Author: B2B

Challenges faced by Livestock sector in India
Challenges faced by Livestock sector in India
1. Improving productivity of farm animals is one of the major challenges. The average annual milk yield of Indian cattle is 1172 kg which is only about 50% of the global average.
2. The Frequent outbreaks of diseases like Food and Mouth Diseases, Black Quarter infection, Influenza etc. continue to affect Livestock health and lowers the productivity.
3. India’s huge population of ruminants contributes to greenhouse gases emission adding to global warming. Reducing greenhouse gases through mitigation and adaptation strategies will be a major challenge.
4. Crossbreeding of indigenous species with exotic stocks to enhance genetic potential of different species has been successful only to a limited extent.
5. Limited Artificial Insemination services owing to a deficiency in quality germplasm, infrastructure and technical manpower coupled with poor conception rate following artificial insemination have been the major impediments. After more than three decades of crossbreeding, the crossbred population is only 16.6% in cattle, 21.5% in pigs and 5.2% in sheep.
6. The sector will also come under significant adjustment pressure to the emerging market forces. Though globalization will create avenues for increased participation in international trade, stringent food safety and quality norms would be required.
7. Livestock sector did not receive the policy and financial attention it deserved. The sector received only about 12% of the total public expenditure on agriculture and allied sectors, which is disproportionately lesser than its contribution to agricultural GDP.
8. The sector has been neglected by the financial institutions. The share of livestock in the total agricultural credit has hardly ever exceeded 4% in the total (short-term, medium-term and long-term). The institutional mechanisms to protect animals against risk are not strong enough.
9. Currently, only 6% of the animal heads (excluding poultry) are provided insurance cover. Livestock extension has remained grossly neglected in the past. Only about 5% of the farm households in India access information on livestock technology. These indicate an apathetic outreach of the financial and information delivery systems.
10. Livestock derives a major part of their energy requirement from agricultural byproducts and residues. Hardly 5% of the cropped area is utilized to grow fodder. India is deficit in dry fodder by 11%, green fodder by 35% and concentrates feed by 28%. The common grazing lands too have been deteriorating quantitatively and qualitatively.
11. Access to markets is critical to speed up commercialization of livestock production. Lack of access to markets may act as a disincentive to farmers to adopt improved technologies and quality inputs. Except for poultry products and to some extent for milk, markets for livestock and livestock products are underdeveloped, irregular, uncertain and lack transparency. Further, these are often dominated by informal market intermediaries who exploit the producers.
12. Likewise, slaughtering facilities are too inadequate. About half of the total meat production comes from un-registered, make-shift slaughterhouses. Marketing and transaction costs of livestock products are high taking 15-20% of the sale price.
13. Other Major Challenges faced by the sector are:
- Inadequate availability of credit.
- Poor accesses to organized markets deprive farmers of proper milk price.
- Limited availability of quality breeding bulls.
- Deficiency of vaccines and vaccination set-up.
- Due to industrialization and Urbanization Majority of grazing lands are either degraded or encroached.
- Diversion of feed and fodder ingredients for industrial use.
December 14, 2017

Planning in India: Bombay Plan; People’s Plan; Mahalanobis Plan; Wage-Good Model; Gandhian Plan

Planning in India

The Planning Debates

The Bombay Plan

A small group of influential business leaders in Bombay drew up and published in January 1944, a plan for the economic development of India. The Bombay Plan, as it is now popularly called, did not represent the opinion of the whole business community. But it claimed public attention because it set forth the considered views of some of the front-rank businessmen and captains of Indian industry.
Mr. J. R. D. Tata and Mr. G. D. Birla were primarily responsible for the initiation of the study. The other industrialists who were part of Bombay plan were P. Thakurdas, Kasturbhai Lalbhai and Sir Shri Ram, Ardeshir Dalal, Mr. A. D. Shroff and Dr. John Matthai.
Toward the end of March 1944, the Federation of Indian Chambers of Commerce representing all business organizations of the country endorsed the Bombay Plan at its annual meeting, and from then on, the plan came to be regarded as the proposal of India’s business community, if not of India’s big business.
The Bombay Plan put forward as a basis of discussion, a statement in as concrete a form as possible, of the objectives to be kept in mind in economic planning in India, the general lines on which development should proceed and the demands which planning is likely to make on the country’s resources.
The principal objectives of the plan are to achieve a balanced economy and to raise the standard of living of the masses of the population rapidly by doubling the present per capita income — i.e. increasing it from $22 to about $45 — within a period of 15 years from the time the plan goes into operation.
The planners have laid down minimum living standards on the basis of about 2,800 calories of well-balanced food a day for each person, 30 yards of clothing and 100 square feet of housing; and they also outline the minimum needs for elementary education, sanitation, water supply, village dispensaries and hospitals. The plan points out that absolutely minimum needs require an annual income of at least $25; and if the income of the country were equally distributed it would give each individual only about $22.
The shares of agriculture, industry and services in the total production is to be changed from 53, 17 and 22 percent, respectively, to 40, 35 and 20 percent.
The plan emphasizes the importance of basic industries but also calls for the development of consumption goods industries in the early years of the plan. Power heads the list of basic industries which are to be developed, followed by mining and metallurgy, engineering, chemicals, armaments, transport, cement and others.
The plan proposes doubling the present total of 300,000 miles of roads, increasing railway mileage by 50 percent from its present 41,000 miles, expanding coastal shipping and investing $150,000,000 on improvement of harbors.
The plan offers a comprehensive program of mass education, including primary, secondary and vocational and university schooling. Provision is also made for adult education and scientific training and research.

