mrunal examnotes_niti ayog,planning commission,functions,criticism

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[Economy] Niti Ayog, Planning Commission: Evolution, Structure, Function andtruckload of Criticism

Posted By Mrunal On 21/01/2015 @ 1:00 pm In Fiscal-Policy | 63 Comments

1. Timeline of planning in India

1. Five Year plans: from 1st to 12th

2. Planning Commission: Criticism/Anti-Arguments

2. Niti Ayog: Structure, Membership

1. NITI Ay og: function s, Mandates

2. Functional Comparison:Niti vs PC3. Niti Ayo g: Cr iticism/Anti-Arguments

4. Allocation of funds to States?

5. Chinese Niti Ayog?

3. Mock Questions

Timeline of planning in India

1934 Visvesvaraya plan in this book The planned economy of India. He was an Engineer, Ex-Diwan of

Mysore and Bharat Ratna recipient.

1938 Nehrus Congress plan. But not implemented due to WW2.

1944 Bombay plan by noted industrialists such as JRD Tata, GD Birla, Kasturbhai Lalbhai et al.

1944 Sriman Narayan Agrawals Gandhian plan.

1945 MN Roys peoples plan with socialist leanings.

1950 Vinoba Bhaves Sarvodaya Plan

1950,March

15 Cabinet resolution to form Planning commission.

1952,Aug. National Development council (NDC) made by Cabinet resolution.

2014,Aug. Modi shuts down planning commission.

2015, Jan Government notified the formation of Niti Ayog- National Institution for Transforming India.
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Five Year plans in India

Plan Period theme/Model/target

1st 51-56Harrod Domar ModelMain focus: Agriculture, irrigation and power.

Got more GDP growth than its original target.

2nd 56-61 P.C.Mahalanobis Model

Socialist model, Rapid industrialization, heavy industries.

3rd 61-66Sukhmoy Chakraborty and Sanddy

Also called Gadgil Yojana.

Failed to achieve its target due to droughts and wars with Pak-China

Holidays 66-69 Holiday declared thanks to #EPICFAIL of 3rd FYP.

4th 69-74Ashok Rudra-Alon Manneygrowth with stability and self-reliance. [Garibi Hatao came here, says LucentGK]

#EPICFAIL due to Bangladeshi refugee problem and drought.

5th 74-79C.Subramaniam and later redrafting by D.P.DharOriginally it was a 10 year long term perspective plan with focus on poverty removal

and self-reliance

RollingPlan 78-80 Morarji Desais Janta government came up with Rolling plan system well measure

progress every year and make new plans accordingly for next year.

6th 80-85 Poverty removal (Garibi Hatao), IRDP, NREM, TRYSEM etc. [Garibi Hatao came here

says Ramesh Singh]


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7th 85-89 Pranav Mukherjee

Focus on employment. Jawahar Rozgar Yojana started.

2 Annualplans

89-91 Political instability at Centre. Hence only annual plans.

8th 92-97 John W.Miller model.

PV Narasimha Rao- LPG reforms

9th 97-02 Growth with social justice and equity. Mostly indicative planning.

#EPICFAIL due to global slowdown after Asian financial crisis.

10th 02-07 8% GDP growth rate, double per capita income in 10 years.

11th 07-12Theme: inclusive growthC.Rangarajan framed it with targets: 8-10% growth rate, 70 million new jobs, lower

IMR, CMR, TFR etc.

12th 12-17

Theme:Faster, More inclusive and sustainable growth.Target growth rates: 9% GDP, 4% Agriculture, 10% Mfg.

10% reduction in poverty, create 50 million new jobs.

Get IMR:26, MMR:1000,Child Sex ratio: 950, TFR: 2.1Increase mean school years, forest cover, infrastructure investment, rural tele-density.

Planning Commission: Criticism/Anti-Arguments

1. Achieved >9% GDP growth-rate during 2005-07, thanks to American boom prior to sub-prime crisi. But

almost all nations of world experienced high growth. So 9% GDP did not come from Monteks magic wand.2. Post sub-prime crisis, failed to evoke the animal spirit in Indian economy. GDP-fell, inflation rose during

2008-13 nonstop.

3. Reduced poverty by doctoring the BPL-line. Tendulkar line says 27 crore BPL, if we use Ranga line then 37


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Niti Ayog: Structure, Composition, Membership

Position Planning Commission NITI Ayog

Born

1950, March 15th

died in 2014, Augustafter Modi became PM.

2015, January 1st


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Chairman Prime minister same

ViceChairman

Last Dy.Chairman wasMontek Singh Ahluwalia(Cabinet minister rank).

