Approach Paper to twelfth Five Year Plan India 761718a

8/4/2019 Approach Paper to twelfth Five Year Plan India 761718a

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1

An Overview1.1 The Indian ~conoI1lY, on the eve of the TWelfth Plan, is characterised by strong

maCro fundamentals, and a very good pelfonn~lnce over the l;;leventh Plan period, though

clouded by some slowdown in growth in the current yeJr, continuine concern Jbout

inflation and a sudden increase in uncertainty about the global economy. The objective of

the Eleventh Plan was faster and inclusive growth and the initiatives taken in the EleventhPlan period have resulted in substantial progres~ towards both objectives. Inevitably, there

are some weaknessE!>s that need to be addressed and also new challenges that need to be

faced. Some of the c1hallenges are themseli/es the consequence of the economy's transition

to c: higher and more inclusive growth path, H1C structural changes th(1t come with it. and

the expectations it generates. There are external challenges


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8.5 per cent growth in 20~0-11. In5tead, the economy has slowed down comptlred with the

previous year - a phenomenon common to


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1.3 One important feCltLlre of the growth experienced in thp. Eleventh Plan, which is

relevilnt for inclusiveness, is that high rates of economic growth have been more bro;ldly

shared thiln ever before ,Kross the States. While most States hcve shown sustflined high

r


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accelerated in the last two years of the Eleventh Plan period, since several Eleventh Plan

programmes aimed at increasing inclusiveness would have begun to have a fuller impact. 1\

summllry assessment is that the pace of poverty reduction has accel:!rated, though it may

still be short of the targe~, However, too king ahead, India IS welt poised to meet the

Millennium Development Goal targ't of SO percent reduction of poverty between 1990 and

1.015,

1.12 One critical parameter to examine the degree of inclusiveness is to s ee what has

happened to the real farm wages in the rural areas. This is because the largest number ofpoor, prim


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migrCltion. This is not to deny that with better project dc~i~~nimplementation leakages could

be greatly reduced; dl~d the Zl:;sets so cre


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1.17 The country's total population, as rC'cordee j in Censu~ 2011, at 1.21 billion, is slightly

more than what was foreC


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unemployment rate which h~ld inCt~r:lsed from 6_06 percent in 1993-94 to 7_31 percent in

1()99-2000 Clod further to ~L~8perc~nt in 2004-05, C;]fl1e down to 6.60 in 2009-1C.

1 21 Thf' lower Growth in the labour forcE' is f10t expected to continue in future and we

can aSSUrile that much larger numbers of educated youth will be joining the labour force in

j',ucasing numbers during the Xllth Plan and in tl~(' yetlrs beyond. The c!eai- irnplicdCon of

this is that the p


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1.24 Since agriculture is a State subject, the Centre will have to work hand in h;.Uld with

th~ States to bring coherence in policies and strategies. Overall investment in agriculture,

which had dipped to less than 10 per cent of agri-GDP in 2002~03 has been 5ub~tantia"Yraised and tod


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1.28 The Eleventh P!an had articulated the r-eed fm expanding educdtional f


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good quality and some Jre quite inferior. Minimum stcindards will have to be ensured. But

free entry will, in the end, automatically weed out the poor quality institutions. Private

initiatives in higher educition, including viable and innovative PPP-models, will therefore be

actively promoted. The current "not-for-profit" prescription in the education sector should

be fe-examined in a pragmatic manner so as to ensure quality, but witholJt losing focus on

equity.

I

1.33 Inadequate infrastructure was recognised in the Eleventh Plan as a major constraint

on rapid growth. The Plan had, therefore, emphasized the need for a massive expansion in

investment in infrdstructure based on a combin;;ltion of public and private investment the

latter through various form; of public-private-partnerships. Substantial progress has been

made in this respect. The total investment in infr


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I

The Energy Challenge

1.36 The energy needs of rapid growth will pose a major challenge. since tl105(:

requirenlGnts have to be met in an envIronment where domes Lie f::nergy prices


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available in India is fixed, but its dem


