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NITI Aayog: There is a need for cooperative competition among states

The first meeting of the National Institution for Transforming India (NITI) Aayog on Sunday gave the impression that it is more than just a successor body to the Planning Commission. It seeks to combine the roles of the organisation it replaced and also seeks a synthesis of the functions of the National Development Council and the Finance Commission.
By HT Correspondent | Hindustan Times, New Delhi
UPDATED ON FEB 09, 2015 11:54 PM IST

The first meeting of the National Institution for Transforming India (NITI) Aayog on Sunday gave the impression that it is more than just a successor body to the Planning Commission. It seeks to combine the roles of the organisation it replaced and also seeks a synthesis of the functions of the National Development Council and the Finance Commission.

An inchoate organisation needs time to evolve and so it is with NITI Aayog. Unlike the Planning Commission and like the National Development Council it has all the chief ministers as its members. And that it hasn’t entirely cast off the legacy of the Planning Commission has been proved by the Union finance minister’s statement that the 12th Plan will continue and the mid-term appraisal is on.

Various chief ministers raised many demands at the meeting. But as the devil is always in the detail, what they did not specify can set the stage for a second round of confrontation. For example, Uttar Pradesh chief minister Akhilesh Yadav asked for 90% grant for centrally-sponsored schemes.

This begs the question whether he meant the schemes that are directly administered by the Centre or the ones funded by the Centre and executed by the states. Also, if 90% of the funding was to be by grant, what would the remaining 10% be — a loan or the contribution of the states? Special category states — eight from the North-East, Himachal Pradesh, Uttarakhand and Jammu and Kashmir — in any case get 90% of their funding through grants. All this has to await the report of the Finance Commission. Currently 32% of the central revenue is given to states. There is speculation that it will be raised to 42%. And how that will be divided is also open to question.

According to the current formula, 25% weight is given to population, 10% to area, about 48% to fiscal capacity, i.e. the lower a state’s capacity to raise revenue is, the higher is the allocation, and 17% to fiscal discipline. Even if this overall architecture remains the same, the states could ask for more discretion in the way the money is spent. Herein will become crucial the roles of the two task forces — one on agriculture and the other on poverty — that Prime Minister Narendra Modi wants each state to set up under the aegis of NITI Aayog.

Mr Modi has stressed the need for ‘cooperative competition’ among states. But West Bengal chief minister Mamata Banerjee did not do her state a good turn by staying away from the meeting. The state’s finances are not healthy and it needs the Centre’s help in shoring them up. It is possible many other chief ministers had grouses against the Centre but still attended the meeting. Ms Banerjee can learn from their example.

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