How States Can Leverage NITI Aayog for Better Governance and Outcomes


Recent data from the Indian government highlights the critical importance of obtaining better outcomes from government expenditures. According to India’s Public Finance Statistics in 2016, India’s total government expenditure at all levels (on cash accounting basis) at all levels was ₹38 trillion, equivalent to 27.9 percent of GDP. However, revenue receipts and tax revenue was ₹28.4 trillion (equivalent to 20.9 percent of GDP), and ₹24.2 trillion (equivalent to 17.8 percent of GDP).

 In spite of spending such large share of GDP, outcomes from the government expenditure in terms of public amenities and services are not commensurate with resources spent. Expanding government expenditure without reallocating funding and continuing with ‘business as usual’ will be counterproductive, because the household’s burden in supporting government spending is already so high. The Indian government needs to employ urgent sustained efforts at obtaining more effective outcomes in order to guarantee India’s future governance and growth.

Obtaining better outcomes requires significantly improving the government data collection, creating a system to manage and analyze the resulting data, and fostering the appreciation and capabilities for using data among decision makers. Leaders need to learn how to use data analysis as an integral part of designing and evaluating government programs and schemes.

In conjunction with the introduction of the Cooperative Federalism initiative, the GST (Goods and Services Tax), the 2016 amendments to the Benami Transactions Prohibition Act, and other reforms, the establishment of National Institution of Transforming India (NITI) Aayog has dramatically altered India’s fiscal-political landscape. Properly used, the NITI Aayog may help India make its policy more effective.

The NITI Aayog was established on January 1, 2015. The NITI Aayog replaced the Planning Commission which has operated as an extra -Constitutional body since the 1950s, as well as the Economic Advisory Committee of the Prime Minister. Since the 12th five-year plan, which ended in March 2017, India no longer has official plans designed to allocate resources to various sectors and the States.

In the name ‘NITI Aayog’, the term ‘transformation’ is significant because it implies a transformation in India’s mind-set and governance, as well as in the design and administration of government programs. The goal is to obtain better outcomes in terms of delivery of public amenities and services, including internal security and justice processes, and make them accessible and affordable uniformly across the country. This is captured in the Modi administration’s vision of ‘Sabka Sath Sabka Vikas’, which translates to ‘collective efforts, inclusive growth’.

The NITI Aayog was designed to suggest methods to obtain better outcomes from government schemes, and to act as a think tank on issues deemed important by the Union government and by the individual states.

The knowledge and expertise that is essential for improving governance exists at all levels of government. However, the NITI Aayong recognizes such knowledge is scarce, and will help coordinate the intelligence and efforts of the many branches of government. Therefore, by objectively analyzing specific governance challenges in a non-partisan manner, the NITI Aayog will be an important shared service for the Union Government but also for the States, their Districts, the ULBs (Urban Local Bodies) and the RLBs (Rural Local Bodies).

NITI Aayog has already been responsible for reports on rationalisation of Centrally Sponsored Scheme(CSS), the Swacch Bharat Abhiyan, and on skill development (as of April 2017). Their recommendations have been translated into reforming these programs and schemes, making them more effective.

NITI Aayog has undertaken useful studies on monitoring outcomes in health care, education, and water supply, areas of particular interest to Haryana. It also provides a forum and a meeting point for States to learn about and from each other. Reforms in health sector, education, and digital inclusiveness are some of the priority areas. It has expertise (or access to it), and modest resources to help incentivize the States in these areas.

The NITI Aayog represents a fundamental shift in the institutional structure and the relationship between the Centre and the States, as well as the ULBs and the RLBs. NITI Aayog can be of considerable relevance to the States and their ULBs and the RLBs as a think-tank, an expert group to suggest feasible measures to improve governance and obtain better outcomes in specific areas.

In order to make NITI Aayog successful, individual states and their ULBs and RLBs will need to focus on implementing efficient policy suggestions and appreciate the importance of outside expertise and new perspectives. They also need to establish formal arrangements for interacting with the NITI Aayog. Some States (including Maharashtra, Madhya Pradesh, Rajasthan, and Gujarat) have already begun to utilize NITI Aayog as a think tank. Such utilization of NITI Aayog should be an integral part of India’s cooperative federalism.

Effective Indian federal policy needs to be coherent and organized between the many layers of government. The Union Government, the States and their Districts, the ULBs and the RLBs, all represent different layers of Indian government which need to be on the same page in order to ensure better outcomes. The NITI Aayog will assist in obtaining better outcomes by creating coherence and coordination between the many layers of government.

For those states which have not yet done so, it would be useful to establish designated liaisons with the NITI Aayog, preferably in the office of the Chief Minister of the State. This is because political commitment to achieve better outcomes must be communicated to all the Departments through the chief Minister’s office for the liaison to yield anticipated results in terms of better outcomes. It would also be useful to designate a small group of officials to identify urgent challenges for the States where the expertise of the NITI Aayog could help improve governance and outcomes.

Systematizing the communication between the state and NITI Aayog should be followed by regular interactions with the NITI Aayog not just by the State officials, but also by select officials from the Districts, from the ULBs, and from the PRIs. This is because while the Districts, ULBs, and RLBs provide many day-to-day services, they have limited opportunities to interact with knowledge and domain specialists who could help generate context -specific measures to address specific challenges. In short the government bureaucracy needs to tailor itself to take advantage of the wealth of new information provided by NITI Aayog.

Originally published at the Narendra Modi website