The Ninth Plan draft has urged the Central government to transfer a share of the improvement in its fiscal deficit-at least 0.45 per cent of the GDP, to the states in order to make their finances viable.This, it was pointed out could be done in a number of ways including reducing the loan component of the of assistance to states from 50 per cent to 30 per cent.Improvement in state finances, was necessary to prevent asymmetrical division of fiscal consequences between Centre and states during the Ninth Plan period. According to the document, the net fiscal deficit arising from a gross fiscal deficit target of 4.1 per cent will be substantially lower than that required for sustainability whereas for the states it will be above.
The draft has also suggested to the Central government to take adequate care of fiscal deficit while stepping up public investment in the total investment to 34 per cent from below 30 per cent recorded in the terminal year of the Eighth Plan. This should be done in a manner so thatthe fiscal consolidation process was not jeopardised.
The allocation of responsibilities for meeting the targets should be such that the Centre bore only a minor burden of 13.75 per cent of the total public investment necessary for meeting the Ninth Plan targets, and the major responsibility should be that of states (27.9 per cent) and the publicsector enterprises (58.35 per cent).
On the investment front, corporate sector will be required to do much better during the Ninth Plan. Investment by the private corporate sector is projected to rise to 8.8 per cent of GDP as compared to 4.33 per cent planned for the Eighth Plan. Household sector investment as a percentage of GDP is also projected to rise from 8.4 per cent in the Eighth Plan to 9.7 per cent in the Ninth Plan. The share of public sector is expected to increase from the actual of 8.6 per cent of GDP to 9.8 per cent.
The seven per cent economic growth target, it was stressed, hinges on a sharp increase in the investment rate of about 3.3percentage points above the Eighth Plan average, of which 2.1 percentage points would come from domestic sources and the remainder of 1.2 percentage points from external savings. As far as external funding is concerned, the emphasis will be on non-debt creating flows of equity investment from abroad.
Thus the size of national investment was expected to go up from Rs 13,94,000 crore in the Eighth Plan to Rs 22,05,000 crore in the Ninth Plan.
Private consumption expenditure will grow at the rate of 6.4 per cent per annum and per capita consumption growth has been pegged at 4.7 per cent per annum.
Household savings rate has been estimated at 18.9 per cent for the Ninth Plan. The savings rate of private corporate sector has been estimated to be 4.5 per cent.
The public sector savings rate is required to go up to 2.8 per cent of GDP from 1.6 per cent. The Ninth Plan draft has assumed an averge incremental capital output ratio (ICOR) of 4.03 which is higher than the Eighth Plan average of 3.9. This hasbecome necessary in view of the past shortfalls that have to be made good in three major infrastructure sectors namely mining and quarrying, electricity, gas and water and rail transport which have high ICORs.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
