We last met in June 2005 to discuss the Mid Term Appraisal of the 10th FiveYear Plan. The mood of that meeting was one of cautious optimism about India’sgrowth prospects, tempered with concern about groups that seemed to be excludedfrom the benefits of growth. Our optimism on growth prospects has been more thanvindicated by the performance of our economy since that meeting. The concernsthat were expressed in the Mid Term Appraisal, and echoed by many of you in yourinterventions, about the insufficient spread of the benefits of growth have ledto many corrective steps which are beginning to have an impact and will showeven better results in the years that lie ahead. While endorsing the Mid TermAppraisal, we directed the Planning Commission to formulate the Approach Paperto the 11th Five Year Plan building on the potentialities and inherent strengthsof our economy, while also addressing the areas of concern.
The Approach Paper is now before us. Unlike in the past, it has beenformulated after extensive discussion with the Chief Ministers in regionalmeetings convened by the Planning Commission. I know that this process ofconsultation has enriched the document and I sincerely hope you will agree thatit has created a greater sense of ownership and partnership among all of us.
The title of the Approach Paper "Towards Faster and More InclusiveGrowth" reflects the basic challenge facing us in the Eleventh Plan. We needfaster growth because, at our level of incomes, there can be no doubt that wemust expand the production base of the economy if we want to provide broad-basedimprovement in the material conditions of living of our population, and if weare to meet effectively the rising aspirations of our youth.
But growth alone is not enough if it does not produce a flow of benefits thatis sufficiently wide-spread. We, therefore, need a growth process that is muchmore inclusive, a growth process that raises incomes of the poor to bring abouta much faster reduction in poverty, a growth process which generates expansionin good quality employment, and which also ensures access to essential servicessuch as health and education for all sections of the community.
To emphasise the multi-dimensional nature of our objectives, the ApproachPaper specifies not only a growth target but also a number of quantifiable andmonitorable socio-economic targets relating to employment generation, schooldrop out rates, infant mortality rates, maternal mortality rates and otherimportant indicators. These national level targets will be disaggregated intostate specific targets in the 11th Five Year Plan to permit more effectivemonitoring at the state government level and to create awareness of the manydimensions in which we expect and we must make progress. The Planning Commissionhas already made a first attempt at defining targets for individual statesconsistent with the national targets and these have been conveyed to the states.I would request Chief Ministers to give their personal attention to finalisingthese state-specific targets and to incorporate them in the State Five YearPlan.
The GDP growth target proposed in the Approach Paper involves acceleratinggrowth from 8% likely to be achieved in the base year to 10% in the final yearof the Plan, yielding an average rate of growth of 9% in the 11th Plan period asa whole. This is ambitious no doubt but feasible. Growth has averaged 8 percentover the past three years and is likely to be at this level if not more againthis year. This means the last four years of the Tenth Plan will record anaverage growth rate of 8% or more. This has never happened in the past. If weachieve the target of 9% growth in the 11th Five Year Plan, India will be firmlyplaced in the front ranks of fast growing developing countries. Most observersbelieve the we are today at a historic cusp when this transition is possible.There are many positive features of the economy which encourage optimism. Butthis optimism has to be sustained with competent, effective policies andprogrammes. The saving rate of the economy has increased to 29% of GDP in2004-05 and the investment rate to 31% of GDP.
The world has a very favourable assessment of our prospects and this isreflected in the fact that foreign direct investment flows are buoyant. India isbecoming an increasingly attractive investment destination. Indian companieshave responded to reforms by developing a new-found confidence. They are meetingcompetition at home, and also venturing confidently abroad and rapidlyincreasing our global footprint. Our fiscal position has been continuouslyimproving. Inflation has presented a problem recently, but we are determined tocontrol it to within the 5% level indicated in the Approach Paper. These are allvery positive developments but we cannot take an outcome of high growth forgranted. There are several major constraints we have to overcome many of whichrequire difficult policy changes both by the central government and stategovernments. The Approach Paper outlines in broad terms these constraints andwhat we need to do to achieve faster growth while also ensuring greaterinclusiveness. I look forward to hearing your reactions to various elements ofthe proposed strategy. At this stage, I will only comment briefly on some keyissues which need to be addressed.
The 11th Plan must give top priority to redressing the weaknesses in theagricultural sector. Growth in the agricultural sector has been less than 2% perannum since the middle of the 1990s. With about half of our rural populationstill dependent on agriculture for most of their income, we cannot expectinclusive growth if we do not revitalise our agriculture. It is important torecognise that the problem is not just distributional, with the better offfarmers doing well while the small farmers and the landless face hardships.Though the weaker groups clearly face more difficulties and need specialattention, agriculture as a whole is in the midst of a crisis. We shouldtherefore focus on achieving higher productivity and incomes for all farmers inboth crop and non-crop agriculture.
