Relevance: GS Paper III (Indian Economy)
Source:
Understanding NITI Aayog
- The NITI Aayog was formed to bring fresh ideas to the government.
- Its first mandate is to act as a think tank.
- It can be visualised as a funnel through which new and innovative ideas come from all possible sources — industry, academia, civil society or foreign specialists — and flow into the government system for implementation.
- It has regular brainstorming sessions with stakeholders from various industries and sectors.
Significance of NITI Aayog
- By collecting fresh ideas and sharing them with the Central and State governments, it pushes frontiers and ensures that there is no inertia, which is quite natural in any organisation or institution.
- If it succeeds, NITI Aayog could emerge as an agent of change over time and contribute to the Prime Minister’s agenda of improving governance and implementing innovative measures for better delivery of public services.
- It also works to cut across the silos within the government. For example, India still has the largest number of malnourished children in the world. To reduce this number vastly, it requires a huge degree of convergence across a number of Ministries, and between Central and State governments. NITI Aayog is best placed to achieve this convergence and push the agenda forward.
- NITI Aayog is also bringing about a greater level of accountability in the system. Earlier, we had 12 Five-Year Plans, but they were mostly evaluated long after the plan period had ended. Hence, there was no real accountability. NITI Aayog has established a Development Monitoring and Evaluation Office which collects data on the performance of various Ministries on a real-time basis..
- Using such data, it comes up with performance-based rankings of States across various verticals to foster a spirit of competitive federalism. That is another big mandate of NITI Aayog.
- It tries to identify the best practices in different States in various sectors and then try to replicate them in other States.
- It also plays an important role of being the States’ representative in Delhi, and facilitate direct interactions with the line ministries, which can address issues in a relatively shorter time. Improving innovation
- Initiatives like Ayushmaan Bharat, approach towards artificial intelligence and water conservation measures, and the draft bill to establish the National Medical Commission to replace the Medical Council of India have all been conceptualised in NITI Aayog, and are being taken forward by the respective Ministries.
- The Atal Innovation Mission, which is also established under NITI Aayog, has already done commendable work in improving the innovation ecosystem in India.
- With its current mandate that is spread across a range of sectors and activities, and with its unique and vibrant work culture, NITI Aayog remains an integral and relevant component of the government’s plans to put in place an efficient, transparent, innovative and accountable governance system in the country.
Criticism of NITI Aayog
- It has no role in influencing, let alone directing, public or private investment.
- It does not seem to have any influence in policymaking with long-term consequences (for instance, demonetisation and the Goods and Services Tax).
- NITI Aayog is supposed to be a think tank. This implies that while generating new ideas, it maintains a respectable intellectual distance from the government of the day. Instead, what we see is uncritical praise of government-sponsored, acronym-infested schemes.
- It sings paeans to the virtues of the private corporate sector as the saviour of the Indian economy without realising, let alone appreciating, the foundational and socially oriented contribution of India’s vast public sector.
- Planning for a developing economy can be abandoned, but only at its own peril. The implication for a complex country like India that became an industrial economy late is that planning would, and should, remain a central function of the state in the medium run.
- NITI Aayog will need to evolve into a much stronger organisation than it is.
Lessons from other countries: Need of Planning institutions - The Chinese state ensured that after its market-oriented economic reforms began, its State Planning Commission became more powerful in the state apparatus. The result was growth and poverty reduction on a scale unprecedented in history.
- Similarly, in all East Asian and Southeast Asian countries, industrial policy was planned and executed as part of five-year or longer-term plans. It was precisely because these countries had planning institutions which went hand in hand with industrial policy that they managed to steer policies through turbulent times in the global economy, thus sustaining growth.
- In most of Latin America/Caribbean (LAC) countries and in Subsaharan Africa (SSA), two full decades of potential economic growth and human development were lost when per capita income barely rose even as populations continued to grow. These countries abandoned planning and became captives of the Washington Consensus.
- On the other hand, the important identifier of East Asian and Southeast Asian countries, which did not experience such “lost decades” in the 1980s and 1990s, were their planning structures, backed by an industrial policy and implemented by learning bureaucracies. That is how they were able to ride the wave of their demographic dividend, which comes but once in the life of a nation.
Way forward for India
- India cannot risk going the LAC/ SSA way, since it is already past the midpoint of its dividend.
- While East Asian and Southeast Asian countries still had, and have, five-year plans, what was also integral to their planning was productive use of labour, their most abundant factor, through an export-oriented manufacturing strategy. It was this strategy that was lacking in India’s planning. Giving ‘planning’ per se a bad name for poor policy is indicative of an ahistorical understanding of planning.
- Two changes are required and NITI Aayog should spell out how these reforms will be implemented:
- First, planning will have to become more decentralised, but within a five-year plan framework.
- Second, bureaucracy will need to change from generalist to specialist, and its accountability will have to be based on outcomes achieved, not inputs or funds spent.
