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The 12th plan misses the point

The 12th plan misses the point

Most would remember today is the second day of the new financial year: 2012-13. However, very few would be aware that it is also the second day of India’s 12th Five-Year Plan period.

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It is important not just to understand how it will achieve its objective—faster, sustainable and more inclusive growth—but also as to how disconnected the UPA is with the new reality and the Congress with its own inspiring past.

Inclusiveness has been the mantra of the UPA. But walking the talk has been another thing altogether. While the Congress party’s ideology is, thanks to the nudge from party president Sonia Gandhi, closely defined around inclusiveness, the government has been a reluctant participant; tending always to view fiscal support for such causes as not necessarily the most efficient means of utilizing scarce resources.

As a result, the tenor of public debate has tended to view the solution rather simplistically; growth and inclusiveness have been seen as mutually exclusive. In other words, the economy will have to generate sustained growth, which will generate resources to fund the various poverty alleviation programmes. The fundamental flaw with this argument is that it assumes mutual exclusivity, while it is obvious (the late C.K. Prahalad defined it so succinctly in his bottom of the pyramid argument that saw the poor as a solution and not a problem) that they are mutually reinforcing; worse, poverty alleviation cannot wait—it has already waited for over six decades and now an India with a younger demographic profile is unlikely to be as tolerant.

In fact the answers are all very much there; provided ironically by the Planning Commission (actually its earlier avatar) itself in 1951—when the first Five-Year Plan was executed, a mere four years after the country achieved Independence. An aside, this document was inspired by the late K.N. Raj and was introduced well before the Indian economy was bound down by misguided principles of industrial licensing; a context so similar to the one facing the new Indian economy.

The very first line of the opening chapter of the first Plan document (which is available online on the Planning Commission website) says, “The central objective of planning in India at the present stage is to initiate a process of development which will raise living standards and open out to the people new opportunities for a richer and more varied life."

Recognizing that there were limited resources and daunting challenges—very similar to what India faces today even though it is a $1.8 trillion economy—it lays down a basic ideology: “The elimination of poverty cannot, obviously, be achieved merely by redistributing existing wealth. Nor can a programme aiming only at raising production remove existing inequalities. The two have to be considered together; only a simultaneous advance along both these lines can create the conditions in which the community can put forth its best efforts for promoting development."

Calling for an abandoning of the business-as-usual approach, the First Plan said, “That framework has itself to be remoulded so as to enable it to accommodate progressively those fundamental urges which express themselves in the demands for the right to work, the right to adequate income, the right to education and to a measure of insurance against old age, sickness and other disabilities." (What we have come to define as an entitlement regime today.)

The best solution to the vexing problem of poverty and inequality, the founding fathers rightly observed, is employment, education and social safety nets—and more importantly, like they flagged, this is not mutually exclusive from pushing for growth.

Instead, what we have in the 12th Plan is the politically correct claim to push for an inclusive growth, yet little of substance to back it up. Most glaringly the approach paper (also available on the Planning Commission website) has only a passing reference to employment and livelihood, where again the phenomena of jobless growth synonymous with UPA-I is glossed over. (Ironically, the 11th Plan drafted by UPA-I had an entire chapter on employment and laudable targets.)

The big question then is: how does the UPA propose to tackle the phenomenon of inclusiveness? On the one hand, it is in denial on the issue of employment, and more recently, level of poverty in the country (as Mint columnist Himanshu wrote on 26 March), and on the other, it is reluctant to fund the various entitlement regimes that have been committed to by the Congress party.

To make matters worse, even the rosy macro-economic backdrop that underlies the 12th Plan is rapidly giving way. The just presented Union budget will, with its across-the-board increase in indirect levies, revive inflationary pressures in the short run; it has also through its retrospective actions on tax laws planted the seed of mistrust among foreign investors—who are considered the key for India to bridge its deficit in technology and investible resources.

So are we staring at yet another missed opportunity?

Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com.

Also Read | Anil Padmanabhan’s earlier articles

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