Free market economist Arvind Panagriya. He was the Chiefeconomist of Asian Development bank, and the the brain behindRajasthans land-labour reform.

CEO

Member-Secretary(IAS)Sindhushree Khullar

(IAS)

A secretary level bureaucrat with fixed tenure.Same Ms. Sindhushree Khullar is the first CEO.

Ex-officio

members

Finance Minister

Planning minister

PM can nominate four-Union ministers. Modi has nominated

following:

1. Home

2. Finance3. Railway4. Agriculture

Full time

members

4-7 full time members, who

enjoy Minister of Staterank.

Bibek Debroy (Free market economist)

Dr. V.K. Saraswat (technocrat, missile scientist and Ex-DRDOchief.)

SpecialInvitees

Union ministers for

1. Transport2. HRD3. Social Justice

+PM can invite other experts as and when needed.

part-timemembers

Tech experts from research institutes. Currently none declared.Rotational posts.

GoverningChairman: Prime ministerChief ministers of all states


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Council Lieutenant governors of all Union territories.

ad hoc

RegionalCouncils

Will have CMs of states that fall in the region. Theyll be dealing with

specific issue concerning a group of states for example irrigation,naxal-problem, infrastructure etc.

NITI Ayog: functions, Mandates


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Niti Ayog: functions & mandate

1. Think tankfor Government policy formulation.2. Find best practices from other countries, partner with other desi-videsi bodies to help their adoption in

India.3. Cooperative Federalism:Involve state governments and even villages in planning process.4. Sustainable development:+ Modis Zero defect-zero effect (on environment) manufacturing mantra.

5. Urban Development:to ensure cities can remain habitable and provide economic venues to everyone.6. Participatory Development:with help of private sector and citizens.7. Inclusive Developmentor Antyodaya. Ensure SC, ST and Women too enjoy the fruits of Development.

(because Din Dayal said so.)8. Poverty eliminationto ensure dignity and self-respect. (because Poet Tiruvalluvar said so)

9. Focus on 5 crore Small enterprises- to generate more employment for weaker sections.10. Monitoringand feedback. Midway course correction, if needed.11. Make policies to reap demographic dividendand social capital.

12. Regional Councilswill address specific issues for a group of states. Example: Regional Council fordrought, Left-wing extremism, Tribal welfare and so on.

13. Extract maximum benefit from NRIs geo-economicand Geo-political strength for Indias Development.

14. Use Social media and ICTtools to ensure transparency, accountability and good governance.15. Help sorting inter-departmental conflicts.

16. Lot of bol-bachachan giri and vague ideas about national self-interest, capacity-building, participating inglobal-village etc.

Functional Comparison: Niti vs PC

Planning commission NITI Ayog

Design FYP-Five year plans Design national agenda, and cooperative federalism.

Decide two money matters:

1. How much money to give toeach state for centrallysponsored schemes (CSS)

2. How much money to give foreach states own state-five-

year-plans.

Mostly work as a policy-formulation-hub. The Press release issilent on money/funding. so, most probably itll be left to financeministry.

Some experts believe Inter-state council will decide moneyallocation to states, then finance ministry will release the fund.

States/UT were represented in


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National Development Council.PC framed FYP=>went toCabinet=>NDC approved

FYP=>Tabled in parliament.

States/UT represented in Governing council. But no specificmention about whether they can approve/reject/amend Niti Ayogsproposals?

One size fits all, top-down socialistplanning by Armchair Nehruvianeconomists and IES cadre officers

(Indian Economic Service).

Press release talks about participatory planning but how exactly will

they do that? No specific details laid out.IES officers are rarely invited in Modis meetings.But given the entry of Free market economists and Technocrats,

most probably itll be an indicative planning + core planning i.e.after inputs of state governments, a broad outline with selectedtargets, limited subsidies and monitoring through ICT.

Niti Ayog: Criticism/Anti-Arguments

1. Bibek Debroy (Fulltime member) himself criticizedthe vaguely worded press-release on Niti-Ayog formation.

Modi should have specifically pointed out its functions and jurisdiction.2. Modis arbitrary decision to dismantle the Planning Commission, without taking NDC or states into

confidence- this undermines cooperative federalism. (Says Kerala CM).

3. From union territory only Lieutenant Governors invited. CM of Delhi and Puducherry cant participate inGoverning council.

4. Like PC, NITI Ayog too is a non-Constitutional, non-statutory body formed by a cabinet resolution. It is notaccountable to parliament, and if line-ministries fail to achieve targets, NITI Ayog cannot punish them.

