Paradigm shift in economic planning through NITI Aayog

The focus of newly independent countries in the postwar world was economic growth, and India was no exception.
Paradigm shift in economic planning through NITI Aayog

Paradigm shift in economic planning through NITI Aayog

Dr. Rajbir Saha


The focus of newly independent countries in the postwar world was economic growth, and India was no exception. Though India was ushered into an era of planned development with the advent of its first five-year plan in 1951, the historical roots of planning go back to debates and ideas that took birth during the pre-independence years of the National Planning Committee set up by the Indian National Congress (1938) and the Bombay Plan (1944) proposed by J.R.D. Tata and other industrialists. National planning has revived globally in the wake of UN Agenda 30 related to the SDG. India has also adopted a different approach to planning through NITI Aayog. India has witnessed a paradigm shift in planning.

State-led centralized planning saw a decline in the 1980s; the 1980s were years of structural adjustment plans (SAPs) designed to help heavily indebted developing countries under the directions of the IMF and the World Bank. Of late, there has been a rise in global interest in national planning, especially in the wake of UN Agenda 30 and sustainable development goals. The number of countries with a national plan has more than doubled, from 62 to 134 between 2006 and 2018, and 80 percent of the world’s population now lives in a country with a national development plan. India revamped its own planning machinery in 2014 and established ‘NITI Aayog’, which was the advent of India’s “new national planning”. While reviewing the Indian plan experience, we have seen that the major criticism of Indian planning was the heavy reliance on technocratic modelling, disconnect from social reality, and excessive focus on investment. The establishment of NITI Aayog may be seen as a paradigmatic shift in Indian planning in that sense. With the emphasised decentralised approach, Indian planning will be more instrumental with a goal-seeking approach as opposed to the technocratic plans of the planning commission. This paradigm shift in planning will also help establish controls for achieving a macro goal in an effective manner, as plan implementation and the successful implementation of control need decentralisation at every level of planning. Controls are the most important aspect of a plan based on negotiation, communication, and coordination, as well-developed controls help steer different expectations, micro-goals, and motivations towards a macro-goal. After eight years of establishment, NITI Aayog has promoted cooperative federalism, e.g., its role in GST, and competitive federalism through various indices promoting innovation, health, sustainable development goals, etc., among states. NITI Aayog has also fared well as a think tank and research center. However, a lack of action is noticeable as far as the aggregation of village-level planning and the formulation of adequate controls are concerned. Controls can be broadly of two types, namely command controls and manipulative controls. For example, a production-linked incentive scheme can be seen as a type of manipulative control to steer manufacturers towards achieving certain macro goals, i.e., making India a manufacturing hub. Lowe says command controls should be kept at a minimum in a market economy. Certain behavioural controls are also needed for citizens and the bureaucracy. However, effective controls in the case of citizens and bureaucracy may remain a distant possibility without village-level planning and decentralization. Here, the role of state governments has become crucial, and thus, new-age planning in India cannot achieve its potential without a certain degree of cooperation from the states. The novel approach of NITI Aayog towards a macro goal can be seen in India’s pursuit of SDG goals. NITI Aayog has contributed significantly to the pursuit of SDGs by sensitising different stakeholders, monitoring and evaluation, providing need-based technical support, facilitating mutual learning among States/UTs, and ranking the performance of States/UTs on SDGs on a set of select indicators. NITI Aayog has brought a paradigmatic shift in Indian planning, as planning has become an exercise towards achieving a macro goal as opposed to rational science in the top-down model of yesteryear.

The new institution has approached national planning in a more democratic and decentralised way. This change can be seen as a move towards collaborative rationality in planning, which posits a different heuristic for decision-making. The approach views planning as a more decentralised process of negotiation and communication across different stakeholders. The efficient decentralisation and well-designed controls in Indian planning need more decentralisation towards village democracy, with village development plans at the village level aggregating into a national plan. Then, in a true sense, India will have a collaborative plan. NITI Aayog is the first and vital step towards the same.

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