A social role for NITI Aayog

NITI Aayog has had its first meeting with the economic experts. This was crucial since the government is trying to revive economic growth. The economy has experienced slow growth in spite of the revised national income data that has indicated faster growth. Industry, exports and so on, have shown tepid growth in recent years. The National Democratic Alliance’s electoral promise of an economic turnaround seems elusive in spite of its accelerating “reforms” by liberalising foreign direct investment (FDI) flows and land acquisition policies to signal its pro-corporate sector and big business inclinations.

Contradictory views

The budget is first a macroeconomic exercise and then a micro one catering to sectors of the economy. Two contradictory macroeconomic views are emerging from the government and its policy advisers. This is similar to the policy dilemma that the United Progressive Alliance faced earlier. The first view is to have a larger fiscal deficit so as to boost demand. The other view is to cut the fiscal deficit to keep the credit rating agencies (proxy for financial interests) happy so as to prevent a downgrade of the economy.

The Finance Minister favours the latter view and argues that a fiscal deficit imposes a burden on future generations who will have to repay the debt. This conservative view assumes that resources are constrained, so if the government spends more, the private sector has less to spend. But that cannot be true when the economy has spare capacity and can produce more. Increased government expenditures then boost the economy and lead to more investments via the accelerator. If increased spending is financed by increased direct taxation, that is even better. This is feasible in India since direct taxes are around 7 per cent of GDP which is low when compared to most other countries. But a government trying to signal its pro-business inclination would not wish to raise direct taxes like income, corporation and wealth taxes.

Actually, tax rates need not be raised but only the concessions given in taxes (these are called tax expenditures and amount to 4.5 per cent of GDP) need to be curtailed to get more resources. But this may also be seen as anti-business. The other possibility is to tap the black economy (more than 50 per cent of GDP, according to me.) This requires political will which is not yet visible. The business community, the largest generator of black incomes, would see this also as anti business — it has been opposing introduction of general anti avoidance rules (GAAR). Even if the economy grows faster due to the reduction of the size of the black economy and businessmen gain, they fear it since a bird in the hand is worth two in the bush.

The NITI Aayog meeting does not seem to have considered these deeper issues. Advice was sought from former bureaucrats, journalists, industry lobbyists and academics. Media reports suggest a lack of coherence in the discussion or in the advice given. Some of the invitees had been present in the Finance Ministry pre-budget meeting last month. So, what was the point of the meeting now when it did not lead to clarity on long-term issues? Further, the time for incorporation of policies in the budget is over since most of it would have been formulated by now. It may have been better to circulate for comments a discussion paper on the Indian economy’s slowdown and its global interlinkages.

Dilemma with global echoes

India’s current economic dilemma has global roots. The eurozone, Japan and Russia are in trouble, the Chinese economy has slowed down and the U.S. economy is the only big one that has improved. In such a scenario, increasing exports in a big way would be difficult. Declining commodity prices (like that of petroleum goods) signal a weakening global economy. Uncertainty is deepened by the arc of instability due to failing states, from Afghanistan, Syria, Iraq, Libya, Nigeria to East Africa. The war in Ukraine and the rise of IS are compounding the problem.

Greece threatens the economic stability of the eurozone. The new government there is defying the dictates from the world of finance and has promised to end the austerity regime hoisted on the people of Greece. The Greek Prime Minister is telling the European powers that the economic rules of integration of the weaker economies of Europe into the eurozone need change. He is arguing that a substantial portion of the debt resulting from the earlier wrong policies needs to be written off. The other troubled economies of Europe — Portugal, Spain and Italy — are under increasing political pressure to follow Greece’s example.

U.S. President Barack Obama has proposed increasing taxation of the rich while giving more to the middle classes to reverse the growing inequity there. This move not only has a political strategy underlying it but also economic reasons that favour it. Given the Republican domination in the legislature and their conservative inclinations, it is unlikely that this proposal would be accepted any time soon. But, other countries would be forced to think about the idea, especially in the context of the developments in Greece.

In 2011, Mr. Warren Buffett gave a call to tax the rich more not only for the sake of equity but also to tackle the global economic crisis. This call was picked up in Europe with 16 of the wealthiest French urging their government to tax them more. Fifty wealthy Germans backed this petition. In Italy, the chief of Ferrari also lent support.

