The Union Budget for 2012-13, to be presented on Friday, is set to fix the macroeconomic policy map for not only the next financial year but also for the 12th Plan (2012-17).
Pronab Sen, principal advisor to the Planning Commission, said solutions to the current problems would guide in formulating long-term strategies. “This year’s Budget will have to give a lead to the Plan because the problem is, the short term is actually dominating the long term today. We are not on a stable business cycle. In a sense, there is a role reversal between the Commission and the finance ministry.”
The most important input from the Budget to the writers of the Plan document would be the manner in which the finance ministry decides to handle the twin problem of slowing growth and high inflation. “Once we know the finance ministry’s plan, we can build the 12th Plan from there. That would be the next four years’ plan,” said Sen.
| ROLE REVERSAL |
| * Budget to give leads for XII Plan |
| * Strategy to handle slowing growth and high inflation would be main takeaway |
| * Plan panel to assess Budget’s indication for the Five-Year Plan and suggest corrective steps |
| * Plan document likely to be ready by end of 2012 |
He said the finance ministry was responsible for short-run macro management, along with the Reserve Bank of India (RBI). “We need to know what is the greater concern — growth or inflation. These will come out in the Budget and monetary policy clearly,” said Sen.
Another senior official from the Plan panel said whether the finance ministry gave a clear direction or not was less important than what it did. “From there, we will have to derive our own conclusions,” said the official.
Sen said: “We will have to take this Budget as data, rather than something we are recommending. The 12th Plan approach paper doesn’t give the finance minister any real indication. It gives only the fiscal numbers. The Budget is also about macro economic policies. So, what we are saying is alright, we are going to have a Budget this year. We have to quickly assess how the Budget relates to the eventual objectives of the Five-Year Plan and what kind of corrective movement, if any, needs to be done in the intervening four years.”
Commission officials are now hoping that on the basis of the inputs gathered from the Budget for the next financial year, the document for the 12th Plan would be written and final approval from the National Development Council (NDC) taken by the end of 2012.
Sen said the reports of almost all the working groups were in and a majority of the steering committee reports had also been given for writing the plan document.
The writing of the document, which will have three parts, has already begun but it is expected to gather pace only after presentation of the Budget. The first part will cover the overall macro economic scenario and the other two parts would have sector-specific details.
The process of taking approvals after writing the plan normally takes about four months, added Sen.
