The draft document of the Eleventh Five-Year Plan (2007-12) was approved by the full Planning Commission, chaired by the Prime Minister, last week. It now goes to the Union Cabinet for approval, prior to final endorsement by the National Development Council later in the year. In terms of both the scale of resource commitments and their allocation across sectors, the Plan represents a significant re-orientation from its immediate predecessor. Total expenditure out of public resources is pegged at Rs 14.2 lakh crore, some 75 per cent higher than the Rs 8 lakh crore spent during the Tenth Plan. Even after adjusting for inflation, this represents a substantial increase. The aggregate of central and state plans is estimated to rise to about 13.5 per cent of GDP, compared with 9.4 per cent in the Tenth Plan. More importantly, the share of resources going to priority sectors, of which agriculture, education and health care and infrastructure are major components, will rise to almost 75 per cent of the total expenditure, compared with 55 per cent during the last Plan. Education receives the biggest thrust, with its share of resources rising from 7.7 per cent in the Tenth Plan to 19.4 per cent in the Eleventh. Agriculture and rural development see their combined share increasing from about 17.8 per cent during the Tenth Plan to over 23 per cent during the Eleventh. While this is expected to contribute to raising the average rate of growth of agricultural GDP to 4 per cent during the Plan period, overall GDP is expected to grow by an annual rate of between 9 and 10 per cent. This will put government finances in a relatively comfortable position, providing assurance about the availability of resources. | |
| Importantly, the Plan does not restrict itself to public resources. Montek Ahluwalia, deputy chairman of the Planning Commission, has emphasised the importance of liberalising foreign direct investment norms for critical sectors like insurance, which will help to bring resources into the country, and of creating a hospitable environment for public-private partnerships in infrastructure and other sectors and, significantly, of benchmarking retail prices of petroleum products to the international price of crude oil to contain the burden of subsidies on government finances. The focus on inclusiveness has been institutionalised by mandating the regular scrutiny of a number of socio-economic indicators by both state and central governments. |
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| The Commission has done well to re-prioritise public expenditure in response to glaring inadequacies in the sectors mentioned above and some more. But, to paraphrase Bill Clinton's famous campaign slogan, "It's the implementation, stupid!" A couple of years ago, there was the infamous "leaky pipes" spat between the Planning Commission and the ministry of finance, which argued that there wasn't much point in putting money into programmes that were being implemented with gross inefficiency. That inefficiency is very much in evidence even today, with many of the ministries whose allocations would increase significantly under the new Plan demonstrating little capacity to use the resources productively. To ensure that the Plan priorities are translated into action, the government needs to strengthen the organisational capabilities of several ministries. However, experience suggests that this process will fall victim to political compulsions, confining the Plan to a statement of good intentions that accompany the increased spending. This is ironic because, for the first time in six decades, the economy's performance is such that the government should actually have the resources to implement its Plan. |
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