Reforming the NITI Aayog

Context: The justification for the establishment of the NITI Aayog has been more or less disproved by the way development policies are being formulated in the present Union government regime.

Why NITI Aayog was established?

The word “niti” in Hindi means policy and one can say NITI Aayog is the Policy Commission of the Union government. 

The Planning Commission was designed for a top-down command economy and had to be replaced because India is a diversified country, and its states are in various phases of economic development along with their own strengths and weaknesses.

In this context, a ‘one-size-fits-all’ approach to economic planning is obsolete. It cannot make India competitive in today’s global economy.

What kind of role has NITI Aayog played since it was established?

Looking at the work of the NITI Aayog over the past seven years, it would appear that its role in development policy has been mainly that of a formulator of programmes to realise grand goals announced from above.

– For instance: The prime minister announced that agricultural incomes would be doubled by 2022-23 and the NITI Aayog had to work out how this improbable target could be achieved.

A visit to the NITI Aayog website and the list of reports and papers it has prepared show that it focuses mainly on sectoral issues rather than on the overall development strategy.

– One indicator of this is the retaining of the old Planning Commission’s sectoral divisions but winding up of the large and influential Perspective Planning Division and Finance Division into a relatively small Economics and Finance Division, which seems to focus more on monitoring than on developing growth or equity or sustainability strategies.

What are the issues invovled?

No medium- or long-term strategy formulation by NITI Aayog: Most policy initiatives seem to be shaped by immediate sectoral compulsions and political impact and lack a long-term perspective.

Top-down approach: Formulation of development policy is now top-down, not just with the Union government imposing its vision, but with the head of the Union government playing that role. The public hoardings and other publicity measures that associate virtually every governmental activity with the image of the prime minister (as in the Covid vaccine certificates) reinforce this perception.

The real problem of strategy formation for development is that it is not being done. The NITI Aayog has produced some vision documents; but they are not agreed strategies, formulated after widespread consultations with experts and discussion with the states.

What are some key features of a development strategy?

A grand strategy for development must spell out the opportunities and threats faced by the key objectives of development which are growth, equity and sustainability.

It must then identify the changes in the role of the public and private sector, shifts in global economic alliances and policy shifts that are required to maximise benefits from opportunities and manage risks from threats.

The time frame for a grand strategy has to be long-term, but the more specific strategies derived from it must take into account short- and medium-term challenges that the country faces.

What are the challenges to India’s future growth?

The most immediate challenge for growth is the disruption of the global economy brought about by the Ukraine war and related sanctions, the Covid shutdowns in China and the rising tide of inflation.

The goal of equity in growth is a another difficult challenge.

Sustainability of growth: This includes components like climate change, reduction in greenhouse gas emissions etc

What are the steps that need to be taken?

India needs a strategy to grow rapidly in a global economy in which competitive advantages will be shaped by new-age technologies like, machine learning, artificial intelligence, biotechnology, etc. A grand strategy that does this can then be the basis for more specific strategies for infrastructure, technology development, educational quality, and skill formation and so on.

To ensure equity in growth, we need to design and implement an employment generation and skill development strategy that would allow the disadvantaged to earn enough to raise their living standards in a market environment. This strategy can be supplemented with public support for education, health care and social security.

India also needs to tackle the inequality in the pace of development between states, like the northern and eastern states and the southern, western and north-western states.

A grand strategy for sustainability must look beyond just climate change to the broader challenge of environmental conservation in a rapidly changing production and consumption environment.

Way forward

NITI Aayog must bring in the talent required and launch a process of broad-based consultation, particularly with the states, to secure a broad national consensus on a long-term growth strategy.

Specific programmes must be based on the implementation of this strategy.

The NITI Aayog must be converted from a Department of Development Implementation to a High Command of Development Strategy.

Source: This post is based on the article “Reforming the NITI Aayog” published in Business Standard on 16th May 22.