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From the Planning Commission to the NITI Aayog

The transition from the Planning Commission to the Niti Aayog reflects the completion
of the transition of a state. Niti Aayog will oversee a greater centralization of powers in
the central government, and with the abolition of the National Development Council
and its replacement by regional councils, the limited say the states had on policies and
the flow of funds stands further eroded. In short, the constraints on state governments
will be tightened rather than loosened in the Niti Aayog era.
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.
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.
Legacy of Anti-Colonial Struggle
It is a travesty, therefore, to see the Planning Commission as a leftover 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 labor, which had involved 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 risking food security, a fact evident from the massive (over 25%) decline in per
capita food grain availability in British India in the last half-century of colonial rule.
Not only were the countrys natural resources to be brought back under national control
(which was the economic essence of de-colonization, and necessary for mobilizing all
available means for the nations 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 labor, 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 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
It is not just the policy direction of the neo-liberal state that prevents 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 occupied 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-liberalized 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 the Niti (National Institution for
Transforming India) Aayog thus reflects a transition from a state professing anti-
imperialism to a neo-liberal state.
Niti Aayog and Centralization 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 centralization
of economic power that the transition to Niti 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 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.
There was however a second flaw of the plan process. The Planning Commission,
though it was meant to effect national economic 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 central government 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 Mitras strenuous efforts. 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 the Niti 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 constitutional 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 creation 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 centres 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
the Niti 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 the Niti Aayog will entail
neither a reduction in the amount of resources available to the states, nor any increase in
the centres 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 centres forcing states to go in for public-private
partnerships (which the Manmohan Singh government had tried to do unsuccessfully),
the centres forcing states to vie with one another to attract private capital to their
territories, the centres 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. The Niti 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. The Niti Aayog will continue that effort.