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10 Oct
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UncategorizedBy Alok Ranjan

In formative phase

It may be too early to compare the efficacy of still-evolving NITI Aayog vis-à-vis Planning Commission; the new body has the potential to emerge better

The think tank, NITI (National Institution for Transforming India) Aayog, was formed as a successor to the Planning Commission of India on Jan 1, 2015 through a resolution of the Union Cabinet. Recently, I read that the UP government has also passed a cabinet resolution to do away with the state planning commission and replace it with state NITI Aayog. Some states, particularly those governed by the BJP, have set up their own state NITI Aayogs. Among the opposition-ruled states, while Odisha and Andhra Pradesh have been working closely with the think tank, others like West Bengal are not on board. As more than seven years have passed, it would be interesting to evaluate the performance of NITI Aayog vis-à-vis Planning Commission.

Unlike the Planning Commission, NITI Aayog has no powers to allocate funds to Union Ministries or state governments, or to craft schemes for states. It is for this reason that many state governments hold a lukewarm attitude towards NITI Aayog as they feel that they have nothing to gain financially from this body. I recall the time before 2015, when there used to be an annual exercise in which states would make a detailed presentation regarding resources, schemes, projects, targeted growth rate etc. and put up the picture of various departments presenting the work that had been done, and which needed to be done. After a daylong deliberation between the secretaries of various departments and advisors and expert members of the Planning Commission, the chief minister of the state used to attend the final discussion where the deputy chairman of the Planning Commission would be present. The members then gave their assessment of the work done by the state government and presented their views on the projected resource requirements. I do recall that we took the exercise very seriously and every department was represented in the meeting by its secretary and head of department. For at least 15 days in advance, preparatory meetings at the level of the chief secretary of the state used to take place. At the end of the presentation, the deputy chairman of the Planning Commission would approve the plan size of the state and also allocate specific funds. It used to be a great media event, with the chief minister and the deputy chairman jointly briefing the press. The chief ministers of the states, being aware of the political implications, took a lot of interest in the proceedings. Some of us used to be critical of the exercise as it involved spending a lot of time, and more often than not, we were aware of the plan size that was likely to be approved. However, there was no denying the fact that the entire preparation was itself a great learning experience and the state could project its vision and probable growth rate. In addition, the comments and observations of the expert members were of great value.

Despite the above advantages, many states felt that this was an unnecessary exercise. It was with this in mind that the Planning Commission was disbanded and replaced by the NITI Aayog. It is true that the interaction of NITI Aayog with the states has been limited. However, the current thinking is that there will be a closer engagement with the states. The new vice chairman Suman Bery has observed that the challenge is to work with states. The new CEO Parameswaran Iyer is also a great believer of coordination with states. The fact is that the states will look towards NITI Aayog if they feel that they will get some benefit from doing so, and this is what the NITI Aayog has to demonstrate in the coming years if it has to showcase its relevance to them.

There is no doubt that the NITI Aayog, in its short life, has contributed significantly to policymaking at the Central level. This has largely been due to the dynamic personality of its former CEO Amitabh Kant who, by his sheer force of personality and erudition, put the stamp of NITI Aayog on public policy. Some of the areas where NITI Aayog has contributed is regarding the policy related to electric vehicles and semiconductors. It has handled issues like asset monetization which normally would be tackled by the concerned departments. The mandate of the NITI Aayog is policy and programme framework, cooperative federalism, monitoring and evaluation, and acting as a think tank and knowledge and innovation hub. This mandate is quite wide and would often put NITI Aayog in conflict with the concerned departments. However, once again, the personality of the CEO could determine the success of NITI Aayog, and in Parameswaran Iyer — the new CEO — it has another very capable person holding the reins.

The NITI Aayog has recruited a large number of young professionals as domain experts and, currently, it has a manpower strength of over 700. These lateral entrants have come from private sector or other areas and have provided the relevant knowledge base to NITI Aayog to function as a think tank. It has come to light that several private sector executives have joined NITI Aayog, sacrificing their salary in order to contribute to the development of society and gain expertise which would be of great help to them in the future. NITI Aayog has been ranking the states on various parameters like sanitation, health and education. This does lead to a competitive environment in which states want to outshine each other. However, the states would gain more if NITI Aayog could mentor the low-performing states on how to improve their performance.

It is still a little early to pass a final judgment on the efficacy of NITI Aayog vis-à-vis the Planning Commission but one can say that the organization has justified itself to a large extent. However, it is felt that there is a need for greater coordination with the states. Also, NITI Aayog should not depend merely on the competence of their CEOs but on an institutional arrangement which would equip it with resources. These resources can be used to assist the laggard states in their development journey. It is time that the Union Government gave serious thought to this issue and if it does so then the NITI Aayog would certainly be a major improvement on the earlier Planning Commission.

The writer is an ex-Chief Secretary, Govt of Uttar Pradesh. Views expressed are personal

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03 Feb
UncategorizedBy ALOK RANJAN

Inclusive growth?

