Budget outlays for 12th Plan might be lowered

Revisiting targets must as investment in infrastructure, a critical area of growth, has been much slower

The Planning Commission wants the next government to lower the Budget outlays for all sectors in the remaining period of the 12th five-year Plan (2012-13 to 2016-17) than pegged in the Plan document because of slower-than-expected economic growth in the first two years.

In an internal meeting last week, the Commission also decided to instruct all its members and officers to revise the physical and financial targets for the 12th Plan in their recommendations for mid-term appraisal of the Plan to be done by the next Commission, said a senior official.

Although the final appraisal will be done by the next Planning Commission, the incumbent is preparing a blueprint on achievements, failures and road ahead for the next Commission.

In the first three-years of the Plan period, the United Progressive Alliance  government has allocated Rs 14,60,041 crore as Plan expenditure, taking into consideration provisions in the Budget Estimate of 2013-14 as well. The 12th Plan document has pegged the Plan outlay for the entire five years at Rs 35,68,626 crore, which will have to be revised downwards now.

Similarly, as against the Commission’s target of attracting over Rs 56 lakh crore investments (at current prices) in the infrastructure sector during the 12th five-year Plan period, investment in FY13 cutting across all sectors have been to the tune of Rs 5,34,645 crore (at 2011-12 prices), the lowest since 2010-11.

“The mid-term appraisal offers a window to revisit all the targets and given that economic growth in the first two-years of the Plan period has been below the estimated average annual growth of eight per cent, we want the new government to lower budgetary provisions and also revisit the physical and financial targets,” said the official. Economic growth stood at an average of 4.7 per cent in the first two years of the Plan, taking into consideration advance estimates for the current financial year. The advance estimates pegged the growth at 4.9 per cent. The economy expanded 4.5 per cent in 2012-13, the first year of the Plan.

Some officials said members in the Commission were also critical of the three growth scenarios mentioned in the Plan document as barring the best case scenario of eight per cent average annual growth, not much has been elaborated on the consequences of the other two.  In its 12th Plan document, the Commission had envisaged three growth scenarios. The first one pegged average annual growth rate of eight per cent in the 12th Plan, provided the government takes strong policy action on the fiscal front and address the government issues related to delivery.

Growth could slip to 6-6.5 per cent, if insufficient policy measures are taken and the government is not able to solve the conflict between subsidies and financial stability.

In the third scenario, it said that growth might slip to just 5-5.5 per cent average if there is logjam in policies and reform measures don’t move at the pace that they should have been. The first two years have, in fact, delivered average growth rate of lower than even the worst-case scenario.

“The first scenario has been clearly explained but the definition of the remaining two scenarios are not clear except that it broadly amounts to not following the recommendations made in the Plan,” said the official.

The official added that revisiting physical and financial targets in the next few years of the Plan period is imperative because investment in infrastructure, one of the critical areas of growth, has been much slower.