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10th Plan okayed; PM for tough reforms for 8% growth

Shahid K Abbas in New Delhi

The full Planning Commission on Saturday unanimously approved the Tenth Five-Year Plan document with Prime Minister Atal Bihar Vajpayee unveiling a tough six-point reform agenda to push the annual growth from a 'stagnant' 5.5 per cent to a high 8 per cent.

Prime Minister Atal Bihari VajpayeeThe three-volume document proposed to carry forward key reforms, particularly in agriculture, to generate 50 million jobs in the next five years, besides raising foreign direct investment flow to $7.5 billion annually and mop up Rs 78,000 crore (Rs 780 billion) through divestment notwithstanding stiff resistance from within the National Democratic Alliance to privatisation.

The Plan includes a tough six-point reform agenda, including divestment, tax and labour reforms and fiscal prudence during the Tenth Five-Year Plan.

Giving details of the plan document, Planning Commission Deputy Chairman K C Pant told reporters that the public sector outlay has been pegged at Rs 15,92,30 crore (Rs 1,592.30 billion), including Rs 9,21,291 crore (Rs 9,212.91 billion) central plan outlay.

The outlay for the states would be Rs 6,71,009 crore (Rs 6,710.09 billion) with a gross budgetary support of Rs 706,000 crore (Rs 7,060 billion).

Though the government was confident of achieving the ambitious growth target, economic analysts were apprehensive that the average tenth plan growth could not surpass 7 per cent considering various projections of 5 to 5.5 per cent growth in the first two years of the Plan period (2002-2007).

The draft Plan also aims to doubles per capita income in ten years, while setting key targets including reduction in poverty ratio from 26 per cent to 21 per cent, decadal population growth to reduce from 21.3 per cent in 1991-2001 to16.2 per cent in 2001-11 and growth in gainful employment to at least keep pace with addition to the labour force.

The Tenth Plan has also set a target to provide schooling to all children by 2003 and all children to complete 5 years of schooling by 2007, reduce gender gaps in literacy and wage rates by 50 per cent, increase literacy rate from 65 per cent in 1999-2000 to 75 per cent in 2007, provide potable drinking water in all villages, reduce infant mortality rate fro 72 in 1999-2000 to 45 in 2007, reduce maternal mortality ratio from 4 in 1999-2000 to 2 in 2007, increase forest or tree cover from 19 per cent in 1999-2000 to 25 per cent in 2007 and cleaning of major polluted river stretches.

Seeking cooperation of all political parties and state governments to prepare the nation for big challenges ahead, Vajpayee told the full Planning Commission meeting in New Delhi that difficult decisions simply could not be avoided to actively pursue divestment of PSUs, labour reform, remove restrictions on agriculture marketing.

"Tax reforms will have to be accelerated. We must quickly move towards integrated central and state value-added taxation system," he said, adding that fiscal prudence with all its attendant measures, will have to be pursued vigorously both by the Centre and states.

The full commission meeting was convened to approve the Tenth Plan document.

Allaying fears about the role of foreign direct investment, Vajpayee said: "Let there be no worry in any quarter that we would follow such an FDI policy as would weaken Indian industry or hurt our national interests."

"This will never happen," he said, adding that the draft plan makes it very clear bulk of higher savings and investments for 8 per cent growth would have to come from domestic sources. FDI would only supplement domestic resources.

Detailing the six-point reform agenda, Vajpayee said there could be no delay in "removal of the bottlenecks in our energy-transport-and-water infrastructure."

"I am deeply worried by the very slow pace of power sector reforms," he said, adding that "one of the principal reasons why our current growth rate is stagnating at around 5.5 per cent is due to severe infrastrcutural constraints."

"We have to squeeze maximum efficiently and productivity from every rupee of investment already made. We must utilise excess capacity effectively, upgrade existing capital assets, raise the knowledge and skill level of our workforce in all sectors, reduce public sector dis-savings, and remove all non-financial barriers to speedier development."

Stressing that economic reforms could not yield optimal results without concomitant governance reforms, Vajpayee said these had to be in the administrative system, judiciary and internal security system.

"In the economic sphere, the primary aim of these governance reforms will have to be greater encouragement to private entrepreneurship, with the government strengthening its role in the formulation and implementation of policies, legislation, regulation, and facilitation and exiting from direct participation in production and distribution."

Noting that there was scepticism in some quarters about climbing up from 5.5 per cent growth to 8 per cent in the Tenth Plan, Vajpayee said: "We have no choice." "We cannot afford to set a lower growth target if we want to move towards our cherished dream of building an India free of poverty, illiteracy and homelessness, free of regional, social and gender disparities... and capable of facing all possible challenges to national security," he said.

