NEW DELHI, March 1: The Planning Commission has bowed to the market realities and has pushed for continuation of economic reforms. The Ninth Plan draft has moved away from the interventionist strategies of the past to planning for policies which would promote private and foreign investment and improved returns.While presenting the draft paper on Sunday, Planning Commission deputy chairman Madhu Dandavate stressed on greater capital market reforms, depreciation of the rupee, selective privatisation of the infrastructure sector, disinvestment to take care of stepped up social sector outlays and a shift in public policy from protecting specific jobs to protecting the interests of the work force.
The draft paper has projected an increasing role for the private sector whose investment has been projected at 8.8 per cent of GDP compared to 7.2 per cent in the Eighth Plan.
Dandavate pointed out that the total investment requirement during the Ninth Plan would be Rs 22,05,000 crore at 1996-97 prices) of whichthe public sector is expected to put in Rs 7,59,000 crore, private sector Rs 6,91,000 crore and the household sector Rs 7,55,000 crore.
The Planning Commission has projected a GDP growth rate of 7 per cent as against 6.5 per cent in the Eighth Plan but points out that unemployment will decline only if the growth rate touches 7.5 per cent. The GDP growth target assumes that annual inflation would remain in the 5-7 per cent range. And for revving up employment, the Plan emphasises the need to sharply boost the agricultural growth rate.
Unlike older plans, which set out sectoral growth targets and prescribed the measures that must be implemented, the Ninth Plan is non-deterministic but it does clarify the constraints and how these could be overcome.
The Plan thrust on higher rate of growth of output and employment, an all-round human development with stress on social sector and eradication of poverty, according to Dandavate, has to surmount a Rs 70,000-crore gap. The planners have not been able to suggestany viable remedy except for PSU divestment, but Dandavate said any shortfall in this respect would have to be made through a reappropriation of Plan expenditure. The method of reappropriation has not been spelt out.
Asked whether he was presenting the document virtually on the last working day of the United Front government to pressurise the new government, Dandavate said, "it can be utilised as input for the Ninth Plan to be finalised by the new government."
A staggering gap of Rs 2,49,800 crore between exports and imports during the Ninth Plan period has been projected owing to an unfavourable trade balance. Exports are projected to grow at 14.5 per cent against 10.3 per cent in Eighth Plan touching Rs 9,16,300 crore. The import growth rate has been slashed to 12.2 per cent from 14.1 per cent in the previous plan to reach a whopping Rs 11,66,000 crore for the entire period. But net of invisible receipts, the current account deficit comes down to a manageable 2.1 per cent of GDP. A departure from thepast has been made with regard to foreign investment. It is largely to be allowed where technological requirement remains unfulfilled, a suggestion common to the UF CMP and BJP manifestoes.
The investment pattern in other areas will be from the domestic public sector, particularly the infrastructure area, and private sector. The paper calls for private participation in the infrastructure sector. There is a reversal of stress for PSUs as well. The paper targets 35.7 per cent increase in public sector plan outlay. Total outlay for PSUs would be Rs 875,000 crore.
This is largely in tune with the Plan concept of reation of employment for five crore persons as well as to correct the imbalance created during the Eighth Plan.
Another novelty it aims at is the financing pattern. Deficit financing has been kept at zero level. According to Dandavate, it is not an improbability, as in the past budgetary deficit had been on the lower side.
All the same, the Plan aims at financing 41.5 per cent of the centraloutlay through fiscal deficit. It was 50 per cent in the Eighth Plan.
The total capital inflow required during the Plan period would be Rs 1,95,700 crore accounting for 2.5 per cent of GDP. It emphasises the need for greater inflow of foreign direct investment (FDI) at Rs 93,200 crore amounting to 1.2 per cent of GDP and net portfolio investment of Rs 38,800 amounting to 0.5 per cent of GDP.
The Plan stresses encouraging competition between private and state sector -- a new concept to spur economic activity and strengthen both the sectors in marketing terms.
The strategy is to accelerate the growth rate with stable prices for ensuring food and nutritional security for all, deciding the poverty line as per the Lakdavala formula at the state level as "there is no national formula to assess poverty", and a decentralised planning process where not just the states but even the local bodies can play an effective role.
Dandavate cited the instances of Kerala and Andhra Pradesh where such experiments atpanchayat and municipal levels have been started with respect to resource mobilisation. Asked how he wanted to overcome the inflationary trend, Dandavate said the suggestion was to have adequate money supply but not too high to cause inflation. The Plan suggests a four-pronged strategy including a viable minimum support price and input subsidy policy.
Between the lines
The Ninth Plan has predicted a rise in the share of public investment in total investment from 30 per cent to 34 per cent. The investment will be largely undertaken by public-sector enterprises and states. Accordingly, the Ninth Plan projects a sharp reduction in the centre's revenue deficit but brings out the need for raising the fiscal deficit from 4 per cent to 5 per cent of GDP. It assumes that inflation will be held in the 5-7 per cent range, and interest on government borrowings will be lower than in the past. In this scene, the Ninth Plan argues the case for an increase in the monetised deficit to 1.6 per cent of GDP. Thiswill enable the centre to transfer an additional 0.45 per cent of GDP to the resource-strapped states. Money supply expansion will accelerate somewhat, but the Ninth Plan argues that this will not be inflationary.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
