NITI's Destiny & The Federal Question
"Ah! my Lord Arthur, whither shall I go?
Where shall I hide my forehead and my eyes?
For now I see the true old times are dead,
And slowly answer'd Arthur from the barge:
"The old order changeth, yielding place to new,
And God fulfils Himself in many ways,
Lest one good custom should corrupt the world.
(Alfred Lord Tennyson)
Goodbye Gadgil and all that the Planning Commission stood for. There was a time when the nationalist leaders, intellectuals, and businessmen agreed that laissez-faire was the root of all evil and central planning the new panacea. Those were the times when the idea of the Planning Commission was a brand new idea, an idea that would create a self reliant economy through centralized planning along Keynesian lines and bring India into the modern world. But as destiny would have it, everything would change.
The Planning Commission during the first three decades, had only partial success in reducing regional disparities in socio-economic development across the Indian States. In the later years, especially from the early 80s onwards, it became one of the most important reasons for the deterioration in state finances. Yet, it took the massive macroeconomic crisis of 1990–1991 and the consequent economic reforms to smash the intellectual coherence and precision of the logic that justified Nehruvian socialism and central planning. However, it was for Modi to ring the bell to announce the death of the Planning Commission.
Indeed, the birth of the NITI came during one of those pregnant lulls that soldiers talk about that seem like they must be invented, but do, in fact happen. In fact, federations tend to evolve as ongoing contracts; and remain, by their very nature, under constant renegotiation. International experience also suggest that federalism is not a rigid structure but an ever-evolving science of flexible, complex, and dynamic intergovernmental interactions. As Carl Friedrich, a highly respected scholar of federalism, famously argued that Federalism is a process rather than a design and a way of bringing people together through practical arrangements.
For the same reason, let us make no mistake, the recent structural shifts have not in any way quenched the thirst for reform, rather these have brought up new quests for more change and reform. This is evident from the intense and heated debates surrounding the NITI Aayog and the report of the Fourteenth Finance Commission that has done away with the 'illogical and dysfunctional’ distinction between Plan and Non-Plan and has increased the states’ share in central taxes to 42 per cent from the present 32 per cent.
The policy analysts and researchers not only in India but across the world are intrigued by recent developments suggesting that it is fruitful to examine perplexing questions surrounding the recent debate.
It is being argued that with the abolition of the Planning Commission, the National Development Council (NDC) has also lost its relevance as the structure of the Governing Council of NITI almost serves the same purpose. M G Rao (Director, NIPFP, New Delhi), responding to the recent survey of opinion by the author, supported the view that the NDC as well as the Governing Council shall be abolished and the Inter-State Council be allowed to perform the coordination functions. Prof Sandeep Shastri (the Pro Vice Chancellor of the Jain University) also endorsed this idea. However, for Mohammad Mehmood (retired Professor from the Dept. of Political Science, Aligarh Muslim University) and Suhas Palshikar (Professor and Director of Lokniti), the NDC remains relevant even after abolition of the Planning Commission. Prof. Mohammad Mehmood specifically argued that the NDC is still required as a forum for discussion and approval of centrally sponsored policies by the representatives of the States. Indira Rajaraman (Member, Central Board of Directors, Reserve Bank of India ) and Nirvikar Singh (Professor of Economics, University of California Santa Cruz) think that it all depends on what Niti Aayog does, and how it's role develops especially vis a vis the Inter State Council. Prof. Nirvikar Singh further argues that, although “it does seem that with the composition of Niti Aayog, the NDC is less distinctive, yet, it may make sense to still separate (to the extent possible) technical analysis from political bargaining.”
Overall, out of the 43 respondents (including professionals, practitioners, elected representatives, bureaucrats, academics, industrialists and civil society representatives) 40 per cent of the respondents think that NDC has lost its relevance against 48.57 per cent who think that it is still relevant.
The Governing Council of the NITI is qualitatively different from the NDC in the sense that it includes States and Union Territories (UTs) as equal partners in the policy making process. Earlier, the role of the NDC was just to approve the five year plans as a matter of formality. However, one sensible option is to consider some way to eliminate the risk of multiple bodies trying to achieve the same goal. At present the NDC, the Governing Council, the Inter-state Council and Regional councils to address specific issues within a specific time frame seem too much.
Indira Rajaraman would prefer clear demarcation of roles rather than merger of any of these institutions. Her idea is that, “since the Inter State Council presently comes under the Home Ministry, its role could be confined to dispute resolution, and the NDC could exist alongside for long term development policy formulation. The Governing Council could then be charged with monitoring of policy execution.”
On the other hand, M. Govida Rao’s eminent opinion is to transfer the role of the General Council to the Inter-State Council. However, Baldev Raj Nayar (Professor Emeritus of Political Science, McGill University, Canada) feels that it is best to have a simple arrangement. “Just keep development to itself and not involve the Inter-state council.” Prof. Nirvikar Singh feels that nothing can be said for sure without a clear discussion of current and potential roles and overall institutional structures. The devil lies in the detail!
