A mixed picture

THE MID-TERM REVIEW of the Ninth Plan by a full meeting of the Planning Commission (PC), presided over by the Prime Minister, Mr. A. B. Vajpayee, recently has come to terms with reality. Without being too optimistic on the growth prospects, the PC has painted a grim picture, pointing to all-round slippages in targets and performance. During the first three years of the plan period (1997-2000), the Gross Domestic Product is estimated to have grown at only 6.1 per cent, against a toned down target of 6.5 per cent for the five-year plan. To achieve that goal, the economy will have to grow at 7.1 per cent in the two remaining years and this looks unlikely. The RBI has also lowered the growth projection. There are two very striking features which stand out in the assessment - first, the three States of Bihar, Uttar Pradesh and Orissa are dragging down national growth and need to be pulled up; second, women continue to bear the burden of both poverty and illiteracy. Unless the PC, the Centre and the States take on the challenge and arrest this trend, it could hurt growth prospects of the country in the medium and the long term. Another glaring factor, though well-known, is the continuing growth in Government expenditure and a shortfall in projected revenue collections.

The Centre and the States have to share the blame for the fiscal health of the Governments. The main problem appears to be the sharp fall in investments by the States, which will adversely impact on key segments of the economy such as agriculture, health and education. The review showed that the States were able to mobilise only 44.4 per cent of the projected resources in three years and their investment was not likely to cross 67 per cent of the original target. The Electricity Boards remain the white elephants. The Centre too was culpable, with a shortfall of 8.6 per cent in gross budgetary support. It could provide only less than 50 per cent of the projected resources for its own plan. Hence, the total outlay for the public sector was likely to be only 86 per cent of the Plan target, while public investment would fall to just 81 per cent. The trend of increased borrowings by both the Centre and the States was worrisome as it would widen fiscal deficit beyond sustainable levels. The performance of the public sector undertakings, both Central and State, left a lot to be desired and the best way out of this crisis seems to be to speed up the process of disinvestment or privatisation.

Instead of stopping with fault-finding, the PC has come up with several key recommendations: increase user charges for power, irrigation, urban water supply, health, education and Government housing; rationalise the railway tariff structure within five years; raise the tax-GDP ratio by three percentage points by 2007; downsize Government; pursue civil administration and judicial reform, and restructure poverty alleviation programmes. Above all, the Centre and the States must set aside political differences, jettison populist schemes and set a reasonable time- frame to phase out subsidies. They could reduce the burden on the poor by targeting the public distribution and poverty alleviation programmes. The Commission wants the Tenth Plan to aim for a 9 per cent rate of growth, by pulling up the northern States, reversing the slowdown in the agriculture and manufacturing sectors and enhancing the total investment ratio from 24 to 30 per cent of the GDP on an annual basis. To achieve such ambitious targets, the PC has to be drastically restructured and revamped. It has to be made proactive and relevant to the planning process. Mr. Vajpayee hinted at `difficult steps' with far-reaching changes in policies and systems perhaps after the knee operation. Unless he is able to first convince his allies, the `Swadeshi' lobby and the State Governments, it will be difficult to take those crucial decisions in time to push up the growth trajectory at least in the Tenth Plan.

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