NITI Aayog’s Development Agenda

Context

• NITI Aayog is preparing a 15-year vision and a seven-year strategy document, and has circulated a three-year action agenda.
• The goal of transforming India and attaining the desired level of economic and social outcomes will require higher and sustainable growth in coming years.
• Higher economic growth will not only create employment, but will also generate higher revenue which will help increase government spending without disturbing the budgetary balance.
• The vice-chairman of NITI Aayog, Arvind Panagariya showed that the size of the Indian economy will increase from a level of Rs 137 trillion in 2015-16 to Rs 469 trillion by 2031-32 (2015-16 prices)— a compound annual growth of about 8%.

Background

• Niti Aayog sets a 15-year plan for government actions for achieving social goals such as poverty reduction, and improving health and sanitation.
• Another seven-year strategy document for 2017-24 will chart out policy action outlined as the “National Development Agenda”.
• A three-year “Action Agenda” from 2017-18 to 2019-20 is being worked out to assess funding requirements.
• Major outlines are –

Unshackling agriculture

• The plan panel proposed major changes in the agricultural produce marketing committee act, the law that sets in place systems to ensure farmers get a fair deal for their produce and are not exploited.
• Once implemented by states, the APMC changes will be one of the biggest reforms in the country.
• The panel has also drawn up an agricultural marketing and farmer-friendly reforms index to assess and encourage states to implement new rules.
• At present, more than two-thirds of Indian states have not been able to reach even the halfway mark of reforms score in the year 2016-17.

Preparing for second Green Revolution

• Increasing crop yields to feed 1.23 billion Indians is high on the agenda of the government.
• A task force, headed by Niti Aayog vice chairman Arvind Panagariya, also suggested ways of raising agricultural productivity and making farming remunerative for farmers.
• The panel suggested reforms in land leasing policies, ramping up of land records and land titles, preparing the country for the second “Green Revolution” in eastern states, and addressing farmers’ distress.

Cashless transactions

• After the demonetisation of high-value notes in November, Niti Aayog has driven new initiatives to push Indians to go for digital payments.
• It has been training officials of various ministries, at the central and state levels alike, to adopt digital modes of transaction. It announced award programmes for businesses and individuals to use cashless transactions.
• The Centre allocated Rs 50 crore to states for moving 5 crore no-frill Jan Dhan accounts to the digital platform.

Improving health, education and access to water

• The plan panel came up with indices for measuring states’ performance in health, education and water management.
• The indices helping states gauge the results of social programmes, compete with each other and share best practices and innovations.
• The Aayog also suggested clubbing various social programmes and centrally-sponsored schemes under 28 umbrella projects.
• The panel suggested changes in Swachh Bharat Abhiyan, skill development, poverty measurement, Atal Innovation Mission.

What is the need?

• Higher growth is the best way of lifting standards of living, as has been demonstrated by China in recent decades.
• Attaining and sustaining this level of growth is feasible, but will need policy action on various fronts—as has also been highlighted in NITI Aayog’s action agenda.
• A 2016 working paper published by the Reserve Bank of India (RBI) noted that India’s potential growth slipped to about 7% during 2009-15 compared with 8% during 2003-08. The Indian economy is estimated to have expanded by 7.1% in the last fiscal.

What should be the focus areas?

In order to push both potential and actual output growth, policymakers would do well to focus on at least four broad areas.

1. Focus on strengthening macroeconomic fundamentals

• A sound macroeconomic environment is a prerequisite for sustained higher growth. India has made significant progress over the last few years on this front, and all efforts should be made to attain the medium-term fiscal and monetary policy targets.
• The N.K. Singh committee has proposed a new fiscal architecture that will reduce the level of total debt stock with steady reduction in fiscal deficit.
• On the monetary policy side, the RBI’s rate-setting committee is targeting 4% inflation on a durable basis.
• Continued progress in both these areas will help strengthen economic stability.
• One of the reasons for softer growth in recent years is a decline in savings rate. Higher growth in the last decade was backed by higher savings.
• India’s savings rate is estimated to have declined from the level of about 37% of the gross domestic product in 2007-08 to under 30% in 2016-17.
• India will need higher savings to sustain higher growth. A stable macro environment should augment savings and investment.