Sarvodaya Plan (1950)

It was drafted by Jaiprakash Narayan. The plan was mainly inspired by the Gandhian Plan provided by S N Agarwal & the Idea of Sarvodaya presented by another Gandhian leader Vinoba Bhave.

The sarvodaya plan put forward and emphasized the importance of agriculture and village industries especially small-scale textile & cottage industries in the process of economic development. The plan also recommended the Luddite approach and was pessimistic towards the usage of foreign technology.

The most important and well acclaimed part of the plan was its emphasis upon land reforms and decentralized participatory people planning.

People’s Plan

The People’s Plan was Authored by M N Roy and drafted by the Post- War Re-Construction Committee of the Indian Federation of Labour.

The object of the Plan is to provide for the satisfaction of the immediate basic needs of the Indian people within a period of ten years. This objective is to be achieved by expanding production and by ensuring an equitable distribution of the goods produced. Therefore, the Plan prescribes increased production in every sphere of economic activity. But its main emphasis is on agricultural development, since its authors believe that the purchasing power of the people cannot be raised unless agriculture, which is the biggest occupation in the country, becomes a paying proposition.

Agriculture, it is argued, forms the foundation of a planned economy for India. Apart from the nationalization of land and the compulsory scaling down of rural indebtedness, the Plan formulates two schemes for increasing agricultural production: (a) extension of the area under cultivation and (b) intensification of cultivation in the area which is already under cultivation.

In the field of industry, the People’s Plan gives priority to the manufacture of consumer goods. It is argued that as a large volume of demand for essential good for the community remains perpetually unsatisfied, the goal of planned economy in industry must be to satisfy it first.

The People’s Plan attaches great importance to railways, roads and shipping in a planned economy. Therefore, it recommends the rapid development of the means of communication and transport to cope with the increased movement of goods and traffic between town arid country.

The Mahalanobis Strategy

The three main aspects of the strategy of development in the earlier phase of planning was:

The Critique of Mahalanobis Mobel:

The Wage Good Model

Prominent Economist like, C N Vakil and P R Brahmananda advocated Wage Good model for the development of the Indian economy and Industrialisation. Vakil and Brahamanda differed from the Mahalanobis strategy as they believe “At the low level of consumption (this was the situation in India) the productivity of the workers depends on how much they consumed.

According to them, if people were undernourished, they will lose their productivity and become less efficient, at this juncture it is necessary to feed them to increase their productivity. But this is not true for all consumer good; so they differentiated between Wage Good (whose consumption increase worker productivity) and Non-Wage Good (whose consumption did not).

To sum up, Wage Good model says; worker’s productivity depends on not on whether they use machines to produce goods but also on the consumption of wage goods like, food, cloth and other basics. Therefore, the first step towards development is to mechanize agriculture and raise food production; once this objective is reached, one should go for Mahalanobis strategy of Heavy Industrialisation.

Anyway, Vakil and Bharmananda strategies were ignored and India launched heavy Industrialisation in the Second plan without mechanising agriculture. The result was failure of Mahalanobis Strategy and by 1965-66 India was hit by a severe food shortage crisis. Finally, in the wake of the crisis, the government adopted Bharamananda strategy of mechanizing agriculture sector and engineered green revolution.

Changing Objectives of Successive Plans.

