Pant dispels scepticism over growth target

NEW DELHI OCT. 5. With the full Planning Commission meeting today approving an eight per cent growth target for the Tenth Five Year Plan, the Deputy Chairman of the Planning Commission, K.C. Pant, dispelled the scepticism that the target was not achievable. The draft will now be presented before the National Development Council (NDC) for final approval.

Pointing out that poverty alleviation and employment opportunities were the major objectives of the Tenth Plan (covering the years 2002-2007), Mr. Pant said this could be possible only if a high growth rate was aimed for. Responding to criticism that the Ninth Plan had recorded growth rates well below the set target, he said three out of the five years of the Ninth Plan were drought years; the east-Asian crisis took place during that time and global recession had set in after years of economic boom.

Therefore, when agricultural production was hampered for three out of five years, the impact on industrial production was also a reason for the overall reduction in growth rates.

Taking up the point of ``over ambitious'' growth target of eight per cent, Member, Planning Commission, S. P. Gupta, said the high growth target was based on the reforms package that was recommended in the draft Tenth Plan. The package was such that capital was to shift to areas which would offer better returns, resulting in lowering of the incremental capital: output ratio (ICOR) and the emphasis on rural and agro industries was expected to generate disposal income in the hands of the rural population.

``The growth constraints that we see today are not because of capacity limitation but because of demand compression. Once there is purchasing power in the hands of those who do not have it now, there would be more demand, leading to higher growth,'' Dr. Gupta pointed out.

Giving out details of the draft Tenth Plan, Mr. Pant said the public-sector outlay had been pegged at Rs. 15,92,300 crores at 2001-02 prices, out of which the Central Plan would have an outlay of Rs. 9,21,291 crores and the outlay for States and Union Territories would be Rs. 6,71,009 crores. The Central budgetary support to the Plan was targeted at Rs. 7,06,000 crores.

However, the envisaged quantum of gross budgetary support (GBS) of Rs. 7,06,000 crores could be realised only if the tax-GDP ratio increased from 8.6 per cent to 10.3 per cent in the terminal year of the Plan and non-Plan expenditure decreased from 11.3 per cent to nine per cent of the GDP. Disinvestment proceeds were expected to contribute Rs. 78,000 crores at current prices towards meeting the GBS target.

For efficient fiscal management, the Plan had recommended widening of the tax base and improving collections, removing of tax incentives and concessions, introduction of an integrated Central and State VAT, reduction in Central Government staff strength and reduction in subsidies and administrative overheads.

The ICOR was likely to come down to about 3.6 against 4.5 during the Ninth Plan and this was to be achieved mainly through better utilisation of existing capacities and suitable sectoral allocation of capital and its efficient utilisation. The growth target would require an investment of 28.4 per cent of the GDP, to be met to the extent of 26.8 per cent of the GDP from domestic savings and external savings (foreign investment) of 1.6 per cent of the GDP. The bulk of the additional domestic savings would have to come from reduction in Government dissavings (losses) from a negative level of 4.5 per cent to negative 0.5 per cent of the GDP.

The Tenth Plan has also set down monitorable social targets like reduction in poverty ratio from 26 per cent at present to 21 per cent by 2007, reduction in decadal population growth from 21.3 per cent in 1991-2001 to 16.2 per cent in 2001-11, growth in gainful employment to, at least, keep pace with addition to the labour force and aim to place all children in school by 2003 and all children to complete five years of schooling by 2007. Other social objectives are for reducing gaps in literacy and wage rates by 50 per cent, increase in literacy rate from 65 per cent in 1999-2000 to 75 per cent in 2007 and providing potable drinking water in all villages. The Plan also aims to bring down the infant mortality rate from 72 in 1999-00 to 45 in 2007, maternal mortality ratio from four in 1999-2000 to two in 2007 and increase in forest/tree cover from 19 per cent in 1999-2000 to 25 per cent in 2007.

On the industrial front, the Planning Commission felt that during the first two years, public investment would ``crowd in'' private investment for staging an industrial recovery.

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