Friday, April 24, 2015

NITI Aayog

Priyang Pandey

In an effort to restructure the growth vehicle of the nation, Sh. Narendra Modi has announced a paradigm shift from the erstwhile Planning Commission to a new institution named ‘NITI Aayog’ or the National institute of Transforming India. NITI Aayog, in a departure from the working methodology of the Planning Commission, will serve as a ‘Think Tank’ of the Government – as a directional and policy dynamo.

NITI Aayog will provide governments at the central and state levels with relevant strategic and technical advice across the spectrum of key elements of policy, including matters of national and international exchange on the economic front, rational distribution of best practices from within the country as well as from other nations, the infusion of new policy ideas and specific issue-based support.1

On January 1, 2015 the new Government ushered in not only the Gregorian New Year but also a new era in governance. After 65 years of the Planning Commission, Sh.Modi in a bold stroke announced the dismantling of the Yojana or Planning Aayog and setting up of the NITI Aayog, which would infuse new blood into the system till the grassroots. The PM had already given inkling in his maiden speech from the historic Red Fort on August 15, 2014 about his epochal decision.

Civilisationally, we have had a culture of grand strategic thinking which can be proved by the epics like the Chanakya’s Arthashastra. In fact, in Mahabharata as well Virata Parva, Bheeshma and Krishna symbolise the strategic thinker. Now, NITI Aayog is the Grand Strategic Think Tank of the government. According to the Shrimad Bhagwad Geeta, “You have the right to work only, but never to its fruits. Let not the fruits of action be your motive. Nor let your attachment be to inaction.” On the path of Karma and Jnana, NITI Aayog is to be the new charioteer to the Government’s chariot. The NITI Aayog will play the role of Shri Krishna, be the guiding force of the Government which is playing Arjuna or the Karmayogi in the battle against the evil of poverty and corruption and for the socio-economic growth and well-being of the people and the Nation.3

As laid out in the cabinet resolution on NITI Aayog, it has been established with an idea of ‘good governance’. The resolution clearly states: “Our legacy to future generations must be sustainable progress.” It goes on to spell: “Specific to the planning process, there is a need to separate as well as energize the distinct ‘processes of governance from the ‘strategy’ of governance.” This is important as despite decades of effort, policy solutions have always played second fiddle to increasing Plan allocations and expenditures without any “social benefit-cost analysis” or “Macro-economic models” to back the decisions.

Background to changing course

It’s not the first time that the Indian government has had to make a course correction. In 1991, the Indian economy was ailing with bankruptcy and evils of license-raj, resulting in a huge financial crisis. The then government framed the new policy and decided to open up the market to the world by implementing L.P.G (liberalisation, privatisation & globalisation). Coincidentally, it was also a result of the terms and conditions which was been put in front of the government by International Economic bodies in lieu of the heavy loans sanctioned by these organisations for bailing out the Indian economy.

Post LPG, we have reached at a stage where adherence to the global market is the basic necessity for the progress and sufficiency. To encash the global opportunities in a better way we need to frame policies in an efficient way to reach out the last downtrodden citizen of the country and make him a part of the development journey with a new vision and mission while ensuring upliftment of the people who are living a horrifying life of poverty lacking the basic amenities they are entitled for.4

Why the NITI Aayog

“From being preoccupied with survival, our aspirations have soared and today we seek elimination, rather than alleviation, of poverty, The role of the government as a “player” in the industrial and service sectors has to be reduced. Instead, government has to focus on enabling legislation, policy making and regulation,” says the mandate of the NITI Aayog. Globalisation is now one of the realities which can’t be neglected, where every nation and its economies are inter-connected and inter-dependent,

The international market which is a driving force of the economies worldwide is also playing a crucial role. We are no different, from crude oil to modern technology and sophisticated weapons, from gold and silver to diamond and other precious stones. India is also a big importer which makes us dependent on the global community on many fronts. Nearly 75% of the crude oil requirement is being catered by foreign countries which can’t be avoided or nullified.5,6

Far from being a revamped Planning Commission, the NITI Aayog has been conceived as a wholly new institution that will function as the government's friend, philosopher and guide with State governments as equal partners. The NITI Aayog, as its name suggests, is about adapting governing institutions, policies, strategies and processes in keeping with the changed, and changing, circumstances.
Unlike 1950 when the Planning Commission was set-up based on the presumption that the government should be in the driver’s seat for the economy, economic growth in India is now driven primarily by the private sector, the farmer, the pot makers, the tea vendors, the self-employed lower middle class, the small shop owner, and the multi-billionaire factory owner. The economy is driven by their decisions to invest, to borrow, and to hire.

