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From Planning to Transformation: An uphill task!

The task is cut out for the new avatar of the now disbanded Planning Commission

Narender modiAT The Economic Times’ Global Business Summit in mid-January, Prime Minister Narendra Modi laid out his Transformation Agenda in no uncertain terms. After presenting a poser—“India is a $2-trillion economy today. Can we not dream of an India with a $20-trillion economy?”—he unveiled his ‘doctrine of development’ in lucid terms: “The government must nurture an ecosystem where the economy is primed for growth; and growth promotes all-round development. Where development is employment-generating; and employment is enabled by skills. Where skills are synced with production; and production is benchmarked to quality. Where quality meets global standards; and meeting global standards drives prosperity. Most importantly, this prosperity is for the welfare of all.” With such seamless segueing, India will be transformed from a poor/low-income to a high-income/rich nation and poverty will stand eliminated.

To facilitate such transformation, just two weeks earlier the Planning Commission was disbanded and reinvented as Niti (National Institution for Transforming India) Aayog with a multi-tiered structure, including a governing council that comprises the chief ministers of all States and lieutenant-governors of Union Territories. Niti will serve as a government think-tank with the mandate to provide strategic and technical advice on issues of national and international importance to the Centre and States. With the Prime Minister as chairperson, this body will have a vice-chairperson and a CEO, some full-time members and two part-time members. Four Union ministers would serve as ex-officio members. While the Planning Commission was primarily responsible for deciding on Plan spending of the Centre and allocation to State governments, Niti will provide a national agenda framework for the Prime Minister and the Chief Ministers after evolving “a shared vision of national development priorities, sectors and strategies with the active involvement of States”.

The neo-liberal school believes that the Planning Commission was relevant only in a command economy structure and its ‘one-size-fits-all’ approach is no longer valid in a market economy. Columbia University professor Arvind Panagariya, Niti’s first vice-chairman, has stated that the government might even scrap the Five-Year Plan altogether as a market economy should not be driven by plans but by policies.

Primarily, Niti is meant to serve as a source of new ideas and achieve convergence between the Centre and States for evolving a long-term vision for India. It is also expected to coordinate among the various departments of the Centre and governments in the States

It is indeed ironic because Montek Ahluwalia, Deputy Chairman of the Planning Commission for over a decade, is a die-hard neo-liberal and was the most ardent votary of the market economy as the panacea for all of India’s ills! For this ‘eminent economist’, price rise and inflation were the best indicators of economic prosperity and for the ailing power sector his only prescription was continuous tariff hike without any concern for efficiency!

Panagariya seems to have chosen labour reforms and strengthening of the SME (small and medium enterprise) segment—the backbone of manufacturing—as thrust areas for the promised transformation. Probably he believes in the ‘small-is-beautiful’ concept. But, will it vibe with the ‘Make-in-India’ juggernaut that has everything big: mega-infrastructure, mega-industries, mega-corridors, mega-cities and mega-everything, all driven by mega-FDI flows from mega-MNCs? This conflict needs to be resolved upfront.

Be that as it may, the demise of the Planning Commission is self-inflicted. The Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of its declared objectives 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 charged with the responsibility of making an assessment of all resources of the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities. The Planning Commission was always headed by the Prime Minister.

This mandate was observed more in breach than in compliance. Over a period of time the commission became the dumping ground for either unwanted civil servants or sinecures for the old-boy network and establishment stooges. Even after 12 Five-Year Plans, over one-fourth of India lives below the poverty line at `32 per diem (as absurdly defined by Montek Ahluwalia), with a vast section of the population bereft of access to basics like shelter, potable water, electricity, healthcare and primary education. The commission has been accused of packing its establishment with people who were paid to mine data for the mighty MNCs and semi-commercial institutions to help them plan their India business!

During the past decade, the commission has spent more time clearing projects like airports, highways and privatisation of natural resources, and less on poverty elimination and basic healthcare. With a core team of 20, that included ministers and seven full-time members, the commission was assisted by over 60 advisers who had hardly ever served in small towns or villages. Most members were
associated with the corporate sector or academic institutions.

THE commission was set up within seven weeks of the adoption of the Constitution and the resolution referred to the Fundamental Rights and the Directive Principles of State Policy. It was specifically mentioned in the government resolution that the commission’s success would depend on the extent to which it enlisted the association and cooperation of stakeholders at all levels and involved them in the formulation of plans. Despite this, the commission developed a unilateral approach and States came to be treated as supplicants, and not stakeholders.

The commission wrote its own epitaph, particularly in the last 10 years, by making the poor poorer and the rich richer and creating wide disparities between various regions of the country. This was because it had become an extension of the World Bank and the MNCs and had openly promoted crony capitalism through predatory policies in the name of ‘reforms’. No tears, therefore, need to be shed over its unceremonious demise.

