The Planning Commission said on Thursday that it will not change its target for the economic growth in the 12th five year Plan period (FY13 to FY17) in the wake of the US fiscal cliff deal. The Commission has already cut its target for the Plan period to 8 per cent a year on an average against 9-9.5 per cent pegged initially.
As it moves to rejig the 147-odd centrally sponsored schemes (CSS), the Planning Commission said the 12th Plan will abolish small schemes, which have no consequence.
According to a senior Planning Commission member, the Commission has factored in international economic conditions in its target for the 12th Plan and hence it sticks to the target of 8 per cent a year growth during FY13 to FY17.
The Commission had talked about 9-9.5 per cent growth in the initial draft to the Approach Paper to the 12th Plan. However, it was later slashed to 8.2 per cent and then to 8 per cent.
The Planning Commission attributed this to the changed global and domestic economic scenario and expected lower economic growth rate in the first two years of the five-year period. In the first half of FY13, the first year of the 12th Plan, economy grew by just 5.4 per cent. The finance ministry expects the growth to be 5.7-5.9 per cent in the entire FY13.
When asked about the fiscal cliff deal and global economic outlook, Planning Commission Deputy Chairman Montek Singh Ahluwalia said, “It is not for me to comment on the domestic politics of the US. What we are interested is whether the macro-economic picture of the US will deteriorate. I don’t see that happening. US growth is weak, but it is not expected to worsen.”
Some people think the US economic growth would be about 2 per cent this year, he said. The International Monetary Fund (IMF) had pegged US economic growth at 2.2 per cent in 2012 and 2.1 per cent in 2013.
Some people think that the economic growth in the euro zone would be zero or mildly negative in 2013, Ahluwalia added. The IMF projected GDP to contract by 0.4 per cent in the Euro zone in 2012 and grow by 0.2 per cent in 2013.
Montek said the 12th Plan will avoid a proliferation of small schemes with no consequences.
“However, it will always remain open to innovative new ideas, judged on merit to be truly worthwhile. You should have a good scheme,” he said.
Officials said the Planning Commission will soon move a Cabinet note to prune the number of CSS to 59. The move is based on a report by its member B K Chaturvedi. The report also suggested giving more flexibility to states to modify the uses of funds allocated under the scheme. It recommended giving 10 per cent flexibility in case of usual schemes and 10 per cent in case of flagship schemes such as Mahatma Gandhi National Rural Employment Guarantee Act.
A Planning Commission official explained that the flexibility will not be allowed to cut legal entitlements under the scheme.
“We (the Centre) can give flexibility, but we can’t give it to the extent that it reduces the legal entitlement. States can’t say that with the 10 per cent they would pay half the minimum wage. But they could say that with this 10 per cent, the state is going to allow more material component,” he said.
