Five Year Plans dead, NITI Aayog takes over

NITI Aayog has ushered in a new era of 3 - 7 - 15 plans. Five year planning is dead. What does this mean for India?

Five Year Plans dead, NITI Aayog takes over

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Centralised planning begins in free India : In the 1950s, Pandit Nehru envisaged a central economic planning model for India, on Soviet lines. After India was free from the British Raj, a formal model of planning was adopted, and the Planning Commission (reporting directly to the Prime Minister of India) was established on 15 March 1950. Jawaharlal Nehru was the first Chairman.

An ‘extra constitutional’ body : The Constitution of India had no provision for such a body. It wasn’t a statutory body either. It was established in March 1950 by an executive resolution of the Government of India, on the recommendation of the Advisory Planning Board constituted in 1946, under the chairman of K C Neogi. Thus it is an extra constitutional body, but not a constitutional or statutory body.

Track record : The Planning Commission in its nearly 65 years history, brought 12 five-year plans in all, the last one ending in 2017, and six annual plans involving fund outlays of over Rs.200 lakh crore. The Modi government in 2014 realised that this working model was not suited to India, facing enormous new challenges in an uncertain world. It was observed that the 65-year old Planning Commission had its relevance in a command economy, but was redundant now.

Enter NITI Aayog : The NITI Aayog (National Institution for Transforming India) is a Government of India policy think-tank established by the present NDA government to replace the Planning Commission that followed the top-down approach. On May 29, 2014, the Independent Evaluation Office submitted an assessment report to Prime Minister Modi with the recommendation to replace the Planning Commission with a "control commission".

National Institution for Transforming India : On August 13, 2014, the Union Cabinet scrapped the Planning Commission. On January 1, 2015 a Cabinet resolution was passed to replace the Planning Commission with the newly formed NITI Aayog (National Institution for Transforming India). The first meeting of NITI Aayog was chaired by Prime Minister Modi on February 8, 2015.

One size fits all doesn’t fit : India is a diversified country and its various states are in different phases of economic development with their own strengths and weaknesses. In this context, the ‘one size fits all’ approach to economic planning was incapable of making India competitive in today’s global economy. Although in defence of the Planning Commission, it is said that funds allocations was not arbitrary, but followed rigorous processes, that kept evolving.

Composition of NITI Aayog : (1) The Prime Minister is the ex-officio chairman of NITI Aayog, who appoints the Governing Council, which includes himself and (2) Ex officio members, (3) Vice-chairperson, NITI Aayog [Shri. Arvind Panagariya in 2017], (4) Full-time members, (5) Part-time members, (6) Chief Executive Officer (CEO) to be appointed by the PM for a fixed tenure in the rank of Secretary to the Government of India (presently Mr. Amitabh Kant), (7) All Chief Ministers of Indian states, etc.

Objectives of NITI Aayog : It’ll aim at accomplishing the following: (1) an administration variant where the government will be an “enabler” and not a “provider of the first and last resort”, (2) Progress from "food security" to focus on a mix of agricultural production, and actual returns to farmers from their produce, (3) Ensure that India is an active player in the debates and deliberations on the global platforms, (4) Ensure that the economically vibrant middle-class remains engaged and its potential is fully realized, integrate villages institutionally into the development process, and (5) Safeguarding of the country’s environmental and ecological assets, (6) Leverage India`s pool of entrepreneurial, scientific and intellectual human capital, use urbanization as an opportunity to create a wholesome and secure habitat through the use of modern technology, and use technology to reduce opacity and potential for misadventures in governance.

Kickstarting the 3 – 7 – 15 year approach : On 23 April 2017, NITI Aayog vice chairman Arvind Panagariya presented the government’s new approach of envisaging a 15 year long term vision, together with a 7 year strategy and a 3 year action agenda at the third governing council meeting. The Aayog unveiled draft of a new three-year action plan, replacing the age old five year plans. While outlining the draft action plan, Mr. Panagariya said that over 300 action points had been identified from all the sectors. The period of the action agenda coincided with the period of the 14th Finance Commission award which stabilizes the funding estimates of both the Centre and the states.

In the long run, we are all dead! The 15-year long-term vision document will prepare ways through which India can achieve its broader social objectives to meet the UNDP’s 2030 sustainable goals and will form a blueprint on transformation required in the planning system to sync it with the 14th Finance Commission recommendations. The 15-year vision document will also include internal security and defence that have not been a part of five-year plans. The first 15-year vision document will come into force from 2017-18.

Long term to actionable medium term : As a part of the national developmental agenda, NITI Aayog will also prepare a 7-year strategy from 2017-18 to 2023-24 to convert a long-vision document into implementable policy and action. The 7-year strategy will have a mid-term review during the year ending March 2020.

Sector specific action : In order to draw up strategies, the Union ministries/ departments, state governments, experts, academia, professionals and the like will be involved in the formulation of sector-specific working groups and steering committees. The institution would form a view on the basis of its internal thinking and the government's vision and develop strategy with objectives and incentives to ensure that different ministries work in tandem.

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3 Year Action Plans : The NITI Aayog is preparing to launch the three-year action plan from April 2017. The 12th five-year plan came to an end on March 31, 2017. The three-year action plan will end the present system in which the Centre waits for states to implement various schemes. Under the new system, states will be encouraged to meet the targets of various schemes; failing to do so may end up in the prospects of drying up of the funds flow for states.

Expenditure on Capital and Revenue basis : The new three-year plan will also provide details of the government’s expenditure classification on the basis of capital and revenue categories. The plan would consider demonetization and refrain on projecting revenue for the next year. The three-year action plan will aim at overall development of the country.

Everyone, we are listening : Inputs for the three-year action plan have been taken from various entities such as leading economists, business experts, scientists, farmers, defense and security experts, technology sector and various states and union territories.

Parts of the 3 year agenda : The three-year agenda has been divided into seven parts, each having a number of specific action points. In part one, revenue and expenditure exercise is undertaken to illustrate how we can begin to shift expenditure on the basis of set priorities within a three-year period, like increasing expenditure on health, infrastructure, agriculture, and rural economy. Part two deals with agriculture, industry and services; part three with transport connectivity, digital connectivity, public private partnership, energy, and science and technology.

Part four focuses on innovation and entrepreneurship; part five on governance, tax policy and administration, rule of law, and pro-competition policies and regulations. Part six deals with health, education and building an inclusive society; and part seven on environment and forests, and sustainable management of water resources.

Already in action : During NITI Aayog Governing Council's third meeting, Aayog CEO Amitabh Kant explained the initiatives taken in areas like agriculture, poverty elimination, health, education, digital payments, disinvestment, coastal zone, and island development. NITI Aayog will work with states to improve basic services and infrastructure, particularly in those districts and regions which require immediate and specific attention.

GST is arriving : Union Revenue Secretary Hasmukh Adhia made a presentation on the Goods and Services Tax (GST). He explained the benefits of the indirect tax collection system and what it really means for the future. He urged the state Chief Ministers to speed up the legislation of State GST Bills.

Chief Ministers have a say : The Modi government has restructured the centre-state relations in which state chief ministers have become governing body members of NITI Aayog, thereby, giving them due importance in various policy making efforts at the national level. PM Modi’s concept of “Cooperative Federalism” seems to be taking off. For the first time that Chief Ministers had been asked to suggest the list of centrally sponsored schemes and the sharing pattern.

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Five Year Plans dead, NITI Aayog takes over