Inequity has grown in most countries since the mid-1970s following the domination of global financial capital over policies — spearheaded by the World Bank and the International Monetary Fund (IMF). These policies have not only marginalised other sectors of the economy but also promoted bubble economies that are prone to periodic collapse as it happened beginning 2007 and from which the world economy has yet to fully recover.

These policies promoted shadow banking and all manner of opaque financial instruments that created economic instability. A casino economy emerged with speculation leading to a fictitious boost in paper wealth, promoting a false sense of well-being among individuals and increased consumption by them. As inequality increased dramatically, and there was the marginalisation of the vast majority, there followed the “Occupy Wall Street movement”, termed as the “99% v the 1%” and which also popularised the term, “Main street versus Wall street”.

For people policies

Events in Greece and Mr. Obama’s suggestion suggest that the time has come to end the domination of finance capital over the rest of society. Policy space has to be recaptured from the world of finance by the democratic forces so that policies favouring the people can be initiated.

The dilemma currently facing Indian policymakers reflects these global trends. India’s rightward drift started with the Emergency in 1975 when Sanjay Gandhi marginalised the left of Centre thinking in the Indira Gandhi government. The trend continued during the Janata regime and thereafter under the Indira Gandhi government which had to approach the IMF for adjustment in 1980. Rajiv Gandhi, under considerable influence of the liberalisers, pushed this tendency faster. With the New Economic Policies in 1991 and the emergence of the World Trade Organization (WTO) in 1995, there was a paradigm change, with the policies of finance capital becoming entrenched.

For India, which remains very poor and very unequal, policies based on the interest of finance capital and a narrow section of society can only spell disaster. These policies push markets and technology-based solutions which marginalise the individual. The underlying idea is that if making democracy work is difficult, substitute it with technology. Those lacking faith in democracy and social institutions are (in the name of the poor) pushing an autocratic agenda based on greater use of technology. The hard work of creating and nurturing institutions that can deliver to the people and strengthen democracy is sought to be circumvented. So, one of the key proposals today is to push Goods and Services Tax (GST) even if it does not suit the needs of the vast unorganised sectors of our economy and benefits the MNCs and big business. The hard work of making taxation simple and effective and shifting to direct taxes is hardly on the agenda. Creating a large number of jobs is secondary to cash transfers, bullet trains for the elite and smart cities for the upwardly mobile.

The flyovers of Delhi were built to ensure smooth traffic flow but now have speed bumps to slow down vehicles and which leads to jams. The technological solution failed because the institutional design of management of urban traffic is flawed and that is because policymakers did not go deeper into the problem in their urge to provide quick fix technological solutions. The NITI Aayog could throw light on such long-term issues (with solutions that are not just economic or technological but also social and political) of strengthening democracy, building institutions, regaining policy space and so on.

(Arun Kumar is the author of Indian Economy since Independence: Persisting Colonial Disruption. )

http://www.thehindu.com/todays-paper/tp-opinion/a-social-role-for-niti-aayog/article6903189.ece

Role and Functions of NITI Aayog / M Govinda Rao

1 Demise of the Planning Commission

There have been wide-ranging discussions on the role and remit of the new institution to replace the Planning Commission ever since the prime minister in his 2014 Independence Day address declared that the Planning Commission would be replaced by a new institution. In the cabinet resolution passed on 7 January, the government has come out with the broad contours of the new institution, National Institution for Transforming India (NITI). The remit and functioning of NITI Aayog will become clearer as it evolves over time. This note analyses the possible role it can take and the challenges it is likely to face in carrying out remit assigned to it.

Not many will shed tears on the abolition of the Planning Commission. In fact, the previous prime minister himself had called for redefining its role to suit changing realities. The planning exercise that was followed had hardly any relevance for the market economy. It did very little to plan and implement even public sector investments for infrastructure and its role in promoting public-private partnership was mostly seen as obstructive. The whole exercise of giving approvals to state plans smacked of dispensing patronage. The proliferation of various centrally-sponsored schemes (CSS) with “one size fits all” design and conditionality contributed to severe distortions in public spending. Often, the Planning Commission came up with discretionary transfers to states to meet non-plan revenue deficits negating the norms set by the Finance Commissions. The presence of a member of the Planning Commission as a part-time member of the Finance Commission did very little to correct this anomaly.

