Like the previous two plans, the 12th five-year Plan (2012-17) also officially began today without a final document in place.
Officials said this would be ready by November and then sent to the National Development Council (NPC) for approval.
The process of receiving reports from the working groups and steering committees is not complete, a delay quite routine in the formulation of five-year Plans. Documents for the 10th and 11th Plans were also finalised much after the formal beginning.
The 11th Plan began in April 2007 and was approved by the NDC in December that year. The 10th Plan began in April 2002 and was cleared for implementation by the NDC in December.
“This time, too, the final document is not ready and we are hopeful it will come into operation six month into the 12th Plan,” a senior Commission official said. In the interim, the objectives and actions mentioned in the approach paper will form the basis of policy formulation.
The moot question is whether the target set for economic growth, of nine per cent a year on an average for the Plan period, will be truncated in the final document. The Budget assumption is 7.6 per cent growth for 2012-13 and the Economic Survey has pegged growth at 8.6 per cent for 2013-14. Officials ruled out revising the growth target in the final document, though nine per cent growth would require the last three years of the 12th Plan to deliver a little over 9.5 per cent growth.
The economy is estimated to grow 6.9 per cent in 2011-12, the concluding year of the 11th Plan. The original estimate for the year was 10 per cent However, at that time, no one had anticipated the severe global financial crisis of 2008-09.
When asked, Planning Commission member Saumitra Chaudhuri said the economy would grow at close to the target of nine per cent a year on an average for the coming five years, even if the first two years delivered a slower rate. He’d based his assumptions on revival of the fixed investment rate and drawing the projected investment in the infrastructure sector.
The gross fixed capital formation (GFCF) rate has declined steadily since 2008-09, after the global financial crisis hit the Indian economy. Even for 2011-12, it is estimated to be 29.2 per cent of GDP, way down even from the 2008-09 level of 32.3 per cent. For 2012-13, the Prime Minister’s Economic Advisory Council expects gross fixed capital formation to be 31.3 per cent of GDP.
Chaudhuri said if GFCF rises by 1.5 percentage points to GDP in the next three years after 2012-13, “We would be very close to the nine per cent a year average growth rate for the 12th Plan.”
The increase in 1.5 percentage points in GFCF would take the rate close to 32.9 per cent of GDP as was witnessed during 2007-08, before the crisis.
However, for that, investment in infrastructure should be forthcoming. With the government trying to solve various problems in power, like coal supply linkage. Chaudhuri said investment of almost $1 trillion (Rs 51 lakh crore) could be attracted. In the 12th Plan, half the investment in infrastructure is supposed to come in the power sector. So, if power sector problems are resolved, the projected investment would not be difficult, he added.
India’s economy never grew at nine per cent yearly after the global financial crisis of 2008-09. For the previous three pre-crisis years, it grew at a little over nine per cent, on an average.
