Plan bottlenecks

Earlier this month, the Planning Commission released its draft approach paper to the Eleventh Plan, entitled "Towards Faster and More Inclusive Growth". A disclaimer says that the document is yet to be approved by the Commission. Given the contents of the paper and the emphasis on "inclusiveness", however, it is unlikely to provoke any controversy with regard to the general approach. Specific recommendations may, on the other hand, ruffle a few feathers, but these are well-known points of disagreement between different components of the governing coalition and are unlikely to either be resolved quickly or, for that matter, disrupt the process of translating the ideas in this paper into an actual plan. In terms of the realism and potential effectiveness of that plan, however, the question is whether these disagreements are critical to the foundations of the plan. It doesn't really make sense to develop a plan based on patently unrealistic assumptions. The Commission has worked its way round the problem to an extent by laying out three scenarios, reflected in alternative growth rates of 7, 8 and 9 per cent, respectively. It believes that the objective for the plan period (2007-12) should be an average of 8.5 per cent, but is clearly prepared for some disappointment by elaborating on a 7 per cent scenario as well.

Two sets of issues are given prominence in the paper. Both should contribute to a broad political consensus on the approach. One deals with "challenges" and covers such issues as public services, stagnation in agriculture, manufacturing competitiveness, human resources and environmental issues. On some of these, scepticism may be warranted. Despite the incontrovertible evidence of a secular decline in the trend growth rate of agriculture, the paper articulates the need for a "second green revolution", which will raise the growth rate of agricultural GDP from around 2 per cent to 4 per cent during the plan period. Even if this quantum leap were possible, the volume of resources and the extent of institutional changes required simply make this aspiration look like a fantasy in the current political and fiscal environment.

The Commission's contribution to realistic and practical debate on this issue could have been enhanced if it had argued that moving people as rapidly as possible out of agriculture should be the main priority in dealing with growing disparities. To do this, hundreds of millions of jobs need to be created in industrial and service activities, a level which we are far, far away from today. The paper makes a rather muted reference to labour market reforms, which is one issue likely to raise familiar hackles, but abstains from taking the firm position that these are critical to its more optimistic growth scenarios.

The second set of issues deals with a variety of "disparities and divides" "" rural-urban, regional, gender, caste and so on. It makes the very valid point that growth alone is not going to solve these potentially disruptive situations. As many countries have discovered, special and focussed interventions are necessary to offset the several disadvantages that underpin these disparities. Of course, as we have seen recently in the reservation issue, good intentions do not always translate into good interventions. The Commission would do well to initiate discussions on the least costly and most effective ways to deal with these many disparities.