Planning Commission and its formation

There has been a crying need to replace the Planning Commission for some time now. The Planning Commission was formed by a cabinet resolution on 15th of March, 1950 and was formulated as per the needs and ways of functioning of the then government.

Formulating the Five Year Plans was the primary task that was assigned to the Planning Commission. The FYP was inspired by communist ideology. The first FYP was implemented in the Soviet Union by Joseph Stalin in 1920 and even now, many communist led nations like China are still following the pattern of FYP.7

India’s Planning Commission after its formation started working on the first FYP which was based on the Harold-Domar model with the total outlay of Rs.2378 crore and the target of the growth rate was set as 2.1%. After the end of the first FYP, the achieved growth rate was 3.6%, with the first few FYPs primarily focussing on agriculture, industrialisation, energy generation and infrastructure building.8

The second FYP based on Mahalanobis model focussed more on heavy industrialisation by the public sector, After a plan holiday of three years due to wars and famine and also due to BOP crisis at the end, which also led to food crisis in the country and to overcome the urgent scarcity, a new revolution was started in the field of agriculture named ‘Green Revolution’.

However, after the Third Five Year Plan (FYP), there has been a steady productivity decline till the ongoing twelfth Five Year Plan in terms of outcome, efficiency and efficacy.

Table 1- Five year plans: facts and figures9,10,11,12

Till now there have been twelve FYPs with the total outlay of Rs.9929475.47Cr However, despite funds being allocated, there is not much to show on the ground.

Planning Commission and its failures

The failures of the Planning Commission are many. The reasons are also differing. Here’s a look at some of them.

Against the Federal structure:

The Planning Commission has been gradually expanding its jurisdiction. As per the Constitution, the Finance Commission shall formulate the principles and policies for tax collection by the government of India as well as its distribution among the state and the centre. The Finance Commission is to be set up every five years to keep in mind the current economic and social scenario while calculating the ratio of centre-state share as well the distribution among the states depending on its population and area. However, the previous government decided to take out the flow of plan funds to states from such fiscal transfers. Gradually a large discretionary element crept in, particularly when central ministries started developing their own schemes, called Centrally Sponsored Schemes (CSS) even in subjects that constitutionally belonged to states.

This reduced the State governments to becoming supplicants with chief ministers having to approach the Planning Commission seeking funds that were legitimately theirs to begin with. In the process, the Planning Commission moved away from its key role in developing policies and sorting out inter-sectoral issues that span beyond a single ministry. It started concentrating on approving not just the overall five-year and annual plans of states, but also their individual schemes as CSS which was a clean attack on the federal structure of the nation.13

NITI Aayog however, will focus on building a knowledge base of strategies and policies while giving back the lost importance of a constitutional body, Finance Commission in terms of mandate of distributing funds to the states.

Against Inclusiveness:

To treat states of the Union as mere appendages of the Centre is a gross violation of the Federal structure. As the NITI Aayog says: “States should have a decisive say in determining the architecture of economic growth and development as per their own needs. The one-size-fits-all approach, often inherent in central planning, has the potential of creating needless tensions and undermining the harmony needed for national effort. Dr Ambedkar had said with foresight that it is “unreasonable to centralise powers where central control and uniformity is not clearly essential or is impracticable”.
The impracticality is apparent from the fact that Sh. Narendra Modi, serving as a Chief Minister of Gujarat, had raised his voice during the Dr. Manmohan Singh led UPA government against the structure and working style of the Planning Commission which led to discrepancies and enemity in fund allocation to the non-UPA ruled states which they were entitled to.

The fallout of not including states in planning process is apparent from the failure of the MNREGA and the PDS like schemes.

Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA)

In a field research in Agra, Uttar Pradesh, on terms of not getting quoted, an Engineer from the local civic agency said that there are many flaws in MNREGA. As Planning Commission decided everything on its own without even taking the states advice into cognizance, the scheme wage rate per day was decided by the Centre, and the labour rate per day is different in every state and region, the places with rich soil have labour rates more than the backward or remote states. Places with great agriculture production have daily wage rate up to Rs.393 per day as mentioned in the state government’s schedule of rates policy on its website, which is much below the wage rate decided by the centre. The state agencies have been asked to employ MNREGA job card holders into the non-machinery works for rural connectivity.