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1.45 The protetlon and strenBthening of our natural forests is ()nother critical area. This

is also linked to co~lserv


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1.50 Finally, to combat corruption, it is imperative to ensure speedy prosecution and trial

in corruption cases. The long delays in the judicial process (lre an irnport


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Table 1.3

Structure of Global GDP (in current US $ Trillion)

~- - - -=.= =-= ---r. 2000 T 2011-' 2016 ! 2020 -II 2025-1I Wor~G~ . 32.2.J ~.7 9?5 T '11,0.5_ 14'O~5 IAdvanced Economies 25.'; I -14.4 I 53.3 61.1 I 71 7--,---

Developing & Emerging I 6.5 I24.3

L37,2

I49.4 I 68.8..~ . .~.Q9,3%) E4%). (41.1%LL{44.7%) I (48.9%~

__ . ._ o/Which

Developing Asia - - 1-2,3--1-10~r'17.4 T -;S~6-I-:;O7-- --'.--'-- ._._I .E.]~) 11S.2%lj-.1l9.3%) I 1241%l.-.-J28.9%}~

a/which India ._ ,,_._I.~~~ ~~~) ~3~~) [[S5;~1-L3:~~).1\

'--'--'- ~ 0,3

I1,2 1.7 i 2.5 ~.9Sub-Saharan Africa I

1_,._ .. ._._ . (1,O~~ (1.8%_) (l,9r~. ~.2%). ~2.8.%)I

I West Asia &. North Africa I 0.8 i 2.8 I 3.8 I 5.0 I 7.1 I't- - - --' -- .-L (2.5%U.. (4'O%~_ (/U%)~ .. (4.5%U (5.0%)-1

I L t A ' & C 'bb 1 2.1 If 5.5 7.4 I ~J.7 I 13.3 I

a In rncrlca an ean I I ,1 _'_. . _. _. (6.6%) __ (SpX,) ~.2%) L(8.8%)LJ.~.5%) ,

[FiglJres in parentheses denotE''; sharp. of world GDP]

Sour!;/?: rhe World Eccnon,ic Outlook database of the lntcmalional Monetary Fund, This data up to 2010 in

most ClISCS (up to 2009 cnd earlier In i:I few) is actui:l1 elata. Thereafter the figures up to 201G arc

projections by the IMF. The pl'oJections for India and other countries beyond 201G have been m;Jde

intern;:llly in the DP?P Division of the Planning Commission,

1.54 The important point emerging from these projections is that India has the potential

to become thf! third largest GDP in the world in two decades. However, to realise this

potential we must f!nsure sustained rapid growth. China has grown around 10 per cent per

year in real terms for 30 years and is now expected to slow down. India is currently behind

.Chin;), but the evidence suggests that India has now developed the potentiJI for Sllstaim~d

. rapid growth over the next two decades, provided supportive appropriate policies are put in

place. These policies must promote and support changes in many sectors.' Our

infrastructure, our industrial sophistication, our management of cities, and also our

manag~ment of a whole range of knowledge promoting institutions, partic.ularly theuniversities, will have to change dramatically. Institutional c1lZlnges will be necessary. These.


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1.55 The message emerging from this overview is that the economy has gained instrength in many dimensions and is therefore well placed to achieve faster, sustainable and

more inefusive growth. Having achieved 8.2 percent growth in the Eleventh Pl~m, it IS

reasonable to airo at 9 percent growth for the Twelfth Plan. As pointed out in Chapter II, this

is a feasible target from a macro-economic perspective but it cannot be viewed as an

assured outcome. Global economic conditions are very uncertain and energy prices are

likely to remain high. To achiElve rapid growth, the economy will have to overcome

constraints posed by limited energy supplies, increase in water scarcity, shortages in

infrastructure, problems of land acquisition for industrial development and infrastructure,

and the complex problem of managing the urban transition associated with rapid growth.

Greater efforts also need to be made in agriculture, health and education to ensure

inclusion of the most excluded and sometimes invisible parts of our population.

1.56 These difficulties suggest that a 9 percent growth target for the next five years isambitious. But it is hot impossible, if we have the political will to do what is necessary.

Economic reforms over the last twenty years have resulted in the citizens of India having

high expectations. The Twelfth Plan has to meet tile

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Approach Paper to twelfth Five Year Plan India 761718a