Niti Aayog: Rethinking National Planning

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On 1 January 2015 the Government of India issued a cabinet resolution creating the National Institution for Transforming India, known by its Hindi acronym Niti Aayog, and simultaneously wound up the Planning Commission that had existed since March 1950. Both bodies were created the same way, by executive resolution rather than by statute or constitutional amendment, which is the first thing to understand about them. Neither has ever been a constitutional body. Their authority came from proximity to the Prime Minister, who chairs both, and from what the government of the day chose to route through them. The change of 2015 was therefore not a legal reform so much as a decision about where money and advice would flow.

The Planning Commission's central function had been the Five Year Plan. It set sectoral targets, projected investment, and, crucially, recommended how much central assistance each state would receive for plan expenditure. State chief ministers travelled to Yojana Bhavan in New Delhi to argue their case. That gave the Commission real leverage over states, and it was the source of the standing complaint against it: an unelected body of appointed experts in the capital was effectively rationing development finance to elected state governments. Critics also argued that the planning model, designed for an economy of licences and public sector dominance, had outlived its purpose after the liberalisation of 1991. Defenders replied that someone had to think in decades rather than in budget cycles, and that poorer states benefited from a national body that could argue for them.

What actually changed

The decisive shift was fiscal, and it happened alongside the institutional one. The Fourteenth Finance Commission recommended a substantial increase in the share of the central government's divisible tax pool transferred to states as untied funds, and the government accepted it for the period beginning in 2015. Untied money goes to state treasuries to spend as they choose, without a central body approving projects. At the same time, the responsibility for allocating central transfers moved to the Ministry of Finance. Niti Aayog was therefore designed without the one power that had made its predecessor feared. The Twelfth Five Year Plan, covering 2012 to 2017, was the last; India no longer produces Five Year Plans at all.

Structurally, Niti Aayog is chaired by the Prime Minister and run day to day by a Vice Chairperson and a Chief Executive Officer, with full time members, part time members drawn from universities and research institutions, and ex officio members who are serving Union ministers. Above this sits the Governing Council, which comprises the chief ministers of all states and the lieutenant governors of union territories. The Governing Council is the body that carries the phrase used to justify the whole redesign: cooperative federalism, meaning policy shaped by negotiation between the centre and the states rather than issued downward. Regional councils can be convened for problems that cross state boundaries, such as river basins or a shared drought.

What it does instead

Without money to allocate, Niti Aayog works through measurement, convening and publication. It has built a series of composite indices that rank states and, in some cases, districts: an SDG India Index tracking progress against the United Nations Sustainable Development Goals, a Composite Water Management Index, health and school education indices, an export preparedness index, and a National Multidimensional Poverty Index built on the methodology used internationally by Oxford and the United Nations Development Programme. The theory behind this work is competitive federalism. If a state's performance is published beside its neighbours', the reasoning goes, political incentives will do the work that central directives once did.

Its most tangible programme is the Aspirational Districts Programme, launched in January 2018, which selected more than a hundred districts scoring worst on a bundle of health, nutrition, education, agriculture, financial inclusion and infrastructure indicators. Each was assigned a senior central officer as a mentor, given a monthly published ranking on a defined set of indicators, and encouraged to converge existing scheme funds rather than receive new ones. Niti Aayog also houses the Atal Innovation Mission, which funds school tinkering laboratories and startup incubators, and it produces framework documents on subjects ranging from electric mobility to the reform of medical education and the restructuring of loss making public sector enterprises.

How well this works is genuinely contested, and the disagreement is not a matter of detail. Supporters argue that the older model of directive planning was incompatible with a large market economy and with states that raise and spend serious money of their own, and that a body producing comparable data and technical advice is more useful than one distributing grants. Critics answer that an institution with no statutory basis, no funding power and no independent authority can be ignored whenever its findings are inconvenient, and that publishing a ranking is not the same as changing an outcome. Some state governments, particularly those governed by parties in opposition at the centre, have argued that the Governing Council functions more as a briefing session than a negotiation, and several have periodically declined to attend. There is also a quieter technical criticism, that the indices depend on data supplied by the very states being ranked.

For anyone trying to read Indian policy, the practical lesson is about where power sits. Documents issued by Niti Aayog signal the direction of central thinking and often precede formal policy by a year or more, so they are worth reading early. But the decisions that move money are taken elsewhere: in the Union Budget, in the Finance Commission's five yearly recommendations, in the GST Council where the centre and states set indirect tax rates together, and in individual ministries running centrally sponsored schemes. Niti Aayog is best understood as the government's in-house think tank with unusually good access, not as the successor to a planning authority.

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