Fiscal powers will aid NITI Aayog to work better with states: Rajiv Kumar5 min read . Updated: 11 Feb 2019, 07:01 AM IST
- NITI Aayog’s autonomy is like that of RBI. We all are autonomous and independent, but we do have to maintain dignity and honour
- The government wants to make sure the data that is released is comparable across different quarters
NEW DELHI : NITI Aayog, successor to the Planning Commission, has been striving to contribute to and influence policies at the national and state levels. But without the financial leverage its predecessor had with state administrations, all that NITI Aayog has in getting states to act on its recommendations is the power of ideas it can bring to the table. Is NITI Aayog measuring up to this challenge? In an interview, vice chairman Rajiv Kumar speaks about the think tank’s autonomy, need for fund allocation powers and the impact of the interim budget FY20. Edited excerpts:
The delay in publishing the annual Periodic Labour Force Survey (PLFS) report of the National Sample Survey Office (NSSO) gives the impression that the government is shying away from publishing the jobs data. (A recent news report on the NSSO survey suggested joblessness was at a 45-year high at 6.1% in 2017-18.) Your comment?
That is not correct. The government wants to make sure the data that is released is comparable across different quarters and does not lead to wrong conclusions. NSSO will release the employment data when we have the comparison data between first and 5th quarter, so that we can calculate the change in employment. The government has always given premium to honesty. But the fact of the matter is that the quality of our data needs to improve. So does the whole data system in the country, which has been neglected to some extent. It needs more attention and resources, and needs to be modernized. We need to ensure that the quality of data collected by all agencies of the government is of the highest level.
NITI Aayog seems to favour the official narrative on the economy. As a think tank, NITI Aayog should be more independent, should it not?
NITI Aayog is a government think tank and it works for the government. It helps the government to get new ideas and make policies. It also helps the government with feedback from the ground that it collects. In that sense, NITI Aayog is independent to do all of these things on the basis of objective criteria. But of course, you cannot expect NITI Aayog to be overly critical of the government. Whatever feedback we need to give, we can give without going to the public. NITI Aayog’s autonomy is like that of the Reserve Bank of India, which is also part of the macro team. We all are autonomous and independent, but we do have to maintain dignity and honour. We have never shied away from using or publishing data as we think is right. In the water index that we brought out, we said that India is facing acute water shortage. In the sustainable development goals index, the toppers (Himachal Pradesh, Kerala and Tamil Nadu) are not ruled by the party at the centre. Isn’t this proof enough that we work on an objective basis?
Tax policy expert Dr Vijay Kelkar said last month that after NITI Aayog replaced Planning Commission, central government’s policy reach in promoting regionally balanced growth has reduced. Although Kelkar did not recommend returning to the Planning Commission era, he said this weakness in fiscal federalism needs to be corrected. Do you agree?
I am glad Dr Kelkar had said that we do not want to return to the Planning Commission days. I do not think that is required. In some sense, it becomes dysfunctional and the previous government too had recognized it. I have been on this job for about 17 months. I have seen that the transfer of extra 10% (of the divisible pool of centre’s tax revenue) to the states by the centre has not resulted in the level of infrastructure development in the relatively backward states that is required. A lot of that fund has been used up for revenue spending. Dr Kelkar, in my view, is right that additional resources will not result in balanced development. I agree with him that it will be useful for any agency, whether NITI Aayog or any other agency, to be able to allocate funds for focused infrastructure development in relatively backward regions such as northeastern India. I think NITI Aayog is the right body (for it) because working with the states and cooperative, and competitive federalism, are the mandates of NITI Aayog. We can achieve a better working relationship with the states if we can have some financial leverage. It will help push forward some of the projects like linking rivers. It will help our dialogue and the relationship with states.
Interim budget FY20 has steps that could boost consumption. What will be its impact on inflation?
I think the boost to consumption is actually required and, because there is still an output gap in the economy, the existing rate of growth is below its potential rate of growth, and there is enough capacity in the system for it to absorb. More importantly, there are signs that some capacity expansion is already beginning to happen. This boost to consumption will give a strong fillip to investment activity. I think the supply side response will be sufficient to prevent any inflationary pressures from rising.
The immediate criticism from the opposition party Congress is that this budget is meant for mobilizing votes and that the farm package is far too small. Your comments?
The opposition party is caught between its own rhetoric. If it is too small, it will not influence voters. This budget balances fiscal prudence with meeting some specific needs of the population where there is rising distress. For example, the income tax exemption threshold has not been raised, only a rebate is given. This is a budget that keeps in line with the past performance of this government which has always focused on development, but within fiscal limits. Poor farmers’ monthly average income is barely ₹2,000 or ₹3,000. A ₹500 increase is a jump of about 25% and will aid in meeting some of his consumption needs. It could have been much bigger but would that have allowed us to maintain fiscal balance? The finance minister tried to seek balance between what can be done and what could have been done. The government is doing the best it can while being responsible.
But this does not address the root cause of the agrarian distress.
The agrarian crisis will not go away by these palliatives. For that, you need true modernization of the farm sector. That includes making the farmer not just a producer of a commodity, but a part of the agrarian value chain. He should participate more in agro-processing and convert his produce into products. Secondly, we have to modernize our marketing structure. That would mean the farmer will get liberated from the local middlemen. Thirdly, we have to reduce the cost of farming. As long as cost of production keeps rising, our agriculture will not be globally competitive. One important part of modernizing agriculture and raising farmers’ income is to export a larger quantity of agricultural produce. That goal will be met when cost of production goes down. Finally, you have to diversify farming into horticulture, floriculture, fisheries etc.