The survey results show that 53.85 per cent believe that the role of the Governing Council could be transferred to the Inter-State Council, while keeping NDC intact.
The experts’ opinions can be contextualized in the light of the Punchhi Commission’s recommendation on Centre-State Relations (2007-10) which suggested that the ISC should be made a vibrant negotiating forum for policy development and conflict resolution. Once this outcome is achieved, the Government may consider the functions for the National Development also being transferred to the ISC. Note that the first Administrative Reforms Commission, constituted on 5th January 1966, in its 13th Report had also recommended replacement of the NDC with an Inter-State Council. However, the Sarkaria Commission (1983-87) had recommended that the separate identity of the NDC should be maintained and it should be entrenched under article 263 and renamed as National Economic and Development Council.
Interestingly, the Punchhi Commission on Centre-State Relations (2007-10) has also recommended a quasi-judicial status for the Council, although the Administrative Reforms Commission, 1969 in its 13th report did not recommend the invoking of the clause (a) of Article 263 for the purpose of setting up of the Inter-State Council because it intended to give quasi-judicial powers to the council, complementing the Supreme Court’s jurisdiction under Article 131. In our survey, 75 per cent respondents voted against the idea of quasi-judicial status to the ISC. Prof Nivikar Singh believes that “giving the ISC quasi-judicial powers is a terrible idea.”
Despite all that has been said and done, it should be noted that NITI Aayog has no “constitutional sanctity.” The decision to create NITI Aayog was not taken after a discussion in the parliament; however, the entity’s framework was discussed in a meeting attended by all the chief ministers and chief secretaries on December 7, 2014. Further, if the “extra-constitutional” NITI eventually overshadows the Inter –State Council, it would have to face the charge of another government-decreed body, taking custody of the vital issues by subordinating a constitutional body.
While 41.38 per cent of our respondents believe that the NITI shall be granted a constitutional status as against 31.03 per cent who don’t, Prof. Baldev Raj Nayar’s simple logic is that “if the Planning Commission can exist for more than six decades (without constitutional status), why is it necessary now for NITI, especially when it has a reduced role in planning?” On the other hand Prof. Nirvikar Singh feels that, “if India is a constitutional republic, then perhaps it is a good idea to finally give this function a firm institutional basis. On the other hand, if it is not successful, then giving it constitutional status will just entrench a bad idea. The Planning Commission had no constitutional status but was difficult to get rid of; and it took two decades after liberalization!”
Another contentious issue is that the financial allocation function which the PC had appropriated to itself, against the spirit of the constitution, has not been transferred to the Finance Commission. Rather, it has been transferred to the Ministry of Finance— leading to the suspicion that the control over the flow of the central funds to states will be even greater under the new dispensation. A whopping 81.48 per cent of respondents believe that this function shall go to the Finance Commission, while 50 per cent of them (40.74 per cent of total) believe that it a permanent Finance Commission is required for it to take up this function.
In light of this response, it is quite interesting to note that the three leading experts, Indira Rajaraman, M.G. Rao and Nirvikar Singh differ from the majority opinion. They believe that the Government has made the right move. Although Prof. Baldev Raj does not support the government’s move, yet, he is not in the favour of granting this function to the Finance Commission either. His counter question is, “Why not restore the function to NITI, which has domain expertise in development?”
Prof. Nirvikar’s response puts all the controversy to rest when he remarks emphatically that, “The Finance Commission should be responsible for tax sharing and horizontal equity across states. Making specific purpose grants for investments is completely different from that role, and should be done by individual ministries, with the Finance Ministry ensuring there is coordination and respecting overall budget constraints. Guidance on prioritization should come from the Cabinet and NITI Aayog. A permanent Finance Commission would be a good idea anyway, but not in the context of deciding specific purpose support for investments.”
In any case, transforming the FC into a permanent body (as it is in Australia) seems to be a reform that is still pending. Such a move would improve coordination and state-level fiscal data collection. It would also enable the FC to carry out proper monitoring of policy implementations in states. In fact, the FC, as a permanent body, can make annual projections to allocate funds to the states instead of five-year projections.
What is the total picture that emerges from this mosaic of different ideas? All possible competing suggestions have been made by the leading authorities and the government appointed commissions. However, as always, only time will tell what actually happens. But we can hypothesize that, over the next decade, political and economic changes will lead to a merging of different approaches, including one that were artificially excluded from the political psychology of the Government of India.
The author, Dr Chanchal Kumar Sharma, is Fellow, Centre for Multi-Level Federalism, Institute of Social Sciences, New Delhi; OSD (Academic) and Head, Department of Political Science, Central University of Haryana, Mahendergarh. He is Partner, Leverhulme International Grant on Indian Federalism, University of Edinburgh, Scotland, U.K.