NITI Aayog, China's DRC to develop macro-economic models

At a time when grasping a new methodology to estimate gross domestic product (GDP) has become a tedious exercise, NITI Aayog and China's Development Research Centre (DRC) will collaborate to understand the latest ways to calculate economic growth, besides developing other macro-economic parameters and models. These parameters and models can, then, become a reference and basis for assessing future economic growth in both the countries.

According to officials, the cooperation between the two could be in the form of understanding GDP methodology, competition between sectors, status of agriculture and models involved in reaching a particular goal. "It would more of a macro-economic modelling between India and China, in which both DRC and NITI Aayog have expertise," said an official.

NEW BONDS

• NITI Aayog and China’s Development Research Centre enter into agreement for cooperation on economic models
• Initially, the agreement was to be between Department of Economic Affairs and DRC, but was later transferred to NITI Aayog
• This could lay the foundation for more such cooperation between the two countries to understand their economic models
• Since its inception, DRC has done indepth research on China’s national development
• The Planning Commission, NITI Aayog's predecessor, too has entered into a broad agreement with China

DRC in China functions under the overall supervision of the state council, which is a council of all state governments, and acts as policy research and consulting institution. However, it is not counterpart of NITI Aayog.

China's National Development Reforms Commission (NDRC) could be considered the Aayog's counterpart, but the former has a much wider role. The Commission is sometimes referred to as 'mini-state council' and 'number one ministry'. It has broadly 26 functional departments with around 900 civil servants.

Interestingly, when the Planning Commission was scrapped and replaced with NITI Aayog by the new government at the Centre last year, there was some talk among experts that it might be modelled on NDRC.

The major function of DRC, on the other hand, is to conduct advanced research on the overall strategic and long-term issues in the economic and social development. It also conducts research on relevant problems related to reforms and opening up of certain sectors. It provides policy options and consulting advice to the Central Committee and the State Council. Since its inception, DRC has done in-depth research on issues related to national development in China.

An agreement between NITI Aayog and DRC will enhance the role of the former as the main think-tank of the Government of India.

Officials said that during the visit of Chinese President Xi Jinping to India in September last year, an agreement was signed between India's Department of Economic Affairs in the finance ministry and DRC for cooperation on economic matters.

But after the NITI Aayog was formed in January, its function was found to be more in sync with DRC, leading to a fresh agreement between the two.

NITI Aayog's predecessor Planning Commission, too, had entered into an agreement with China for strategic dialogue and cooperation in various fields, like energy and environment.

However, the current agreement is limited to macro-economic issues. China, which calls itself a manufacturing hub, has focused more on industrialisation over the past few decades through a combination of policy initiatives and measures.

India, on the other hand, moved at a greater speed towards services. Despite the new methodology of GDP calculation giving more share to manufacturing, its contribution to the economy is only 17 per cent. On the other hand, services, including construction, contributes 61 per cent. With the Make in India campaign, India plans to increase the share of manufacturing to 25 per cent over a decade.

India's new GDP methodology has puzzled many experts, including leading economists, since other parameters of the economy do not corroborate high economic growth in recent times. The country's economy rose 7.3 per cent in 20014-15, slightly less than 7.4 per cent by China in 2014. However, in the January-March quarter, India's economy grew 7.5 per cent, higher than China's 7 per cent in the same period.