By Shakti Sinha
One common feature of most strategic defeats is the exercise of policy options that may have worked in the past but have outlived their relevance. At the same time, unnecessary diversification away from core competence has led many a corporate house to grief, with Vijay Mallya being the most prominent, recent example. Often clever leaders simply re-package tried and tested products and policies to make it appear different as a marketing package to retain/win market share, something Mrs Indira Gandhi did with great skill in the famous ‘Garibi Hatao’ elections of 1971.
The recent constitution of the NITI Aayog has led many critics of the government to allege that essentially nothing has changed except the name. That in any case the Planning Commission had evolved, that planning was longer predicated on government investment driving economic growth and so on. And if it won’t ‘plan’, what will the new body do? According to these critics, if it is simply meant to sort out Centre-State or Inter-State issues, then we already have the National Development Council and the Inter-State Council. In other words that the change is not significant and other than possible weakening of its role, the Planning Commission has reincarnated as the NITI Aayog. A few analysts have criticised the change on the ground that it has not been thought through, or that it leaves out much of substance e.g., it is not clear who would approve state plans, or dispense with plan funds among other perceived gaps.
Opposition parties have gone further in criticising the Modi government’s actions. The government has been accused of conspiring to gut the federal spirit of the polity, and excessive centralisation of powers in the PMO. These are serious charges, particularly as it directly challenges Modiji’s stated desire to develop the spirit of cooperative federalism in the running of the economy, arguing that the days of government of India dictating to the States was over. In other words the allegation is that the government says one thing but does the very opposite. It would be worthwhile to look at this allegation first before moving on to assessing whether the NITI Aayog represents a new way of doing things or is simply old wine in a new bottle?
The Planning Commission was neither a Constitutional body nor a statutory one; it was a creation of a resolution of the Union cabinet. It reported to the Prime Minister, who was both its Chairman and its Minister, with at best a Minister of State to take care of parliamentary work and other official formalities. The NITI Aayog is exactly the same in these respects so it can be nobody’s case that this change has in any way adversely affected the federal equilibrium or that it will lead to an increase in centralisation in the office of the Prime Minister. But where it differs from the Planning Commission is that it actually seeks to give the States a role in its management, and creates a mechanism to sort out regional issues. Unlike the unitary nature of the Planning Commission, the NITI Aayog will have a Governing Council whose members will be Chief Ministers of States and Lt. Governors of Union Territories. Further, it can constitute regional councils on ‘specific issues and contingencies impacting more than a state or a region’. The PM or his nominee would chair this issue-based council whose members would be the relevant Chief Ministers and Lt. Governors. Clearly, the opposition objects too much, for the NITI Aayog would actually make the States effective stakeholders in the development process, a true example of cooperative federalism.
The substantive part of the criticism is that the change is not substantial or well-thought out. These criticisms have more weight as they are not tainted by political bias or the need to score debating points. Many such analysts have, in fact, welcomed the abolition of the Planning Commission as a Stalinist relic that has no place in a market economy. Since the NITI Aayog has just been set up, we can only judge it from the intentions to establish it, as reflected in its composition and terms of reference.
Its unusual federal governing arrangements and mechanism to handle specific regional issue has already been referred to. What makes the latter, issue-driven regional councils, particularly in the Indian context, is that it seems intended to be a time-bound, solution-based mechanism, not a self-perpetuating one. This and the provision to associate domain experts where necessary in the new set-up sums up PM Modi’s penchant for practicality and moving-on, not excessively intellectualising or constant referencing and procrastinating a la Hamlet or UPA.
The choice of name, which is actually an acronym, does not appear to be an accident. Modi campaigned and came to power based on the promise of transforming India, a ‘young’ and deeply aspirational country. It is no more about poverty alleviation; it is about its elimination. Our governing arrangements with ‘mai-baap’ sarkar as its fulcrum where the people were expected to be passive recipients, called upon once in five years to exercise their preference, had become an anachronism. The Indian people had moved with the times but our political parties were still bogged in identity-politics using the dole as their only tool of mobilisation. The policy making process has broken down, driven by individual preferences and the need to be seeing to satisfy specific groups. The disconnect between the people and the State had broken down largely, giving rise to the phenomenon called the Soft State, whose writ was easily challenged by criminal elements, malcontent extremists and the nexus between the corrupt elements of the polity, business and bureaucracy. The extent of breakdown was such that it was even reflected at the top, with individual ministries in the government of India not working in harmony. Different ministries vied with each other to become relevant to the growth process by creating innumerable hurdles in the path of investment in manufacturing and infrastructure. This was seen as progress. The result was an inter-ministry deadlock that led to, what the then finance minister and now president, termed ‘policy paralysis.’ The result was an under-performing India with a few bright sparks in states with effective leadership.
