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Asia-PacificOctober 3 2004

Montek Singh Ahluwalia

Deputy Chairman, Planning Commission
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Soon after Dr Manmohan Singh took over as India’s prime minister in May, he called his trusted lieutenant, Montek Singh Ahluwalia, to return home from Washington where he was working as the director of the International Monetary Fund’s independent evaluation office. As finance secretary in the ministry of finance in the early 1990s, the 61-year-old Oxford University-trained economist worked closely with Dr Singh, then finance minister, to conceive and execute India’s economic reforms. Mr Ahluwalia is now back in New Delhi as deputy chairman of the planning commission, a government panel that, somewhat ironically, was at the heart of economic planning in India’s socialist past.

Mr Ahluwalia says he is certainly no believer in the virtues of centralised planning. The tone of the commission’s reports in the recent past was “not exactly friendly” to the market-oriented reforms started by the government. Dr Singh’s job is to reinvent the commission to act as a think-tank on economic policy for the new government, and as a key agency for public investment. “In the past, the commission’s job was mainly to allocate funds to various ministries and government projects. There was not much evaluation done on how the money was spent,” he points out. To get a sense of the resources at the commission’s command, the budget for this year is $32bn, larger than the sum the World Bank allocates to the developing world, he says.

A mid-term plan review is under way, and for the first time, Mr Ahluwalia invited multilateral lenders, economists, trade unions and non-governmental organisations to participate in the assessment. Drawing in the private sector as a partner in the development of public infrastructure will be a key focus. “There are many canals, ditches, tanks, water bodies that need investment but the private sector is unlikely to be interested in them. The government must make those investments; we have no intention of taking up projects that can be left to the private sector,” says Mr Ahluwalia. Yet his intervention in the workings of this government are not likely to be welcomed by all its constituents, given that most ministers drawn from the coalition are likely to resent encroachments on their turf. He seems mindful of that, pointing out that the commission is not out to take credit for what works in the government, just to set right what does not.

As a member of the planning commission before he left on his assignment to the IMF in 2001, Mr Ahluwalia authored a paper presented at Stanford University on the uneven impact of economic reforms on India’s federal states, which had meant the developed states had grown faster than the underdeveloped ones. This, he said, was because once industrial licensing was abolished, the government could no longer push private investment into backward regions, and states that were more market-friendly attracted higher investment. Critics point out that the government should step up public investment in weaker regions, while others believe that the competition between states to attract investment and create new jobs would eventually remove those inequalities. That debate is alive today as the new government talks of reform with equity, and it is up to Montek Singh Ahluwalia to settle it.

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