Approving an average GDP (gross domestic product) growth target of 9 per cent in the 12th Plan (2012-17) at a full Planning Commission meeting on Saturday, Prime Minister Manmohan Singh pitched for a push forward to the reforms programme as his government's topmost priority in broad national interest while keeping open the possibility of scaling up the growth rate to 9.2 per cent.
Speaking to the media after finalising the Commission's Approach Paper on the 12th Plan at the meeting chaired by him, he said: “It is our hope that we should generate a broad climate in which all political parties can unite to push forward an agenda, which is in broad national interest. That will be our priority number one, to push the reform process forward.”
With his government coming under flak for “policy inertia,” Dr. Singh pointed out that second generation reforms were difficult to implement in view of the lack of broad-based national consensus, which was required for their rollout.
“In many cases they involve legislative action and we do not have, I think, the type of majority that is necessary to put in place, for example, the Goods and Services Tax [GST], which we think is very important. We want financial sector reforms like the insurance sector reforms,” he said.
The Prime Minister conceded that since the lack of national consensus on certain issues was a problem, “effort has to be made to create a climate of opinion whereby all parties would unite in national interest to push forward the reforms agenda.”
Dr. Singh reminded the people of the opposition that the reforms programme faced earlier.
“If you look at the reforms programme, when we launched it in 1991, there was lot of opposition both from the Right and the Left. But subsequently we have had the governments of the Right and the Left at the Centre. I think in the last 20 years broadly, they have all kept to the path that was outlined by us in 1991-95.”
On the growth target for the five-year period, as proposed by the Commission's Approach Paper at 9 per cent — marking a scale-down from the 9.5 per cent envisaged earlier — Dr. Singh said that with improvement in the domestic and global environment, the rate could be raised to 9.2 per cent.
“... We will be working on a growth rate of 9 per cent per annum, but we will also keep open the possibility of raising the growth rate, if the domestic and international situation improves, to 9.2 per cent.”
However, in view of the current global uncertainties and inflationary pressure at home, Dr. Singh said it would be “prudent to have a growth target that will ensure the achievement of the objective of sustained inclusive growth ...” That would also take into account the capabilities of the economy to achieve higher rates of growth.
Even the 9 per cent growth, he had noted at the meeting, would be feasible only if the government was able to “take some difficult decisions.”
Financial reforms
Evidently, among the decisions that need to be taken are financial sector reforms, which are long overdue. In fact, several major Bills on the insurance sector and the GST are yet to get parliamentary approval. Alongside is industry's worry over the high interest rate regime being followed by the Reserve Bank of India to douse inflation.
In his media briefing after the meeting, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the 9 per cent target for the next Plan was fixed on the assumption that headline inflation would be 5 per cent.
Agricultural growth
The Approach Paper also advocates an annual agricultural growth of at least 4 per cent in the Plan period, which would be necessary to douse inflationary pressure as well as improve rural income.
Mr. Ahluwalia said that with the Approach Paper now approved, it would be placed before the National Development Council by the end of next month or early October.
Among other issues, the Paper calls for proper and efficient utilisation of the country's natural resources, while stressing that scarcity in their availability should not be a constraint for growth. It also stressed need for a new land acquisition policy to strike a balance between land owners and development needs.
