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NITI Aayog – Promoting Privatisation

R Arun Kumar |
The Three Year Action Agenda of the NITI Aayog is full of tailored prescriptions for the government to virtually privatise all sectors, albeit in the name of PPPs.
niti aayog

NITI Aayog – Promoting Privatisation

The Three Year Action Agenda of the NITI Aayog is full of tailored prescriptions for the government to virtually privatise all sectors, albeit in the name of PPPs. Niti Aayog, the champion ‘consultancy firm’, which enjoys government patronage, is parroting the World Bank line. Coming from World Bank, they are called ‘conditions’ attached to loans, while these very prescriptions coming from the Aayog are called ‘advice’. Most importantly, the ‘nationalist credentials’ of the government are secure as the interference from external agencies can be masked by projecting the very ‘Indian’ NITI Aayog.

Contextualising the economic reform policies, Arvind Panagariya authoring a working paper for the IMF (2004), (which was incidentally ‘authorised for distribution’ by Raghuram Rajan) writes: “the process of relaxation of regulation of industry began in the early 1970s and of trade in the late 1970s, the pace of reform picked up significantly only in 1985. Major changes were announced between 1985 and 1988 (‘reforms by stealth’) with the process continuing to move forward thereafter. Indeed, during this latter period, liberalisation had begun to take a somewhat activist form….The substantial yet half-hearted reforms of the 1980s gave way to more systematic and deeper reforms of the 1990s and beyond”.

The Congress government that had come to power in June 1991 launched India's first comprehensive economic policy reform program, which the World Bank supported with a $500 million structural adjustment operation (SAL), approved in December 1991 and closed in December 1993. The WB appreciatively notes (India: 1991 Country Economic Memorandum): “Within weeks of announcing the reform package, the government devalued the rupee by 23 percent, raised interest rates, and revised the 1991/92 union budget, making sharp cuts in subsidies and transfers to public enterprises. Over the next six months, it abolished the complex system of industrial and import licensing, liberalised trade policy, and introduced measures to strengthen capital markets and institutions”. But it was not satisfied with the pace and extent of their implementation and demanded the government to: “(i) reduce public expenditures, (ii) reform the tax system (iii) liberalise the trade regime (iv) complete the process of industrial deregulation (v) increase the efficiency of the financial sector and (vi) restructure public enterprises”.

Successive governments at the centre since the 90s, went on enacting policies to meet these demands of the international finance institutions. Deriving confidence from the majority that they enjoy in the parliament and unashamed of being subservient to imperialist financial institutions, the present BJP government is hastening this reform process. It is leading them to their logical conclusion i.e., complete abdication of State’s social responsibilities. Let us see how NITI Aayog is working to realise this agenda.


Disinvestment has been identified as a major area for reform by the WB, as we have seen above. The Aayog boasts about its role in the disinvestment of Central Public Sector Enterprises (CPSEs) – the ‘first of their kind being taken after 13 years by this Government’. It analysed the work of all the 235 CPSEs and detailed a plan of action for 74 of them, including closure and strategic disinvestment, which “has to be done with urgency in the coming three years”. In order to hasten the process, it has submitted two lists of CPSEs for strategic disinvestment and the Cabinet Committee for Economic Affairs (CCEA) has given “in-principle approval for the strategic disinvestment of 20 CPSEs”. The first real acceleration to disinvestment was during the BJP’s first stint at the central government and was carried on by the disinvestment ministry. Now, the second major acceleration is again carried by the BJP through the Department of Investment and Public Assets Management. Don’t miss the irony!

Disinvestment is a method to transfer public resources to private players at nominal costs. This is nothing but State supporting the private corporates in ‘primitive accumulation of capital’. With many corporates reeling under the impact of global economic crisis, this is a help they demand from the State, which the government is happily obliging.

