The Hindu : Front Page : Growth rate scaled down

Online edition of India's National Newspaper
Friday, May 20, 2005

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Growth rate scaled down

Special Correspondent

Cabinet approves mid-term appraisal of Tenth Plan

NEW DELHI: The Union Cabinet on Thursday approved the Planning Commission's mid-term appraisal (MTA) of the Tenth Plan for undertaking corrective action to put certain sectors of the economy back on track. This is in keeping with the revised targets set for the remaining two years of the Plan period.

Briefing newspersons here after the Cabinet meeting, Finance Minister P. Chidambaram, said: "The MTA document will now go to the National Development Council. A meeting of the NDC will presumably be called very shortly."

He conceded that the actual gross democratic product (GDP) growth during the first three years of the Plan period was lower than the targeted 8.1 per cent. "In the first year itself (2002-03), the growth was four per cent."

Realistic target

Therefore, apart from scaling down the annual economic growth target from 8.1 per cent to a more realistic 7-8 per cent, the MTA listed 58 strategic policy measures which, along with its "short-term" recommendations, are expected to steer the economy closer to the Eleventh Plan goals. In effect, the economy must grow by 7.5 per cent annually during the current fiscal and in 2006-07 to meet the MTA growth target.

The downward revision in the GDP growth target, official sources said, was necessary. This was because although the growth in the second year was higher at 8.5 per cent and estimated at 6.9 per cent in the last fiscal (2004-05), the average growth for the three years worked out to 6.5 per cent. Thus, to attain the Plan growth of 8.1 per cent for the five-year period, the economy had to grow by over 10 per cent annually in 2005-06 and 2006-07, which was found unrealistic.

The MTA document contains numerous policy changes aimed at filling critical gaps in social and physical infrastructure such as roads, irrigation projects and employment schemes.

On the reforms side, it has a host of recommendations, including regulatory mechanisms for the infrastructure sector. It has suggested speedy divestment in profit-making public sector undertakings while retaining the Centre's holding at a majority 51 per cent.

Stressing the opening up of more sectors such as retailing to foreign direct investment, it said: "Entry of foreign retailers through joint ventures in India will develop backward linkages to sources of supply and thus develop a domestic supply chain capable of meeting international quality standards."

For the aviation sector, it suggested equity participation by foreign airlines in domestic operations so as to get the necessary expertise, while proposing a statutory regulatory body for economic regulation and dispute resolution. It suggested the need for a regulator for the Railways to streamline passenger and freight tariffs.

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