12th Plan snippets

PM Singh told a meeting of the full Planning Commission that it will take “courage and risks” to achieve high growth.
The PM, in a tempered but insistent manner, sought to rally senior ministers and his Congress party by warning that a bleak “policy logjam” scenario will collapse growth to 5%.
“I want everyone to understand this… the people of India deserve better,” he said.
A meeting of the Plan panel to approve the 12th Plan provided a political setting for the PM to argue half-hearted action and poor implementation will doom the economy. And although he did not say so, it is also meant Congress’s fortunes.
The government’s bid to break months of policy paralysis induced by allies and a lack of consensus within Congress on the way forward saw Singh make a strong pitch that good economics is essential for UPA’s political survival.
 In a bid to underline his commitment to putting the government back on track, Singh said, “I will personally review the performance of the infrastructure ministries compared with targets at the end of the first six months.”
Acknowledging the negative impact of downgrades, the PM said a large fiscal deficit has attracted the adverse comment of analysts.
There has been a steady build up the burst of decision making endorsed by senior ministers on Saturday. The PM’s message at the end of the washed out monsoon session promised to accelerate decision-making to boost the economy. Earlier, he called on finance officials to unleash the “animal spirits” of the economy.
Apart from a rapidly narrowing window of opportunity ahead of state polls and next year’s Budget, backing of the Congress leadership has proved crucial. It is understood that some quiet diplomacy between the PMO and the party helped move UPA into a decision-making mode.
Finance minister P Chidambaram put forward a sober assessment of a “difficult fiscal situation” that curbed generosity in allocations. But he backed the PM’s call to boost investment, saying growth has outpaced infrastructure although he questioned some of the Planning Commission’s projections.
In keeping with the progrowth mood, urban development minister Kamal Nath called for the launch of Jawaharlal Nehru Urban Renewal Mission phase II, while HRD minister Kapil Sibal argued for greater private participation in college education. Sibal pointed out that increased school recruitments due to right to education will not be met by the existing capacity.
Deputy planning commission chief Montek Singh Ahluwalia admitted that even the scaled down 8.2% growth target is a stiff ask given that the current year is likely to end up in the 6% - 6.5% range.

Finance minister P Chidambaram cautioned against Planning Commission’s over-optimistic assessment on at least two counts – subsidy reduction and investment – and suggested that a National Investment Board be set up under the PM for faster implementation of infrastructure projects that are held up for want of “truly final” decisions.
While underlining the need to move to a system of cash transfers, the finance minister told the meeting plan panel meeting chaired by PM Manmohan Singh that that subsidies would add up to 2.4% of GDP this year, well above the 1.9% target. In the 12th five year Plan (2012-17), subsidies are proposed to be pruned to 1.2% of GDP in 2016-17. “…and a sharp fall as assumed in the plan may be over-optimistic. Direct cash transfer of subsidies in food, fertilizers and petroleum will help in this reduction,” Chidambaram said.
His assessment of the plan size too was similar and cited the experience of the eleventh plan when the gross budgetary support or the government support to the plan was 4.7% of GDP, which is proposed to be enhanced to 5.2% for 2012-17. The support to the plan consists of the Centre’s support and Internal and Extra Budgetary Resources (IEBR), which should ideally be split equally between the two sources.
“The assumptions of tax to GDP ratio seem to be highly optimistic,” Chidambaram said while adding that public sector enterprises may have to chip with higher IEBR to meet a possible shortfall in the 12th Plan. On the issue of investment, the finance minister cited the experience in coal, power, oil and gas and railways to argue for a new entity at the cabinet level. In all the sectors, the achievements were far short of the targets set in the 11th plan despite a committee on infrastructure headed by the PM, which is serviced by the Planning Commission.
Pointing to current system where no ministry is incharge, Chidambaram said, “…this is the reason why a truly “final” decision does not emerge for many years... The National Investment Board’s authority should extend to proposals/projects where the investment is above a certain threshold, say, Rs 1,000 crore. Once the final decision is taken by the National Investment Board, no other ministry or department or authority should be able to interfere with that decision or delay its implementation.”

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