PM helped sort out Finance Ministry, Plan panel differences?

By Alok Mukherjee

NEW DELHI, JUNE 27. A late intervention by the Prime Minister, Mr. Atal Behari Vajpayee, possibly helped in sorting out the differences between the Union Finance Ministry and the Planning Commission over the financing of the Tenth Five Year Plan which will cover the years 2002 to 2007.

Till Tuesday, there were irreconcilable differences between the two wings of the Government with the Planning Commission seeking a gradual increase in the gross budgetary support to the Plan from about four per cent to five per cent of the gross domestic product (GDP) during the Plan period. The Commission also wanted an increase in the investment ratio from 24 per cent of the GDP at present to 32 per cent per annum over the Plan period and an increase in the tax to GDP ratio from 9.2 per cent in 2001-02 to 11.7 per cent by 2006-07. In this context, it had suggested extending the scope of value added tax (VAT) to both goods and services and setting a disinvestment target of Rs. 16,000 crores per year.

The Finance Ministry was reportedly not in favour of raising the gross budget support to the level sought by the Commission; nor was it in favour of extending the scope of VAT to services as well. Even the disinvestment target of Rs. 16,000 crores per year was not found feasible by the Ministry.

The Commission's contention, however, was that unless the financing of the Tenth Plan was secured, the eight per cent growth target set for the Plan would not be achievable. A reference was also made to the `directive' of the Prime Minister to explore the possibility of a nine per cent growth which now stood reduced to eight per cent. It was pointed out that if the required financing was not possible, then the growth target would have to be lowered further.

Since the differences could not be reconciled, the Deputy Chairman of the Planning Commission, Mr. K.C. Pant, is understood to have met the Prime Minister on Tuesday evening. While what transpired at that meeting was not given out, there was total unanimity of views that emerged after the two-and-half hour meeting that the Finance Minister, Mr. Yashwant Sinha, had with Mr. Pant on Wednesday morning. In fact, Mr. Sinha told presspersons after the meeting that there was complete agreement between the Ministry and the Commission on all issues pertaining to the approach to the Tenth Plan.

The other issues that figured at the meeting between Mr. Sinha and Mr. Pant include downsizing of Central Government employees by three per cent per annum, maintaining the real non- Plan expenditure at current levels, that is, no growth in real terms over the Ninth Plan expenditure.

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