58-point roadmap chalked out

Cabinet approves mTA of 10th plan

The Union Cabinet, which met today, approved the mid-term appraisal (MTA) of the Tenth Five Year Plan. Now, it will be placed before the National Development Council (NDC), which is scheduled to meet next month.

"The Cabinet approval and then approval from the NDC will mean that the central as well as state governments are in agreement on the kinds of reforms which need to be undertaken. These will then become an action plan for the government," said officials in the Planning Commission.

The MTA listed 58 policy decisions that will impact growth in the next two years.

In addition, there are about 300 action points that will have to be taken up by the government at a later stage. These have recently been revised after taking into account the views of administrative ministries.

The policy suggestions include, sale of up to 49 per cent equity in profitable public sector units, foreign direct investment in the retail sector, review of the mineral policy, reducing inspector raj and making labour laws more flexible.

On the government's expenditure commitments, the MTA said converting the food-for-work programme into an employment guarantee programme would cost the government Rs 20,000 crore per year, water conservation programmes would cost around Rs 7,000 crore, expenditure on health, education and on infrastructure (about Rs 20,000 crore annually) would also be required.

This increase in expenditure will require increase in tax revenues, improved tax administration and decrease expenditure on untargeted subsidies. It called for expanding tax bases and doing away with distorting exemptions.

On indirect tax, it said that it was essential to streamline the interface of domestic indirect taxes with customs to facilitate the continued growth of domestic manufacturing.

"This is especially urgent as regimes will require to be put in place to operationalise the Free Trade Agreements already entered into with various countries and trade blocs," the MTA says.

"There will be a lag effect in introducing VAT since losses incurred by states in early years may not be fully compensated by increased central revenue," the MTA said.

There is a lot to be done in the area of domestic consumption taxation. The eventual move to a coordinated countrywide goods and service tax would require detailed consultations with states, after the value added tax (VAT) system was further refined, it added.

Plan prescription

Sale of 49% equity in profitable public sector units

Allowing FDI in retail

Making labour laws flexible

Regulator for rail fares

Foreign equity in aviation

Expand tax base

Streamline interface of indirect taxes with Customs

Decrease expenditure on untargeted subsidies