Fourth Five-year plan	In the Fourth Five-year plan, the basic framework of industrialisation was retained. The objective of self-reliance was not given up, but the main emphasis was shifted to economic growth. The government had starting putting focus on light industries. The agriculture sector was given due importance with adoption of new technologies, improved seeds and fertilizers. The biggest paradox of the industrialisation strategy was that ‘poverty has failed to subside despite growth. The paradox is rightly capture by the Renowned Economist Mahbub-Ul Haq in his famous quote “People are not going to eat tractors”.
Fifth plan	The Fifth plan bough the focus of poverty reduction back on the agenda with government prioritising ‘Minimum Needs Program’. The plan had accorded highest priority to the removal of poverty. The plan document mentioned “The existence of poverty in incompatible with the vision of an advanced, prosperous, democratic, egalitarian and just society”. The forthcoming periods saw turmoil in the country in general and economy in particular. The new Janta Party government decided to terminate the strategy of planning and put a moratorium on the fifth five year plan. The Janta Party presented their own draft plan (1978-83) which stated a new development strategy. For the first time, the planning commission acknowledge the fact that the benefits of growth had failed to reach the poor. The commission further decided that there would not be undue emphasis on numbers such as growth rates. The focus will be on raising the standard of living of the people. The Janta government however could not last long and when the new congress government come in power it terminated the fifth plan and adopted sixth five-year plan (1980-85).
Sixth plan	The Sixth plan puts its objective as: To structurally transform the economy; To achieve sustained and high growth rate; To improve standard of living of masses & Eradication of poverty and unemployment. Several anti-poverty programs like IRDP AND NREM was initiated with the aim of removing poverty and unemployment.
Seventh plan	The Seventh plan marks a departure from earlier plan strategies and spelt out new long-term strategy. The plans objectives were: solving the basic problems (food, shelter, clothing, education and health) of the people besides creating conditions for self-sustaining growth in terms of both the capacity to finance growth internally and the development of technology. The seventh plan contained key elements of change. It gave highest priority to increasing agricultural production through adoption on new technology. It reversed the role of public sector and induced privatisation of industrial activity. Liberalisation of external sector with the aim of increasing efficiency in the manufacturing sector. The administrative procedures were changed from regulatory to faciliatory procedures. The strategy was a variant of what is now known as “Agricultural Development led Growth” Strategy.
Eighth Five-year Plan	The new development strategy: The economic growth during the 1980s was not capable of stopping the economy from economic crisis. The reckless spending’s and fiscal mismanagement by the government has put India on the edge of an economic crisis. The full-scale crisis began in 1990-91 and the year of 1991-92 turned out be a severely bad year for the Indian economy. The crisis was market by an Inflation rate of 16 percent and severe shortages of foreign exchange and Balance of payment difficulties. The severity of the crisis was such that India had to shipped its gold to the Bank of England as collateral against a loan of $ 600 million. As a response to the economic crisis, India adopted structural changes to its economy. The changes which will transform the Indian economy for betterment and will took economy to new heights. The new approach (Liberalisation, Privatisation and Globalisation) adopted have major policy initiatives: Macroeconomic stabilisation Fiscal reforms Trade policy reforms Industrial Policy reforms Financial sector reforms The new development strategy was a complete reversal form the earlier strategies. The old rigidities of the command economy were dismantled and the strategy of external pessimism was eliminated. The new strategy favoured globalisation and was characterised with Export Led Growth.
Ninth plan	The Ninth plan proposed to achieve a 7% growth rate during the plan period. It introduced fiscal discipline and aimed to control rise in prices through controlling money supply. It aimed at resource mobilization and attracting foreign direct investment. The thrust of the plan was to achieve agricultural growth. The proposition was to broaden the direct tax base for raising resources at the center. Target Growth: 6.5% Actual Growth: 5.35%
Tenth plan	The Tenth plan laid emphasis on the role of government in the new emerging economic scenario. The plan mentions specific areas where the state has to play a proactive role. The social sector The infrastructure sectors. Equity and social justice was given priority. The 10th Five Year Plan (2002-2007) targeted at a GDP growth rate of 8% per annum. The primary aim of the 10th Five Year Plan was to renovate the nation extensively, making it competent enough with some of the fastest growing economies across the globe. It intended to initiate an economic growth of 10% on an annual basis. In fact, this decision was taken only after the nation recorded a consistent 7% GDP growth, throughout the past decade. GDP growth target: 8% (realized: 7.8%), savings rate target: 27% (realized: 31.4%)
Eleventh plan	The Eleventh plan emphasised on ‘faster and more inclusive economic growth’. The objective of inclusiveness and sustainability were accorded with highest priority. The plan mentioned that the strategy must be based on sound macroeconomic policies which establish the precondition for rapid and inclusive growth. The eleventh plan aimed at: Rapid growth (more than 9%) to reduce poverty and unemployment. Access to health and education for all. Equality of opportunity Empowerment through skill development Employment opportunities underpinned by the National Rural Employment Guarantee Act. Environment Sustainability Good Governance Recognition of Women’s agency.
Twelfth Plan	The Twelfth Plan seeks to achieve the growth rate of 8.2 per cent, down from 9 per cent envisaged earlier, in view of fragile global recovery. The theme of the plan document is “Faster, Sustainable and more Inclusive growth”. The plan projects an average investment rate of 37 per cent of GDP in the 12th Plan. The projected gross domestic savings rate is 34.2 per cent of GDP. Besides other things, the 12th Plan seeks to achieve 4 per cent agriculture sector growth during 2012-17. The growth target for manufacturing sector has been pegged at 10 per cent. The total plan size has been estimated at Rs.47.7 lakh crore, 135 per cent more that for the 11th Plan (2007-12). Key Highlights: The target growth rate has been set at 8.2 percent. The priority areas are: Infrastructure, Health and Education. Agriculture is given its due importance and it has been documented in the plan that agriculture should maintain a growth rate of 4%, in order to reduce rural poverty. The targeted growth rate for the manufacturing sector has been pegged at 10 percent. Health, Education and Skill development continues to be the focus areas for the government in the Twelfth Plan. The plan mentioned that there is a need to ensure adequate resources to these sectors. Simultaneously, it also points to the need to ensure maximum efficiency in terms of outcomes for the resources allocated to these sectors. The need to harness private investment in these sectors has also been emphasized by the approach. Poverty alleviation needs to be done at a much faster rate. The Planning commission envisage to reduce the poverty Head count Ratio by additional 10 percent during the plan period. At present, the poverty HCR is 21.8 per cent of the population. The outlay on health, Drinking Water and Sanitation should be increased. It suggests the need to take steps to reduce energy intensity of production processes, increase domestic energy supply as quickly as possible and ensure rational energy pricing that will help achieve both objectives viz. reduced energy intensity of production process and enhance domestic energy supply, even though it may seem difficult to attempt. Generation of employment for the youth is the key challenge. The plan targets the creation of additional 50 million jobs. Infrastructure investment should be increased to 9% of GDP. The plan document mentions of providing ‘Affordable and accessible Banking Facility to at least 90% of the population’.