A related area of reform to help the capitalists increase their profits and give them a free-hand in running their industries is, reforming the labour laws – another long pending demand. The WB states that labour reforms should receive ‘attention and priority in the future’. The Aayog hence reasons: “unifying the existing large number of labour laws into four codes without reform of the laws themselves will serve little purpose. Unless we bring about substantive change either by amending the existing laws or rewriting them afresh, we cannot expect to change the current situation”. It proposes an innovative solution, declare any ‘enterprise less than five years old and having less than Rs 25 Crore in turnover’ as a start-up, so that labour laws will not be applicable to them! Expressing concern that a central labour law cannot be passed due to the opposition to it, Aayog suggests to vigorously pursue the alternative route of the states passing such laws and getting presidential assent. For ensuring all these reforms, it quotes Gujarat appreciatively….the famous Gujarat model!


Another concern expressed by the Aayog is the number of regulations in our economy. It argues that often the regulations enacted by the government ‘restrict competition and harm efficiency of markets’. Aayog laments the fact that ‘government ownership of companies remains pervasive’ and ‘government regulations give significant advantage to state enterprises over their private-sector counterparts’. It wants all such regulations removed as they have ‘harmed competition in many markets’ and restricted ‘the ease of doing business’. Hence the recommendation is to relax these regulations further to promote competition.

Niti Aayog wants traditional public sector monopolies like the railways, banks and electricity distribution companies to be opened up for private participation. It wants the introduction of policies to ensure a ‘level-playing field’ for both the government and private players. It advocates a separation between, ‘policy, regulation and business operations’, simply meaning that government should confine itself to formulating policies, leaving regulatory role to quasi bodies filled with willing bureaucrats and business operations to the private sector. This explains the rationale behind the government’s decision to give 400 railway stations for ‘redevelopment’ through the PPP model and the opening up of defence sector to private participation and foreign investments. The Aayog also calls for the sale of lands owned by these two departments to private parties and raise revenue.

Opening up our financial sector was another important demand of international finance, which was uncompleted due to the widespread resistance. The WB stated that the “longer-term framework for financial sector development could include a growing role for the private sector”. The Aayog wants the present government to push it through, ignoring the resistance and this is what the government is doing. The Financial Resolution and Deposit Insurance Bill 2016 (FRDI) cleared by the cabinet in June incorporates many of the WB/Aayog ideas and is a step in this direction. The banking and insurance sectors in our country are very lucrative ‘markets’ for finance capital, which it wants to devour at any cost. Battered by the economic crisis, they desperately want to enter the Indian market and the NITI Aayog and BJP government are ready to welcome them with open arms.

The WB wanted priority sector lending targets for banks to be reduced and eventually eliminated. Successive governments have ensured this, adversely effecting agriculture in our country. The Aayog too treads in the same path. It advocates for meeting the WTO requirements by further reducing subsidies, withdrawal of the government from procurement of farm produce, declaring MSPs and supply of seeds. It wants the government to encourage private sector in seed production and distribution, procurement and marketing and agribusiness. Deploying machines in production along with contract farming is another major suggestion. The government should not have any ‘major financial commitments’, but ‘inform’ the farmers of all the private options available.

These are in fact some of the conditions imposed by the WTO and WB with an intention to capture our agricultural market. Already we see the penetration of multinational corporations like Monsanto in seed business. The government, through the Aayog intends to further expand the tentacles of foreign capital in our agriculture. Government policies are so designed to weed out native farmers from agriculture by making it unviable. The distressed farmers are forced to quit agriculture and, either commit suicides or migrate to cities. These reforms, not only change the land relations but also make available a huge reserve army of labour for the exploitation of capital. The government induced agrarian crisis is to benefit multinational corporations by making us completely dependent on them.

NITI Aayog justifies this withdrawal of government from manufacturing and agriculture in favour of private participation, saying that it should intervene more in the social sector. But, when we look at its WB influenced prescriptions for social sector reform, they are for a nominal role of the government.

Disclaimer: The views expressed here are the author's personal views, and do not necessarily represent the views of Newsclick.

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