Growth rate lowered, targets revised for the Eleventh Plan

Plan panel projects 6.3% growth for 2009-10

The Planning Commission today lowered the average growth target over the Eleventh Five-Year Plan period (2007-2012) to 7.8 per cent from an earlier projection of 9 per cent during the five years. It has projected 6.3 per cent growth for the current financial year 2009-10, assuming a contraction of 2.5 per cent in agriculture due to the weak monsoons. Foodgrain output is also expected to fall by 18 million tonnes as a result of drought.

The new projection puts the growth rate almost the same as the Tenth Plan period. Prime Minister Manmohan Singh, however, was optimistic about the economic outlook. “We have been through a difficult year because of the global economic downturn, which is only now coming to an end, with slow return to normalcy in the months ahead,” the prime minister said while addressing the meeting of the full Planning Commission.

The economy had grown by 6.1 per cent in the first quarter of the current fiscal, which is broadly in line with expectations. However, weak monsoons are expected to hamper growth in the coming months. “Growth in the coming two quarters will be lower than that of the first quarter (April to June). However, after that things will pick up in the fourth quarter,” Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters after the meeting.

Farm sector growth, which is expected to suffer in the current fiscal, is projected to bounce back to 6 per cent in 2010-11. The Plan panel report states that objectives of growth and food security cannot be achieved unless the farm sector achieves an average of 4 per cent growth during the Eleventh Plan period.

Rise in the wholesale price inflation (WPI) is a cause of worry and the panel report said that inflation might easily exceed the RBI projection of 5 per cent by March 2010. “It is evident that if we project underlying movement in WPI in the current year, we will end the fiscal year with inflation above the comfort zone of 4-5 per cent,” the panel said in a background note.

The panel report also expressed concern that drought would consume fiscal resources in an unanticipated fashion due to increased demand for reliefs from states. This is expected to lead to a gap of Rs 1.6 lakh crore of resources to finance the Plan.