A minimum employment of 100 days was guaranteed at the statutory minimum wage of Rs.120 (2.63$) per day in 2009 prices, after six years it has been increased seven times to Rs.174 per day and it differs from state to state but there is a huge rate disparity which is evident from the data of Schedule of Rates of respective states, unskilled workers in Haryana would get the highest daily wage of Rs. 214, up from Rs. 191/day but still its less than the actual market rate of labour per day.14
To compensate the difference in the schedule rates of state and daily wage rate of MNREGA, government offices are forced to employ one labour at the cost of two as per NREGA norms to fill the wage difference and to show the work done they use JCB machines which is against the policy of MNREGA.

Out of the total outlay of Rs. 272945.2 crore15 on MNREGA last year, the rural connectivity area shared the major potion of 36.7%16 where these labours were deployed to aid the civic agencies. If this doubling of the figure to adhere with the existing local wage rate is prevalent throughout then it’s an issue to be addressed promptly with consultation of the state government to fix the base wage rate according the regional rates and prevalent conditions.

Moreover, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has come under the scrutiny of the Supreme Court which said money was not reaching real beneficiaries and in many cases, going to wrong hands. “There is no uniform policy. The money is not reaching actual beneficiaries,” a bench comprising CJI K.G Balakrishnan and Justices Deepak Verma and B .S Chauhan said. The Bench, which expressed concern over the implementation of MGNREGA said several projects under the scheme are failing as the funds allocated for them either remain unutilised or in many cases money lands up in wrong hands. “There has been distribution of money. But in many cases, it is going to wrong persons and real beneficiaries do not receive the cash,” the Bench said. It added money under MGNREGA is not an ex-gratia payment as people in villages are assured that money is guaranteed in lieu of the work performed by them.17

The CAG (Comptroller and Auditor General) performance audit report of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has also shown significant decline in per rural household employment generation in the last two years and increasing corruption.18

NITI Aayog is going to be a boon to solve such issues of corrupt practices which is depriving the needy in getting their entitled benefits. If the policies are formulated with the state stakeholders as members in the policy formation group then on one hand it will help in curbing corruption and malpractices while on the other hand it will also provide the states their right of having a say in the policy. This will eventually result into a ‘healthy democratic federalism’.

Public Distribution System (PDS)

Due to the centralised nature of decisions, successive PDS schemes have been failures. For instance, in many areas, where the population is majorly wheat eating, supplying nearly equal quantity of rice is redundant as it goes undistributed. This is then used by the local vendors to sell in their stores elsewhere. An example is West Bengal which is majorly a rice eating state where according to the PDS data portal,19 wheat which is supplied in the same quantity or more gets into the system of black markets and corruption.

CAG have pointed to the loopholes in public distribution system (PDS) on non- availability of grain to beneficiaries, poor oversight and possibilities of diversion into open market. 20 Under PDS, beneficiaries get rice, wheat, sugar, edible oil, tur dal and kerosene. Under Targeted PDS system 35kg of food grain is issued per month at subsidised rate to BPL families. Functioning of PDS had several deficiencies; Identification of BPL families was faulty due to enlisting ineligible families and leaving out those eligible. Non-lifting of food grains from FCI led to BPL beneficiaries being deprived of benefits, there was avoidable expenditure on purchase of rice from open market, said the CAG report on PDS.

This clearly undermines the intention of launching such centrally sponsored Schemes where the needs of the target group are not getting catered efficiently and honestly, due to lack of co-ordination between the Centre and the States.


There were many other controversies related to Planning Commission earlier. In 2012, the Planning Commission was accused for spending some Rs. 35 lakh in renovating two office toilets, and then it was questioned for suggesting that people who spent Rs. 27 or more a day were not poor, which in a way ridiculed the poor. The commission had remained powerful over the decades because it had emerged as a sort of parallel cabinet with the Prime Minister at its head. The Commission's power in allocating central funds to states and sanctioning capital spending of the central government was deeply resented by states and various government departments.