There were two contradictions between the Indian development strategy and the institutional framework constraining economic environment over the years. The first is the contradiction between the planning framework and the role of the market. The initial years after Independence required a planning frame to allocate the low levels of savings to invest in much needed infrastructure and priority sectors to overcome severe infrastructure deficits and the lack of competitiveness of the economy. However, the framework failed to adapt to the transition after the liberalising reforms were initiated. With fiscal constraints becoming more and more binding and political economy factors crowding out infrastructure spending with subsidies and transfers, the planning exercise lost much of its relevance.

The second contradiction was between the centralised command over resource allocation and the developmental role of the states in a federal polity. The end of single party rule and the emergence of coalition governments and regional parties as members of the central coalition brought to the fore the contradiction between centralised planning in a federal framework. The response of the central government was to further centralise even by intruding into the legislative domains of the states by various means including the proliferation of CSS. The consequence of the above was that the two important sources of economic dynamism, the private sector and the states, had to function in a constrained environment.

The architecture, engineering and management aspects of the new institution, NITI Aayog, will have to be crafted carefully, if it has to serve as an institution to impart dynamism to the developmental process in a harmonious manner. First, economic liberalisation has created a vibrant private sector and the new institution should assist in policymaking to enable private entrepreneurs to unleash their animal spirits and not to constrain them. Second, horizontal and vertical competition in a multilevel fiscal system can be an important source of economic dynamism so long as a certain measure of “competitive equality” and “cost-benefit appropriability” are ensured and predatory competition is prevented. “Laboratory federalism” can be a source of innovations, imitations and learning and facilitating this is important. Third, coordination costs are higher when there are coalition governments and the parties in power in the states are different from that of the centre. There is an urgent need for an institution to promote healthy intergovernmental competition while preventing the “race to the bottom”. All these underline the need for an institution to promote “Coasean bargains” in the spirit of cooperative federalism and ensure resolution of issues when such bargains fail.

2 NITI Aayog: Role and Remit

The cabinet resolution lists 13 different tasks to it which may be grouped under four major heads, namely: (i) fostering cooperative federalism by providing structured support to states on a continuous basis; (ii) formulation of a strategic vision and long-term policies and programme framework both for the macroeconomy and for different sectors; (iii) acting as a knowledge and innovation hub and providing research inputs by undertaking and accessing globally available research; and (iv) providing a platform for interdepartmental coordination. Each of these functions is discussed here in some detail.

(i) Cooperative Federalism: Platform for Interface between the Centre and States: The most important responsibility of NITI Aayog relates to promoting “…cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis”. The Seventh Schedule to the Constitution demarcates the legislative domains and functional responsibilities of the union and states in terms of union, state and concurrent subjects. However, there is considerable overlap in the functions requiring coordination between the union and the states and among the states inter se. Carrying out stable and sustainable developmental agenda requires fostering the spirit of cooperation and cementing the federal structure.

The areas of coordination needed are many and some of them may be listed here. First, there is considerable overlap in carrying out legislative and executive functions in concurrent subjects. Recent years have shown the need for cooperation in areas such as energy and environment, education and poverty alleviation where the need for coordinated action and speedy decisions are critical for pursuing the developmental agenda. Second the union government may have to intervene in the national interest even if they are in the State List or Concurrent List. There may be some public services in the State List, which, for reasons of nationwide externalities or for redistribution require coordinated action to ensure minimum standards throughout the country. The examples include healthcare, urban development and poverty alleviation. In these cases, the state governments are the partners in achieving a common goal. Third, In the case of union subjects too, the states may be involved in implementation as agencies due to their proximity to the people. In addition, NITI can facilitate exchange of information and experiences and promote heathy intergovernmental competition through monitoring and regulation.

The most important issue which the NITI Aayog will have to deal with is the rationalisation of CSS as there is considerable resentment by the states on them. In 2011, there were over 147 schemes which have since been consolidated into 66, but a close examination shows that these have been retained as sub-schemes even in the new arrangement. The “one-size fits all” design of the schemes do not take account of varying local conditions and institutions, The large counterpart/matching fund requirements distort priorities of the states, conditionalities in availing the grants make them restrictive and the final distribution of transfers is very different from the original design. Finally, when the schemes are discontinued, they leave large committed liabilities on the states.