5. Niti Ayog should have been created through a legal/Constitutional amendment. There should be a

perspective plan spanning for 15 to 20 years. Otherwise, what if another party comes into power anddismantles this? Recall Morarji vs Indira.

6. Itll take minimum 6-8 months for Niti Ayog to set things in motion. In between that time, Development will be

halted due to paucity of funds and ideas.7. Planning commission and NDC decided special category states and gave them additional funding to help

the poor and backward regions. With advent of Niti Ayog, will those states lose their status and extra-funding? Uncertainty prevails.

8. Niti Ayog will conflict with Cabinet Secretariat(for inter-ministerial coordination) and constitutional body

Inter State Council(for coordination with states).

9. FinMin officials always try to squeeze budget to keep the fiscal deficit under FRBM targets. Niti Ayog and itsfree market economists will further reduce welfare schemes to help them.
http://blogs.economictimes.indiatimes.com/policypuzzles/seven-questions-about-niti-aayog-that-modi-govt-should-answer/


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10. At present weve 60+ centrally sponsored schemes. Modi aims to combine them into just 10 schemes. Thus,poor and marginalized communities will suffer.

11. Planning commission used to monitor of human development in the States, Sub-plans for women, SC and

ST. Niti Ayog doesnt say how theyll do it.12. Niti Ayogs mandate repeatedly says theyll focus on manufacturing sector. Rajanbhai says just because

China succeeded on manufacturing focus, doesnt automatically guarantee that same Cinderella story willrepeat here.

13. Modi distributed the planning-Expenditure function to FinMin and subject matters to respective ministries.This will result in loss of perspective and long-term view. Now State governments will have to lobby at bothtype of ministries to get funds released.

14. Planning Commissions Nehruvian Economists advocated decentralized planning. Modis free market

economists and technocrats will pursue centralized planning and e-monitoring. (It is both pro and anti-argument depending on how brainwashed a person is after reading theHindu.)

15. 1961: Indian Economic Service (IES) was born on Nehrus initiative. Modi doesnt invite them in meetings,free market economists look down upon them with utter disdain. How theyll be integrated in the newsystem? No clear answers given in the press-release.

16. There is no need for any Planning commission or Niti Ayog. Good work can be done even without them-through line ministries and inter-state councils.

Anyways, the real work of NITI Ayog is yet to begin. So, most criticism is centred around the theme that Since

press release doesnt talk about xyz thing- so only bad thing will happen.. But, only time will tell how NITI Ayogfares in real life.

Allocation of funds to States?


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Until now, States got funding from two places

Financecommission

Gave share from Union revenue to states. Decides the formula for every 5 years.~2% of GDP flew this way.

Planning

Gave two types of funding

1. Centrally sponsored schemes (~66 schemes). Money given after consultation between PC

and respective ministries of health, education etc. at union and state level.2. Central assistance for state plans. Money given after consultation between PC, FM and State


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commission Government.

~2.5% of GDP flew this way.

After scrapping the planning commission, Modi wanted the Finance commission to overesee all three types of

money-allocations i.e.

1. Share from union taxes2. CSS: Centrally sponsored schemes

3. Unions assistance to states plans.

But Modi couldnt do it easily because:

1. Constitution amendment necessary, to give finance commission these new powers.2. But the Chairmen of 13th and 14th Finance commission dont like this additional homework. NOT ONE bit.

Because

Finance commission is a non-permanent body constituted every 5th year, hence it can look at theissues from a fresh perspective. If its turned into a permanent body- then incrementalist approach will

creep in i.e. throwing more money in existing schemes rather than fixing from scratch.Finance commission members are expert in revenue-sharing. But planning Expenditure requires expert

members with development, capital-asset building perspective.Gujarat CM even said, Union itself should give the plan-money to states, instead of keeping suchbackdoor mechanism.

Chinese Niti Ayog?

Chinese NDRC India present system

Makes macro-economic policy Finance ministry makes fiscal policy.

RBI makesmonetary policy.

Approves investment & construction projects CCI, FIPB and many other bodies @union and state

level.

Makes Energy & oil policy Oil ministry, DG Hydrocarbon decide it.

Looks after backward provinces in the Western

region. Separate ministry for NE Development

Real-Boss: State council headed by President of


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China. Cabinet Headed by PM.

Experts thought Modi wanted to replace PC with a body like Chinas NDRC. (National Development and

reform commission).But Niti Ayog press release and jurisdiction is so vague, its nowhere near Chinese NDRC.

Read background theory in Indian Polity by M.Laxmikanth (4th Ed.) Chapter 15, 41, 48, 49.

