Planning for a New India

By Anand Mishra
In Issue 6
March 5, 2015
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Niti-aayogOn Feb 8, the newly constituted NITI (National Institution for Transforming  India) Aayog had its first meeting under the leadership of the Prime Minister Narendra Modi in which Chief Ministers of most states were in attendance. During the meeting, most CMs demanded  greater autonomy in deciding their own developmental policy making process and a reduction in the number of centrally sponsored schemes. These two demands basically sum up what was wrong with the erstwhile Planning Commission and what is desired from the new planning body. As the blueprint of the NITI Aayog suggests, the centre is willing to transform the way economic planning is done in the country. Under previous set up and under all previous governments, the Planning Commission was the power that decided the economic landscape of the country and allocated money accordingly. The new body is supposed to be a facilitator and advisor, not the high lord of the national money. So, what is this new body and how is it going to be different from its predecessor which even its fervent supporters say was dire need for change to stay relevant in the economic realities of a free market defined India.

How the Planning Commission Lost its Halo
In order to understand what went wrong in the Planning Commission, we first need to understand the circumstances in which its mandate was developed. Right after independence, the country was highly capital scarce, and required extreme caution in resources allocation. Further, the knowledge pool that was required to effectively allocate resources was also in limited supply  and as such had to be centralized for maximum impact. The Planning Commission was thus created as a body at the centre which, even though non-constitutional in nature, could decide on the most optimal allocation of the country’s scarce resources. The most fundamental of the  Planning Commission’s tasks was to frame Five-Year plans that could  provide a base for overall  national development. The Commission was also allowed to decide on the areas and magnitude of central government’s intervention in state level policies and schemes. It was to appraise each scheme for resource optimality and evaluate each scheme as regards proper implementation. Finally, the Commission was to act as the mediator between different central ministries and between the Centre and the states non policy matters. In short, the Planning Commission was the guardian of national resources, omnipotent economic planner and ombudsman for economic schemes all rolled into one.

This Soviet style paradigm was okay as long as the prediction of economic environment was accurate, and no question was raised about the efficacy of resource allocation. Both conditions were satisfied during the initial decade as the entire economy was in government’s hand and politically there was no resistance as most states were ruled by Congress. During later years, as non-Congress governments started to come to power in states, the logic of planning commissions started to be challenged. With private economy growing in eighties and after economic liberalization in  nineties, the Commission started to lose relevance as parameters for long term planning started to change too rapidly.

Operationally, the intervention style of the Commission also changed over the years. From the bulk direct transfers of central assistance, money devolution increasingly went through centrally sponsored schemes (CSCs) which were centrally funded but were implemented by the states. Since the Planning Commission was also the monitoring agency, participation of states in policy matters was reduced to making annual petitions for grants to the Commission, something that states did not like.

Another crucial aspect of the Commission’s irrelevance and out of sync with reality came into light when it started to vet the infrastructure projects which pitted it against ministries especially transport and power ministries.

Left to its own devises, it also devised a nine-point action plan for Naxal-affected areas. In all, the Commission had miserably failed to reinvent itself in changed economic paradigm and has ceased to add any value to the process of economic planning.

Radically Altering the Paradigm
On the day of the first meeting of NITI Aayog, the government released an e-booklet which expanded on the rationale of the NITI Aayog and how it should operate. According to this documentary, the fundamental premise of the new body is that in view of the changes that has been brought about because of globalization, emergence of private enterprises and massive economic expansion, a new institution and a changed planning philosophy was required. Addressing the need to separate the strategy formulation element from the implementation element, the government has put the onus of resource allocation on the Finance Ministry and kept the NITI Aayog solely focussed on strategy formulation. This  also takes care of the bickering between centre and states on one hand and between central ministries and the planning body on the other, something that had had plagued the erstwhile Planning Commission.

make-in-indiaThe document also offers important pointers to how the new planning body would broadly be working. First and foremost tenet of the new body is that in place of a top down approach which was the hallmark of the Planning Commission, the NITI Aayog would work on a bottoms up model. This is reflected in the focus that has been laid on cooperative federalism and decentralized planning process. This will allow states to have a greater stake in policy making process at the centre. The NITI Aayog would be primarily a research agency, and will allow states to formulate plans according to their ground realities and synthesize plans of various states to come up with best fit policies for the country.

Secondly, the NITI Aayog is expected to act as a coordinating and conflict resolution agency.  As government moves to create ambitious infrastructure programs such as river linking project or Swachh Bharat Abhiyan or bullet trains, it would need many ministries to work together, which would require a coordinating agency. NITI Aayog is well suited to do this job. Further, it is mandated to interact with external agencies on behalf of government.

Third, the new body is expected to develop expertise in select areas critical to country’s progress. For this it can act on its own and with other agencies. Lot of focus has been laid on building a repository of specialized domain expertise, building network of expertise within and outside the government and enabling capacity building. The new body would also act as an internal consultant for central and state governments on policy matters.

In totality, the government has planned the new body as a think tank and as a knowledge based institution which would be a goto agency for various stakeholders involved in governance, unlike the Planning Commission which was designed as a body to do planning work along with resource allocation.

However, there are some crucial functional areas in which NITI Aayog might either functionally conflicts with other bodies. For example, the proposed inter-ministerial coordination role of the NITI Aayog is in conflict with that of Cabinet Secretariat. Similarly, if NITI Aayog coordinates with states on policy matters, that might impinge on the jurisdiction of Inter State Council. The biggest hanging area, according to as an economist with a premier think tank, is that of allocation of funds to states. This may even decide how happily states participate in the overall scheme of the new body. While Finance Ministry has assumed this role for now, there are concerns that this power would make Finance Ministry too powerful with no independent agency vetting its decisions. Also the fate of 12th five year plan and the entire exercise of drafting five year plans is currently not clear. Naturally, there are grey areas that need further work in the new arrangement of things.

The Way Ahead
Over last couple of decades, India has become an aspirational country whose planning needs are radically different from those during fifties or even eighties. Planning in contemporary environment  requires consultation among all stakeholders, development of domain expertise by harnessing knowledge from wherever it is available and the ability to coordinate efforts of all stakeholders. There is a consensus among experts that the topmost planning body of the country should have a long term, strategic and expertise based approach to the planning instead of getting bogged in money management. However, developing expertise and building capacity are long term processes and require infusion of monetary and human resources on one hand and forging effective, winwin collaboration with diverse set of institutions and people on the other.

The new body has been pitched right on functionality and approach to planning. What is going to be crucial is to effectively manage transformation of planning paradigm of the country. The top down method of planning does not have any role in present scenario when many states are working better than national government and have greater expertise in select areas of governance. By making Chief Minister of states members of the new body, the government has made its intent clear regarding the participative nature of prospective planning process. The challenge would be to manage the demands and aspirations of multiple states that are at different levels of economic development, have different social and human developmental conditions and are ruled by parties with different political ideologies. Planning for a country as diverse as India is a complex and big task, and requires massive lot of imagination with human face. Only then can the dream of Antyodaya, the rise of last man in the queue, be realized