The Shift

“The people of India have great expectations for progress and improvement in governance, through their participation. They require institutional reforms in governance and dynamic policy shifts that can seed and nurture large-scale change (paragraph 3, NITI Aayog Resolution).”

The abolition of the Yojana Aayog and its replacement by Niti Aayog by the new government will help change the emphasis from projects and programmes to policy and institutions, from expenditure inputs to real outcomes through better governance and from political disputation over incremental allocations to new challenges and opportunities in a global environment. The discussion of India in a global context also reminds one of Gandhiji’s sayings: “Let the windows of my mind be open to winds from across the world, but let me not be blown away by them.”

Benefits of a more Inclusive Structure

As the cabinet resolution on NITI Aayog says: “An important evolutionary change from the past will be replacing a centre-to-state one-way flow of policy by a genuine and continuing partnership with the states. We need to find our own strategy for growth. The new institution has to zero in on what will work in and for India. It will be a Bharatiya approach to development.” A case in point is the redressal of inequalities based on gender biases as well as economic disparities. We need to create an environment and support system that encourages women to play their rightful role in nation-building. With this thought in mind, a new scheme was launched by PM Modi on 22nd February, 2015 in Panipat district of Haryana state: ‘Beti Bachao- Beti Padhao’.20

The scheme is a perfect example of the vision and ideology on which NITI Aayog was formed. In Haryana, the sex ratio is the worst in comparison to the national average, where it stands at just 879 females per 1,000 males.21

The Beti Bachao-Beti Padhao scheme will be implemented through a national campaign and focussed multi-sectoral action in 100 selected districts, covering all states and UTs. The campaign is a joint initiative of the Ministry of Women and Child Development, the Ministry of Health and Family Welfare and the Ministry of Human Resource Development. The campaign will be aimed at ensuring stricter implementation of existing laws to prevent sex determination tests, ensuring proper education for girls, improving sex ratio and empowering women.

The reason which makes this scheme relevant is because of its future outcome and benefits in the states like Haryana and not in a state like Kerala where the sex ratio stands at 1084 22. Again, villages are the shield of our culture and civilisational values. They need to be fully integrated institutionally into the development process so that we draw on their vitality and energy. Broadly focusing upon the development in the villages which includes socio-cultural development and motivate the village community,“ Sansad Adarsh Gram Yojana23 was launched by the PM on the birth anniversary of the great socialist leader Jayaprakash Narayan, on 11 October 2014.

Policy making must focus on providing necessary support to villages in terms of skill and knowledge upgrades and access to financial capital and relevant technology. An example would be the possibility of using infrastructure of Railway Stations across India and involvement of the ex-army men as trainers. According to Rajiv Pratap Rudy, the skill development minister (independent charge), there are 65,000 kms of railway network in the country with over 8,000 stations, out of which 2000 have busy transactions and rest 6,000 stations have good infrastructure, electricity as well as 4,300 km of optical fiber cable network. This is to be utilized for the Mission Skill India. The Indian Army in this case, would be a vital partner from where ex-servicemen who have had an average experience of 20 years in skilled service could be facilitated as Master trainers or Entrepreneurs. 24

In conclusion

Swami Vivekananda said “Take up one idea. Make that one idea your life – think it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea and just leave every other idea alone. This is the way to success.” Through its commitment to a cooperative federalism, promotion of citizen engagement, egalitarian access to opportunity, participative and adaptive governance and increasing use of technology, the NITI Aayog will seek to provide a critical directional and strategic input into the development process. This, along with being the incubator of ideas for development, will be the core mission of NITI Aayog.

India is an emerging market as it encompasses of a major chunk of the world’s working population, especially the middle class. The cabinet resolution on NITI says: “Our continuing challenge is to ensure that this economically vibrant group remains engaged and its potential is fully realised.” Recognition is also given to Non resident Indians. This is a crucial geo-economic and political dividend which can’t be ignored. Sh. Modi has realised this and announced lifetime visas and plans for voting rights during his recent visits to USA and Australia. An ordinance amending the citizenship act, 1955 has already been effected.25

What makes NITI Aayog unique and relevant to today’s India is not just the emphasis on developmental planning – versus merely project allocation but also the understanding that development has to be global. Geo-political economics is getting increasingly integrated - ‘Vasudhaiva Kutumbakam’ a term propounded by our sages which literally means the whole mother Earth is our home – is turning into a reality with the increasing globalisation.


(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

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