Prime Minister’s Statement at the Full Planning Commission Meeting
I welcome you to this meeting to consider the draft Twelfth Five Year Plan.
The full text of my remarks is being distributed separately, so I will be brief.
We ended the Eleventh Plan with some notable achievements. The economy grew at an average annual rate of 7.9 percent. This is commendable for a period which saw two global crises – one in 2008 and another in 2011.
Poverty declined twice as fast between 2004-05 and 2009-10 than it did in the previous ten years.
Agriculture grew at 3.3 percent per year in the Eleventh Plan, much faster than the 2.4 percent observed in the Tenth Plan.
These are positive features. However, we must also recognise that the Twelfth Plan is starting in a year when the world economy is experiencing difficulties and our economy has also slowed down.
These short term problems present a challenge, but they should not lead to undue pessimism about our medium term prospects.
The economy has gained many strengths. Our immediate priority must be to orchestrate a rebound in the second half of the current year. We should then try to accelerate growth to reach around 9 percent by the end of the Plan period.
This will yield a target growth rate of around 8.2 percent over the Twelfth Plan. This is lower than the 9 percent originally projected, but some downward revision is realistic given the state of the world.
As the Plan document points out, our objective is not just growth of GDP, but growth that is inclusive and also sustainable. The SC/STs, OBCs, and the minorities must all participate fully in the growth process. The Plan has many elements designed to ensure this.
The most important area for immediate action is to speed up the pace of implementation of infrastructure projects. This is critical for removing supply bottlenecks which constrain growth in other sectors. It will also boost investor sentiment to raise the overall rate of investment.
The infrastructure ministries must set ambitious goals for their sectors over the Twelfth Plan. We need close to a trillion dollars of investment in infrastructure and we have to work hard to achieve this.
I will personally review the performance of the infrastructure Ministries compared with targets at the end of the first six months. I hope that out of this review we can define an agenda for improved implementation.
Turning to the longer term policy agenda, the Plan can be seen as consisting of three broad components.
One is the set of Government programmes aimed at achieving specific sectoral objectives. The Plan contains ambitious programmes in health, education, water resource management, infrastructure development, and a number of programmes aimed at inclusiveness, most notably the MGNREGA, the PMGSY, the IWDP and the National Rural Livelihoods Mission.
Considerable resources are being allocated for these programmes. We need to pay much greater attention to making sure that these programmes are also delivering results on the ground, especially for the SCs/STs and the weaker sections. Some of the changes in the Centrally Sponsored Schemes suggested by the Chaturvedi Committee will help to improve effectiveness.
The second component relates to macro economic balance. To achieve the target of 8.2 percent growth we need to revive investment in the economy. The investment environment is therefore critical.
Our fiscal deficit is too high and is attracting adverse comment from analysts. It must be brought down over the medium term to release domestic resources for productive deployment in the economy.
Because export prospects are weak, the Plan projects a current account deficit of 2.9 per cent of GDP. This must be financed mainly through FDI and FII flows, so that reliance on external debt is limited. I believe we can attract the financing we need provided our fiscal deficit is seen to be coming under control and the growth momentum is regained.
The third key component of the Plan is the set of policies which can improve performance in individual sectors. Let me mention a few key sector priorities.
Health, education, and skill development are key sectors which enhance human capability and can contribute hugely to the objective of inclusive growth. They have been given high priority in the Twelfth Plan.
Agricultural growth must be accelerated to about 4 percent
Manufacturing must grow much faster than it has, to generate the employment growth we need.
Infrastructure development is vital. It needs a combination of public investment and PPP.
Energy is a difficult area where our policy needs a comprehensive review. We are energy deficient and import dependence is increasing. It is vital for our energy security that we increase domestic production and also increase energy efficiency. Rational energy pricing is therefore critical. Our energy prices are out of line with world prices. The recent increase in diesel prices is an important step in the right direction.
Water is another area where problems of scarcity and the challenges of effective resource management are likely to expand in the years ahead.
Urbanisation is a new challenge which we must address.
The central message of the Plan is that we can achieve our objective provided we put in place policies that will take care of our weaknesses. The Plan for the first time introduces alternative scenarios.
Scenario one is called “Strong Inclusive growth”. It presents what is possible if the policy actions outlined in the Plan are substantially implemented. One can expect a number of virtuous cycles to start operating, leading to positive results on both growth and inclusion. This is the scenario we should aim for.
Scenario two is called “insufficient action”. It describes a state of partial action with weak implementation. The virtuous cycles that reinforce growth in Scenario I, will not kick in, and growth can easily slow down to 6 to 6.5 percent. Inclusiveness will also suffer. This is where we will end up if we make only half-hearted efforts and slip in implementation. It is my sincere hope that we do not do so.
