Plan panel feels even 6-6.5% GDP growth a challenge

It had targeted 8% average annual growth for 12th Five Year Plan in the best-case scenario

Clocking annual average GDP (gross domestic product) growth of even six-6.5 per cent for the 12th Five Year Plan (2012-13 to 2016-17) could be a challenge, given sub-five per cent economic expansion in the first two years of the plan, feels the Planning Commission.

Officials said some members of the Commission did raise the issue of slow growth during a recent meeting with Prime Minister Manmohan Singh. The meeting, held earlier this week, was the last internal meeting of the Commission, chaired by Singh.

The Commission had targeted eight per cent average annual growth for 12th Plan in the best-case scenario. But, it gave two other scenarios of six-6.5 per cent growth if policy decisions are not sufficient and five-5.5 per cent if there is a policy logjam.

GDP growth in the first year of the 12th Plan, 2012-13, was 4.5 per cent, while it is projected to be 4.9 per cent in 2013-14.

The Reserve Bank of India (RBI) pegged GDP growth in 2014-15 to be five-six per cent, while most independent assessments pegged it at the most of five-5.5 per cent.

Even if one assumes growth rate to be six per cent in the current financial year, the next two years will have to deliver average growth rate of 7.3 per cent to yield six per cent growth rate for the entire 12th Plan.

For meeting the average annual growth of eight per cent in the 12th Plan period, the economy needs to expand at over 12 per cent on an average in the last two years of the plan, which is not feasible.

In the 11th Plan (2007-08 to 2012-13), the Commission had cut the annual average growth rate to eight per cent from targeted nine per cent in the mid-term review.

Slow economic growth has also jeopardised investment in infrastructure and is likely to compel the Commission to revise all its investment targets.

"Some members of the Commission are also of the view that Budget outlay targets for the 12th Plan needs to be revised due to low growth when the mid-term appraisal is done sometime around October by the new Commission," the official explained.

The UPA government has allocated Rs 14,60,041 crore as budgetary support in the first three years of the Plan, not enough to meet the targeted Rs 35,68,626 crore for the entire Plan.

Due to low growth, the economy managed to attract investments of Rs 5,34,645 crore cutting across all infrastructure sectors (at 2011-12 prices) in 2012-13 (first year of the plan), lowest since 2010-11. The Commission had set a target of attracting over Rs 56 lakh crore investments (at current price) in the infrastructure sector during the 12th Plan period.