The Budget envisions growth as a driving factor for development; could have been more cautious on privatisation and explicit in employment generation

The Budget 2021-22 has received wide acclaim and the Sensex has given its thumbs up to it. The Government has responded to the unprecedented once-in-a-century crisis brought about by the Coronavirus pandemic which saw GDP plummeting down to -23 per cent in the first quarter and it is likely to be -7.7 per cent by the end of the financial year. This led to problems of large scale unemployment and hardship to a lot of people but the last few months have shown a v-shaped recovery brought about by the liquidity enhancing measures of the Government and the resilience of the economy. The Budget speeches always give an indication of the economic philosophy of the government and the Finance Minister outlined this by stating that this Budget is based on six pillars — health and well-being, investment in human capital, more research and development, infrastructure development, inclusive development for aspirational India and maximum governance. She went on to elaborate on how these pillars have led to the areas of focus — health, education, agriculture, youth empowerment, women empowerment, inclusive growth, increase in capital expenditure and innovation. This represents sound economic thinking and is an indicator not only of the desire to handle the current economic situation but also to give a vision and a roadmap for the future. In this regard, it is really a very welcome and laudable Budget.

The Economic Survey had been very clear in saying that growth was the main objective and the Government would be focusing on it. From time immemorial, economists have been debating the issue of growth versus equity but this survey and the Budget is clear that growth is the mantra which will pull all sections of the society forward and also contribute to the reduction in disparities. Personally, I feel that at this particular moment, to come out of the depths to which the economy has been pulled down by the pandemic, growth is the only way out. However, looking into the future for a country like India, where millions have been pushed into poverty by the pandemic, direct intervention by the Government to bring about distributive justice is required. To my mind growth alone is not enough. There are a lot of data showing that the Coronavirus pandemic has led the widening of inequalities, and all over the world including the World Economic Forum at Davos, the economic thinkers are talking about a “reset of capitalism” implying that we need to have growth along with a reduction in inequalities. This is a growth-oriented Budget and this fact must be appreciated because the economy has to come back on the rails as fast as possible. However, a major pillar of the Budget, as enunciated by the Finance Minister, is inclusive development which I think should be the main guiding principle for the future to make this growth sustainable.

The emphasis on infrastructure is indeed a very positive step with over one lakh crore increase proposed in capital expenditure including a 33 per cent hike in Rural Infrastructure Development Fund. There are increased allocations for construction of roads, development of an ambitious National Rail plan to develop rail infrastructure by 2030 and to increase the share of rail in freight from the current level of 27 per cent to 45 per cent and 100 per cent electrification of broad gauge routes by 2023. The infrastructure of the ports, to double recycling capacity by 2024, is being improved and major reforms in power distribution outlined with an outlay of Rs 3,05,984 crore over five years. For financing infrastructure, a new development finance institution would be introduced and a national monetisation pipeline of brownfield infrastructure assets created. We all know that infrastructure has a huge multiplier impact on the economy and these steps should lead to a high level of growth and employment. However, it is important to keep in mind that there is always a time lag in reaping the full benefits of investment in infrastructure, and therefore, certain sections of society would need immediate support to get gainful employment. It is for this reason that I think the Budget should have come out with some measures to boost immediate consumption demand which has a direct bearing on the growth rate as well as lead to the creation of employment. As an example, I would like to say that the services sector, hospitality sector, in particular, is likely to take another year or so to fully get back on its feet and some direct cash support for this sector would have been more useful.

The Budget has been bold in declaring privatisation of public sector banks and undertakings as a policy moving away from hesitant and time-taking disinvestment processes. I read the statement of the Disinvestment Secretary that even organisations like Steel Authority of India could be considered for privatisation. This brings to my mind a dilemma which is whether a profitable and cash-surplus public sector undertaking should be privatised? It would definitely lead to the generation of resources but may not lead to any better management or their more efficient allocation. I do not think anything and everything that goes under the name of the public sector should be given a bad name. There are a large number of public sector enterprises performing extremely well and fulfilling multiple objectives. Moreover, already the farm sector reforms which are in the right direction have got the farmers up in arms and this kind of a bold no holds barred approach to privatisation would similarly lead to agitating the minds of the labourers and employee unions. Privatisation of PSU’s is a path full of pitfalls and the Government will have to tread carefully.

The biggest issue even before the pandemic was rising unemployment but the Budget has not directly confronted this problem and it appears that the belief is that growth by itself will lead to a situation where employment is created. The reduction in MNREGA allocations as compared to the revised estimates of 2020-21 is a little surprising, especially when one was looking forward to concrete schemes for generating employment like starting an urban version of MNREGA.

A redeeming feature of the Budget is that there have been no new taxes and the Government is relying on borrowings to meet its expenditure. This again is a very positive step and makes economic sense also as the Economic Survey has pointed out that the Government is in a position to handle this debt burden. The Budget has rightly not been squeamish about a high fiscal deficit of 6.8 per cent for the Budget year and fully recognising that fiscal prudence can take a back seat today to economic growth and let things normalise by 2025-26.

The increased allocation to health raising to 1.8 per cent of GDP from 1.3 per cent is a very positive step, though 35,000 crores out of this is to go for vaccination and the 15th Finance Commission grant for health has also been included in the proposed outlay of 2.23 lakh crore along with items related to water, sanitation and nutrition. In any case, this is a welcome beginning

and the Government should aim to raise health expenditure to 2.5 per cent of GDP next year. Though investment in human capital and agriculture development has been mentioned as areas of focus, I feel the education sector deserved a higher outlay, especially, for early childhood care education and for improving the quality of education across all levels. The Government has reaffirmed its commitments to maintaining the agriculture mandis and MSP, and has also introduced a special cess for financing agricultural infrastructure. I feel this sector also needed a little more attention. However, the focus on animal husbandry and fisheries and developing them as agri-business enterprises is worth appreciating.

There is no doubt that this is a Budget that would lead to growth and it is based on a strong economic philosophy which should form the blueprint for future budgets and bring about sustained economic growth in the future.

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