There is certainly a case for having specific purpose transfers for ensuring minimum standards of services which are considered to be of national importance. Given the collaborative nature of such schemes, they should be designed and implemented in the spirit of cooperative federalism. The schemes should be holistic with scope for flexibility in implementation depending on the varying local conditions and they should be limited in number (not more than 10). They should have considerable scope for flexibility in implementation. The new institution could provide a platform for designing the schemes, implementation systems, monitoring and evaluating them in a collaborative framework.

In order to enable NITI Aayog to play a constructive role in fostering cooperation, it is necessary to place the Inter-State Council, properly empowered under Article 263 of the Constitution, in the Aayog. This institution should be the nodal agency for negotiation, discussion, bargaining and resolution of all major issues. It should have the required expertise on intergovernmental relations, fiscal federalism and constitutional law.

(ii) Strategic Planning: One of the major tasks assigned to NIti Aayog is strategic planning at both macro and sectoral levels. Perspective planning helps to make projections on the macro variables and keep the policy perspective in view. The strategy and policies required to improve the standard of living of the projected population and improve human development to empower the people to productively engage them in economic activities over a long-term horizon are important. These should be constantly revisited to ensure their relevance.

The cabinet resolution also speaks about planning at the grass-roots level which implies that the exercise of medium-term planning could be continued, but in a different manner. It could be indicative planning to provide satisfactory levels of social and physical infrastructure for meeting the growing needs of the economy, with the roles of public and private sectors clearly defined. Grass-roots planning entails building up of the plan right from the village level based on the resource envelop, with each higher level aggregating the plans and adding the investment requirements for the category. In other words, the planning should be built right from the village, block and district levels and these should be harmonised with planning at the state level. Similarly, national planning should be the consolidation of state-level plans along with the planning infrastructure and service requirements for the country as a whole worked out at the union level. NITI can provide a framework for preparing the plans to the states and the latter, in turn, to the lower levels of government. It should also have a unit to advise and guide if any state is in need of such assistance.

(iii) Innovation and Knowledge Hub: Closely aligned to strategic planning is the role of NITI Aayog as a think tank facilitating partnerships between the stakeholders. Formulation of strategic vision and policies and programmes aligned to it as well as initiating and monitoring them requires state of the art research, technology upgradation and capacity building. As a major think tank of the government working on various developmental policies, it should not only have basic research capabilities but also should access and outsource research on relevant subjects globally. It should have a strong data bank consolidating data and information on economic, demographic, geographic and social variables relevant for research and policy. Among other functions, the institution should also provide a platform for experience sharing among the states.

(iv) Coordination: The fourth important task of the Aayog is to ensure inter-governmental and interdepartmental coordination. The disastrous consequences of lack of coordination between the infrastructure, including environmental, ministries on economic growth were clearly evident in the last years of the previous government.

3 Conclusions

The cabinet resolution lays down only the broad framework for the Aayog. The effectiveness of the NITI Aayog in transforming India will depend upon the clarity in the functions assigned, the status and power given and the quality of the people who will steer the institution. In fact, the first Aayog will have a tremendous responsibility of carving out a niche for itself, setting the pace and steering the transformation.

Thus, the effectiveness of NITI will depend on how it charts out a course for itself. Despite the claims of a marked departure from the past, the institution has to function in the prevailing milieu and deal with the burden of legacy. The important question is whether the Aayog will have influence when it does not have the power to give grants and when it does not have the powers to make plan allocations to different ministries and departments.

The abolition of the Planning Commission paves the way for restoring the role of the Finance Commission to assess the total requirements of the states in the revenue account without making a distinction between plan and non-plan spending. However, the Finance Commission does not have a comparative advantage in recommending specific purpose transfers unless it is made a permanent body. Of course, the constitutional provision does not require it to be a temporary body – Article 280 simply states that the commission should be appointed every five years or earlier; the appointed commission can continue until the new commission is appointed. However, so long as the Finance Commission continues to be a temporary body, the NITI Aayog will have a role in designing and implementing these programmes.