What is this new avatar called Niti and what is it supposed to deliver? Is Niti really needed? The grounds for this question are two. Putting the Prime Minister’s ‘Development Doctrine’ into practice by improving the business climate and overcoming the governance or infrastructure deficit is not about new policies and ideas, but about implementing those already on the table. To some extent, this has taken off. Second is about new ideas, of which also there is no dearth. ‘Make-in-India’, Swachh Bharat, Digital India, FDI in railways, defence production and insurance, cash transfers in lieu of subsidies and self-certification are all examples. This list can be expanded by getting inputs from the ministers, bureaucrats and domain specialists. Will Niti end up as another overload?

THE resolution establishing Niti lays down 13 objectives. These range from fostering cooperative federalism to developing mechanisms for preparing credible plans at the village level; ensuring that national security concerns are taken on board in development policies; creating a knowledge, innovation and entrepreneurial support system; serving as a platform for coordinating inter-departmental issues; and serving as a “repository of research on good governance and best practices in sustainable and equitable development”. Niti will evolve its own priorities from this long list, as its rules of business are prepared.

Primarily, Niti is meant to serve as a source of new ideas and achieve convergence between the Centre and States for evolving a long-term vision for India. It is also expected to coordinate among the various departments of the Centre and governments in the States. It is expected ‘to pay special attention to the section of our society that may be at the risk of not benefiting adequately from economic progress’. This is to take care of the marginalised laggards. Another objective—‘providing advice and encouraging partnerships between key stakeholders and national and international like-minded think-tanks’—could encourage conformity, not creativity, and block dissenting opinions and innovative ideas.

As per the cabinet resolution, success of Niti will be seen in coming up with a national vision, based not on borrowed models but on an honest analysis of the hugely diverse ground realities in India and as a response to the aspirations of the rising middle class. This is significant.

Niti is work in progress and the work has just commenced. As an institution, Niti will have to emerge as a credible and lean knowledge body that should be well equipped to think out-of-box and not iterate ‘development’ clichés such as ‘reforms’, ‘FDI’, GDP and so on. It should deliver sound policy initiatives and strategies for the medium term and beyond to enlarge the economic pie and have it shared equally. In order to do that, it must have the ability to envision future scenario and suggest corrective steps when required. For doing all this effectively, it will have to build sustainable partnerships with the private sector, trade unions, media, think-tanks and civil society organisations. Niti also needs to build capacity to deliver directional and strategic recommendations to the governments on the developmental process.

Bibek seeks answers

Excerpts from Bibek Debroy’s blog sharing his article that appeared in The Economic Times. The article was published before his appointment as a member of the Niti Aayog was announced

Ihave several questions about Niti Aayog and here are some of them. Since such a lot of time was spent on working out its mandate and terms of reference, I presume these questions have been asked and answered somewhere. But since those answers are not in the public domain, one should ask those questions, in the hope of eliciting answers.

Bibek Debroy’sFirst, the Planning Commission’s role wasn’t restricted to the much-abused “planning” exercise. There is no doubt that this role is completely dysfunctional in this day and age. Until government systems are completely revamped, there is a Plan versus non-Plan distinction in expenditure, not quite the same as the revenue versus capital distinction. In general, Plan and capital expenditure are desirable. Every Finance Ministry and Finance Minister seeks to slash Plan and capital expenditure, in an attempt to reduce deficits. And prior to every Union Budget, across governments, Planning Commission was the body that lobbied with Finance Ministry to protect Plan expenditure. Who will do that now? Since Niti Aayog doesn’t have that role assigned to it, no one will do that lobbying. Ipso facto, Finance Ministry will be free to slash Plan expenditure and annual budgetary support to the Plan.

Second, you might legitimately argue the Finance Commission is the only Constitutional body for devolution to States. The Finance Commission’s mandate was diluted in the 1970s to cover only non-Plan expenditure, not Plan expenditure. The 14th Finance Commission has just submitted its report and there won’t be any Finance Commission for a few years. Beyond the inter-regnum, there is no indication that the Finance Commission’s mandate will be widened to cover Plan expenditure. If you argue that the Plan versus non-Plan expenditure is dysfunctional and will be abolished, has there been any indication from the government that this will be done?

