New Delhi: The Planning Commission will propose to lower the average growth target for the 12th Plan period (2012-17) to 8% from 8.2% earlier at the National Development Council (NDC) meeting, which will discuss and clear the Plan document at its 57th meeting on Thursday.
The NDC is the apex decision-making authority on development and is headed by Prime Minister Manmohan Singh and attended by all Cabinet ministers and state chief ministers.
“Growth has been less than what we thought four months ago,” deputy chairman of Planning Commission Montek Singh Ahluwalia said on Wednesday, citing lowered expectations for the current fiscal in India and other economies.
The finance ministry has lowered the current fiscal year’s growth projection from 7.35%-7.85% announced at the time of the Budget to 5.7-5.9%.
Ahluwalia’s recession expectations in Europe, flat growth in Japan, less than 2% growth in the US and the lowered world growth forecast for next year were also factors in the Plan Panel’s move to lower the growth target.
The United Nations cut its global growth projection for 2013 from 2.7% to 2.4% last Tuesday. The lowering of the growth target wouldn’t be accompanied by a reduction in the financial resources available, Ahluwalia said.
“Whether the growth is 8.2% or 8%, we are staying with broad parameters on the resources side,” he said. “As far as the sectoral composition is concerned, none of that has been changed.”
The 12th Plan draft—Faster, more inclusive and sustainable growth—currently targets an average growth rate of 8.2% and sets 24 other targets. These include raising the mean years of schooling to seven, generating 50 million non-farm jobs and providing access to banking for 90% of Indian households. The draft document highlights the role of states in implementing the plan and urges them to set state-specific targets for similar parameters.
Health and education are highlighted as priorities for the 12th Plan period, which started in April 2012.
For the first time, the Plan draft talks about lower-than-targeted growth scenarios—“insufficient policy action” could leave average growth at 6-6.5%, while a “policy logjam” could see this even lower at 5-5.5%.
The draft was cleared by the full Planning Commission headed by the Prime Minister in September and by the Cabinet in October. “This reduction is a recognition that potential growth rate has come down because of supply-side constraints such as the lower household saving rate,which is not so easy to lift up,” said D.K. Srivastava, chief policy advisor at Ernst and Young.
“It does not matter if they lower the growth targets as long as they focus on the pressing concerns such as health and employment, which I don’t think this plan is adequately addressing,” said Jayati Ghosh, professor at the Centre for Economics Studies and Planning at Jawaharlal Nehru University.
Chief ministers of 28 states and five union territories attended the 54th NDC, which cleared the 11th Plan.
Concerns expressed by chief ministers and state representatives at that time included state-specific modifications in centrally sponsored schemes, making coal and gas available at reasonable prices for power production, speeding up clearances for irrigation and other projects, and reducing regional inequalities.