The Full Planning Commission chaired by Prime Minister Manmohan Singh on Saturday approved the 12th Plan (2012-17) draft document endorsing the scaling-down of the annual average economic growth target to 8.2 per cent from the 9 per cent envisaged earlier, keeping in view the fragile economic environment.
Briefing reporters after the meeting, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “The Full Planning Commission approved the draft 12th Five-Year Plan document, subject to certain suggestions made in the meeting… The full Commission endorsed the revised growth target of 8.2 per cent for the 12th Plan, which is necessary to achieve inclusive growth.”
As per practice, the draft document will now have to be vetted by the Union Cabinet and then placed for final approval before the National Development Council (NDC), the country’s highest decision-making body, comprising the Chief Ministers of all States and Union Territories, and the Full Planning Co
At Saturday’s meeting of the full Plan panel, which was attended by Commission members and all key Cabinet members — though Railway Minister Mukul Roy (belonging to the Trinamool Congress) was not present — the Prime Minister gave an overview of the economic scenario and the circumstances in which the GDP growth target for the five-year period had to be lowered and what needed to be done to attain inclusive growth.
Keeping in view the fragile economic recovery and uncertain global environment, Mr. Ahluwalia pointed out that the 12th Plan growth target of 8.2 per cent, as compared to 7.9 per cent achieved in the 11th Plan period, was “actually a realistic target” for the five-year period, although it was lower than the nine per cent envisaged earlier in the Approach Paper.
Mr. Ahluwalia pointed out that the 12th Plan strategy would be to provide flexibility to States in utilisation of funds provided to them under various Centrally-sponsored schemes (CSS) with the liberty to make State-specific guidelines under these programmes for incurring expenditure.
With regard to rationalisation of subsidies, he said the Commission would take follow-up action on Finance Minister P. Chidambaram’s suggestion with regard to cash transfers pertaining to food, fuel and fertiliser subsidies. He hoped that the exercise of cash transfer of subsidies would be completed by March 2017, which marks the end of the 12th Plan period.
As for the concerns expressed by Mr. Chidambaram that reducing the subsidy burden to 1.2 per cent of the GDP by 2016-17 from the 1.9 per cent estimated in the Budget for 2012-13 was optimistic, Mr. Ahluwalia said: “I agree that these are all ambitious targets. Plan is all about ambition”.
The three scenarios
Earlier, justifying the hike in diesel prices and advocating the need for “courage and some risks” to break the policy logjam, the Prime Minister presented three economic scenarios — “Strong inclusive growth”, “Insufficient action” and “policy logjam” — as unveiled by the draft document and argued in favour of the first one for the country needed close to a $1-trillion investment in the infrastructure sector during the period.
“I believe that we can make Scenario I possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less,” Dr. Singh said.
Dr. Singh pointed out that the Plan document’s central message was that all stated objectives can be achieved provided policies are put in place to take care of the weaknesses.
Providing, for the first time, a choice to policymakers as to what they desire, the Plan document noted that under the ‘Strong Inclusive Growth’ scenario, one could expect a number of virtuous cycles to start operating, leading to positive results on both growth and inclusion. “This is the scenario we should aim for,” it said.
Scenario II (Insufficient action) is described as a state of partial action with weak implementation. In this scenario, the virtuous cycles that reinforce growth in Scenario I do not kick in and growth can easily slow down to 6 to 6.5 per cent.
Driving home the point of aspiring for higher growth, Dr. Singh noted that the second scenario would make it hard to achieve inclusiveness. “This is where we will end up if we make only half-hearted efforts and slip in implementation. It is my sincere hope that we do not do so.”
Scenario III (Policy logjam), Dr. Singh said, reflected a situation where for one reason or the other, most of the policies needed to achieve Scenario I are not taken. “If this continues for any length of time, vicious cycles begin to set in and growth could easily collapse to about five per cent per year, with very poor outcomes on inclusion.
“I urge everyone interested in the country’s future to understand fully the implications of this scenario. They will quickly come to an agreement that the people of India deserve better than this,” Dr. Singh said.