Panel decides on 8.5 per cent growth target

IN FOCUS: 11TH PLAN

Oil at $70 a barrel a threat.

The Planning Commission has factored the volatility in crude oil prices while making its economic assumptions for the 11th Plan period.

The commission has assumed a benchmark crude oil price of $70 per barrel for the period 2007-12 which, though lower than some estimates, would make sustaining a growth rate of over eight per cent a formidable task.

Officials said the Plan panel had considered three scenarios for crude oil prices. In the first, crude oil price was projected at $50 per barrel, which would make growth of over 8 per cent easily achievable.

In the second scenario, the price was projected at $70 per barrel and achieving a growth rate of even 8 per cent would be contingent on factors like good performance of the agriculture sector and exports. A third scenario, with crude oil price at $100 per barrel, projected growth below 7 per cent.

While the Plan panel has projected two growth rates, of 8 per cent and 8.5 per cent, in its draft, officials said the approach paper was likely to finalise an 8.5 per cent economic growth rate since the 10th Plan, formulated under the BJP-led NDA (National Democratic Alliance) government had initially targeted 8 per cent growth.

The panel has estimated that the growth rate for the current fiscal would be around 7.8 per cent.

Officials added that the growth rate during the Tenth Plan period would be marginally higher than its intended target, at over 7 per cent The panel had revised the growth rate for the plan period from 8 per cent to 7 per cent.

The commission has also set an agricultural growth rate of 4 per cent during the Eleventh Plan period. "Achieving such growth would be contingent on good growth in exports, since the domestic demand in agriculture can only grow to around 3.2 per cent. The remaining 0.8 per cent has to come by way of agricultural exports," an official said.