The legacy issues do not end merely with the abolition of the Planning Commission. There are parallel institutions in the states and it is important to transform them to meet the new requirements. Similarly, the Constitution requires the establishment of district planning committees and metropolitan planning committees. Their role in the new environment needs to be specified. Although the cabinet resolution states that NITI Aayog will facilitate grass-roots planning, how exactly this will be carried forward needs to be seen.

The success of the institution in achieving interministerial, interdepartmental coordination will depend on the trust and cooperation it receives from them and the harmony with which the Aayog and various ministries work. There could be tensions between the technocrats in the Aayog and various ministers on the one hand, and between the technocrats and bureaucrats on the other. There is also the danger of bureaucratisation of the Aayog. Similarly, success in fostering cooperative federalism will depend on the trust of and cooperation from the states. In particular, the first Aayog will have a tremendous task of shaping the character and charting a course to make it an important institution in Indian federal polity to transform India.

M Govinda Rao (mgrao48@gmail.com) was a Member of the Fourteenth Finance Commission; he was earlier Director of the National Institute of Public Finance and Policy.

source: http://www.epw.in/commentary/role-and-functions-niti-aayog.html

From the Planning Commission to the NITI Aayog

The idea of “national planning” had been in the air long before independence. Indeed, the Planning Commission established in the Nehru era was the descendant of the National Planning Committee that Subhas Chandra Bose had set up at the suggestion of Meghnad Saha when he was the president of the Congress, with economist K T Shah at its head.

One of K T Shah’s outstanding intellectual contributions had been an estimate, together with K J Khambatta, of the annual “drain” of surplus from “British India” to the home country (a figure later used by Paul Baran in his classic work, The Political Economy of Growth), which gives an inkling of Shah’s world-view. The idea of planning, in short, was closely linked to overcoming colonial exploitation and to redeeming the pledge of the anti-colonial struggle to the people of India (expressed inter alia through the Karachi Congress Resolution of 1931).

Legacy of Anti-Colonial Struggle

It is a travesty, therefore, to see the Planning Commission as a relic of the “Soviet era”, a sort of ideological baggage borrowed from the Soviet Union that has outlasted the Soviet Union. Only a person unaware of and unconnected with the anti-colonial struggle can make such a claim. Though the Soviet achievements of the time may have inspired the particular course that “planning” took after its inception, the process itself was embedded in the formation of the post-colonial state; it was a necessary legacy of the anti-colonial struggle. It is not surprising that such “planning” came into vogue not just in India but in a whole range of countries that were newly liberated from colonialism.

The Planning Commission was meant to oversee a break of the economy from the inherited pattern of colonial division of labour, which had entailed the export of a range of raw materials, including agricultural materials in raw or processed form (cotton and jute textiles), and the import of a range of manufactured goods from the metropolis. Since the cultivable land-mass was limited and could not be augmented because the state pursued a policy of “sound finance”, which excluded any significant investment in land-augmenting practices (such as irrigation or yield-raising “research and development” in publicly-funded institutions), pushing out more exports of the existing kind necessarily meant jeopardising food security, a fact evident from the massive (over 25%) decline in per capita foodgrain availability in “British India” in the last half-century of colonial rule.

Not only were the country’s natural resources to be brought back under national control (which was the economic essence of decolonisation, and necessary for mobilising all available means for the nation’s development, without any “drain” on account of the dominance of foreign capital), and the production pattern altered from what had been dictated by the colonial division of labour, but the benefits of all these measures were to accrue to the people at large by ensuring that wealth and income inequalities were kept in check. The point here is not whether planning actually achieved these objectives (it obviously did not); the point is that this was the perception which informed planning and it was in keeping with the promise of the anti-colonial struggle.

Extinction – the Result of Neo-liberalism

The fact that neo-liberalism entails a break with this perception, the fact that the neo-liberal state is qualitatively different from the postcolonial dirigiste state (even when both promote capitalism in different ways), underlies the extinction of the old Planning Commission. Its extinction is not linked per se to the collapse of the Soviet Union (though it is obviously not unrelated to the change in the international scenario following this collapse); it is linked directly to the abandonment by the Indian state of any anti-colonial, or more generally any anti-imperialist, agenda, and to its embrace of international capital with which the domestic corporate-financial oligarchy is closely integrated.

