This editorial was first published in Business Standard on Feb 11, 2016. It is being republished as Panagariya has quit as the vice-chairman of the NITI Aayog
A visible sign of change in the nature of policymaking under the Narendra Modi government was seen on January 1, 2015 when the 64-year-old Planning Commission was replaced with the ambitiously named National Institution for Transforming India (or NITI) Aayog. The hope then was that it would be a leaner outfit with more sector experts. It was also expected to perform the role of a think tank and advisor on social and economic policies for the prime minister. The appointment of the well-known trade economist, Arvind Panagariya, as vice-chairman, and two respected academics and a scientist as members - plus the sharp reduction of staff - suggested that Mr Modi was on the right track. Replacing a secretary for planning with a CEO for the organisation indicated a new direction in institution building. Yet, over a year on, NITI Aayog's usefulness and purpose remain unfortunately unclear.
On current evidence, NITI Aayog can best be described as a poor relation to the Planning Commission rather than a brave new initiative. As yet, no significant policy prescriptions have emerged from its pink-and-grey portals, nor does the political establishment - although it includes many first-timers in government - appear to access it for advice, even on matters such as trade negotiations regarding which NITI's experts are world-renowned. Then the usual problems that beset government institutions are already surfacing. Some in it argue for more members to distribute the workload. There also appears to be some variance over the responsibility of the office bearers. Are they supposed to be policy advisors, as their expertise suggests, or quasi-political liaisons with state governments?
Certainly, it was common knowledge that the Planning Commission had outlived its utility in that form once controls were relaxed and the states came to play a bigger role in economic decision making. In the last years of the United Progressive Alliance, the chief ministers of some of India's better-run states - Mr Modi in Gujarat and J Jayalalithaa in Tamil Nadu notable among them - were vocal in their objections to spending priorities being dictated by a centralised body. In addition, over the past few years several decisions devolved far greater decision-making powers to the states in terms of how they choose to spend central grants and funds for welfare schemes. This diminishes one of the Planning Commission's major roles. Another function, that of resource allocation, has been shifted to the finance ministry. Clearly, NITI Aayog should have been freed up to find an alternative role. But it is unfortunate that the political leadership has not adequately empowered it to do so, or structured it to fulfil its initial promise.
NITI Aayog would have been in an ideal position to provide the government, which suffers the lack of a sound advisory establishment, with the crucial research heft and intellectual underpinning for its many policy initiatives, making it a genuine and powerful agent of transformation. There is still time - many bemoan the lack of new ideas emerging from stultified Union ministries. The NITI Aayog could be freshly empowered to serve as an advocate for progressive, market-friendly reform, so the political leadership has additional input on whatever policy proposals may emerge from the traditional bureaucracy.