Third, through Planning Commission there were formulae-based (Gadgil-Mukherjee) transfers and discretionary ones, such as the Centrally Sponsored Schemes (CSS-s). Who will determine Special Category Status now, or changes in the formula? Niti Aayog has no such role. For “Plan” discussions, Chief Ministers had to queue up before Planning Commission and there were complaints about this. Will they now have to queue up before Finance Ministry or the relevant Ministries?
Fourth, there were genuine complaints about the rigidity and multiplicity of CSS-s. But the idea was that CSS-s would be rationalised and the Delhi-based templates weakened. The idea also was that the CSS money would be directly transferred to States. But if you notice what has happened in this restructuring of CSS-s, and this pre-dates the present government, all that has happened is that they are no longer being shown as CSS-s. Instead, they are being shown as allocations to Central Ministries/Departments.

Fifth, the limited efficacy of CSS-s was because of high administrative costs of delivery, routed through Ministries/Departments based in Delhi. Especially because the 14th Finance Commission seems to have indicated a higher share for States, unless this routing through Ministries/Departments in Delhi is curbed and the number of Central Ministries/Departments slashed, I am not convinced that the desired objective of eliminating CSS-s will be achieved.

Sixth, unfortunately, a problem with the historical Planning Commission has not been adequately flagged. It wasn’t a Constitutional body, nor was it set up through legislation. Therefore, it wasn’t accountable, at least not to Parliament. How is it obvious that Niti Aayog is best set up executively, rather than through a specific piece of legislation?

Seventh, there is a multiplicity of objectives. There is a secretariat function for NDC. There is the Inter-State Council. There is something akin to a National Advisory Council (NAC), in the so-called think-tank role. By bundling all of these together, the proposed structure of Niti Aayog seems to have become unnecessarily cumbersome and complicated. While one should be charitable and should wait until it becomes functional, the Cabinet Resolution doesn’t inspire a great deal of confidence. Since there was such a great deal of discussion and debate before Niti Aayog was set up, I had hoped the answers to these seven questions would have been provided. If they have, I have clearly missed the answers.

NITI is Modi’s ‘Team India’, which he promised during his fiery electoral campaign and is now in place. While the mandate eschews the word planning from its nomenclature, the objectives of Niti are unequivocally about ushering in village-level planning and aggregation of plans at progressively higher levels. This means linking up six lakh-plus villages with State governments and, in turn, the Central government. This is indeed a mammoth task and one that is likely to throw up fresh and competing demands. Though there is no clarity on the fate of Five-Year Plans, it would be a fallacy to assume that Niti would completely jettison planning from its mandate despite Panagariya’s claim of scrapping these legacies since Niti will be ‘driven by policies, not plans’.

This brings us to the core of Niti’s mandate and the caveat of evolving a ‘national vision based not on borrowed models, but on India’s ground realities’. This precisely was what our Founding Fathers meant when they unravelled their ‘idea of India’ at the dawn of independence. They had envisaged people-based governance with a bottom-up decision-making process that would give every citizen a ‘place in the sun’. Built on this premise was the ‘economic idea’ of equity envisaging independent India as sui generis, a society unlike any other, in a class of its own that would not follow the borrowed western pattern of mega industrialisation, urbanisation and individuation. India’s would be a people’s economy that would chart out a distinct course in economic growth, which would be need-based, human-scale, balanced development while conserving nature and livelihoods. In a self-respecting nation, every citizen should get the strength, resource, opportunity and level playing field to stand on his/her feet and earn a living with honour instead of endlessly depending on trickle-downs and charity. God-given resources—land, water, forests and minerals—belong to the people and these must be managed as such. Only then there will be development with dignity.

The ‘development model’ pursued by the UPA government was the opposite of this sui generis concept. It was an FDI-driven ‘growth’ agenda, laden with predatory and market-obsessed economic policies, that has polarised people into one-third ‘privileged’ class and two-third ‘laggards’! In the event, the economy has been sinking. Due to exploitative land policies, agriculture is languishing and food insecurity is looming. Bereft of any ethos, urbanisation has descended into chaotic landlust. The FDI-GDP mania has choked the labour-intensive manufacturing
sector, thereby crippling the development of skills and employment generation.

As of now, the Founding Fathers’ equitable ‘idea of India’ lies in virtual ruins and needs to be rebuilt. This is the challenge that Niti needs to meet. This can’t be done by listening to Global Summits from Davos or Delhi, but by getting into the urban bylanes and rural hinterland where India’s ‘laggards’ live. Former US President George Bush’s ‘Agenda for India’ still rings in my mind: “We will deal with 300 million Indians”. That was what the UPA government was doing. It is time the Modi government dealt with the other 900 million and Niti should provide the ideas, policy inputs and implementation strategy to make that happen. Only then will there be true transformation and poverty elimination.

This is the task cut out for the new avatar. Can Niti deliver? The jury is out!

VOL. 8 | ISSUE 11 | FEB 2015

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