India was one of the countries Walt Rostow was thinking of when he used the aviation metaphor to describe the growth process. After years of “taxiing” and building the energy to “lift off”, an economy enters its “take-off” stage “when the old blocks and resistance to steady growth are finally overcome. The forces making for economic progress, which yielded limited bursts and enclaves of modern activity, expand and come to dominate the society. Growth becomes its normal condition. Compound interest becomes built, as it were, into its habits and institutional structure” (The Stages of Economic Growth: A Non-Communist Manifesto, W W Rostow, Cambridge University Press, 1960).
Most would agree an economy that grew at an average annual rate of close to zero per cent for half a century (from 1890 to 1940), then at 3.5 per cent (from 1950 to 1980) and 5.8 per cent (from 1980 to 2000), and more recently at 9.0 per cent (2004-08) has settled into a phase when “growth becomes its normal condition”, as Professor Rostow put it.
The question is, has “compound interest become built … into [India’s] habits and institutional structure”? That is the point, in essence, that India’s Planning Commission has raised in its “approach” to the 12th Five-Year Plan (2012-17). *
After five years of 8.2 per cent growth in the 11th Plan period (2007-12), says the approach paper, “it is reasonable to aim at 9.0 per cent growth for the Twelfth Plan”. This is “a feasible target from a macroeconomic perspective”, the paper notes, “but it cannot be viewed as an assured outcome”. Indeed, the paper adds that nine per cent growth over the next five years is an “ambitious” target.
Two caveats stand between feasibility and possibility: first, “global economic conditions” which are “very uncertain”; and second, the required “political will to do what is necessary”. The term “political will” is as old as the word “planning” in development literature!
To achieve rapid growth, says the paper, “the economy will have to overcome constraints posed by limited energy supplies, increase in water scarcity, shortages in infrastructure, problems of land acquisition for industrial development and infrastructure, and the complex problem of managing the urban transition associated with rapid growth. Greater efforts also need to be made in agriculture, health and education to ensure inclusion of the most excluded and sometimes invisible parts of our population”.
Global conditions are a given. India can, at best, take some proactive steps to ensure that they do not become more hostile. These would include making the G20 a more meaningful forum for global policy, working with other developing countries, especially Brazil, Indonesia and South Africa, to ensure that global economic, trading and climate change regimes do not impose an additional burden on India and other developing countries, and the G7 economies do not become more protectionist.
But none of this is likely to alleviate the burden imposed by a slower global economy. The worst external constraint on growth is likely to be persistently high crude oil and food prices, but the solution lies in domestic “political will”, to which the approach paper refers, and the ability to find domestic options in energy, food and key non-tradeables.
In the midst of three continuous years of nine per cent growth (2004-07), with rising foreign exchange reserves, rising exports, low current account deficit and rising foreign direct investment into India, an optimistic Prime Minister Manmohan Singh famously observed that the “external constraint” on India’s growth process was probably a thing of the past and India’s challenges lay largely at home.
India’s planners used to talk of the “two gap” model — an external resources gap and a domestic resources gap. Many believed during the 10th and early 11th Plan periods that the former had been surmounted. The year 2008 and the global slowdown since have countered that optimism; the external constraint has returned.
However, the real policy challenges remain domestic, and the approach paper shows adequate recognition of all of them — infrastructure (urban and rural), agricultural productivity, energy pricing, finding the money to invest in health care and education, stepping up manufacturing sector growth and employment, ensuring that the growth process is ecologically sustainable and socially equitable, and making the government and public services delivery more efficient and less corrupt.
The chapter on innovation is an important reminder that India remains a laggard on new technology and new product development and in science and technology (S&T). The S&T foundations of the country’s growth process require renewal and new strategies of public-private partnership, including with foreign firms and institutions. The modernisation of the human resources development infrastructure and systems and the integration of strategies to promote industrial development and S&T education and skills development are needed.
Some may regard a five-year plan an anachronism in the modern world. However, this thoughtful and comprehensive document shows why it is useful for a developing country democracy to have such a plan in the public domain. Development is a political process. Democratic governments have to make difficult choices with limited resources and within short time periods. The 12th Plan approach paper offers immense food for thought for an informed public debate.
The Planning Commission correctly notes that the “high expectations” of citizens are probably running ahead of the ability of both the economy and the institutions of government to deliver. “The Twelfth Plan has to meet the aspirations of millions of young men and women. This cannot be done by following a business-as-usual approach. All sections of society – government, farmers, businesses, labour and concerned citizens – have to adopt newer, more effective ways of pursuing their activities, so that we can collectively achieve our lofty goals.” The challenge for all political parties is to be able to handle this “revolution of rising expectations”.
*Available at www. planningcommission.nic.in/plans/planrel/12appdrft/appraoch_12plan.pdf
