2.5.3. NITI AYOG

NITI Aayog (National Institution for Transforming India – Aayog) has been constituted to actualize the important goal of cooperative federalism and to enable good governance in India to build a strong nation state. It is envisaged as a platform to inspire cooperative federalism, stressing on the need for effective center-state cooperation to advance development outcomes and achieve double-digit and inclusive growth for India. NITI Aayog is visualised as a think tank 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 replaces the erstwhile Planning Commission which was facing certain criticisms:

♤ It seemed that it was not able to capture the new realities of macroeconomic management at the national level.

♤ It had not been conducive to sound fiscal relations between the Union and the States since it followed “top-down” approach where states participated just as spectators in annual plan meetings.

♤ The funds it allocated to states were tied to projects it approved and they were imposed on states rather than being consultative.

In this context Niti Ayog seems to have more relevance:

♤ Due to its composition, NITI Aayog gives better representation of states which facilitates direct interactions with the ministries & helps to address issues in a relatively shorter time. Thus, furthering the idea of cooperative federalism.

♤ It is also taking steps towards Competitive Federalism. Various reports of NITI Aayog like Healthy states Progressive India etc. which give performance-based rankings of States across various verticals to foster a spirit of competitive federalism.

o It helps to identify the best practices in different States in various sectors and then try to replicate them in other States.

o Moreover, being a common point for similar issues faced by different sectors, states etc., it acts as a convergence point and platform to discuss these issues.

♤ NITI Aayog has also established a Development Monitoring and Evaluation Office which collects data on the performance of various Ministries on a real-time basis. The data is

then used at the highest policymaking levels to establish accountability and improve performance. Earlier, India had 12 Five-Year Plans, but they were mostly evaluated long after the plan period had ended. Hence, there was no real accountability.

However, there are certain concerns as well with NITI Aayog:

♤ While generating new ideas, NITI Aayog needs to maintain a respectable intellectual distance from the government of the day rather than resorting to uncritical praise of government’s projects.

♤ It has no powers in granting discretionary funds to states, which renders it toothless to

undertake a “transformational” intervention.

♤ Further, It acts as advisory body only which advices the government on various issues

without ensuring enforceability of its ideas.

The body has also missed some opportunities to make qualitative difference. For instance, CSS had to be reformed in the light of the recommendations of the 14th Finance Commission. Instead of reforms in design and implementation of the Schemes that was promised when the Planning Commission was wound up, changes were made only to shift greater responsibility onto States in terms of financing. A second opportunity arose when the distinction between Plan and non-Plan was removed. At that point, the organization had an opportunity to insist on taking a sector-wise comprehensive view of capital and revenue expenditures. However, that has not been done.

In this context, steps need to be taken to either convert the Finance Commission into a permanent body that can oversee fiscal transfer mechanisms rather than just give a tax sharing formula every five years or give a funding role to the NITI ayog. Towards the task of cooperative federalism, NITI Aayog should receive significant resources (say 1% to 2% of the GDP) to promote accelerated growth in States that are lagging, and overcome their historically conditioned infrastructure deficit, thus reducing the developmental imbalance. Here It should be noted that it should have the powers for allocating development or transformational capital or revenue grants to the states, but not the power to approve the annual expenditure programmes of individual states, unlike the Planning Commission.