The Hindu Business Line : Mid-term appraisal of Plan targets — An opportunity for experts to get real

The Mid-Term Appraisal presents the Planning Commission an opportunity to tackle certain problems head-on. Dr Ahluwalia and his team will have to plot the right route to bridging the differences between the Finance Ministry and the planners. And he must find a way to translate the Plan targets into realisable goals, given the political reality of the coalition, the NCMP and the looming resource crisis. Above all, implementation has to get priority.

THE Planning Commission has come out with its paper on the approach to the Mid-Term Appraisal (MTA) — a paper that was to have been considered by the consultative groups, since disbanded, but now to be discussed with various experts.

The document spells out the issues that have to be gone into by the mid-term review. It is quite refreshing to see such a frank document that lays bare many of the weaknesses of our Plan and its implementation.

In particular, it gives potential room for a face-off between the Finance Ministry and the Planners, especially on the issue of budgetary support for the Plan.

The approach paper notes that the MTA will have to consider whether the Tenth Plan growth target of about 7 per cent on the average is still feasible. The growth performance has been 4.6 per cent in 2002-03 and 8.3 per cent in 2003-04 averaging 6.4 per cent for two years.

The disturbing fact, says the paper, is that the momentum for acceleration, which was essential to achieve the 8.1 per cent rate of growth, has not been achieved.

The paper states that the current year's rate of growth is likely to reach 6.5 per cent of GDP so that achievements of the next two years have to be around 11 per cent per year, if we are to achieve the original Plan target.

This goal seems infeasible, given the current circumstances of resources. The MTA has to explore the scope for accelerating growth in the remaining years of the Tenth Plan to achieve the target of 7-8 per cent growth mentioned in the National Common Minimum Programme (NCMP).

The approach paper sets out the potential erosion of resources for the Plan as a result of NCMP's commitments unless NCMP itself can be read as a mandated extension of the Plan. I cannot do better than quote from the Plan Paper to bring out this implicit dilemma:

"It is clear that the resources position in the remainder of the Tenth Plan period will be much more difficult than was envisaged at the time the Plan was formulated.

"The resources constraint will be especially difficult because the NCMP has established new priorities, which required a substantial increase in allocation in critical areas, such as health, education, irrigation, watershed management, railway modernisation and employment programme.

"The MTA will examine the resource position critically and its implication for plan programmes, keeping in mind the new priorities identified in the NCMP."

The approach paper notes that the allocation for the Central Plan over the first three years is running less than the target at 44.2 per cent of the total plan as against an expected 54 per cent. The position is much more difficult in the States. The States' Electricity Boards are more under stress and the Pay Commission impact is still troubling States.

The MTA will have to assess the impact of these adverse resource developments on the Plan.

An additional factor to be taken into account in the Appraisal is the already-mentioned impact of the fresh commitments taken on by the Government as a result of NCMP. The MTA will have to assess the resource implications of these commitments.

The approach paper recognises that the Employment Guarantee Scheme mentioned in the NCMP will demand large resources. It estimates the likely cost of introducing the Employment Guarantee Scheme for rural areas only at between Rs 21,000 crore and Rs 40,000 crore.

This cost could be shared between the Centre and the States — the States will inevitably turn to the Centre for assistance.

The approach paper says that the feasibility of embarking on such a commitment will have to be examined on the basis of the overall resources picture and demands of other sectors and the feasibility of increasing the employment content of investment expenditure, especially in rural areas.

The Employment Guarantee Scheme is thus guaranteed to go back to the drawing board pending the MTA's expert scrutiny!

The Planning Commission touches on another hot topic when it refers to the Tenth Plan's identification of the reform of labour laws as one of the crucial factors for sustained industrial growth.

Is the Planning Commission unaware of the politically correct path in these matters?

Turning to the slowdown in agriculture, the approach paper identifies various possible areas for attention, including watershed development and investment in waste and degraded lands. It rightly identifies the importance of the issue of land rights in this sector.

There is need to be clear as to how far local Governments will be prepared to go to assign land rights to local communities in this matter.

The approach paper touches on yet another sensitive topic when it mentions the collapse of the extension system in most of the areas and the decline in agricultural research universities.

These are obviously areas which fall under the remit of Dr M. S. Swaminathan in his role as Chairman of the Commission on Farmers.

The approach paper also mentions the problems of credit availability to farmers, but does not take note of the recent initiative in this regard nor of the limitations imposed by the structural weaknesses of banks in the public and cooperative sectors.

While touching on agricultural diversification, the paper emphasises the need for a supportive policy framework, including focus on marketing, including the involvement of the private sector in marketing arrangements.

It cites the Tenth Plan, which had identified the Essential Commodities Act as a major impediment to the development of modern markets.

The paper notes that this reform faces problems in view of the assertion in the NCMP that the Essential Commodities Act will not be diluted.

It affirms that it is necessary to examine this issue in depth so that the changes necessary for accelerating the growth of farm incomes, can be made.

The MTA has its task cut out to reconcile the demands of modernisation of agriculture with the framework of the NCMP.

This is all the more necessary since agriculture has not demonstrated the resurgence of growth expected in the Tenth Plan document. Turning to another important sector — education — the approach paper emphasises that the targets regarding 100 per cent enrolment in primary schools to be achieved by 2003, and 100 per cent retention to be achieved immediately thereafter, are unlikely to be achieved even by 2005.

One of the major problems is that the Sarva Siksha Abhiyan, the education initiative of the previous Government, does not get as much allocation of resource as it needs.

The future depends on what the Twelfth Finance Commission's recommendations will mean for States. Otherwise, the programme will run into financial constraints.

The approach paper notes that in view of the right to education being declared a Fundamental Right, there is every possibility of the Courts intervening, "which could prove disruptive".

This statement, however, affirms the increasing surrender of administrative space to India's judiciary — ranging from sports through education to environment.

In regard to infrastructure, the approach paper recognises that there are serious problems.

It assigns the MTA the task of making an assessment of the scope for increasing capacities through a combination of enhanced public investment and also attracting private investment where feasible.

The approach paper notes the lacunae in rural roads programme as well as Railways, but falls short of identifying the critical bottleneck, viz. the lack of political will to enforce good financial and track management in our Railways.

Speaking about power sector, the paper notes that it has suffered from serious under-investment in the Ninth Plan period 1997 to 2002.

The MTA will have the task of reviewing progress in this sector, where there are large gaps. SEB reforms are lagging behind schedule.

The paper notes that "populism by State Governments continues to be an impediment to following a rational electrification strategy" "Free power" is the inarticulate major premise of all political parties, including the UPA. Who is to bell this cat?

On international developments, the approach paper is relatively taciturn.

It does not touch on the ticklish issue of use of RBI's large forex reserves for domestic development. Nor does it examine the need to liberalise FDI limits.

Overall, however, the MTA presents an opportunity for the Planning Commission and its experts to get real.

The problems of resources are, above all, to be faced upfront. The contradictions between the NCMP and economic reforms have to be fleshed out.

I am sure the bright economist and experienced civil servant that Dr Ahluwalia has been, he will find the right formulation for the MTA to bridge over the differences that exist on the surface between the Ministry of Finance and the planners.

But, more to the point is how he will be able to translate the Plan targets into realisable goals, given the political reality of the coalition, the NCMP and the looming resource crisis.

It will be an interesting, but challenging, time for both the Planning Commission and the Government as a whole. The brouhaha about the consultants is over.

Let the real consultations begin in right earnest with the States and the experts. Above all, let the task of implementation take first priority. All the rest is meaningless.