The Narendra Modi government, on new year’s day, announced a NITI (National Institution for Transforming India) Aayog to replace the over six-decade-old Planning Commission, which was viewed as a relic of the old era of Nehruvian socialism. While the symbolism is obvious, it remains to be seen what the new institution would turn out to be. To be fair, the Planning Commission itself had come a long way from the days of highly centralised, predominantly public sector-led planning. In the last few decades, its approach had changed to “indicative planning”. This involved formulating long-term growth and sector-specific plans, while aiming at indirectly influencing decisions by market players as opposed to fixing mandatory production quotas. Whether the NITI Aayog — which is supposed to work as a government strategic think-tank and a national policy advisory body — would be any different is something only its actual functioning will reveal.
One vital role the Planning Commission played was that of an intermediary between the Centre and the states. While it was meant to be the fair arbiter — especially in the allocation of Central funds — the truth is that this never worked in practice. States had reason to believe that the commission’s attitude was mostly condescending and arbitrary. The manner in which plan monies were transferred to states often smacked of favouritism and discrimination against those that were ruled by the Opposition. The NITI Aayog will have a national-level governing council comprising all state chief ministers, besides regional councils having chief ministers belonging to states of specific regions. The fact that the prime minister would be chairperson of both councils should, hopefully, address one of the serious shortcomings of the Planning Commission in recent times. This is also consistent with the new reality, wherein no significant reforms — be it the goods and services tax or those involving labour and land acquisition — are possible without getting the states on board. At best, the Centre can act as facilitator.
While one could expect the NITI Aayog to be a more representative body, it would be equally useful to think in terms of giving greater freedom and flexibility to the states to implement programmes without micromanagement by New Delhi. Why have, for example, annual plans, now that the Planning Commission itself stands abolished? Instead, the Centre could simply pass on a higher share of its tax collections to the states, which can then formulate plans according to their local conditions. The Centre, in turn, can concentrate on a few sectors — say, building national highways or the optic fibre network — in which there is clear advantage to be derived from federally-funded programmes.
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