Analysis of twelfth Five Year Plan
Gautam Chimagundi 2011A08
Leena Khiani 2011A09
Asita Ajgaonkar 2011A14
Rudhreesh Kapur 2011A23
1.1 Introduction 2
2. Prospects for the Twelfth Plan 2
3. Drivers of Growth in the Twelfth Plan 2
3.1 Macro‐Economic Fundamentals 2
3.2 Management and Labour Skills 2
3.3 Aspirational Drivers 2
4. Growth Targets for the Twelfth Plan 2
5. Energy 2
6. Transport 2
6.1 Roads 2
6.2 Railways 2
6.3 Ports 2
6.4 Civil Aviation 2
7. Farm Sector 2
7.1 Water Management 2
7.2 Soil Nutrient Management 2
7.3 Efficiency in Use of Chemical Fertilizers 2
7.4 New Technologies for the Farm Sector 2
8. Livestock and Fisheries 2
8.1 Improving Marketing and Logistics 2
9. Manufacturing sector 2
9.1 The Cost of Doing Business 2
10. Health 2
10.1 Comprehensive Healthcare 2
10.2 Health Infrastructure 2
11. Services: Tourism, Hospitality & Construction Need for Employment Opportunities 2
11.1 Tourism 2
11.1.1Potential / Opportunities 2
11.1.2 Issues & Challenges 2
11.2 Construction 2
11.2.1 Employment Potential 2
11.2.2Issues and Challenges 2
11.2.3 Strategies 2
The Indian economy, on the eve of the Twelfth Plan, is characterised by strong macro fundamentals, and a very good performance over the Eleventh Plan period, though clouded by some slowdown in growth in the current year, continuing concern about inflation and a sudden increase in uncertainty about the global economy. The objective of the Eleventh Plan was faster and inclusive growth and the initiatives taken in the Eleventh Plan period have resulted in substantial progress towards both objectives. Inevitably, there are some weaknesses that need to be addressed and also new challenges that need to be faced. Some of the challenges are themselves the consequence of the economy’s transition to a higher and more inclusive growth path, the structural changes that come with it, and the expectations it generates. There are external challenges also arising from the fact that the global economic environment is much less favourable than it was at the start of the Eleventh Plan. These challenges call for renewed efforts on multiple fronts learning from the experience gained, and keeping in mind global developments.
2. Prospects for the Twelfth Plan
The message emerging is that the economy has gained in strength in many dimensions and is therefore well placed to achieve faster, sustainable and more inclusive growth. Having achieved 8.2 percent growth in the Eleventh Plan, it is reasonable to aim at 9 percent growth for the Twelfth Plan. Global economic conditions are very uncertain and energy prices are likely to remain high. To achieve rapid growth, the economy will have to overcome constraints posed by limited energy supplies, increase in water scarcity, shortages in infrastructure, problems of land acquisition for industrial development and infrastructure, and the complex problem of managing the urban transition associated with rapid growth. Greater efforts also need to be made in agriculture, health and education to ensure inclusion of the most excluded and sometimes invisible parts of our population.
These difficulties suggest that a 9 percent growth target for the next five years is ambitious. But it is not impossible, if we have the political will to do what is necessary. Economic reforms over the last twenty years have resulted in the citizens of India having high expectations. The Twelfth Plan has to meet the aspirations of millions of young men and women. This cannot be done by following a business‐as‐usual approach. All sections of society – government, farmers, businesses, labour and concerned citizens – have to adopt newer, more effective ways of pursuing their activities, so that we can collectively achieve our lofty goals.
3. Drivers of Growth in the Twelfth Plan
There are several potential drivers of growth that suggest it may be possible to accelerate GDP growth in the Twelfth Plan beyond the 8.2 per cent level achieved in the Eleventh Plan. However, each of these needs to be nurtured and built upon with appropriate policy interventions to achieve the desired growth objective.
3.1 Macro‐Economic Fundamentals
The high rates of investment (over 36 per cent of GDP) and private sector savings (34 per cent of GDP) constitute strong macro‐economic fundamentals supporting high growth. However, there has been a slowdown in the pace of increase in private corporate investment, in part due to the uncertainties flowing out of the global crisis and continued difficulties in world markets, and in part due to the rise in global energy and commodities prices. The uncertainties in global markets are expected to continue. Domestic inflationary pressures, particularly as reflected in rising wages, add to the uncertainty in this regard.
Until recently, there was also a steady improvement in the government savings in the form of a steady reduction in the revenue deficit. This process was interrupted by the crisis of 2008/09 and the revenue deficit increased sharply thereafter, reflecting the reduction in taxation designed to counter the negative effect of the crisis, and also the decision not to raise oil prices for domestic consumers in line with rising oil prices in global markets. However, the process of restoring fiscal discipline has begun and is projected to be continued in the Twelfth Plan.
Indian companies in many sectors have shown capacity for innovation, which needs to be nurtured and strengthened as we move into the Twelfth Plan. This calls for a greatly expanded programme of Research & Development (R&D), as well as other innovations, to lift Indian manufacturing to a higher level. It is important to emphasise that dynamism is not limited to large companies. Many companies in the MSME sector have also expanded and shown the capacity for innovation. However, much more needs to be done to strengthen and nurture the potential performance of this sector. Particularly important in this context are improved infrastructure services, including reliable power and better logistics for transport, as also better financial access, including development of institutions that can provide start‐up finance for small and potentially innovative businesses.
3.2 Management and Labour Skills
Entrepreneurial capacity in the private sector is matched by an impressive pool of managerial talent and an increasingly skilled workforce. However, experience has shown that rapid growth in the recent past has been accompanied by shortages of specific skills and increasing rates of employee turnover. The MSME sector is particularly hard hit in key areas of skills. Therefore, much more needs to be done in the area of skill development to adequately complement the potential expansion in the level of economic activity. The expansion underway in educational institutions needs to be accelerated and greater attention needs to be paid to the quality and appropriateness of skills being imparted. The government has taken a number of steps in this area and these need to be strengthened in the Twelfth Five Year Plan.
3.3 Aspirational Drivers
The aspiration for change amongst the entire population, especially the young, is an important feature that can help push the economy to a higher growth path. These aspirations have arisen because of the demonstrated success in many sectors, and are also fuelled by increase in school attendance and the hope that better education will lead to better job opportunities. However, while the aspirational drive is a force that can push the economy towards greater achievements, it is also true that if not adequately fulfilled, it can lead to frustration and cynicism. A major challenge in the Twelfth Plan is how to ensure that the performance of the economy remains ahead of ever rising expectations. These drivers of growth are to some extent offset by some important critical constraints arising from the supply side. The most important of these relate to (i) availability of energy
(ii) growing evidence of problem with water availability (iii) slower than required improvement in farm output and in the logistics of farm produce (iv) difficulties relating to land acquisition for industry and infrastructure development, and (v) The lack of a credible and fair system for exploitation of mineral resources.
4. Growth Targets for the Twelfth Plan
The Planning Commission has explored two alternative targets for economic growth in the Twelfth Plan. The first is a restatement of the Eleventh Plan target of 9 per cent growth, which has yet to be achieved. The second is an even higher target of 9.5 per cent average growth for the Twelfth Five Year Plan. Several macro‐economic models have been used to examine the ...