By,

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

October 16, 2017

Issues related to Planning in India
Economic planning has been a central belief of India’s development strategy since independence. Since the time of independence, India has successfully followed the path of planned development.

Understanding How Planning Worked: The Model

The Indian Situation at the time of Independence.

The Choices

The basic question’s that planners had to decide are:

The First question:

The Second Question:

The Third Question:

The Chosen Path by the Indian Planners: Mahalanobis Model

Centralised (Imperative) versus Capitalist Economic Planning

Indicative versus Imperative Economic Planning

The Rationale for Planning in India

The Feature of Indian Planning

The Key Objectives of Planning in India

The Achievements of Planning in India

India’s development strategy, commitments, and approaches towards growth and development, as reflected in the Plans, have undergone various shifts over the years in response to the objective conditions of the economy and challenges of the moment. Some of these changes have been strikingly bold and original, others more modest.

Criticism of Indian Planning: The Debate

Despite the achievement, however, in recent years Indian planning has come under attack from a number of quarters, both within and outside the country. Countries which for long had centrally-planned economies have abandoned planning, at least overtly. It sometimes comes as a surprise to people abroad that India continues to preserve planning as a central pillar of its development strategy despite having had a vibrant market economy for many years now.

The dissatisfaction with planning originates from two main directions.

The Counter Arguments

The Relevance of Planning in the 21^st Century India

The Way Forward
1. All this is not to say, however, that the planning methodology should not change so as to reflect the new economic realities and the emerging requirements. It has, it must, and it will.
2. First of all, the – inter-sectoral balancing and indicative planning, at least in the sense of working out the optimal investment programme, which has been the centre-piece of Indian planning since the Second Plan, will continue to remain important in the foreseeable future.
3. Despite the much greater openness of the Indian economy, our very size and diversity will ensure that imports will continue to play a relatively small role in the economy, except in a very few products. Thus, the requirement of planning in estimating the sectoral investment needs will remain.
4. A more important conceptual issue relates to the nature of the planning problem itself. In a controlled or directed economy, it is only necessary to work out a feasible path from the initial condition to the target. However, in a largely market economy this is not sufficient. Although working out the traditional feasible path continues to be necessary, it needs to be complemented by an assessment of the path the economy is likely to take on a business-as-usual basis.
5. The planning problem then is how to move from the projected path to the desired. Thus, in addition to the standard planning model, there is need to have two other models: (a) a projection model; and (b) a model which adequately captures the effect of policy measures on key parameters.
By,

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University
October 16, 2017
Mobilization of Resources
October 16, 2017
Planning Commission
The Planning Commission

The Planning Commission was set up on the 15^th of March 1950, through a cabinet resolution.

Planning Commission had evolved over time from developing a highly centralised planning system towards indicative planning where Planning Commission concerns itself with the building of a long term strategic vision of the future and decide on priorities for the nation.

The commission works out sectoral targets and provides promotional stimulus to the economy (through its “plan funds allocation”) to grow in the desired direction.

Planning Commission attempted to play a system change role and provided consultancy within the Government for developing better systems. In order to spread the gains of experience more widely, Planning Commission also played an information dissemination role.

Thus, historically, Planning Commission’s work was three dimensional.

(a) design policy direction and suggest required schemes/ programmes;

(b) influence the resource allocation from budget; and

(c) oversee the performance and record the same on a standard framework for comparative assessment of all the states from time to time.

