New Delhi: NITI Aayog, the new economic planning body, will set up sub-groups of state chief ministers to review and reduce the number of national welfare schemes and promote skill development, in line with Prime Minister Narendra Modi’s plan of giving more powers to the states.

The Prime Minister also asked states to play a greater role in reviving economic growth, especially in the agriculture sector, and reducing poverty at the first meeting of the governing council of NITI Aayog on Sunday. The meeting was chaired by Modi and attended by several chief ministers, with West Bengal’s Mamata Banerjee a notable absentee.

More decision-making powers and higher devolution of central taxes to states, in line with the recommendations of the 14th Finance Commission, will aid the Modi government to implement the idea of cooperative federalism.

Mint had reported on 28 January that the 14th Finance Commission has recommended that the share of the states in the centre’s tax revenue be increased to 42% from the current 32%. The report of the commission will be tabled in the upcoming budget session, following which the government will decide on its adoption.

“The thrust of the Prime Minister’s comments was that economic activity has to take place in states, and that increased empowerment of states is required for this," said finance minister Arun Jaitley at a press briefing after the meeting. “States sought more financial devolution and greater flexibility."

In addition, the Prime Minister has also asked every state to constitute two sub-committees within the state to look at ways for poverty alleviation and the steps needed to improve the growth of the agriculture sector.

Stressing on the need for cooperative and competitive federalism, Modi asked states to aim for a high rate of growth to remove poverty and create more jobs.

He also asked chief ministers to expedite stuck projects to revive the investment cycle.

Of the three sub-groups, the first sub-group will look into the 66 centrally sponsored schemes and identify which must be cut, which have to be continued and which can be transferred to states. The sub-committee has been asked to submit its report within the next two months.

Modi expressed hope that India could move away from one-size-fits-all schemes and forge a better match between the schemes and the needs of the states.

While Tamil Nadu chief minister O. Panneerselvam suggested a devolution of the share from the centre to the states of at least 50% of the aggregate resources available with the centre and greater flexibility in the operation of centrally sponsored schemes, Uttar Pradesh chief minister Akhilesh Yadav said the process of allocating funds to states should be made more transparent and the central government should ensure there was no room for discretion.

The second sub-group will look into human resource development and what kind of activity should happen in states under NITI Aayog to promote skill development and creation of skilled manpower within the states.

The third group will look into what is the kind of institutional mechanism that has to be evolved and the technology required to make the government’s Swachh Bharat Abhiyan a success.

Members of the sub-groups will be decided later, after the chief ministers indicate which group they want to be part of, Jaitley said.

NITI Aayog was set up on 1 January as a think tank for the centre and states, replacing the Planning Commission.

N.R. Bhanumurthy, professor, National Institute of Public Finance and Policy, said there is a need to take a balanced approach on the role of centre and the states as many states that lack capacity may need the help of the centre.

“The action has to be at the state level. In the past, the central government has only got into the state government’s role in cases where the states have failed to catch up in growth and development," he said. “But many of the states may still need the help of a central organization. It is important to take into account the absorptive capacity of states rather than philosophically going ahead with the idea of cooperative federalism," he added.

PTI contributed to this story.

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