The Approach Paper calls for corrective action in several dimensions ofagriculture. Water is a critical input for agriculture and we need to re?examineall aspects of our water economy. We are not spending enough on irrigation andwhat we are is not being utilised efficiently. Projects take far too long tocomplete and resources are spread far too thinly. Existing irrigation systemsare also not being maintained well. I would urge Chief Ministers to give highpriority to ensuring efficient use of resources in the vital area of watermanagement.
In addition to investment in irrigation, we must take steps to conserve waterand promote artificial recharge in rainfed areas. This calls for both resourcesand knowledge inputs. The central government is in the process of establishing aNational Rainfed Area Authority as a professional high powered body charged withthe responsibility of ensuring technically efficient design of watersheddevelopment.
Other issues on the agriculture agenda identified in the Approach Paperrelate to the need for focussed research in specific crops, farming systems anddryland farming practices; improved extension work to close the knowledgedeficit affecting farm productivity; better seeds and inputs; enhancedfacilities for credit, including revamping the cooperative credit system;initiatives to support agricultural diversification with effective marketingsolutions; and completing the unfinished agenda of land reforms. I look forwardto hear from chief ministers on these vital issues. The NDC Committee under theMinistry of Agriculture is expected to make specific recommendations by earlynext year. These will be incorporated in the Eleventh Plan.
Employment generation is another priority area of concern. The growth oftotal employment in recent years has accelerated compared to the second half ofthe 1990s but this growth has been almost entirely in the non-agriculturalunorganised sector. We do need to provide non-agricultural work opportunitiesfor those moving out of agriculture, but we also need to create quality jobs inthe organised sector of the economy. The Approach Paper proposes several policyinitiatives that will achieve a faster growth in the manufacturing sector and,within manufacturing, encourage investment in labour intensive manufacturing andalso encourage units to graduate from small to medium and from the unorganisedto organised sector.
These efforts at generating demand for labour must be accompanied by astrategy to upgrade skills of the new entrants to the labour force. The agestructure of our population is such that the proportion of our active labourforce will continue to rise at a rate when most industrialised countries, andeven China, face an increasing dependency ratio. This is an asset we must takefull advantage of. This is a boon if we can create an environment which ensuresskill upgradation and encourages investment in labour intensive manufacturingprocesses. It will become, however, a bane if we fail on these counts.
I must also mention the National Rural Employment Guarantee Programme (NREGP)which we have implemented initially in 200 districts but which we plan to expandto cover all districts. The NREGP aims to provide a social safety net byguaranteeing employment in rural areas. The programme can also be used to buildand must be used to build rural infrastructure especially if resources fromother schemes are also pooled in.
This brings me to the issue of education and skill development. Education isthe greatest equalizer and therefore the key to ensuring inclusiveness. We havemade a good start with primary education through the Sarva Shiksha Abhiyan, butmuch more needs to be done to improve the quality of elementary education. TheMid Day Meal Scheme (MDMS) can be an effective instrument for increasingattendance and also for improving the nutritional status of our children. Wemust pay special attention to the Mid-Day Meal scheme. I look forward to hearingyour views on these issues, especially on how to improve the quality ofeducation based on your grassroot experiences thus far.
In the 11th Plan, we must go beyond primary education to secondary educationand higher education. Considerable additional resources will be needed toachieve our objectives and the Centre and states must share this burden. Stategovernments have a major role to play in this area and I look forward to yourreaction to the suggestions contained in the Approach Paper.
In addition to general education, we need to do much more on skilldevelopment. For example, we are currently planning on upgrading 500 ITIs butprobably need to double the 6000 ITIs we have over the next 5 years and alsoupgrade them all. The central government will, therefore, launch a Mission onSkill Development based on a thorough overhaul of existing traininginfrastructure. As a first step, the Planning Commission has appointed a TaskForce on Skill Development which includes representatives of both the privateand the public sector.
The Approach Paper endorses the need for a very substantial increase inresource commitment in Health, where we are seriously lagging behind otherdeveloping countries in Asia. We should also ensure that functioning of thepublic sector health system improves. We have launched the National Rural HealthMission recently and will need to monitor its progress. Public PrivatePartnerships in higher level health care also needs serious consideration,especially in view of our resource constraints. It is important that we takesteps to ensure the success of the Integrated Child Development Scheme (ICDS),which aims to give children below the age of 6 the right start in life. Theprogramme must also be universalised during the 11th Five Year Plan. I wouldwelcome the views of states on these issues.
Infrastructure development is another area which must receive priorityattention in the 11th Plan and this must cover both rural and generalinfrastructure.
