The draft Tenth Five-Year-Plan will be discussed at a Planning Commission meeting headed by Prime Minister Atal Bihari Vajpayee on October 5. With the deadline approaching, Business Standard spoke to K C Pant, deputy chairman of the plan body, on the issues involved in attaining the targeted 8 per cent growth.
Is a 8 per cent growth target practical, given that both the Reserve Bank of India and the finance ministry have pegged it much lower in the first year?
Though there is no overlooking the fact that growth in the first year is important as far as attainment of the target is concerned, things are not as bleak as projected. Exports have gone up, foreign direct investment (FDI) inflows are higher, and foreign exchange reserves are fine. However, agriculture is not expected to do very well.
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Lowering the growth target is also not feasible. Both committees on unemployment, set up by the Planning Commission, have agreed that the level of unemployment will go up if the growth rate falls below 8 per cent.
You have recently written to the Prime Minister that the government can increase public investment during the first year of the Plan. Given the already serious position of the fiscal deficit, how feasible do you think is it to increase expenditure?
The gross budgetary support this year is the same as was proposed in the approach paper for the Plan, and funds have been disbursed to ministries and states. But, fiscal deficit is a matter of concern.
Apart from the growth rate, we also have to look at the structure of growth. We have to ensure the flow of investment to sectors like agriculture, especially irrigation and watershed development. The incremental capital-output ratio in these areas is lower than in industry, and capacities can be utilised quickly. Therefore, if we put public investment here, we can maintain the rate of growth even with lower investments. By the third year of the Plan, the industrial sector can catch up.
If the revenue deficit can be controlled and borrowings can be used for productive purposes, the outlook will be different. For this, we have to focus on both the expenditure and the revenue. For instance, the tax-Gross Domestic Product ratio is decreasing, and user charges are still low.
The finance ministry and the Planning Commission always seem to be at loggerheads over the issue of funds.
The finance ministry and the Planning Commission work together. The ministry looks at problems keeping its responsibilities and national priorities in mind. Our focus may be different, but we have to work together.
Given the slowdown in the reforms process, do you think the target will be met?
The Plan proposes a target subject to specific conditions being met. If the conditions are not met, the target will not be attained. However, debate and discussions need to be held. We should concentrate on taking fast decisions, and we need the political will to take decisions which are necessary but may not be popular.