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Prime Minister Manmohan Singh is ready to take more political risks to achieve a higher average growth rate of 8.2 per cent during 12th Plan. The new Plan period started on April 1.
The Plan document speaks of three scenarios for economic growth. The first, ‘Strong Inclusive Growth’, talks of an average 12th Plan growth of 8.2 per cent starting from 6.7 per cent in 2012-13 rising to 9 per cent in 2016-17.
The second, ‘Insufficient Action’, feels growth may decline to 6-6.5 per cent while the third, ‘Policy Logjam’, can send growth drifting down to 5 per cent.
Addressing the Full Planning Commission Meeting on Saturday, the Prime Minister said: “I believe we can make Scenario One possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less.”
Manmohan Singh said the economy has gained strength. The Government’s immediate priority must be to orchestrate a rebound in the second half of the current year. “We should then try to accelerate growth to reach around 9 per cent by the end of the Plan period.”
The most important area for immediate action is to speed up the pace of implementation of infrastructure projects.
This is crucial for removing supply bottlenecks that constrain growth in other sectors. This will also boost investor sentiment to raise the overall rate of investment, he said.
‘Ambitious targets’
The infrastructure ministries must set ambitious targets for their sectors over the 12th Plan. The Government has set a target of $1 trillion investment in infrastructure during the 12th Plan period.
“I will personally review the performance of the infrastructure ministries compared with targets at the end of the first six months. I hope that out of this review, we can define an agenda for improved implementation,” the Prime Minister said.
On the longer term agenda, he listed three broad components with specific focus on two key deficits — fiscal and current account. Investments need to be revived to achieve 8.2 per cent growth, bring down the fiscal deficit and contain the current account deficit within 3 per cent of GDP, he said.
Manmohan Singh said the fiscal deficit was “too high” and attracting adverse comment from analysts.
It must be brought down over the medium term to release domestic resources for productive deployment in the economy. Since export prospects are not very encouraging, the Plan projects a current account deficit of 2.9 per cent of GDP.
This must be financed mainly through Foreign Direct Investment and Foreign Institutional Investment flows, so that reliance on external debt is contained, he said.
“I believe we can attract the financing we need provided our fiscal deficit is seen to be coming under control and the growth momentum is regained.”
> shishir.sinha@thehindu.co.in
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