In short, Planning Commission was doing the job both that of a think tank and the function of allocation of plan resources among the Central Ministries and States in as judicious a manner as possible, given the limitations of resources.

The announcement on setting of Planning Commission and its expected role in the economic management was first made in the Parliament by the President, and the details were disclosed by the Finance Minister (Shri John Mathai) through his budget sppech in the first year of the Republic (1950-51).

Rightly, Planning Commission was anchored to India’s political history of immediate past and the Directive Principles of State Policy as enunciated in the Constitution of India.

Functions of Planning Commission

The 1950 resolution setting up the Planning Commission outlined its functions as to:
1. Make an assessment of the material, capital and human resources of the country, including technical personnel, and investigate the possibilities of augmenting such of these resources as are found to be deficient in relation to the nation’s requirement;
2. Formulate a Plan for the most effective and balanced utilisation of country’s resources;
3. On a determination of priorities, define the stages in which the Plan should be carried out and propose the allocation of resources for the due completion of each stage;
4. Indicate the factors which are tending to retard economic development, and determine the conditions which, in view of the current social and political situation, should be established for the successful execution of the Plan;
5. Determine the nature of the machinery which will be necessary for securing the successful implementation of each stage of the Plan in all its aspects;
6. Appraise from time to time the progress achieved in the execution of each stage of the Plan and recommend the adjustments of policy and measures that such appraisal may show to be necessary; and
7. Make such interim or ancillary recommendations as appear to it to be appropriate either for facilitating the discharge of the duties assigned to it, or on a consideration of prevailing economic conditions, current policies, measures and development programmes or on an examination of such specific problems as may be referred to it for advice by Central or State Governments.
Planning Commission was replaced with NITI Aayog on 1 January 2015. However, the financial powers like setting sectoral priorities, designing the schemes and programmes, estimating the entitlements to State development programmes (other than devolution), and influencing the annual allocations as per the priorities etc. now come under the direct influence of the Ministry of Finance, Budget Division.

By,

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University
October 16, 2017

NITI Aayog (National Institution for Transforming India)

The NITI Aayog (National Institution for Transforming India), is a think tank of the Government of India established on 1 January 2015 as a replacement for the Planning Commission to provide Governments at the central and state levels with relevant strategic, directional and technical advice across the spectrum of key elements of policy / development process (eg. special attention to marginalized sections who may be at risk of not benefitting adequately from economic progress, on technology

(eg. special attention to marginalized sections who may be at risk of not benefitting adequately from economic progress, on technology upgradation and capacity building etc.) In addition, the NITI Aayog will monitor and evaluate the implementation of programmes.

The NITI Aayog also seeks to foster better Inter-Ministry coordination and better Centre-State coordination. This is to help evolve a shared vision of national development priorities and to foster cooperative federalism, as strong states make a strong nation.

To achieve this, NITI Aayog also envisages creation of regional councils comprising of chief ministers of concerned states / central Ministries to address specific issues and contingencies impacting more than one state or region.

National and international experts, practitioners and partners are intended to be part of the NITI Aayog.

The shift to NITI Aayog was taken due to the changing economic landscape of India in the globalised world with greater role for private players, technology and evolving demographic aspirations.

Since the inception of Economic reforms of 1991, it has been argued by various renowned Economists and Policy makers (Both Inside the Government and Outside Experts) that the Planning Commission has served India well for the past 60+ years and now it needs either to be revamped or abolished all together because:

India has changed with the adoption of globalisation
India’s demography has changed
Indian States have changed,
India’s private sector has changed,
the level of technology has changed, and
India’s integration with global markets has changed,

Keeping the changes in mind, the NITI Aayog has been created to replace the Planning Commission. It is also stated that the NITI Aayog will ‘facilitate a transition from the isolated conceptualization of merely ‘planning’, to ‘planning for Implementation’.

Further, NITI Aayog would also be a sounding board and offers internal consultancy services to State and Central government departments for programme design, evaluation, monitoring, capacity building, structuring of PPPs etc. However, such services would be available ‘on-demand basis’.

Objectives

The NITI Aayog has the following objectives as outlined in the cabinet resolution forming it.

To evolve a shared vision of national development priorities, sectors and strategies with the active involvement of States in the light of national objectives. The vision of the NITI Aayog will then provide a framework national agenda for the Prime Minister and the Chief Ministers to provide impetus to.
To foster cooperative federalism through structured support initiatives and mechanisms with the States on a continuous basis, recognizing that strong States make a strong nation.
To develop mechanisms to formulate credible plans at the village level and aggregate these progressively at higher levels of government.
To ensure, on areas that are specifically referred to it, that the interests of national security are incorporated in economic strategy and policy.
To pay special attention to the sections of our society that may be at risk of not benefitting adequately from economic progress.
To design strategic and long term policy and programme frameworks and initiatives, and monitor their progress and their efficacy. The lessons learnt through monitoring and feedback will be used for making innovative improvements, including necessary mid-course corrections.
To provide advice and encourage partnerships between key stakeholders and national and international like-minded Think Tanks, as well as educational and policy research institutions.
To create a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and other partners.
To offer a platform for resolution of inter-sectoral and inter-departmental issues in order to accelerate the implementation of the development agenda.
To maintain a state-of-the-art Resource Centre, be a repository of research on good governance and best practices in sustainable and equitable development as well as help their dissemination to stake-holders.
To actively monitor and evaluate the implementation of programmes and initiatives, including the identification of the needed resources so as to strengthen the probability of success and scope of delivery.
To focus on technology upgradation and capacity building for implementation of programmes and initiatives.
To undertake other activities as may be necessary in order to further the execution of the national development agenda, and the objectives mentioned above.

