WHY IN NEWS?

The Government of India has appointed former Chief Economic Adviser Ashok Kumar Lahiri as the new Vice-Chairperson of NITI Aayog, succeeding Suman K. Bery.

What is NITI Aayog?

NITI Aayog (National Institution for Transforming India) is the policy "think tank" of the Government of India, established on January 1, 2015, to provide directional and policy inputs.

It is an advisory body that promotes "Cooperative Federalism" by integrating State Governments into economic policy-making, based on the principle that robust states build a strong nation.

Why was the Planning Commission replaced?

Outdated "One Size Fits All" Model: The 65-year-old Planning Commission's centralized command-economy approach became obsolete in a globalized era where uniform plans failed to address diverse state needs.

Transition to Cooperative Federalism: Moving away from the Commission's top-down policy imposition, NITI Aayog treats states as equal partners to foster shared national priorities.

Strategic "Think Tank" Focus: To separate strategy from process, NITI Aayog serves as a knowledge hub and policy advisor, transferring the Commission's former fund-allocation powers to the Finance Ministry.

Evolution of the State's Role: As the private sector grew, the government shifted from a primary provider to a policy enabler—a flexible transition the rigid Planning Commission could not facilitate.

Adopting Bottom-Up Planning: The replacement prioritized local governance, aggregating village-level plans into national strategies rather than following a centralized center-to-state flow.  

How does NITI Aayog differ from the Planning Commission?

Financial Control ("Power of the Purse")

• Planning Commission: Possessed the mandate to allocate funds to State Governments and Central Ministries for various programs.
• NITI Aayog: Lacks fund allocation power; financial distribution authority now resides solely with the Finance Ministry.

Role of States (Federalism)

• Planning Commission: Utilized a "Top-Down" model where the Centre formulated and imposed policies, reducing States to mere implementers seeking plan approvals.
• NITI Aayog: Employs a "Bottom-Up" approach through Cooperative Federalism. State Chief Ministers are equal Governing Council partners who actively co-create the national development agenda.

Nature of Planning

• Planning Commission: Used rigid, Five-Year Plans (12th Plan: 2012–2017) and a "one-size-fits-all" approach that often overlooked local needs.
• NITI Aayog: Replaced Five-Year Plans with a 15-Year Vision, 7-Year Strategy, and 3-Year Action Agenda to drive long-term structural change.

Organizational Structure

• Planning Commission: Included a Deputy Chairperson and full-time members but lacked a flexible system for integrating short-term outside experts.
• NITI Aayog: Features a flexible design with a PM-appointed CEO, academic part-time members, and the capacity to recruit industry specialists. 

What are the core functions of NITI Aayog?

Cooperative & Competitive Federalism: As a forum for structured state support, NITI Aayog treats States as equal "Team India" partners to build a stronger nation.

Policy & Strategy Formulation: It develops long-term frameworks like the 15-Year Vision and 7-Year Strategy, monitoring efficacy and making necessary mid-course corrections.

Think Tank & Knowledge Hub: As a "Knowledge and Innovation Hub," it shares best practices in sustainable development and governance with stakeholders.

Monitoring & Evaluation: The Development Monitoring and Evaluation Office (DMEO) tracks government programs to improve implementation and success rates.

Conflict Resolution: It offers a platform for the resolution of inter-sectoral and inter-departmental issues to accelerate the implementation of the development agenda.

Technological Upgradation: It focuses on technology upgradation and capacity building for the implementation of programs and initiatives.

What are the major initiatives of NITI Aayog?

Aspirational Districts Programme (ADP): Since 2018, ADP has targeted 112 under-developed districts, monitoring 49 indicators across themes like health, education, and infrastructure via monthly delta rankings.

Atal Innovation Mission (AIM): Promotes entrepreneurship through Atal Tinkering Labs (ATLs) in schools and Atal Incubation Centres (AICs) for startups.

SDG India Index: The first government-led sub-national measure ranking States/UTs on 16 Sustainable Development Goals to encourage peer learning.

Aspirational Blocks Programme (ABP): Targeting 500 blocks, this initiative builds on ADP to transform local governance and service delivery.

