Plan panel to lower inflation target to 4.5%

Even as rising prices continue to dog the Indian economy, the Planning Commission is likely to lower its average annual inflation target to 4.5 per cent for the 12th Five-Year Plan, compared with six per cent for the current Plan.

In an approach paper to the 12th Plan, to be finalised tomorrow, the Commission is likely to stress that a lower inflation target is critical for nine per cent average annual growth. Officials said the Commission had projected a drop in average annual wholesale price index-based inflation, expecting a fall in primary food inflation—from the expected 6.8 per cent in the current plan to four per cent.

Inflation for manufactured goods is targeted at four per cent, against 5.4 per cent in the 11th Plan. Consumer price inflation for industrial workers is targeted at 4.5 per cent, down from the average annual rate of 7.3 per cent for the 11th Plan.

To achieve the targeted growth during the Plan period, the approach paper is also expected to peg manufacturing growth at 9.8 per cent over the next five years, compared with 8.5 per cent in the ongoing plan. The paper is also expected to target average annual agriculture growth at four per cent. This is crucial to achieving the targeted nine per cent growth.

The average annual investment rate during the 12th Plan would be pegged at 38 per cent, up from 37 per cent, according to the mid-term appraisal of the 11th Plan. Of the overall investment rate, the fixed investment rate would be targeted at 34.5 per cent.