The Bharat Nirman Programme focusses on rural infrastructure, such asirrigation, rural roads, drinking water, rural electrification, housing andrural telecom connectivity. We have established monitorable targets for eachstate which are further disaggregated into targets for districts. The componentthat is the most challenging is rural electrification and we need to makespecial efforts in this area. We are determined to ensure that Bharat Nirmansucceeds and forms the launching pad for further growth.
Turning to general infrastructure, the Approach Paper correctly identifiesweaknesses in this area as a major constraint on our achieving double digitgrowth. Our roads, our railways, our ports and our airports and the power sectorall need massive expansion and quality improvement.
The investment requirements of such expansion are massive and cannot be metfrom the public sector alone. The Approach Paper therefore proposes a strategywhere public investment will be used to develop infrastructure in areas wherethe private sector is reluctant to enter, while private participation will beencouraged wherever it is feasible. The Centre has made a good start onencouraging public-private partnerships in infrastructure. Many states have alsotaken bold steps in this area. We must make every effort to ensure thatpublic-private partnership succeeds as a means of delivering reliable andcredible infrastructure. Here, I must express my concern on the performance ofthe power sector. As a country, we are not investing as much as we should in thepower sector. It is important to recognise that public-private partnershipscannot be a solution if the power sector is financially unviable. Improving theefficiency of distribution and reducing the transmission and distribution lossesis critical, otherwise we will not be able to finance the needed capacityexpansion, nor attract investment on a scale we do need. This is an areaentirely in the hands of state governments. I look forward to having your viewsin this subject.
Let me now say a few words on the all important subject of resources. Much ofthe investment needed for rapid growth will come from the private sector andthis calls for maintenance of a sound macro economic framework, an investorfriendly environment and a strong and innovative financial sector capable ofresponding to the needs of new entrepreneurs especially in the small and mediumenterprises sector. Revival of cooperative credit is absolutely critical andmuch will depend on whether state governments finally implement therecommendations of the Vaidyanathan Committee. However, the objectives andambitions of the 11th Plan also call for a larger Plan, especially in states notjust in absolute terms but also as a proportion of GDP. The Approach Paper callsfor gross budgetary support of the Centre and states combined to be 2.5percentage points of GDP higher than in the present Plan. This is perhaps thesmallest increase that will accommodate the ambitious agenda we have for publicinvestment in agriculture, infrastructure and the social sector. Even so, wemust ensure that this level of budgetary support does not come at the cost offiscal prudence and stability.
We have all experienced the painful reality of coping with fiscal imprudencein the past, and we should resolve never to find ourselves in that situationever again. Higher levels of public spending are needed in many areas but theyshould and they must be achieved through improvements in revenue mobilizationand greater efficiency in expenditure. Specifically, our ability to increasegross budgetary support to 2.5 percentage points of GDP in the 11th Plan willdepend upon containment of open and hidden subsidies, revenue buoyancy, pruningongoing programmes that are not very useful and successful implementation of thepublic-private partnerships on a large scale in infrastructure. We need to thinkcreatively in these areas and not be afraid to break from past practices.
A critical issue we have to face relates to the sharing of responsibilitybetween the Centre and the states. Over a period of time, much of the Centre’sresources have been going to areas which are the primary responsibility andconcern of the states. Such programmes must involve a significant statecontribution to total costs. This would enhance a sense of ownership, a sense ofpartnership and also efficiency in implementation. Fortunately, the resourcesposition of states makes it possible to make credible efforts in this direction.On its part, the Centre should give flexibility to states to design and toimplement various Centrally Sponsored Schemes.
I believe our collective priorities are clear. Agriculture, irrigation andwater resources, health, education, critical investment in rural infrastructure,and the essential public investment needs of general infrastructure, along withprogrammes for the upliftment of SC/STs, other backward classes, minorities andwomen and children. The component plans for Scheduled Castes and ScheduledTribes will need to be revitalized. We will have to devise innovative plans toensure that minorities, particularly the Muslim minority, are empowered to shareequitably in the fruits of development. They must have the first claim onresources. The Centre has a myriad other responsibilities whose demands willhave to be fitted within the over-all resource availability. The PlanningCommission will of course undertake a thorough review of ongoing programmes toeliminate those which have outlived their original rationale, but we cannotescape from the fact that the Centre’s resources will be stretched in theimmediate future and an increasing share of the responsibility will have to beshouldered by the states.
The 11th Plan is beginning at a point when the economic potential of ournation has made it possible for us to realise the dreams of our founding fathers– to have an India which is prosperous and equitable; an India which is caringand inclusive; an India which provides opportunities for every citizen to excelin their areas of work and live up to their fullest potential.
The 11th Five Year Plan must fulfil that dream.