Vajpayee said an 8 per cent gross domestic product growth was also essential in view of the fears in certain quarters that the rate of unemployment could rise further going by the present rate of growth of the labour force.

"The issue before us is not whether we can achieve a significantly higher growth rate, rather, it is whether can we afford not to," he said.

He said the draft Tenth Plan addresses the concerns on the content and direction of India's development.

Accordingly, it lays much emphasis on speeding up the development of agriculture, agro-industries, small-scale and cottage industries and the whole array of activities in the informal sector, Vajpayee said.

"We have to squeeze maximum efficiency and productivity on every rupee of investment already made. Specifically we must utilise excess capacity effectively, upgrade existing capital assets... reduce public sector dis-savings and remove all non-financial barriers to speedier development," he said.

In this context, it would be pertinent to effect labour reforms, remove legal and other restrictions in the evolution of the national market, particularly, for agriculture and actively pursue divestment of our PSUs.

Expressing concern over the 'very slow' pace of power sector reforms, he said the removal of bottlenecks in the energy, transport and water infrastructure were tasks that could no longer be delayed.

"One of the principal reasons why our current growth rate is stagnating at around 5.5 per cent is due to severe infrastructural constraints, which can only be eased by accelerating reforms," Vajpayee said.

Vajpayee said India's experience of over 10 years of economic reforms had clearly shown "that these cannot yield optimal results without concomitant governance reforms - reforms in our administrative system, judiciary and internal security system."

He said in the economic sphere, primary aim of the governance reforms will have to be greater encouragement to private entrepreneurship, with government strengthening its role in formulation and implementation of policies, legislation, regulation and facilitation and exiting from direct participation in production and distribution.

Urging state governments to extend their fullest and most enthusiastic cooperation to the Centre, Vajpayee said the ambitious targets could be achieved "only when we are able to make development a people's movement and the Tenth Plan, a people's plan."

Vajpayee said cooperation of all political parties, social organisations, voluntary agencies and media was required in this important endeavour.

Highlights of 10th Plan

  • Annual 8 per cent GDP growth during 2002-07
  • Annual FDI flows of 7.5 billion US dollars
  • Divestment target of Rs 78,000 crore (Rs 780 billion) in five years
  • 50 million jobs in five years
  • Public sector outlay at Rs 15,92,300 crore (Rs 1,592.30 billion)
  • Central plan outlay at Rs 9,21,291 crore (Rs 9,212.91 billion)
  • States and UT outlay at Rs 6,71,009 crore (Rs 6,710.09 billion)
  • Central Budgetary support at Rs 7,06,000 crore (Rs 7,060 billion)
  • Incremental capital-output ratio at 3.6 per cent
  • Reduction in poverty ratio to 21 per cent from 26 per cent by 2007
  • Literacy rate to increase to 75 per cent by 2007
  • Infant Mortality rate to be reduced to 45 in 2007
  • Maternal mortality ratio to be halved to 2 in 2007
  • Increase in forest/tree cover to 25 per cent in 2007
  • Potable drinking water in all villages
  • Cleaning of major polluted river stretches
  • Decadal population growth to reduce from 21.3 per cent in 1991-2001 to 16.2 per cent in 2001-11
  • All children in school by 2003 and all children to complete five-year schooling by 2007
  • Investment rate of 28.4 per cent of GDP
  • Domestic savings rate of 26.8 per cent of GDP
  • External savings of 1.6 per cent
  • Reduction in Government dis-savings to -0.5 per cent
  • Increase in tax-GDP ratio to 10.3 per cent by 2007
  • Widening of tax base and improving collections
  • Removing tax incentives and concessions
  • Introducing an integrated central and state VAT
  • Reduction of central government staff
  • Reduction in subsidies and administrative overheads
  • Eliminating inter-state barriers to trade and commerce
  • Amendment of Essential Commodities Act
  • Amending Agriculture Produce Marketing Act
  • Liberalising agri-trading, agri-industry and exports
  • Encouraging contract farming
  • Futures trading in all commodities
  • Restriction on financing of stocking and trading to go
  • Repeal of SICA
  • Strengthening of bankruptcy and foreclosure laws
  • Labour reforms
  • Policy reforms for Small scale including dereservation
  • Early enactment of Electricity Bill
  • Coal Nationalisation Amendment Bill
  • Communication Convergence Bill
  • Decontrol of private road transport passenger services

Additional inputs: PTI & UNI

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