might be asked to prepare the vision for the countrys macroeconomic policy framework; within the framework, it needs to identify priorities. Making an Indian NDRC work on every aspect of the economy would be a futile exercise. There must be clear priorities in this regard.

With the Prime Minister seeking suggestions on the mandate and constitution of the body, it would be good to keep the Chinese experience in mind: both the upsides and downsides.

Amitendu Palit

The author is Head (Partnerships & Programme) and Senior Research Fellow with the Institute of South Asian Studies in the National University of Singapore. He can be reached at [email protected] Views are personal