The niyati of Niti Aayog

Published: January 7, 2015 12:09:19 AM

The niyati (destiny) of the Niti (policy) Aayog lies in founding it on an appropriate yojana (blueprint)

The Prime Minister may have revealed some of his thinking on the Niti Aayog (National Institution for Transforming India), the institution set to replace the Yojana Aayog (Planning Commission). To make this transition revitalising for India’s development efforts, it is necessary to reflect on the lessons learnt from the Yojana Aayog’s recent work and focus on some other concerns vital for transforming India. Indeed, the niyati (destiny) of the Niti (policy) Aayog lies in founding it on an appropriate yojana (blueprint).

The Yojana Aayog’s performance in the past two decades is, at best, a mixed one. A large part of the success of the Tenth and Eleventh Five Year Plans is due to private-investments-led growth spurt in a supportive macroeconomic and global environment. Its focus on infrastructure development was marred by turf-wars with ministries and implementation delays. Though it found resources to speed up social sector development (education) and for social security (NREGA) by expanding centrally-sponsored schemes, the next round of results are less likely to come from more of the same approach.

There is a need to contextualise and exercise state-level ownership on social sector programmes. Financial decentralisation to the lowest tiers of the government for improved efficiency in public goods delivery is essential. Yet, given the disparities across states and the magnitude of development gaps, it is nobody’s case to suggest that there is no place for a federal entity with some allocative role in the pursuit of balanced regional development in India. The question is, should this role be kept outside the preview of the Niti Aayog, as has been argued?

It has been suggested that the allocative role of the Yojana Aayog be shifted to the finance ministry and the dual economic and functional classification of public expenditure in terms of revenue/capital and Plan/non-Plan be discontinued. Instead, the finance ministry should take a consolidated view of public expenditure. There is some merit in this argument as the increase in public social sector spending is mostly in revenue expenditure, which could be allocated as non-Plan transfers to implementing entities. But there are good reasons for not adopting such an approach for at least another decade. Unlike non-Plan expenditure, Plan expenditure requires a longer-term perspective, which is less likely to happen in a finance ministry under stress to protect its fiscal bottom line. Longer-term commitment for planned expenditure benefits from a non-adversarial assessment, independent of those who control the purse strings (finance ministry) and those who implement the programme and may, thus, have vested interests in its continuation. Also, a planning process housed in the finance ministry is likely to be technically driven. The success of the Niti Aayog lies in restoring the balance between the technical and political (federal) drivers of the planning process.

The finance ministry manages macroeconomic policy and has its hands full with providing a real-time response to the challenges facing a globalised economy. It would be better off by focusing on bridging capacity gaps in tracking global developments and strengthening its capacity for economic forecasting, rather than getting embroiled in domestic politics of resource allocation between competing sectors and states.

It has been suggested that allocation of Plan resources could be tasked to the Finance Commission, which is required to make recommendations regarding the sharing of Union taxes, principles governing grants-in-aid to states and transfer of resources to local bodies, and any other issue that has a bearing on Centre-state financial relations. These tasks are the very pathways for the country’s planning and financial decentralisation, to address the problems of vertical and horizontal resource imbalances in a federal entity. In making its periodic awards, an objective assessment of the changing socio-economic realities of states will make the Finance Commission contribute to right-sizing of the role and importance of the allocative functions entrusted to the Yojana Aayog’s successor. At the same time, the allocative role that continues to be relevant for a federal entity cannot be entirely divorced from the political process. Planning cannot be reduced to a mechanical exercise of earmarking public expenditure across competing needs. It has to respond to the evolving needs and concerns, especially for a society in transition. By divorcing the allocative role from the agency’s policy advisory functions will make that agency a toothless tiger.

On the think tank role, the performance of the Yojana Aayog has been far from satisfactory. Despite being the best-placed institution, to concert the stakeholders across the country, it failed to build the much-needed consensus and in implementing structural reforms when the opportunity arose in the last two decades. The Yojana Aayog does not have an adequate information base to address distributional concerns and monitor social indicators of progress and inequalities. It failed in building up on its initiative of preparing a state-level broad-based development scorecard after the release of India’s National Human Development Report in 2002. It confined itself largely to economic planning, even as governance failures, more generally, began undermining the country’s development momentum.

There are two main factors that eroded the credibility of the Yojana Aayog and its capacity to deliver on its mandate. First, the move to give the leadership of an inherently political process to a technocrat, albeit a good one, but with no political capital to invest for consensus building on the reforms and at a time when regional political parties were gaining strength, undermined the effectiveness of the institution. Sustaining reforms needs a fine balance between proactive political backstopping and deployment of expertise to address the issues. This was demonstrated in the success of the team at the helm of economic reforms in the early 1990s. It depends on the economic environment and the constraints that may impose on decision-making. The situation on these counts has changed sufficiently.

Second, the Yojana Aayog is more bureaucratic and hierarchic today than at any time in the past. From the mid-1990s, senior civil servants occupying top positions in ministries, who had to make place for others knocking at their doors, were practically dumped as principal and senior advisers in the Yojana Aayog. This meant an additional layer or two of disheartened civil servants between the working middle and senior level professionals and the experts (members) who provided the overall subject leadership at the Yojana Aayog. Barring a few, most advisers were ill-prepared to meet the challenges of the new assignment. The inertia from their past positions encouraged them to seek more of an executive role in the dealing with their counterpart ministries. This became a bone of contention in many instances, especially involving PPP projects in infrastructure.

It is important to overcome institutional weaknesses that crept into the Yojana Aayog. The Niti Aayog should be given a specific time-bound mandate and direction for economic, social and political transformation of the country over the next two decades. It has to facilitate India’s transition into a developed nation, while strengthening her federal structure, her unique socio-cultural diversity and setting a global example of sustainable resource-use strategy. There is a need to make the Aayog into a commission for development and governance reforms, with a mandate to bring about the required institutional reorganisation and policy reforms in public service delivery, including in areas of law and order, administration of justice, electoral reforms to deepen democracy, health, education, energy and environmental management.

This calls for not just one Five Year Plan, but several strategic plans for a period of five years at a time, on each issue that needs to be addressed. The most suitable state-level (political) leadership should be entrusted with the task of devising these plans using the best available talent, including from industry and abroad, with the secretarial support of the Niti Aayog. It would strengthen the federal structure of the policy-making process. This requires a non-hierarchic, flexible and a lean Aayog that works with other specialised think tanks in addressing India’s policy challenges. The Aayog would need to deploy knowledge in the planned transformation of the country, improve governance effectiveness and capacity for independent monitoring and evaluation. A core staff of motivated professionals, who consider it to be a badge of honour to be posted at the Aayog, will have to work in tandem with experts engaged on a fixed tenure to address specific issues. The niyati of the Niti Aayog hinges vitally on how some of these concerns are addressed in the coming months.

Rajeev Malhotra

The author is professor, Jindal School of Government & Public Policy

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