NITI Aayog: Lessons from decades past
Today marks the 10th birthday of a national organisation—the Niti Aayog—that succeeded the Planning Commission. What was it meant to do? And what has it achieved in the last decade?
To understand what Niti Aayog could have done, we need to place on record what the Planning Commission did. Shorn of all verbiage, the Planning Commission essentially had four functions. First, it articulated a vision for the next five years for the country’s economic and social development based on a political vision given to them by the Union government (which was to consult line ministries and state governments) through the National Development Council. Second, it was to formulate a five-year plan in accordance with the vision and convert it into an actionable document. Third, it was to articulate programmes to implement the vision. Finally, it was required at the beginning of each financial year to negotiate, with the finance minister and the commission’s chairman (the PM) annual budget allocation for plan and non-plan funds. This then left the finance minister free to formulate the national budget for that financial year.
The last 10 years have shown that the Niti Aayog performs practically none of these four functions. India is the only Asian country which, after 2014, has no ministry planning, nor a five-year plan (other than South Korea since 1994, soon after which it became a high-income country). In the 1980s and 1990s, Latin American and sub-Saharan countries abandoned central planning under the influence of neo-liberal, IMF- and World Bank-driven structural adjustment policies. They saw their per capita incomes stagnating and poverty increasing. NoAsian economy abandoned central planning and continued to grow relatively evenly.
It was announced early in Niti Aayog’s existence that a 3-, 7- and 15-year vision document will be prepared for India—the current chair of the Finance Commission was then the deputy chair of Niti Aayog. No such document was prepared. So how do we plan to get from here to having a developed nation 100 years after independence?
We are told a few committees of secretaries made presentations; but these have not been made public. So how is one to believe that India will be a high-income country by 2047?
Without a vision document, there is no need felt for any programmes to implement the vision. Hence, there is no financing role for Niti Aayog either. Since it disburses no funds, state governments can ignore the advice that Niti Aayog might offer them.
What has replaced planning? All ‘planning’ or budgeting, as it is understood in government, is now concentrated in the ministry of finance. In other words, like with Centre-state fiscal relations, centralisation is the turn of the game.
To perform its functions, the commission had around 1,200 people working for it. By late 2015, Niti Aayog had barely 400-450 regular staff. The decision makers felt it should suffice for a think tank. That staff situation has not changed.
Here is one effect of that. The 7th Pay Commission informed us that 89 percent of the Union government staff belong to groups C and D, the lowest two categories of government employees. That leaves 11 percent for groups A and B, the so-called professional staff.
Now note that Niti Aayog has 26 verticals, or subject divisions, that would be staffed by a few dozen professionals if we go by the average—that would mean fewer than two senior members per vertical. Hence, Niti Aayog has no choice but to hire a host of consultants, senior consultants, and young professionals as temporary staff, apart from hiring lateral-entry personnel. It is no surprise then, that there is little institutional memory in the so-called think tank.
No one is saying the Planning Commission was a flawless body, performing its role brilliantly since 1950. When I joined it in 2006, to head one division then another, I was appalled at the kind of domain expertise present in what should have been a premier government institution.
I have never failed to point out the contrast with China’s State Planning Commission before and after its economic reforms began. First, China’s PC was staffed by permanent staff who had spent their careers in it, so there was no lack of institutional memory. This is a critical asset in an institution entrusted with planning for the social and economic development of one of the world’s largest countries. Second, after its market reforms, China’s planning commission had become more, not less, powerful than under Mao’s strict Gosplan-style functioning inherited from the Soviet Union). In fact, China’s manufacturing success story was crafted by its industrial policy—created and implemented by this commission.
India, by contrast, destroyed its Planning Commission just as it was about to embark on a bizarre neo-liberal economic agenda, when Keynesian policies had made a significant comeback to address the global economic crisis of 2008 in OECD countries.
What China’s massive divergence from India in the last three decades—although both started at the same level of per capita income in 1995—teaches is that no one today should live under the illusion that China is a socialist economy and India a full-fledged market economy just because the latter abandoned planning. China is very much a capitalist economy, already on the verge of becoming a high-income country—despite, and partly because of, its successful planning.
Meanwhile, India’s failures have not been those of planning per se—there were failures of policy that resulted in the moribund growth of 3.5 percent over 1950-1980.
What the founding fathers of our nation inherited from the British Raj was not the country that Mughal emperors had left us—India contributed 25 percent of global GDP in 1600 and 1700. But in 1950, India’s literacy rate was 18 percent; life expectancy was 32 years; and its economy had only grown at 0.5 percent a year during 1900-1950, and contributed only 4 percent to global GDP. The British had destroyed our erstwhile institutions of governance and left behind 560 principalities.
In this context, the Planning Commission was a testimony to the genius of Jawaharlal Nehru’s vision and the operational flexibility of the early planning strategists that, out of the various disparate streams of thought at the time—Soviet, Western development economics, Gandhian, Congress socialism—a coherent and consistent planning framework could emerge that stood the test of time for well-nigh six decades.
(Views are personal)
Santosh Mehrotra | Visiting Professor of economics, University of Bath; author of Planning in the 20th Century & Beyond