Kalam for achieving 9 p.c. growth rate

NEW DELHI April 9. Stressing the need for achieving a 9 per cent annual growth to reduce the huge numbers of those below the poverty line by 2020, the President, A.P.J. Abdul Kalam, today urged the Twelfth Finance Commission to evolve a mechanism for efficient resource allocation to ensure poverty reduction through proper fiscal management.

Speaking at the golden jubilee function of the Finance Commission here, Mr. Kalam called upon the Centre and the States to find a solution to the problem of the mounting debt burden by orienting their financial management towards higher economic growth and poverty reduction. Emphasising the unsustainability of the growing debt burden on the exchequer, he said not only were many States burdened with debt, the Union budget also showed that one-fourth of the total receipts went for debt payments.

On making India a developed country, Mr. Kalam said the economy had to grow by nine per cent in the coming year so that the 260 million people below the poverty line came above it by 2020. The target of 8 per cent growth set by the 10th five year plan along with the measures announced by the Finance Minister, Jaswant Singh, in the budget were steps in the right direction, he said.

Dr. Kalam outlined a vision of connectivity and transparency in governance in administration to bring about development. This had four aspects — fiscal connectivity, knowledge connectivity, electronic connectivity and economic connectivity — which could lead to empowerment of the rural people and bring about economic development.

Mr. Jaswant Singh conceded that the high fiscal deficit was a problem which had to be addressed urgently. It was essentially the revenue deficit and primary deficits that had to be tackled. At the same time, he felt the country had achieved significant economic progress especially in the last decade showing both financial and political resilience in dealing with a difficult economic situation.

Pointing out that India was a continental economy and in many ways a unique common market, he said the achievements were remarkable as the country had recorded a six per cent GDP growth over the last decade. But this had to be continued even further.

In his welcome address, the 12th Finance Commission chairman, C. Rangarajan, pointed to the fact that the States' finances were under strain. Every State had to address the issue of how to contain fiscal deficit within reasonable limits while meeting their responsibilities, he said. "Raising revenues including non-tax revenues and pruning non-developmental expenditures must assume importance. Only such a stance can result in an accelerated flow of developmental expenditures leading to improved socio-economic growth." At the same time, efficiency in using resources should be ensured and promoted.

Mr. Rangarajan noted that the task of formulating a sound transfer system had to strike a fine balance between equity and efficiency, a system where fiscal disadvantage was taken care of but fiscal imprudence was effectively discouraged. In such a system, he said States that are fiscally disadvantaged but prudent stood to gain and States that had the resources but did not use them well stood to lose. "The task is to devise a formula that redresses disadvantage but penalises imprudence."

Mr. Rangarajan conceded that the calculation of available resources for transfer to the Centre and the States might face "some additional difficulties" in view of the impending changes in commodity taxation at the State-level such as the introduction of value added tax and other related modifications. On user charges, he felt a consensus must develop especially in sectors such as power, transport and water, to correspond with costs.