Much ink has been spilled on the realism—or unrealism for that matter—of the growth targets for the 12th Five-Year Plan period. Even as the process of finalizing the plan approaches closure, the sound and fury over these numbers continues unabated. These concerns are academic. The real worries lie elsewhere: the processes and policy clarity that go into achieving robust growth.
Seen from this vantage, Prime Minister Manmohan Singh made two interesting observations in his opening remarks at the 57th meeting of the National Development Council (NDC) on Thursday. He re-emphasized the need for high growth to generate the much needed revenue for spending on social development programmes. He also highlighted the fact that strong growth promotes inclusiveness on its own by providing access to income and employment opportunities.
This is in marked contrast to the strategy his government followed over the previous seven years. Inclusiveness was sought, and delivered, at the cost of growth. The massive spending of these years is the root cause for the derailment of growth witnessed in the past two years. The policy imbroglio today is a direct result of this deviation from pro-growth policies.
The question, therefore, is not one of the soundness of the targets outlined by the Planning Commission. In any case, it has outlined three scenarios with different projections. The deputy chairman of the commission, Montek Singh Ahluwalia, has candidly admitted the difficulties in attaining 8% growth. This newspaper has on an earlier occasion pointed out how hard it will be to maintain 8% growth over the entire five-year period. In 2012-13, growth is unlikely to cross the 5.8% mark. Clearly, India will have to grow at Chinese speed over the next three-four years to meet this target.
It is happy to note that key policymakers are realizing the dynamics of damage. There are two other points worth outlining. First, that very often, political goals of the government in power clash with economic requirements of high growth. Two, shortcuts to reduce or eliminate inequalities directly by redistributing money or resources end up reducing growth.
The hard task over the 12th Plan period will be how to manage these contradictory goals. It is not clear if the Indian political system has gained the necessary maturity to keep its short-term—electoral success—and long-term—political stability across the country that can only be ensured by strong growth—interests distinct. Both ought to be managed separately. If that can be done, high growth will follow on its own.
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