Plan panel calls off 8.1% growth

The Planning Commission has formally abandoned the ambitious 8.1 per cent growth target for the 10th Plan by describing it as ‘‘cl...

The Planning Commission has formally abandoned the ambitious 8.1 per cent growth target for the 10th Plan by describing it as ‘‘clearly infeasible’’. With two more years to go, the growth target is being scaled down to around 7 per cent for the 10th Plan Period (2002-07).

However, even at 7 per cent plus, the 10th Plan would be the most rewarding five year plan in terms of growth. The growth rate would surpass the Eighth Plan’s (1992-97) record growth rate of 6.68 per cent. The growth then was much ahead of the target of 5.6 per cent. Those were the years of economic reforms. Prime Minister Manmohan Singh, then as finance minister in the PV Narasimha Rao government, had launched economic reforms programme in June 1991.

As far as the 10th Plan is concerned, the National Development Council (NDC) approved the ambitious growth target of 8.1 per cent in the hope that the economy in the years ahead would improve upon the 5.8 per cent gross domestic product (GDP) growth rate recorded during 2001-02.

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Unfortunately in 2002-03, the first year of the 10th Plan, the country witnessed a widespread drought. It critically affected the growth rate which slipped to 4.6 per cent. The second year of the Plan witnessed impressive recovery and the growth rate zoomed to around 8.3 per cent, as per the latest estimates. The third year of the current Plan is expected to witness a growth rate ranging from 6 to 6.5 per cent, as estimated by the Reserve Bank of India (RBI) and accepted by Finance Minister P. Chidambaram.

The average growth rate in the first two years of the Plan works out to be 6.4 per cent and after accounting for 6 to 6.5 per cent GDP growth rate in the third year, the economy will need to grow by 11 per cent in the remaining two years to hit the 8.1 per cent 10th Plan target. This, according to a recent analysis of the Planning Commission, is clearly infeasible.

The Planning Commission, which has undertaken the mid-term review of the 10th Plan, is currently exploring the possibility of accelerating growth in the remaining two years to achieve the target of 7-8 per cent set in the national common minimum programme (NCMP). This is to be done by addressing the problems in agricultural and industrial sectors. Both the sectors have not performed well during the initial years of the 10th Plan.

The drought of 2002-03 aggravated the situation on the agri front. The 10th Plan had set a growth target of 4 per cent for agriculture sector with the aim of reversing the deceleration in the second half of 1990s. The agriculture growth rate decelerated from 3.2 per cent during 1990-96 to 2.6 per cent during 1996-2002.

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The agriculture growth rate target has turned out to be a mirage. The average agricultural GDP growth in the first two years of the Plan was 1.8 per cent. The growth rate, according to a recent assessment, is unlikely to exceed 1.5 per cent in the current year. According to the Planning Commission, poor agricultural sector performance is responsible for widespread rural distress.

Industrial growth too remains short of expectations. In the first two years it was 6.7 per cent. Although there has been pick-up in industrial output during the current fiscal, the Plan target of 10 per cent growth rate is quite distant.