Scenario three is called “policy logjam”. It reflects a situation where for one reason or another, most of the policies needed to achieve Scenario 1 are not taken. If this continues for any length of time, vicious cycles begin to set in and growth could easily collapse to about 5 percent per year, with very poor outcomes on inclusion. I urge everyone interested in the country’s future to understand fully the implications of this scenario. They will quickly come to an agreement that the people of India deserve better than this.
I believe we can make Scenario I possible. It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less.
It seems, that the Indian taxpayer, feels he owns the coal mined, because of the worth of the coal in currency. The nation has a value, because of the taxpayer. The higher the tax payed, the more seems to be the stake of the taxpayer, according to him/her. Look at how the tax payer looks at the bad roads he uses his car/bike on. He doesn't realise, that we the people, are building the roads, not the government. If, for instance, the road is not built with the total money allotted, the government gives the total money allotted, and the person in charge of the road, being repaired or built, has to give the full consideration of the amount allotted to him, and also pay taxes on the full amount he shows he expended. Who looses? The person who feels that he owns the road, because he paid taxes, and the contractor is one among these persons. The Indian truly feels he owns India, and India encourages the exploitation of the citizens, including him, by citizens, also including the individual exploited.
Our Pm’s intentions are fine. But bitter truth is that if all the recent decisions taken by the UPA government are not going to be followed by reforms, then they would be of little impact. Citizens want an efficient administration in all departments. Unfortunately they are deprived of this basic right. Election law, judicial and police and financial administration reforms are urgently required and there cannot be any more delay to implement these. But my query is: Would there be a review of the discretionary powers of the government officials at all levels and of ministers in particular? Without such a review and without putting in place an effective system of checks and balances, nothing much will be achieved. It is common knowledge that discretionary powers are widely misused by ministers who are willingly assisted by the bureaucracy. All of them are usually seen joining hands to rob tax payers’ money.
Let us now find out the reaction of political parties to two major decisions. It is futile to expect that in this world of opportunistic politics any party would give any serious thought to implications of keeping prices of petroleum products de-linked from price of imported crude. Instead of opposing every price increase, political parties like BJP, SP, DMK, AIADMK, and in particular Ms Mamata Banerjee should demand a review of taxation policy in respect of all petroleum products. Central government and State governments have both to do this exercise of review on a top priority basis.
A taxation policy for petroleum products based on study of inflationary impact of increase in prices of such products, rising crude price in international market and demands of revenue of both Central and State governments is need of the day.
In such an exercise, State governments cannot be allowed to get away by saying that they would quietly collect more sales tax or VAT with every price increase of petroleum products by Oil companies even as the Centre gets blamed for the increase.
Decision to increase duty on diesel run cars and utility vehicles has again been deferred which means giving subsidy to those who can afford to pay more.
As regards the FDI in multi-brand retail, question is whether government wants to protect interests of all - consumers and farmers who produce food grains, milk, and vegetables or whether it is interested in protecting interests of only the middlemen and traders? If organized retail needs and capital and organized retail can further interests of all sections and not just one (traders) then organized retail is welcome. If instead of foreign capital our own companies are allowed to market farmers’ produce without interference from Agriculture Produce Marketing Committees, government can revoke decision of allowing FDI in retail.
What he forgot to tell about.
"Surprisingly, the eleventh plan period saw tremendous increase in scams involving the ruling party and the amount involved could have solved all financial problems without additional taxation. Like anybody dipping into honey pot our and alliance party members gained astounding wealth apart frm my own cabinet colleagues. I was trying to muster courage to bring back the money stashed away in foreign shores but the very image of our party president sent in me shivers. The gap between generation and load on electricity is due to indiscriminate increase in the demand. Cost of living has plummetted and the BPL is fixed at RS.20/- per day which achievement is unique in the world. There is tremendous appreciation from the credit rating agencies about our tackling the economy in the best way when the world economy is on the sink. People must be prepared to sacrifice for the development of the nation. Our finance ministry is busy in cooking up figures for the next five year plan and the taxation is aimed at 75% increse in direct and indirect taxation. The state governments must learn to obey the cenre if they want finanacial assistance."
Not much can be said without being offensive to Dr.MMS.Besides he is preaching to converts. But one must congratulate him for all the right moves at the wrong times. We have friends and GOP men already giving credit to the Great Reformer Sonia.So be it. One stupid newspaper goes so far as to suggest that this slew of reforms is to offset the adverse effects of CoalGate and other scams.It might well be true. If you believe Sri SK Shinde, there is no need to fret as the janata will forget Coal Gate just as it has Bofors. A seasoned GOP man speaking there. So carry on with FDIs galore!
The Indian economy is in unsafe hands.
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