Get Complete Information on the Process of Indian Economic Policy Formulation

Normally, the Government picks up a clue (or a problem) from public domain, constitutes a committee or a task-force to generate policy options, makes ‘necessary political changes’ in those recommendations, and, then, announces its decision at appropriate forums either in the form of an executive order or a legislative resolution.

The character of political system plays a crucial role in identifying and prioritizing problems. As we observe, democracy in India has evolved from a formal democratic system of 1950s to a more meaningful and participative democracy after 1990s.

This led to an environment of ‘more consultative and responsive’ process of policy formulation. It is being reflected in changing ‘policy rhetoric’. Nowadays, no political party talks of setting up of ‘big Public Sector Enterprises’. Instead they are speaking about creating linage business hubs’.

Consult ICE: Transforming Enterprise Policy

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Further, role of mass-media and non-governmental organisations advocating new policy options got acceptance in policy-making process. Creation of National Advisory Council (NAC) consisting of non­governmental activists and headed by chairperson of the ruling coalition is one such example of widening of consultative process.

Notwithstanding the fact that formulation of economic policies is a political process, economists and experts play very important role in the deliberative processes. They are incorporated in Government institutions to make an ongoing consultation possible. They generate policy options based on ‘rational economic and technocratic criterion’.

We have in India a large set of technical, scientific, development organisations/ institutions to provide for an institutional forum for expert advice. The task of detailing the policy documents still lies with the bodies consisting of specialists and bureaucrats within administration.

Some of such bodies/agencies involved in preparation of policy documents for consultation are as follows:


Planning Commission of India: Planning commission is one such organisation. The Planning Commission was set up by a resolution of the Government of India in March 1950, in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community.

The Planning Commission was charged with the responsibility of making assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.

Central Statistical Organisation:

The Central Statistical Organisation is responsible for coordination of statistical activities in the country, evolving and maintaining statistical standards. Its activities include National Income Accounting; conduct of Annual Survey of Industries, Economic Censuses and its follow up surveys, compilation of Index of Industrial Production, as well as Consumer Price Indices for Urban Non-Manual Employees, Human Development Statistics, Gender Statistics, imparting training in Official Statistics, Five Year Plan work relating to Development of Statistics in the States and Union Territories; dissemination of statistical information, work relating to trade, energy, construction, and environment statistics, revision of National Industrial Classification, etc.


It has a well-equipped Graphical Unit. The CSO is headed by the Director-General who is assisted by 2 Additional Director-Generals and 4 Deputy Director-Generals, Directors & Joint Directors and other supporting staff. The CSO is located in Delhi. Some portion of Industrial Statistics work pertaining to Annual Surrey of industries is carried out in Kolkata.

ICSSR was established in the year 1969 by the Government of India to promote research in social sciences in the country. The Council was meant, intcralia, to advise the Government of India on all matters pertaining to social science (including economics) research as may be referred to it from time to time; and take such measures generally as may be necessary from time to time to promote social science research and its utilisation.

The Indian Council of Social Science Research (ICSSR) with 27 research institutes is established to provide regional orientation to research that can be used for policy purposes. All these Hates receive state grants and, therefore, act to the requirements of the pay-master.

Subsequently, few private funded research stations have come up, viz., National Institute of Public Finance and Policy, Centre for Science and Environment, fata Energy Research Institute, Tata Institute of Social Sciences, etc.

Apart from conducting research, these institutes play an important advocacy role by publicizing their studies in the media and holding seminars for the relevant policy-makers. Time to time, the Government also constitutes committees and task forces in which social and other scientists play major roles.

There are other forms of organised advocacy by private interests in the formulation and implementation of public policy. Organised labour (Trade Unions) and their counterparts Trade Associations (FICCI, ASSOCHAM, CII) also influence the policy process through representation and collective actions.

These private organised interest groups are normally well- connected to different political parties as latter depend upon their support for funds and workers during elections. The cost of elections has become almost obscene, requiring candidates to raise hundreds of thousands of rupees just to seek a legislative seat.

The only ready source for such huge sums of money is ‘special interests’. They, of course, have a very direct stake in economic policies.

Recently, with the adoption of economic reform policies in 1991, there has been explicit recognition of the role of markets and non-governmental organisations (NGOs). In fact, the Eighth Plan made a strong plea for greater role of the voluntary organisations.

This resulted into mushrooming of nongovernmental organisations, popularly known as NGOs. Most of these NGOs are registered under the Societies Registration Act, which gives them legal recognition to raise funds from Government and non­government sources. The numbers of such NGOs run into thousands. They also try to influence policy using their micro-level experience as a basis of suggestions for policy options.

In the guise of guidance based upon ‘cross-country experiences’ the external forces also influence the policy formulation in India. We have observed ‘socialistic’ influences during 1950s; and have been feeling ‘pressure for privatisation and liberalisation’ since 1990s.

There has been constant pressure of developed countries to open up fast growing Indian economy for multinational corporations. The subsequent shift in ‘policy framework’ in recent years may be viewed in this perspective.

Anyway, on the record, it is the departments and ministries of Government of India headed by political functionaries (ministers) who supervise the making of economic policies in their respective domains. Normally, these policies are announced with approval of the Union Cabinet. Occasionally, these policy statements are approved by the Parliament in the form of Resolutions/Acts.

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