It is not just the policy direction of the neo-liberal state that precludes a “planning” body of the type that the Nehruvian era had envisioned; the very structure of a neo-liberal state, where the Ministry of Finance is elevated to a domineering status above all other official organs and is in turn peopled by employees of the World Bank, the IMF (International Monetary Fund) and other institutions of finance capital, who are thereby basically put in charge of the economy, has little room for any such autonomous Planning Commission.

The Manmohan Singh government, committed to neo-liberalism but wary of being accused of deviating from its Nehruvian ancestry, sought an amusing way out of this impasse: it retained a Planning Commission, but “neo-liberalised” its key personnel. Narendra Modi has gone one step further and has dismantled it altogether, making India join, quite openly, the ranks of several other third world countries, where, basically, global financial bureaucrats get entrusted with the task of running the economy. The transition from the Planning Commission to theNiti (National Institution for Transforming India) Aayog thus reflects a transition from a state professing anti-imperialism to a neo-liberal state.

Niti Aayog and Centralisation of Power

All this, though important, is too well known to merit much discussion. What does need discussion, since it has received little recognition as yet, is the tremendous centralisation of economic power that the transition toNiti Aayog entails. The old Planning Commission had two serious failings. The first, an obvious one, was that in an economy in which the means of production were largely privately owned, there were no effective mechanisms for the “realisation” of the plans formulated by it. And it was not even the case that plans could be “realised” only in the public sector but not in the private sector; the “non-realisation” of plans in the private sector also entailed in a “resource-constrained system” (whose being resource-constrained was in fact the sign of a “good” plan, since it meant the absence of any “slack”) the “non-realisation” of plans in the public sector.

Various instruments were tried, such as a licensing policy, to make the private sector conform to the overall plan. But these, as is well known from a host of official committees, were ineffective, which also resulted in a significant trend towards centralisation of capital, and hence an increase in wealth and income inequalities. This fact had so alarmed Jawaharlal Nehru that he had set up in the late 1950s the Mahalanobis Committee on inequalities. In short, planning in India was hamstrung from the beginning, by being at best what Amiya Bagchi has called “partial planning”.¹

There was however a second flaw of the plan process. The Planning Commission, though it was meant to effect “nationaleconomic planning”, was a central government entity with no representation from the states. It thus went against the spirit of federalism, and gave expression to that strand of thinking within the Constituent Assembly which saw the centralgovernment as the continuation of the British imperium. While neo-liberal economists have gone to town over the “constricting of private initiative” that planning in India involved (though the private sector itself had asked in its 1944 Bombay Plan for substantial public investment, to be financed not by taxing capitalists but through deficit financing and to be handed over to capitalists after the teething troubles were over), not much is ever heard about the constricting of state government initiatives under Indian planning, notwithstanding Ashok Mitra’s strenuous efforts.² And the crucial point here is this: the constraints on state governments will be tightened rather than loosened in the Niti Aayog era.

To be sure, only the outline of theNiti Aayog is available till now, but the indications are already quite clear. There are, as is well known, three main channels through which funds get devolved from the centre to the states: through the Finance Commission, through the Planning Commission and through discretionary transfers. Barring the Finance Commission which is a onstitutional body, the other two channels basically express the discretion of the central government; and even in the case of the Finance Commission, since the centre appoints its members and ultimately fixes its terms of reference, the central writ is all powerful, a fact that had caused Amaresh Bagchi to submit a dissenting note to the Eleventh Finance Commission when it laid down “conditionalities” (in keeping with the neo-liberal predilections of the centre) for making available to states even such resources as were constitutionally their due.

Likewise the proliferation of “centrally-sponsored schemes” handed down to the states where they have to contribute a certain share, which is itself arbitrarily fixed by the centre, has further taken away the freedom of state governments to make their own state plans.

Further Control over States

Even so, however, the three bodies, the Finance Commission, the Planning Commission, and the Ministry of Finance, can be ranked in that order in terms of the looseness of the restrictions they impose on the transfers effected through them from the centre to the states. The disappearance of the Planning Commission, which would mean that what used to be plan transfers would now be doled out through the finance ministry, would entail both a possible reduction in the total magnitude of transfers, and a definite increase in the centre’s control over states’ plans.