NITI Aayog Vs. Planning Commission

NITI Aayog is Planning Commission with expanded scope but without its financial powers. The financial powers like setting sectoral priorities, designing the schemes and programmes, estimating the entitlements to State development programmes (other than devolution), and influencing the annual allocations as per the priorities etc. now come under direct influence of the Ministry of Finance, Budget Division / Department of Expenditure.
Good or bad, Planning Commission’s influence and impact were perceived, felt and measured through annual plan allocations, acceptance of utilization certificates, discretionary grants in the form of Additional Central Assistance upto autonomous organisations, Zilla Panchayats and municipalities.
Be it rationale or not, the influence of Planning Commission was also reflected in the accounting protocol where budget lines are shown separately for Plan non-Plan, discussed in the CAG Reports and in several proposals by Budget Division, where Plan funds are referred as proxy for development expenditure. But, sans the ability to influence the annual allocations, and influence on the annual budget proposals, the NITI Aayog needs to have a framework to prepare its own annual business plans, to define its outputs and to put in place a framework to assess impact of its outputs and institute an accountability mechanism.
There are some apprehensions as to whether NITI Aayog will be performing such allocative functions just as the erstwhile Planning Commission. This is because the Ministry of Finance (MoF) has created a new budget head titled ‘Special Assistance’ since 2015-16 in Demand No 37 (formerly Demand No. 36) of MoF. The Budget Estimates for 2015-16 is Rs. 20000.00 crore. Ministry of Finance has informed the parliament standing committee that this amount shall be disbursed based on the recommendation of NITI Aayog. (However, the Committee was not appreciative of such allocations.)
Like planning commission NITI sans a legal support or any constitutional foundation. Hence, like Planning Commission, NITI Aayog needs to have its own assessment framework as relevant to its collaborative operations with central government and the respective state governments so that its existence is continuously accepted and respected on the basis of its performance.
As per relevant Rules or Acts, Budget Manual, SC & ST Act, General Financial Rules etc., the Planning Commission as an ‘Organization’ and its officers had ex-officio positions in the decision-making processes or had a direct influence on the financing strategies, including sanctioning and releasing of grants to NGOs and the State Governments, particularly the funds other than those connected to Annual Plan process.

Composition of NITI Aayog

Like Planning Commission, NITI Aayog is chaired by the Prime Minister.

For all practical purposes a Vice Chairman in the rank of a Cabinet Minister (equivalent to Dy Chairman, Planning Commission) and a Chief Executive Officer (equivalent to Secretary Planning Commission) runs the affairs of the institution.

The following are the members of the current team for NITI Aayog:

Chair Person Shri Narendra Modi

Vice Chair Person DR. Rajiv Kumar

Full Time Member Prof. Ramesh Chand

Full Time Member Shri V K Saraswat

Full Time Member DR Bibek Debroy

Chief Executive Officer Shri Amitabh Kant

By,

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

October 16, 2017

Mobilization of Resources: National Development Council; Finance Commission; States Finance Commission
National Development Council

The National Development Council or the Rashtriya Vikas Parishad was set up on 6th August 1952 to strengthen and mobilise the effort and resources of the nation in support of the plan, to promote common economic policy in all vital spheres, and to ensure the balanced and rapid development of all parts of the country.

The Council which was re-constituted on October 7, 1967 is the highest decision-making authority in the country in the area of development matters.

It is a constitutional body with representation from both the Centre and States. The Council is headed by the Prime Minister and all Union Cabinet Ministers, State Chief Ministers, representatives of Union Territories; Members of Planning Commission are its members.The Secretary/ Member-Secretary of Planning Commission functions as the Secretary of the Council and all administrative assistance is rendered by Planning Commission.

The Secretary/ Member-Secretary of Planning Commission functions as the Secretary of the Council and all administrative assistance is rendered by Planning Commission.

