Niti Aayog gives a thumbs-up to cooperative federalism

  • Hindustan Times
  • Updated: Jan 03, 2015 12:23 IST

The setting up of the Niti Aayog - the replacement to the Planning Commission - is widely expected to set the stage for dealing with contemporary challenges, shunning the earlier one-size-fits-all approach. The new body - National Institution for Transforming India (Niti) - besides serving as the government's go-to policy think-tank, will also have a larger mandate.

It is founded on the premise that the government should have a rather hands-off approach to foster the growth of private enterprises. Instead, the state or the government should focus its energy and resources on being an enabler by enacting the appropriate legislation and building a robust regulatory architecture to aid development and allow private enterprise to prosper.

In recent years, the erstwhile Planning Commission had come under increased scrutiny, with many experts questioning the body's role in a market economy where private enterprises are the primary growth engines. The new body, it appears, is set to correct that anomaly.

Prime Minister Narendra Modi will head the body and its governing council will include all chief ministers and lieutenant governors in line with the PM's thrust on cooperative federalism that advocates involving states in the Centre's decision making.

Given India's rapidly changing urban and rural economic landscape, the involvement of states will help policy markets in New Delhi uncover growth opportunities identifying geographic slivers of opportunity - states, metropolitan cities and their hinterland.

The Niti Aayog's focus on India's middle class, including the neo-middle class, is also a recognition of the policy-makers' continuing challenge to ensure that this economically vibrant group remains engaged and its potential is fully realised. Rising demand from a new aspiring class is likely to stimulate growth for industries like cement, low-cost housing, pharmaceuticals, fast-moving consumer goods, two-wheelers, apparel and footwear.

The new body's role as an enabler for the growth of small businesses is also important. There are about 30 million small, micro and medium enterprises in India. Put together, these factories contribute to half of India's factory output and 45% of exports and employ more than 60 million people (India's organised service sector employs about 33 million). About 8% of India's GDP is accounted for by small enterprises.

If the decades of 1970 and 1980 were about seeking jobs in the public sector, the 1990s and the first few years of new millennium were about jobs in the private sector, this could well be the decade of entrepreneurship and the ambitions of a new middle class. The Niti Aayog has got its contours well-defined.

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