Long-Term Fiscal Policy Proposed For 9th Plan

Any deviations from these assumptions should be temporary or if permanent it will lead to a revision of the plan. This will imply that the annual budget will have to be made within the confines of broad assumptions made in the plan document.

The government first took a similar step by spelling out a long-term fiscal policy in 1986 under the V P Singh regime.

Estimation of government resources depends on the structure of fiscal policy. For instance, over a 5-year period, a basic assumption of an average customs duty rate of 30 per cent may be made. If this is changed, the basic assumptions of the plan will be thrown out of gear and the plan will go awry.

 

The plan depends on the structure of fiscal policies that are assumed and reflects long-term fiscal policy, explained a government source. In other words, this means that the duty will be brought down to a particular level by the end of the plan.

For this, the annual budget has to be set in relation to what is prescribed in the plan.

Yet, current realities also have to be kept in mind and any deviation from the plan due to external shocks should either be temporary or lead to an overall revision of the plan if permanent.

The intention of the commission is to explicitly define objectives and assumptions.

The steering committee on financial resources will have to take a view on this and it will, therefore, have the overall agreement of the finance ministry.

The planning commission is also incorporating a short-run model in the coming plan.

This is expected to be ready by next April-May.

The planning model for the ninth plan is likely to take a radical departure from the existing model. Work has started on introducing this short run economic model consistent with the long run five-year plan model in the ninth plan. The new model would supplement the next plan.

The idea is to ensure that the economy and the broad macro parameters are brought back on a steady growth path