The functions of NDC are
1. to prescribe guidelines for formulation of the National Plan, including assessment of resources for the Plan
2. to consider the National Plan as formulated by the Planning Commission
3. to consider important questions of social and economic policy affecting national development and
4. to review the working of the Plan from time to time and to recommend such measures as are necessary for achieving the aims and targets set out in the National Plan.
5. The prime function of the Council is to act as a bridge between the Union government, Planning Commission and the State Governments.
It is a forum not only for discussion of plans and programmes but also social and economic matters of national importance are discussed in this forum before policy formulation. It is a very democratic forum where the States openly express their views. No resolution is passed by the Council.

The practice is to have a complete record of the discussion and gather out of its general trends pinpointing particular conclusions. Sub-Committees under the Chairmanship of Union Cabinet Minister/State Chief Minister are also formed under the NDC to deliberate on policy areas requiring wide-range of consultations.

The NDC ordinarily meets twice a year. So far 58 meetings of the NDC have been held.

Finance Commission.

Article 280 of Indian Constitution

Finance Commission:
1. The president shall, within two years of the commencement of the constitution and thereafter at the expiration of every five years or as such earlier time as the President considers necessary, by order constitute a finance commission which shall consist of a chairman and four other members to be appointed by the President.
2. Parliament may by law determine the qualifications which shall ne requisite for appointment as members of the commission and the manner in which they shall be selected.
3. It shall be the duty of the commission to make recommendations to the president as to:
4. The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under this chapter and the allocation between the states of the respective share of such proceeds.
5. The principles which should govern the grants-in-aid of the revenue of the states out of the consolidated fund of India.
6. Any other matter referred to the commission by the President in the interest of sound finances.
Finance Commission Working

Vertical and horizontal imbalances are common features of most federations and India is no exception to this. The Constitution assigned taxes with a nation-wide base to the Union to make the country one common economic space unhindered by internal barriers to the extent possible.

States being closer to people and more sensitive to the local needs have been assigned functional responsibilities involving expenditure disproportionate to their assigned sources of revenue resulting in vertical imbalances.

Horizontal imbalances across States are on account of factors, which include historical backgrounds, differential endowment of resources, and capacity to raise resources. Unlike in most other federations, differences in the developmental levels in Indian States are very sharp. In an explicit recognition of vertical and horizontal imbalances,

The Indian Constitution embodies the following enabling and mandatory provisions to address them through the transfer of resources from the Centre to the States.

1. Levy of duties by the Centre but collected and retained by the States (Article 268)
2. Taxes and duties levied and collected by the Centre but assigned in whole to the States (Article 269).
3. Sharing of the proceeds of all Union taxes between the Centre and the States under Article 270. (Effective from April 1, 1996, following the eightieth amendment to the Constitution replacing the earlier provisions relating to mandatory sharing of income tax under Article 270 and permissive sharing of
Union excise duties under Article 272).
4. Statutory grants-in-aid of the revenues of States (Article 275)
5. Grants for any public purpose (Article 282).
6. Loans for any public purpose (Article 293).

In addition to provisions enabling transfer of resources from the Centre to the States, a distinguishing feature of the Indian Constitution is that it provides for an institutional mechanism to facilitate such transfers.The institution assigned with such a task under Article 280 of the Constitution is the Finance Commission, which is to be appointed at the expiration of every five years or earlier. Under the Constitution, the main responsibilities of a Finance Commission are the following.

The institution assigned with such a task under Article 280 of the Constitution is the Finance Commission, which is to be appointed at the expiration of every five years or earlier. Under the Constitution, the main responsibilities of a Finance Commission are the following.

1. The distribution between the Union and the States of the net proceeds of taxes which are to be divided between them and the allocation between the
States of the respective shares of such proceeds.
2. Determination of principles and quantum of grants-in-aid to States which are in need of such assistance.
3. Measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of
the recommendations made by the Finance Commission of the State.

The last function was added following the 73rd and 74th amendments to the Constitution in 1992 conferring statutory status to the Panchayats and Municipalities. These Constitutionally mandated functions are the same for all the Finance Commissions and mentioned as such in the terms of reference (ToR) of different Finance Commissions.

To enable the Finance Commission to discharge its responsibilities in an effective manner, the Constitution vests the Finance Commission with the power to determine its procedures.

Under the Constitution, the President shall cause every recommendation made by the Finance Commission together with an explanatory memorandum as to the action taken thereon to be laid before each House of Parliament.

So far, thirteen Finance Commissions have given their reports. The Union government has always been accepting the recommendations of the Finance Commissions, exception being the recommendations of the Third Commission relating to Plan grants.

There have been major changes in the public finances of the Union and the States during the period of over 55 years covered by the Finance Commissions. A number of new matters have been referred to the Commissions in consonance with these developments.

How the different Finance Commissions have discharged their responsibilities in the ever-changing fiscal situation is covered in the following sections under different heads.

State Finance Commission

In India, decentralization reforms, aimed at empowering local people through local governments, assumed significance in early 1990s. Though the Panchayats and the municipalities (rural local bodies and the urban local bodies) existed even before the 73rd and 74th amendment of the Constitution in the year 1993, these amendments provided an impetus to the decentralisation process through a system of self-government for the panchayats and municipalities and devolve greater powers, functions and authority to them.

