The NITI Aayog mirage

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Updated: Jan 15, 2015 1:55 AM

Panagariya’s challenge is to ensure the body plays an effective role in policy-making even without the Five-Year Plans

With eminent economist Arvind Panagariya taking over as the first vice-chairman of the NITI (National Institution for Transforming India) Aayog on Tuesday, the erstwhile Planning Commission is formally dead.

While the NITI Aayog gears up to meet the high expectations created around the institution, questions are already being raised as to what has changed in the Yojana Bhavan (now the NITI Aayog Bhavan). The Prime Minister remains the head of the NITI Aayog as was the case in the Planning Commission, you have a vice-chairman now in place of the deputy chairman, and a CEO instead of a secretary, who is incidentally the same official. Then, two full-time members—economist Bibek Debroy and former DRDO chief VK Saraswat—have been appointed for now, and Union ministers Rajnath Singh, Arun Jaitley, Suresh Prabhu and Radha Mohan Singh are the ex-officio members, while Nitin Gadkari, Smriti Irani and Thawar Chand Gehlot are its special invitees.

While setting up the Planning Commission in March 1950, the declared objective of the government was 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. It was given the responsibility of making assessment of all resources available in the country and formulating Plans for their balanced utilisation.


So what is the NITI Aayog supposed to do? “The Centre-to-state one-way flow of policy, that was the hallmark of the Planning Commission era, is now sought to be replaced by a genuine and continuing partnership of states. The NITI Aayog will emerge as a ‘think tank’ that will provide governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of policy,” said the government release announcing the creation of the Aayog. Fostering cooperative federalism, making states stronger, expediting implementation of various schemes, and ensuring better Centre-state coordination are among its identified goals.

Clearly, constitution-wise and in terms of objective, not much has changed as the Five-Year Plans, too, had moved away from a completely socialistic framework to the ones accommodating the realities of a market-led economy after 1991.

Function-wise, however, the NITI Aayog appears to be playing a much larger role in setting the agenda. But in the absence of the Planning Commission’s crucial power of formulating Plans and deciding on devolution of central funds to the states, its predominant job will be to be the idea box for the Centre and the states.

How effective this change will be in deciding the growth path in the coming years will depend on how successful the NITI Aayog turns out to be in convincing the policy-makers, especially Prime Minister Narendra Modi, about the changes that it proposes. Though Panagariya has been a proponent of the Gujarat model of reforms and the governance style of Narendra Modi, balancing the interests of the states is a different ballgame altogether, especially when the NITI Aayog has no real financial power.

The Planning Commission’s main problem was that it became too powerful in forcing its ideas during the UPA regime because of deputy chairman Montek Singh Ahluwalia’s proximity to the then Prime Minister Manmohan Singh. States thought the institution was part of the central government and that it ignored their interest.

Panagariya’s main job would be to bring states on-board to first develop a common minimum national agenda and then state-specific agendas. This would require complete dismantling of the Five-Year Plan process which has been fairly successful in at least setting the goals for the next five years.

The growth figures during the NITI Aayog regime would be judged against what has been achieved during the Plan period. If the 12th Plan, which is to continue till 2017, is scrapped mid-way—something that looks to be a clear possibility now with Panagariya not being in favour of the Plan-led economic development—the NITI Aayog needs to quickly formulate a fresh growth strategy for the next few years till it gets into the long-term perspective planning mode.

In the past, governments have changed but the Five-Year Plans were not abandoned, which ensured continuity and successive governments found ways to continue with the process.

The first Five-Year Plan was launched in 1951 and two subsequent Plans were formulated till 1965. Then, there were three annual Plans between 1966 and 1969, due to the Indo-Pakistan conflict and two successive years of drought and economic distress. The fourth Five-Year Plan was started in 1969 and two rolling Plans came into force during 1978-80. The eighth Plan also could not take off in 1990 due to the political uncertainties at the Centre and 1990-91 and 1991-92 saw annual Plans. The eighth Plan was finally launched in 1992 after the initiation of structural adjustment policies.

The NDA government also needs to be cautious in jumping off the Plan wagon without a formidable strategy in place.

This doesn’t mean it should not do that. In any case, the mid-term appraisal of the 12th Plan is due and most of the 12th Plan’s projections have gone awry because of the sub-5% growth in the last two financial years as against the target of 8%.

In effect, though, the NITI Aayog will never have the same kind of say in policy-making that the Planning Commission had, without the Five-Year Plans.

Read between the lines and it is clear that, in the NDA regime, Prime Minister Narendra Modi will be the supreme authority in all policy matters and the finance ministry will handle all the funds and financial matters under his guidance. The rest will have to play the implementation part efficiently.

The Budget for FY16 in February is set to outline the policy roadmap of the NDA government for the rest of its five-year tenure.
The NITI Aayog’s job, then, will be to attune these policies and schemes to suit the needs of individual states and also suggest mid-course corrections and modifications.

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