12th Plan: 10% GDP growth, pipedream!

KR Sudhaman

Education, health and infrastructure will be the priority areas of the 12th five-year plan, according to the Planning Commission deputy chairman, Montek Singh Ahluwalia. Besides, the plan will also propose ‘drastic action’ to fix problems in the power sector.

He said on Sunday that it was “probably overambitious” to aim at a double-digit growth in the five-year plan beginning next year. Though, he hastened to add that the exact growth target was yet to be fixed.

He said it would be good if 9 per cent GDP growth could be achieved annually as the global economy was not doing well. “Looking forward, the world economy is not doing well. If India grows at an average of 8.5 per cent in 12th plan period, it would be counted as a very good performance. If we do 9 per cent, it will be excellent. I should add that to get 9 per cent growth or a little over 9 per cent a lot of work has to be done. If we try to take it up by 1 per cent from the 11th plan achievement, it will be 9.2 per cent,” Ahluwalia told Financial Chronicle.

Though the Planning Commission had projected 9 per cent annual growth during the 11th plan, it would end up with average 8.2 per cent. “This is an exceptionally good performance compared to rest of the world,” he said.

Commenting on the IMF observation that India with 10.3 per cent growth would overtake China (10.2 per cent growth), Ahluwalia said one should not get carried away by these numbers as China had been growing much faster for 30 years.

Their per capita income was now much higher than that of India. “Even if India grows at 9 per cent and China at 7 per cent in next 20 years, India would still have a lot of catching up to do,” he said. Ahead of full the Planning Commission meeting on April 21 to be chaired by prime minister Manmohan Singh to discuss the approach paper to 12th plan, Ahluwalia said the government proposed to introduce the public-private partnership (PPP) model in education and health for the first time.

“The human resources development ministry is now considering how to introduce PPP in school education. Of 6,000 model schools, about 3,500 are to be set up in backward areas where we cannot attract the private sector. The remaining 2,500 are to be set up in PPP mode. We will start this year, but 95 per cent of the work will be done in 12th plan,” he said.

This proposal will go to the cabinet soon, he said. A cabinet note prepared by the HRD ministry is already with the Planning Commission. Ahluwalia said the PPP schools should be viewed as a pilot project of the centre. If successful, it could be replicated by state governments as school education was basically a state subject.

In the past the centre had set up 900 Navodhya schools as model residential schools all over the country. These have done exceptionally well. The PPP schools would not necessarily be residential schools.

Turning to the difficult power situation, Ahluwalia said, “More drastic measures were needed. We need to push five or six key issues…Losses on the distribution side are a serious problem. It is not possible to imagine a viable power sector if the losses are Rs 70,000 crore per year. Something has to be done to take care of the weakness in this area.”

“Perhaps incentive funding (in the power sector) will have to be linked to performance and not by merely filling the gap. The banking sector too should impose discipline. Losses are possible only because banks continue to finance public sector distribution companies. If this is tightened, losses (in the power sector) will automatically come down. Poor availability of water, coal and problems of distribution needed to be addressed by the centre and states together.” he said.

On making India a global manufacturing hub, Ahluwalia said the prime minister’s national manufacturing council is meeting on May 4 to give finishing touches to the idea. “It (manufacturing hub) is a good idea. We are in favour of pushing it. The proposal is to create an environment to achieve double-digit growth in manufacturing. This is only one part of what should be a comprehensive approach to manufacturing.”

On the possibility of achieving 14 per cent annual growth in the manufacturing sector, Ahluwalia said, “Frankly achieving such a rate immediately will be difficult, considering that we are struggling at 3.6 per cent factory output growth according to February 2011 data. In April-February, manufacturing grew by 7.8 per cent. Let us take it to 12 per cent. Obviously, if we find this is feasible, we will take it to 14 per cent.”

On taking the share of manufacturing to 25 per cent of GDP from 16 per cent by 2022, he said one should not look at it as a share of GDP. If all other sectors also grew well, the share of manufacturing in GDP would come down. One should rather focus on a sustained double- digit growth in the manufacturing sector.

He made it clear that full Planning Commission meeting on April 21 was not expected to approve the draft approach paper to 12th plan. The purpose was to present some key issues for the plan. “We are working on a draft approach paper that will be finalised based on the discussion in the meeting.”

The Planning Commission has adopted a consultative approach in preparation of twelfth plan. “We have a website and 30,000 visitors have visited it. There have been 1.3 million hits. It is unprecedented and a very new mechanism trying to get views from stakeholders. We are also going to have discussions with the state governments. We are now an economy where growth dynamism is private sector led. The whole of agriculture is in the private sector. We are not taking a view that the government does not have a role because the economy now is the private sector and market driven. The government role too will expand in areas where the private sector does not go.”

Skill development is another area where the next plan will lay an emphasis. The prime minister’s adviser on skill development, S Ramadorai, has been co-opted as chairman of the skills development board headed by Ahluwalia. “I have written to all state chief ministers that Ramadorai would be interacting with them on the issue,” he said.

On infrastructure development, he said, “In the 11th plan, around 65 per cent of infrastructure development was in the public sector and 35 per cent in the private sector. Considering the infrastructure spending was around $500 billion in the 11th plan, the government spent $325 billion. In the 12th plan investment has to be $1 trillion and it is going to be 50 per cent each by the public and private sectors.”
“This is certainly going to be a big challenge.” About the infrastructure debt fund, he said the finance ministry was examining proposals and he hoped to have details by the end of this month.

Source URL: http://www.mydigitalfc.com/economy/education-infrastructure-top-12th-plan-agenda-600.