IGIDR says 10th Plan growth target impractical

The India Development Report released by the Indira Gandhi Institute of Development Research is of the view that the 10th Plan's average growth target of 8 per cent during 2002-06 cannot be realised.

The report said the sustenance of average GDP growth rate of 5.5 per cent under adverse environments should be viewed as a reasonable performance.

High fiscal deficit of about 10 per cent of GDP causes concern about the medium term fiscal stability. Rising government expenditure has put pressure on revenue deficit and government savings have turned into dissavings. This has resulted in a fall in overall savings and investment rate in the economy.

Commenting on the Plan target of 8 per cent, the report stated that the Plan's starting point turned out to be a drought year with a growth rate of about 4 per cent and the expected growth during 2003-04 has been around 8 per cent.

Realisation of the target would thus imply an average growth of 9 per cent during next three years 2004-06, which is clearly beyond the feasible range on considerations of savings and investment, said the report.

Continuation of reform process is another criteria for achieving higher growth rate. Underlining the factors , the report stated that while product market reforms have brought in competition in availability of goods and services , the gains of the reform measures cannot be realised fully unless substantial factor market reforms also take place.

The key areas that call for reforms in the domestic sector include labour market, land market, bankruptcy procedures and small scale reservation.