Another Budget without NITI Aayog

As with last year's, in the wake of the departure of the erstwhile Planning Commission, the latter's functions on allocation are also being handled by the finance ministry directly

Till some years earlier, around January-February, two buildings in the Lutyens Zone here saw high activity.

If North Block was Ground Zero of Budget preparation, which it still is, Yojana Bhavan which housed the Planning Commission, some blocks away, was no less important.


The Commission, whose role and importance within the government had long been debated, was the place where states and central ministries came with lists of demands, working its way through a maze of officials.

Invariably, there was friction between the Commission and the finance ministry but matters were settled one way or the other. The Commission was disbanded some time earlier and a new body created in its place, NITI Aayog.  It was conceived as a think-tank, without financial or fund allocation powers. Which means little or no say in the Budget or plan-making exercise.

That has now moved to the finance ministry and after the 14th Finance Commission devaluation, the amount has also gone down, with the bulk going directly to states as untied funds.  In fact, there is a talk that by 2017-18, the entire Plan and non-Plan distinction would go and all government finances would be categorised only into revenue and expenditure.

Officials said individual NITI Aayog members were being consulted in the Budget exercise and there has been informal discussions but as a full body, the Aayog has not yet been formally involved. It was around October 2014 that the finance ministry issued a formal circular directing all other ministries and departments to furnish their Plan budget estimates for 2015-16 directly to it, a formal shift of responsibility for determining the annual Plan expenditure from the Planning Commission.  

The 2016-17 Budget will be the second one to be prepared with this arrangement. Earlier, around November-December, the Planning Commission would write to all ministries and departments, directing them to spell out their annual Plan fund requirement. The latter were also directed to send their Plan expenditure proposals, usually new schemes and enhanced allocation for older ones, keeping in view the stated priorities, spelt in the Five-Year Plan.

After all the proposals and expenditure details came to the Commission, it held separate discussions with ministries and departments. Meantime, it also received demands from state governments on their annual Plan expenditure. After all the inputs, the Commission sent these to the finance ministry. Followed by intense negotiations between the deputy chairman and senior finance ministry officials on the amount of the government’s annual support to the plan, known as Gross Budgetary Support.

A combination of the Centre’s assistance to its own ministries and departments and the funds it would transfer to state governments was thereafter finalised. It is an important component of the total expenditure of the central government.

In the current NITI Aayog, much of this function is being performed by the finance ministry solely, without much consultation with the Aayog or its team of experts.