Composite Water Management Index (CWMI): A tool to assess and improve the efficiency of water resource management across States.

School Education Quality Index (SEQI): Evaluates the performance of States in the school education sector.

India Innovation Index: Examines the innovation ecosystem of Indian States and UTs to help policymakers identify challenges and strengths.

Shoonya Campaign: An initiative to promote zero-pollution delivery vehicles by working with e-commerce companies and fleet aggregators.

Women Entrepreneurship Platform (WEP): A unified access portal to support women entrepreneurs with knowledge and financial linkages. 

Fiscal Health Index 2026: A newly launched annual index to assess the fiscal sustainability and health of State finances. 

What are the limitations of NITI Aayog?

Structural Limitations 

Funding Restrictions: NITI Aayog is an advisory entity without the power to distribute funds to State Governments. This lack of financial leverage restricts its ability to enforce strategic recommendations.

Limited Implementation Authority: Deprived of the "power of the purse," critics label it a "glorified recommendatory body" that struggles to ensure ground-level execution of its policies.

Operational Gaps: Compared to the Planning Commission, the body faces financial and staffing constraints, hindering its capacity for thorough research and effective program monitoring.

Issues with Cooperative Federalism

State Boycotts & Friction: Despite "Cooperative Federalism" mandate, NITI Aayog faces growing pushback. Chief Ministers from Tamil Nadu, Kerala, and West Bengal have boycotted meetings, alleging centralized decision-making and insufficient fiscal support.

Centralized Agenda: Critics note that while it promotes a "bottom-up" approach on paper, in practice, it functions as a vehicle for the central government's agenda, leading to accusations of politicization and bias

Mediatory Gaps: The body has failed as a mediator for Centre-State financial disputes, with this responsibility shifting to the Finance Ministry and other departments.

Functional & Implementation Challenges

Weak Implementation on Ground: A Parliamentary Standing Committee recently criticized the Ministry of Planning and NITI Aayog for poor execution and planning, noting they utilized only 35% of their 2023-24 budgets.

Data Reliability: Reliance on state-provided data for indices like the SDG Index raises concerns regarding quality and consistency, potentially biasing policy.

Private Investment Constraints: Lacking a direct role in investment influence, its impact on economic transformation remains restricted.

What reforms are needed to strengthen NITI Aayog?

Financial Accountability & Budgetary Discipline

The Parliamentary Standing Committee on Finance (2024-25) highlighted NITI Aayog's poor financial management and urged reforms to improve fund efficiency.

• Realistic Budgeting: Despite using only 35% of past allocations, NITI Aayog requested ₹1,203 crore for 2026-27. The Committee advised matching budget requests with actual spending capacity.
• Curbing "March Rush": To avoid wasteful spending, the Committee recommended a balanced quarterly expenditure plan.

Structural Institutional Reforms

NITI Aayog is restructuring to become implementation-focused rather than just a "think tank."

• Governance & Reforms Division (2025): Established in April 2025 to lead structural reforms and regulatory simplification for Viksit Bharat @2047.
• Urban Governance Reforms: A 2026 report advocates for "empowered city governments" featuring directly elected Mayors and unified service delivery to enhance accountability.

Strengthening Cooperative Federalism 

Experts and state leaders advocate for a less centralized, more authentic "Team India" model.

• Regular Inter-State Engagement: Regularizing Governing Council and Inter-State Council meetings is recommended to resolve disputes early and reduce the "trust deficit" causing state boycotts.
• Incentivizing Reforms: NITI Aayog is replacing top-down mandates with "performance-based grants" and competitive indices to encourage state-led reforms in power and agriculture.

Decentralizing Science & Innovation

A 2025 roadmap for State Science & Technology Councils focuses on decentralizing innovation.

• Council Empowerment: The report recommends strengthening governance and human resources to drive local innovation. Key proposals include structured researcher career paths and reduced central reliance.

Conclusion

NITI Aayog marks a shift to bottom-up governance, but its ultimate success in achieving Viksit Bharat @2047 depends on evolving from a "think tank" to a "do tank" by bridging fiscal gaps and strengthening cooperative federalism.

SOURCE: THEHINDU