2. Fix the banking sector

• High levels of non-performing assets—particularly in public sector banks—are a drag on investments and growth.
• The sector needs a fresh road map in the short to medium term that not only addresses the current problem, but also provides the necessary checks and balances so that a similar situation is avoided in the future.
• NITI Aayog’s action agenda has suggested auctioning assets to private asset reconstruction companies. For a durable solution, the government should reconsider its role in the sector. A significant reduction in government holding in banks will augur well for the economy.
• Further, India also needs a lively corporate bond market as it will provide an alternative source of financing and reduce the pressure on the banking sector.
• A vibrant, competitive and stable financial sector will help push investment and growth in the medium to long run.

3. Improve conditions in land and labour markets

• In order to sustain higher growth, the government will need to make it easier for businesses to acquire land and hire labour. India is a country of small enterprises.
• The latest economic census shows that on an average, enterprises in India employ only 2.24 workers. The small and informal nature of business enterprises in India affects productivity and is an impediment to growth.
• One of the reasons for having too many small enterprises is rigid labour laws. The government should work on creating a flexible labour market, which will allow businesses to take advantage of economies of scale.
• Similarly, the government also needs to make it easier for businesses to acquire land. A number of projects are stuck because of land acquisition problems.
• Reforms in these markets would require greater coordination between the Centre and states.

4. Review the functioning of government

• There needs to be a change in a way that allows the market to attain its full potential. For instance, it will need to withdraw from commercial activities through privatization and focus on strengthening regulatory capabilities.
• Further, it should always be careful about the unintended consequences of intervention. The recent decision of the government to impose price caps on coronary stents is an example of exactly what the government should not be doing.
• Price caps inevitably result in shortages with adverse consequences. The government should always avoid such decisions.

NITI Aayog vision

• The National Institution for Transforming India, also called NITI Aayog, was formed via a resolution of the Union Cabinet on January 1, 2015.
• NITI Aayog is the premier policy ‘Think Tank’ of the Government of India, providing both directional and policy inputs.
• While designing strategic and long term policies and programmes for the Government of India, NITI Aayog also provides relevant technical advice to the Centre and States.
• The Government of India, in keeping with its reform agenda, constituted the NITI Aayog to replace the Planning Commission instituted in 1950. This was done in order to better serve the needs and aspirations of the people of India.
• An important evolutionary change from the past, NITI Aayog acts as the quintessential platform of the Government of India to bring States to act together in national interest, and thereby fosters Cooperative Federalism.
• At the core of NITI Aayog’s creation are two hubs –Team India Hub and the Knowledge and Innovation Hub.
• The Team India Hub leads the engagement of states with the Central government, while the Knowledge and Innovation Hub builds NITI’s think-tank capabilities. These hubs reflect the two key tasks of the Aayog.
• NITI Aayog is also developing itself as a State of the Art Resource Centre, with the necessary resources, knowledge and skills, that will enable it to act with speed, promote research and innovation, provide strategic policy vision for the government, and deal with contingent issues.

Way forward

• It can be said with near certainty that like the last decade and a half, the next 15 years will also bring tremendous change, especially in the area of technology, and throw up new opportunities and challenges.
• Therefore, policymakers will need to constantly work on multiple levels in order to create enabling conditions that will allow the Indian economy to develop at a rapid pace and achieve long-term goals.

Practice Questions

1. Evaluate the transformation in policy affected by NITI Aayog in comparison to Planning model.

What should be the priorities areas to attain sustained economic growth in the coming decades? Examine in the context of NITI Aayog’s 15 years Vision Document.