Social sector spend set for an increase

The draft 11th Five-Year Plan (2007-12) document proposes to shift the country's long-term planning process towards the United Progressive Alliance (UPA) government's pet theme of social and economic equity.

Consequently, the Planning Commission has proposed to substantially increase the Union Government's spending on sectors like agriculture, health, education, social justice and infrastructure.

Prime Minister Manmohan Singh is scheduled to chair a meeting of the full Plan panel here tomorrow to consider finalising the document.

Subsequently, the document will be discussed at the National Development Council meeting early next month.

One consequence of this shift will be that other sectors will see a reduction in the amount of resources allocated over the 11th Plan period. On the whole, the non-priority sectors, which accounted for 44.8 per cent of the total allocation during the 10th Plan period (2002-07), will now only get 25.3 per cent .

While proposing this radical shift, Planning Commission Deputy Chairman Montek Singh Ahluwalia has acknowledged the likelihood of "complaints to the PM on this score".

However, as he has explained in the forwarding note on the 11th Plan document, the idea is to target "inclusive growth" at 9 per cent of the GDP.

"Inclusiveness is not simply added in the form of a few programmes, but is reflected in a particular kind of growth we are aiming at," Ahluwalia said.

A look at the overall proposed framework shows that the Plan lays particular emphasis on agriculture as well as growth in other employment-generating areas like small and medium industries and the burgeoning services sector.

Reviving agricultural growth is therefore a critical aspect of the inclusive structure of aggregate growth the 11th Plan seeks. Agriculture grew at less than 1 per cent in the first three years of the 10th Plan, but accelerating to an average of more than 4 per cent in 2005-06 and 2006-07.

Ahluwalia added that agricultural growth in 2007-08 is likely to be around 4 per cent. "If this happens, the UPA government can claim that its initiatives in this area have delivered an average of more than 4 per cent growth in agriculture 2005-06 onwards," he said.

The 11th Plan recognises that infrastructure will remain a serious and immediate constraint on achieving 9 per cent growth, especially in industry. It estimates that investment in infrastructure, including irrigation, drinking water and sewerage, will need to increase from 5 per cent of the GDP in 2006-07, to 9 per cent by 2011-12.

Ahluwalia has pointed out that public investment in infrastructure in all sectors, barring irrigation and rural roads, is expected to come primarily from internal and extra-budgetary resources of public sector undertakings.

The 11th Plan also proposes an ambitious strategy for public-private partnership (PPP) in infrastructure. "Given the limited public resources available, we have no real alternative and the PPP effort therefore needs to be monitored very closely," Ahluwalia said, adding that much depended on the quality of the government's effort to create an environment that will attract good investors.