There is a second reason for believing this to be so, and that has to do with the abolition of the National Development Council (NDC), where the state chief ministers were represented. This, though not a constitutional body, had a commanding presence, where the states, deriving strength from one another, made a definite impact. Since its decisions, which included the ultimate approval of plans, were taken through a consensus, the centre was often forced to yield on certain matters (though this did not prevent it from flouting the unanimous views of chief ministers on some occasions, such as the funding of the Sarva Shiksha Abhiyan). The elimination of the NDC is a major blow to the power of the states. While the governing council where chief ministers are to be represented is likely to be a purely formal body concerned with the “governance” of theNiti Aayog, rather than with basic development issues, the meetings of the regional councils are likely to be occasions where the states supplicate to the centre for this or that favour. The regional consultations that are supposed to replace NDC meetings are more likely to be occasions where the states supplicate to the centre for this or that favour, rather than serious challenges to central schemes and programmes.

I should make one point clear here. It may be argued that theNiti Aayog will entail neither a reduction in the amount of resources available to the states, nor any increase in the centre’s control over state plans, since it will be open to the states to tie up with capitalists, both domestic and foreign, to work out investment projects of any description and any amount. But that is precisely what I mean by an increase in central control over state plans. The centre’s forcing states to go in for public-private partnerships (which the Manmohan Singh government had tried to do unsuccessfully), the centre’s forcing states to vie with one another to attract private capital to their territories, the centre’s imposition of the neo-liberal model on all states by ensuring that resources available to each state, which the concerned state government can spend on a plan of its own choice rather than on a plan in keeping with what the centre considers “development”, are minuscule: all this is precisely what I mean by the centralisation of economic powers. TheNiti Aayog era will mean that states will not be allowed to go their own ways, not even to the extent that the Planning Commission era had allowed. Centralisation will be the mechanism for imposing neo-liberalism on the country at large.

This may appear odd at first sight. The dominant capitalist powers imposing neo-liberalism on the world have in the past been accused of breaking up large countries, Yugoslavia being a prime example. Should not India, by analogy, be the sort of country that they would be interested in breaking up rather than centralising? The answer is “no”, because in India neo-liberalism has made greater inroads into the central government than into the state governments. Its sweep over the country as a whole therefore requires centralisation. The fiscal crisis of state governments engineered deliberately by the centre through its Shylock-like usurious interest rate loans in the 1990s was an effort in this direction. TheNiti Aayog will continue that effort.

Prabhat Patnaik (prabhatptnk@yahoo.co.in) is Professor Emeritus, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.

Source: http://www.epw.in/commentary/planning-commission-niti-aayog.html

NITI

National institute for transforming India (NITI) Aayog was initiated with 
cabinate resolution is Bharathiya approach to development which is transformed from government resoluted Planning commission to enhance cooperative governance between centre and state to ensure sustainable growth of economy.
SIMILAR ITIES BETWEEN PLANNING COMMISSION AND NITI Aayog:

A..COMPOSITION:
1. Government bodies are chaired by Prime minister.
2.The governing councils have chief ministers and lieutenant governors of Union territories.
3.The deputy chairman were appointed by Prime minister.

B..OBJECTIVES:
i. Develop mechanisms for village level plans and aggregate these plans progressively at national level.
ii. Recommends national agenda with assessment and factors which retard economic development.
iii. To make appropriate recommendations for facilitating its duties .

MAJOR DIFFERENCES :
a) Regional council of Aayog consists of PM,CM ,incontrast to Planning commission to resolve certain issues.
b) NITI has part time members where as Planning commission has full time members and experts from outside government.
c) participative development agenda stressing on empowerment and equality is the guiding principle behind NITI Aayog and ensures every individual enjoy and aspire to lead a better life.
d) The Aayog will serve as a think-tank for the government and will provide suggestions for the economy, including the private sector. 
e) The Aayog will also offer a platform for resolution of inter-sectoral and inter-departmental issues to accelerate the implementation of the country's development agenda where as planning commission resoluted
to specialized sectoral area.
Above all ,Since 6 decades Planning commission was supreme body in Assessing and formulating plans resulted in balanced development of nation in diverse aspects.The composition of Planning commission has experts and full time experienced people even from
outside government will make organization more transparent and
accountable.So.better to reorgansise existed one rather than creating new one .