It also envisaged the panchayats and municipalities as an institution of self-government. These amendments also underscored the organic link in the public finances of the multi-layered federal polity in India. The devolution of financial resources to these bodies was ensured through periodic constitution of the State Finance Commissions (SFCs).

Articles 243 (I) and 243 (Y) of the Constitution spelt out the task of SFCs. Accordingly, SFCs are required to recommend
1. the principles that should govern the distribution between the State on the one hand and the local bodies on the other of the net proceeds of taxes, etc. leviable by the state and the inter-se allocation between different panchayats and municipalities,
2. the determination of taxes, duties, tolls and fees which may be assigned to, or appropriated by the local bodies, and
3. grants-in-aid from the consolidated fund of the State to the local bodies. SFCs are also required to suggest the measures needed to improve the financial position of the panchayats and municipalities.
The importance of the SFCs in the scheme of fiscal decentralization is that besides arbitrating on the claims to resources by the state government and the local bodies, their recommendations would impart greater stability and predictability to the transfer mechanism.

So far, three SFCs have submitted their reports in most of the States. These cover different time period. The convention established at the national level of accepting the principal recommendations of the central finance commission without modification, is not being followed in the states.

Often, even the accepted recommendations are not fully implemented due to resource constraints. There is no synchronization of the periods covered by the reports of SFCs with that of the central finance commission, which affects the central finance commission in assessing the resource required to state governments to supplement the resources of the panchayats and municipalities.

By,
Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University
October 16, 2017
Railway Sector in India

Indian Railways (IR) have been the prime movers to the nation and have the distinction of being the second largest railway system in the world under single management. IR has historically played an important integrating role in the socio-economic development of the country. Its role in economic development assumes importance due to its innate advantage as a mode of surface transport being more energy efficient and environment friendly than other transport modes.

Indian Railways: Segments

Railway Segments

Importance of Railways

Railways Development in India: A Snapshot

Growth Drivers for Railways

Revenue Growth for Indian Railways

Revenue Breakup for Railways

Subsidiaries of Indian Railways

Public Private Partnership in Indian Railways

By

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

October 12, 2017
Government Policy Support for the Energy Sector
Renewable Energy: A rising Source
1. Wind energy is the largest source of renewable energy in India; it accounts for an estimated 64.77 per cent of total installed capacity (24.7 GW). There are plans to double wind power generation capacity to 20 GW by 2022.
2. Biomass is the 2nd largest source of renewable energy, accounting for ~12 per cent of total installed capacity in renewable energy. There is a strong upside potential in biomass in the coming years.
3. In May 2017, India’s solar power tariffs fell to a new low of US$ 0.038 per unit during the auction of a 250-megawatt capacity at Bhadla in Rajasthan. This bid was placed by South Africa’s Phelan Energy Group and Avaada Power to win contracts to build capacities of 50MW and 100MW, respectively, at Adani Renewable Energy Park Rajasthan Ltd.
4. In February 2017, low solar tariffs tendered in India at auction, is expected to catalyse green investments and help in reducing the dependency on fossils fuels.
5. On account of anticipated decline in solar panel prices, due to supply glut in international market, solar power prices in India are estimated to fall by 2018.
6. In March 2017, the Power Ministry has launched an application named – GARV-II, to provide real time data related to rural electrification regarding all un-electrified villages in India.
7. Declining solar power prices as compared to thermal power has prompted the government to switch to the renewable energy resources. Three coal power projects have been shelved in Odisha, Gujarat and Uttar Pradesh due to low rate of renewable solar energy at US$0.038 / kWh.
Nuclear Energy in India: Recent Trends
1. Currently, the country has net installed capacity of 5.8 GW, using nuclear fuels, across 20 reactors. Of the 20 reactors, 18 are Pressurised Heavy Water Reactors (PHWR) and 2 are Boiling Water Reactors (BWR)
2. The government aims to quadruple India’s nuclear power generation capacity to 20 GW by 2020;
3. Nuclear Power Corporation of India Limited (NPCIL) plans to construct 5 nuclear energy parks with a capacity of 10,000 Mwe
4. The Kudankulam Atomic power project, Tamil Nadu, by NPCIL is expected to start operating by 2016-17 with an installed capacity of 1000 MW.
5. Unit II of Kudankulam plant has started functioning in May 2016 with an installed capacity of 1000 MW. The Kudankulam nuclear power plant’s 2nd unit attained criticality on 10th July, 2016.
By

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University
October 12, 2017
Energy and Power Sector

Executive Summary

India’s Power Sector: Evolution

World’s Leading Electricity Producer’s

Sources of Power in India’s Installed Capacity

Energy Security in India: Recent Developments

By

Himanshu Arora

Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

October 12, 2017