Mock Questions

Q1. Arrange following plans in correct chronological order

1. Peoples plan2. Bombay Plan3. Congress Plan

4. Visvesvaraya plan

Answer choices

A. 1234B. 4321

C. 1243D. 2143

Q2. MN Roy was associated with _____.

A. Congress PlanB. Peoples planC. Bombay PlanD. Gandhian Plan

Q3. First Five year plan was based on ____ model

A. MahalanobisB. C.SubramaniamC. John W.Miller

D. Harrod Domar


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Q4. Find incorrect pairs of plan vs focus:

A. 1stFYP: heavy industries

B. 2ndFYP: Agriculture, irrigation, powerC. Both A and B

D. Neither A nor B

Q5. Theme of the 12thFive year plan was

A. Faster, More inclusive and sustainable growthB. Faster, More sustainable and sustainable growthC. Inclusive growth with social justice

D. Social justice and sustainable growth

Q6. if five year planning was continued, the period of 13thfive year plan would be

A. 2013-2018B. 2015-2020

C. 2017-2022D. None of above

Q7. What is the full form of Niti Ayog?

A. National Institute to Transform India.

B. National Institute for Transforming India.C. National Institution to Transform India.

D. National Institution for Transforming India.

Q8. Niti Ayog is formed via ____.

A. Presidential ordinanceB. Allocation of business rules by President of India.C. Cabinet resolution

D. None of above.

Q9. A union minister can become ___ of Niti Ayog

1. Part time member


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2. Ex-officio member3. Special invitee

Answer choices

A. Only 1 and 2

B. Only 2 and 3

C. Only 1 and 3D. All of them

Q10. Find correct pairs of person vs position held in Niti Ayog

1. Sindhushree Khullar: Secretary2. Economist Jagdish Bhagwati: part time member3. VK Saraswat: special invitee

Answer choices

A. Only 1 and 2B. Only 2 and 3C. Only 1 and 3

D. none of them

Q11. Who can become a part time member of the Niti Ayog?

A. A serving IES officerB. A serving IAS officer

C. A union ministerD. An Expert from Research institutes

Q12. Governing council of the Niti Ayog includes

1. Prime minister

2. Finance minister3. Chief ministers of all states

Answer choices

A. Only 1 and 2


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B. Only 2 and 3C. Only 1 and 3D. all of them

Q13. Official mandate of the Niti Ayog includes ___.

1. Cadre controlling authority for Indian Economic service

2. Decide allocation of funding among the states, for centrally sponsored schemes3. Approving funds for state plans.

Answer choices

A. Only 1 and 2B. Only 2 and 3C. Only 1 and 3

D. all of them

Q14. Match correct pairs- Person vs their brainchild service

1. All India services: Nehru2. Indian Economic service: Lal Bahadur Shashtri

3. Indian Civil service: Lord Curzon

Answer choices

A. Only 1 and 2B. Only 2 and 3

C. Only 1 and 3D. None of them

Q15. Find statutory bodies among following

1. Niti Ayog

2. Controller of Certifying authorities3. Atomic energy regulation board

Answer choices

A. Only 1 and 2


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B. Only 2 and 3C. Only 1 and 3D. None of them

Q16. Find correct statements

a. If Modi wants to expand the powers of finance commission, he must amend article 335.

b. If Modi wants to implement GST, he must amend article 315.c. Both A and B

d. Neither A nor B

UPSC Mains examination: General Studies Paper-2

Answer following in 150-200 words each:

1. Examine the inadequacies of machinery for planning to ensure democratic but depoliticized planning processin Indian federation since independence. Discuss how Niti Ayog aims to fix this anomaly.

2. The planning process India in the post-Nehru period has conducted to better Centre-State relations, but (ithas) not necessarily brought about decentralization of the planning process. Can Niti Ayog fill this lacuna? Ifnot, suggest remedial steps.

3. Inter-state council and not the Niti Ayog, is the appropriate instrument to ensure linkages between thedistrict, the State and the regional levels of national planning processes. Do you agree?

4. The ultimate picture of the development in India has to be a network of planning units in the villages andenterprises, coordinated at successive higher levels by State , which will ultimately feed the Niti Ayog atNew Delhi. Make out a case for decentralized and depoliticized federal planning in India.

5. A National planning body must have a statutory or Constitutional backing. Examine the argument in favorand against such design.

6. Compare and contrast the structure and mandate of planning commission and Niti Ayog.

7. (Interview) Without financial and Administrative powers, Niti Ayog may end up becoming yet anotherarmchair advisory body like NAC. Do you agree?

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