*****NITI Aayog needs a new plan – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-commentary/view-niti-aayog-needs-a-new-plan/articleshow/91899980.cms

Synopsis

India has a long and a chequered history of planning, with some success but many failures. It has tried three distinct types of planning: directed planning, indicative planning, and now ‘a strategy, but no planning’. It needed to replace the Planning Commission, but not give up on planning altogether. In doing so in August 2014, India may have thrown the baby out with the bathwater.

Ajay Chhibber

Ajay Chhibber

The writer is former director-general, Independent Evaluation Office, GoI

With a new deputy chairman of NITI (National Institution for Transforming India) Aayog taking over earlier this month, it may be time to rethink its role. For India, the experiment with ‘no planning’ has not worked. India still needs some form of new planning – or, at least, a framework to guide it to achieve shared and sustainable prosperity over the next 25 years, but with flexibility to deal with uncertainties. To achieve and help guide this, NITI Aayog needs a revamp.

India has a long and a chequered history of planning, with some success but many failures. It has tried three distinct types of planning: directed planning, indicative planning, and now ‘a strategy, but no planning’. It needed to replace the Planning Commission, but not give up on planning altogether. In doing so in August 2014, India may have thrown the baby out with the bathwater.

It is difficult to disentangle the role of planning and planning systems from broader economic policy choices in determining socioeconomic outcomes. India followed a policy of import substitution with state-led development during 1950-90. As a result, its economy grew slowly at around 3-4% GDP and poverty increased. India’s economy started to do better from 1980 when there was some internal liberalisation. But the more sustained jump in economic growth came from the 1991 reforms that allowed the private sector to invest and grow.

It also shifted from more directed planning to indicative planning starting with the 8th 5-Year Plan (1992-97), but went on to prepare 5-year plans without levers to achieve announced plan targets. As a result, planning, as practised, lost relevance. In addition, planning remained heavily top-down with GoI controlling many levers, financial and otherwise. This lack of ‘cooperative federalism’ was highlighted by inadequate consultative processes in preparing plans by the Planning Commission, and by proliferation of prescriptive one- size-fits-all central schemes in areas considered largely state subjects.

In 2014, with the creation of the think- tank NITI Aayog, India went away from planning at a time when the number of countries with a national development plan has more than doubled – from about 62 in 2006 to 134 in 2018. More than 80% of the global population now lives in a country with a national development plan of one form or another. This is a stunning recovery of a practice that had been discredited in the 1980s-90s as a relic of directed economies and state-led development.

Several factors have fostered this ‘new national planning’. But from about 2015, the momentum for producing plans has accelerated, driven in part by a need to plan for Sustainable Development Goals (SDGs). NITI Aayog should also prepare a National Investment Financing Framework to outline how best to achieve that vision and, in the interim phase, to achieve SDGs.

NITI Aayog should be preparing a long-term perspective vision, possibly all the way to 2047, with an interim target of 2030 to dovetail that vision to the agreed SDGs and 3-5-year frameworks to move towards that vision. Without such a compass, and with rising inequalities and looming climate change challenges, it is not clear what direction India is headed towards and how it should try and get there. Antoine de Saint-Exupery in his 1943 book, The Little Prince, said it best, ‘A goal without a plan is just a wish.’

It need not be given financial powers, especially as the distinction between plan and non-plan expenditures does not exist any more. But it should have the power to sign off on capital and recurrent expenditure allocations to central ministries, states and local administrations. Without such a sign-off power, it can be easily bypassed and ignored.

NITI Aayog should be given a much clearer and vital role with a leadership team that has the requisite political backing and technical skills. It should be a cabinet minister – a minister of economic development – who should be at all cabinet meetings, a voice for long-term sustainable development. The institution should be authorised through an Act of Parliament so that it can have the required legitimacy and be answerable to Parliament.

The technical skills and sectoral expertise should also include expertise in economic systems and behavioural modelling, critical to understanding how market forces react to policy changes under indicative planning, and how development outcomes are affected by a variety of interventions, to achieve the SDGs. It should have the expertise to be a systems reform commission to address intersectoral linkages and future challenges such as climate change and meeting SDG targets, as well as ensure greater horizontal equity between states through a few core central schemes and lead the way forward. What it must not be is just a reactive body, tasked with piecemeal special projects.

The current NITI Aayog needs a legitimised authorising environment, perhaps working through the constitutionally mandated Inter-State Council in the spirit of cooperative federalism.

The writer is senior visiting professor, Indian Council for Research on International Economic Relations (ICRIER), New Delhi. This article is based on the paper, ‘Economic Planning in India: Did We Throw the Baby Out with the Bathwater?’ (bit.ly/3z6N57v), published in Indian Public Policy Review, May 2022

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