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An approach to the Tenth Plan

S. Venkitaramanan

THE Draft Approach Paper on the Tenth Plan (2002-07) has been released for public discussion. In one sense, it is a tenth approach to the Five Year Plan. But the problems of the country's economy are not new. They have been analysed threadbare over the y ears. There is, indeed, very little that the Planning Commission can contribute new. At the same time, it has to be acknowledged that the Paper does bring together many suggestions which, if implemented, will make the Tenth Plan a purposive and effective instrument for modernisation of the economy.

The Approach Paper recognises the fact that in the recent period there have been a number of discouraging developments in the country's economy. The economy is now in a decelerating phase. The reversal has to take place in an environment where the global economy is slowing down. The Approach Paper is frank about the deficiencies of the recent past.

While the Approach Paper adheres to the view that the private sector and the market must play an important role, at the same time, it concedes that the Government has an important role, albeit a different one from that envisaged in the past. There are ar eas, such as infrastructure development, where gaps are large and the private sector cannot be expected to step in significantly. To quote the Paper, the Government's role has to increase in some areas of infrastructure development, which are unlikely to attract private investment. In areas such as telecommunications, power, ports, and so on, the private sector can plan a much larger role, provided an appropriate policy framework is in place. The Government's role has to be that of a regulator, ensuring a fair deal for consumers.

In keeping with the Prime Minister's direction, the Planning Commission has examined the feasibility of doubling the per capita income in the next 10 years. This target requires the rate of growth of GDP to be around 8.7 per cent over the Tenth and Eleve nth Plan periods as against 6.5 per cent in the recent period. The Approach Paper proposes that the Tenth Plan should aim at an indicative target of 8 per cent GDP growth for the period 2002-07. This is certainly an ambitious target. The demonstrated gro wth potential of the economy over several years is only around 6.5 per cent. The proposed 8 per cent growth rate involves an increase of at least 1.5 per cent over the recent medium-term performance, which is an optimistic target.

The Paper proposes that the Plan cannot be defined in terms of only an uni-dimensional objective of the economic growth. It has also to cover areas such as adequate consumption of food and other types of consumer goods and access to basic social services . The Paper defines monitorable targets for the Tenth Plan in the following terms:

* Reduction of poverty ratio to 20 per cent by 2007 and to 10 per cent by 2012;

* Providing gainful employment to the addition to the labour force over the Tenth Plan period;

* Universal access to primary education by 2007;

* Reduction in the decadal rate of population growth between 2001 and 2011 to 16.2 per cent;

* Increase in literacy rates to 72 per cent by 2007 and to 80 per cent by 2012;

* Reduction of infant mortality rate (IMR) to 45 per 1000 live births by 2007 and to 28 by 2012;

* Reduction of maternal mortality rate (MMR) to 20 per 1000 live births by 2007 and to 10 by 2012;

* Increase in forest and tree cover to 25 per cent by 2007 and 33 per cent by 2012;

* All villages to have access to potable drinking water by 2012;

* Cleaning of all major polluted rivers by 2007 and other notified stretches by 2012.

The Paper also cautions that it is not sufficient to set national targets alone, but emphasises achievement of these targets in those populous States, which have encountered low growth rates in the recent period. Such State-specific targets should take i nto account the potentialities and constraints present in each State.

The Paper considers that 8 per cent growth rate may be feasible in the Tenth Plan because the scope for realising improvements in efficiency is large in both the public and private sectors. But, this improvement in efficiency can be realised only if appr opriate policies are put in place to ensure such improvement. Such policies often involve a radical break from past practices.

The Paper assigns the highest priority to agricultural development, because growth in this sector is likely to lead directly to the widest spread of benefits especially to the rural poor. The Paper points out that the first generation of economic reforms had concentrated on reforms in the industrial sector and now agriculture should take its place. Second, the growth strategy of the Tenth Plan must ensure rapid growth of such sectors that are most likely to create high quality employment opportunities. Sectors such as construction, tourism and transport deserve support.

In reviewing special programmes, the Paper makes an important point. To quote the Paper: ``The Plan provision for rural development is Rs 7,000 crore, for food subsidy Rs 13,000 crore and for kerosene and LPG subsidy about Rs 12,000 crore, making a total of Rs 32,000 crore. Against this, the provision for irrigation is only Rs 1,700 crore and for afforestation only Rs 400 crore. We need to examine whether the resources used for poverty alleviation scheme and for various types of subsidies in the name of poor may not be more effective in alleviating poverty, if directed to various types of asset creation programmes in rural areas.''

Hopefully, the policy-makers in the Government of India and the States will look sympathetically at this well-meaning suggestion.

The Approach Paper also stresses that several evaluations in the Integrated Rural Development Programme (IRDP) have shown that the projects undertaken under the programme suffer from numerous defects. Particularly important is the observation that benefi ciaries of IRDP ended up by being subjected to rising indebtedness. The programme for upgrading management skills of the beneficiaries has not been adequately dovetailed with IRDP.

A growth target of 8 per cent requires considerable additional investments. The investment rate is proposed to be increased from 23 per cent of GDP to 32.6 per cent in the targeted scenario. To translate this into financial terms necessarily means that t he budget support for the Plan has to increase substantially. The public sector should have the necessary surplus.

The Paper stresses the implications of fiscal insecurity on the delivery of programmes, as a result of which GoI funds are often diverted by the States for paying salaries and not passed on to the development department. In such a scenario, the commitmen t of the field staff cannot be sustained. Second, States do not often release their portion -- the counterpart funds -- for various programmes. This means that the political and bureaucratic leadership does not put their weight behind the implementation of such a scheme. The precarious financial position of States is a serious problem.

The Paper does not, however, bring out in sufficient detail the `absolute' dimensions of the additional resource effort, which the proposed targets involve. Granted, it assumes the gross tax-to-GDP ratio rising from 9.16 per cent in 2001-02 to 11.7 per c ent in 2006-07, a sizable tax mobilisation by the Centre as well as the States. The Paper's assumption that the disinvestment process will be accelerated to yield Rs 16,000 to Rs 17,000 crore per year on an average over the first three years of the Tenth Plan is ambitious. The Paper lays a great deal of emphasis on the imposition of indirect taxes on the service sector. It has also expressed faith in special emphasis on expenditure control and in the levy of appropriate user charges.

While the Paper stresses the need for downsizing of Government staff, it emphasises that GoI must take the lead for reducing the staff, especially in Ministries dealing with State subjects.Citing sufficient evidence that there may be a considerable idle capacity in the public sector, the Paper points out that bringing such assets into full productive use can certainly reduce the resources requirement quite dramatically. Too many projects have been undertaken without relevance to the capacity to complete them. The Paper recommends a moratorium on launching new projects until at least a minimum number of partially completed projects are brought to completion. It recommends the Plan to fund repairs and maintenance activities, which will enable the already undertaken projects to become efficient -- an apparent breach in the existing distinction between the Non-plan and Non-plan expenditures. The Paper recommends a three-year rolling Plan system, whereby firm commitment of resources for the Plan will be ma de for a two-year period with an indicative commitment for the third year.

Another sensible recommendation of the Approach Paper is with reference to the provision of balancing equipment in public sector units to make possible better utilisation of existing capital assets. Mere infusion of fresh funds is, however, unlikely to s olve this problem since the roots of the malaise are deeper, and lie in the domain of policies and administrative interference in the management of public enterprises.

The Approach Paper, incomplete as it is, is still a useful starting point for a national dialogue. The States and the Centre should enter into the discussions in a truly participative and critical spirit.