The only key element that had to be addressed was in the failure to adequately recognise and respond to the fact that most economic action had shifted to the states. This was a consequence of the fact that economic growth was now private sector-led, and not driven either by big-ticket public sector investment or by the license-permit Raj where industrialists had to constantly camp in ministries in Delhi seeking all kinds of permissions. (The license-permit Raj has only persisted in allocation of natural resources, which the government is separately tackling, untangling the mess left behind by UPA). The entire gamut of Union-States economic relations had become hostage to political exigencies, and had to be reformed if the Indian people are to realise its full potential.
The National Institution for Transforming India is an idea whose time had come; it was just waiting to be unleashed. What India, and its governance system, needs are ideas to unlock this potential. This has to be done outside the bureaucratic mindset, outside the ‘eye on next election’ mindset. Government and its ministries do not have a monopoly of wisdom, nor can states be treated as supplicants, seeking permissions and funds that doled out in a discriminatory manner. The whole process must utilise knowledge where available and be transparent. The Indian people have to be participants in the process to ensure pro-people policies that lead to equitable and inclusive outcomes. The whole process must be pro-active, not defensively reactive that it had become. Perspective planning and policy development must be a bottoms-up, starting from the village upwards and based on empirical data, not whims and prejudices. People’s empowerment comes from actions such as these, not from clichés like ‘I have come here to give you rights!’
Since it is the individual entrepreneur and private sector in general that is pushing investment, growth and employment generation in agriculture, industry and services, the role of the government must change from being an active player to becoming an enabler. Our investment climate discourages investors as the cost of doing business has become unbearable. Enforcement of contract, reliable infrastructure, a healthy and skilled workforce need the government’s special focus, with clarity on its role and policy makers looking at the overall, long term interest of the people. Where are market gaps, then as a provider of services but overseen by tough, independent regulators. Inter-ministerial and inter-sectoral issues cannot be allowed to act as impediments to growth. The national security angle has been largely absent in the narrative of policy development and implementation, which needed to be rectified. As India has moved up, the value of change, innovation and technology development must be emphasised. Productivity gains are best captured through such intervention, at all levels not just at the high-end. Greater use of e-Governance alone will liberate people who will not have to deal with opaque systems marked by corruption and delays.
The NITI Aayog is charged with all these and more, all explicitly detailed by the government. The appointment of eminent economist Prof Arvind Panagariya as its executive Vice Chairman, and of noted defence scientist Dr. V.K. Saraswat and economist Prof. Bibek Debroy shows the government’s resolve of meaning business very clearly. All three are very sound academically, known to think out-of-the box, and problem-solvers. The government has announced the names of relevant ministers as ex-officio members and special invitees and is yet to name part-time members.
There are pending issues, no doubt, as the NITI Aayog is a work in progress but the doubts expressed are exaggerated. There is no need to approve state plans by what is essentially a think-tank. The Planning Commission had taken on all kinds of responsibilities, the most pernicious of which was the discretionary allocation of plan funds. Constitutionally, federal fiscal transfers are governed by the Finance Commission but sometime around 1970, allocation of plan funds was taken out of its purview through an administrative fiat. Fiscal transfers should be formulaic not discriminatory. Further, this artificial distinction between plan and non-plan must go. A better categorisation can be between capital and recurrent expenditures. A doubt has been expressed that in the absence of five-year plans, India would lose access to IDA, World Bank’s soft window affiliate, amounting to around US$1 billion a year; every eligible country has to prepare participatory Poverty Reduction Strategic Papers (PRSPs), with India’s five-year plans accepted as its PRSP. This fear is overblown. The NITI Aayog is mandated ‘to evolve a shared vision of national development priorities, sectors and strategies with the active involvement of states.’ This itself satisfies the PRSP requirement. In addition, the NITI Aayog is to ‘develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels of government.’ India would continue to enjoy access to IDA and other soft windows of development assistance.
The overall picture is clear. Government structures, processes, policy development approaches, lack of clarity of roles, subordinate position of states, lack of involvement of people etc needs substantial transformation. The establishment of the NITI Aayog is possibly the most significant decision of the Modi sarkar that has the potential to transform India’s growth story, and unleash the very substantial potential of the Indian people, which alone is the raison d’être of the Indian State.
Writer is Former Jt. Secretary Prime Minister’s Office, former Chief Secretary Andaman & Nicobar, former Power & Finance Secretary, Govt. of Delhi