The Hindu : Planning ritual

Online edition of India's National Newspaper
Wednesday, Dec 25, 2002

Opinion

Opinion - Editorials

Planning ritual

THE FORMAL APPROVAL of the Tenth Plan (2002-07) by the National Development Council comes towards the end of the first year of the five-year period of the Plan. While this is a commentary on the seriousness with which the Government and the Planning Commission view the planning process, this is still a shade better than the approval of the Ninth Plan which came nearly half way through its five-year term. But there is the larger issue of the role of planning when most of the controls and regulations, which made the process possible, have long since been removed. More than a decade after the beginning of deregulation, the Planning Commission is yet to redefine its role and that of the Central Plans. There can be little credibility about a Five Year Plan document, which continues to list, as it has been doing for half a century, growth targets, savings and investment rates and resource outlays by the public sector. There is a place for planning in the era of liberalisation, but not of the kind that has been reproduced in the Tenth Plan.

There is no dearth of lofty goals in this Plan — the creation of 50 million jobs, a drop in the poverty ratio by 5 percentage points and, of course, a growth of 8 per cent a year during 2002-07. Unfortunately, this is one Five Year Plan when it is known beforehand that at least the growth target is a pipedream. To begin with, the current financial year is expected to see growth, at best, of about 5 to 5.5 per cent. This means that the economy will have to grow by close to 9 per cent during the following four years so that the 8 per cent growth target can be met for the Plan period as a whole. If that is highly implausible, there is a more fundamental problem with the underlying premises of the Plan. The savings and investment rates are at present around 24 per cent, which is what they have been for nearly a decade. While the Tenth Plan expects a substantial but achievable increase in both rates by 2 to 3 percentage points, the burden of the acceleration in GDP growth is to fall on the efficiency with which capital is to be used. The Planning Commission expects a huge 20 per cent improvement in the efficiency with which new investment generates production, a target that surely belongs to the realm of the impossible. Given that the Tenth Plan target has little meaning, it then becomes a question of taking measures to accelerate the growth rate to the extent possible. Towards this end, the Prime Minister, Atal Behari Vajpayee, used the occasion of the meeting of the National Development Council to announce the formation of four empowered committees which would suggest measures to accelerate the reform process. Unfortunately, the committees cannot be expected to come up with much that is new on the four areas identified for deliberation — governance, restrictions on investment, barriers to internal trade and decentralisation. In all these areas, what needs to be done is known. The problem is of implementation.

Even a moderate realisation of the targets of the Tenth Plan will require support by the State Governments, for whom the main challenge today is to deal with the precarious financial situation that all of them are confronting. It is not surprising then that almost all the Chief Ministers have raised issues of resource transfers on a variety of subjects, from modifying the Gadgil formula that governs Plan assistance to interim compensation during the transition to a value-added tax regime that is to begin in April next year. But the most relevant observation, in the context of the NDC meeting on the Tenth Plan, came from the Kerala Chief Minister, A. K. Antony, who highlighted the inconsistency between NDC approval of the Tenth Plan and the Finance Ministry recently questioning the sanctity of the Centre providing budgetary support for the Plan. The Tenth Plan, as formulated, has little chance of achieving even moderate success if the Finance Ministry is going to narrow the flow of budgetary support.

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