Arvind Panagariya’s plan for NITI Aayog: Focus on labour reforms, SMEs

The Indian Express, January 16, 2015

For Arvind Panagariya, the first Vice-Chairman of NITI Aayog, policy-making, rather than planning, will be his top priority. In his first interaction with officers of the erstwhile Planning Commission, he spoke at length on the need to push through labour reforms and strengthen the SME (small and medium enterprise) segment — the backbone of manufacturing — to take India up several notches in the competition ladder.

On Tuesday, his first day at the NITI (National Institution for Transforming India) Aayog, Panagariya engaged with his senior officers for almost an hour. He told them his focus would be policy, implying that he was not unduly hassled about the need to press for more budgetary support for the annual plan that the Planning Commission normally does weeks ahead of the Union Budget.

In his interaction, Panagariya spoke about the unprecedented growth that India witnessed, pointing out that the sharp deterioration was largely of its own making and could not be attributed to external factors. Policy paralysis and mismanagement led to poor growth rates of 5 per cent and lower, he said.

“Clearly, he wants to remould NITI into a policy hub. He spearheaded labour reforms in Rajasthan, and its demonstrative effect is already visible. Maharashtra followed suit, and other states including Madhya Pradesh and Punjab are getting their act together to give the SME segment the flexibility in hiring labour to spur growth,” said an official.

Panagariya called on Prime Minister Narendra Modi and also met Principal Secretary in the PMO Nripendra Misra, who is the point person for all economic ministries and driving the bureaucracy to deliver on the government’s priorities. It is not known yet if Panagariya broached the topic of budgetary support for the Plan with Finance Minister Arun Jaitley. The finance ministry has not kept the erstwhile Planning Commission in the loop so far on the Budget for the next year.

According to sources, on Wednesday, Panagariya interacted with the two-dozen odd young professionals who were taken on board the Planning Commission on short-term contracts. An academician, he was far more relaxed and more than willing to answer questions put forward by the younger lot.

His two interactions with the two groups, however, raised doubts on whether the Twelfth Five-Year Plan (2012-13 to 2016-17) would be jettisoned midway, in the third year itself. “Will the government go for a Plan holiday?” asked a senior NITI official.

With a 20 per cent shortfall in resources this year, and the possibility of the finance ministry doing away with the Plan, non-Plan distinction, NITI Aayog may not have to worry too much about how to allocate Plan resources next year, or in the coming years.

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