States' spend cuts worry panel

The Planning Commission is concerned about the consequences of states squeezing their non-Plan expenditure to bring down their fiscal deficit.

With no fresh recruitment in sectors like education and health by states in an attempt to check their wage bill, there is an anxiety that implementation of flagship programmes like Sarva Siksha Abhiyan and the National Health Mission could suffer.

Though these projects are funded largely by the Centre, their ground level implementation depends on the states. The commission is planning to take up the matter with the states while finalising the approach paper to the 11th Five-Year Plan.

"Many states have put a freeze on recruitment of government staff since 1997. There is a view that states are trying to reduce their non-Plan expenditure component in order to reduce their fiscal deficit to 2.8 per cent of the state GDP by 2008-09 as mandated by the Fiscal Responsibility and Budget Management Act," an official said.

Officials point out that there is concern that states will continue to squeeze the non-Plan component of the expenditure for the first two years of the 11th Plan as per the FRBM and then begin to increase it gradually, since there are no penalties for states for overshooting fiscal and revenue deficit after 2008-09.

Another major area of concern for the Plan panel is agriculture, where it is targeting a growth of 4 per cent during the next Plan period.

While there is an increased focus on diversification of agriculture, the commission is of the view that states are not providing adequate support or assistance to the farmers.

"It is not sufficient to merely provide cheap credit. Seed companies are directly accessing farmers and supplying them genetically modified seeds without adequately surveying whether the seeds are suited to the kind of soil or climate," an official said.