The Approach Paper to the Twelfth Five Year Plan (2012-2017) is being prepared at a time when the country is facing a vicious circle of corruption and scams. Moreover, the Twelfth Five Year Plan comes at a time when the country’s economic condition is in a phase of instability and speedy and substantial measures are required to bolster the economy. The Gross Domestic Product (GDP) growth for the Eleventh Five Year Plan is likely to be 8.2 per cent, which is less than the target of 9 per cent, but in spite of this it can be taken as a great achievement taking into consideration the worst effects of drought and recession during this period. The major area of concern is inflation which has accelerated in the past few years. The agricultural sector is also a major area of concern and improvements are necessary in this field. There has been substantial progress in the fields of poverty eradication, health, upliftment of the backward classes, and education. The Planning Commission has undertaken extensive consultations with a wide range of organisations and individuals which reveal that citizen groups support the broad objectives of existing Government programmes, but they have little faith in the design of these programmes and the manner of execution. There is a perception that Government programmes, especially Centrally Sponsored Schemes, are not sensitive enough to local needs. Also, Government works in silos with little effort to achieve convergence and co-ordination across Ministries and between Centre and States, even though most problems require inter-Governmental and inter-Ministerial co-ordination. The Twelfth Five Year Plan is expected to control the situation and bring stability and once again accelerate growth in the country.
Agriculture and Rural Development
The Planning Commission is aiming for a target of 4 per cent agricultural growth. Cereals will grow only at 1.5 to 2.0 per cent and so the Planning Commission is not setting higher targets for this. However, other food sectors (horticulture, dairying, fisheries etc.) need to grow at more than 5 per cent. This calls for a change in agricultural strategy as these are all perishable products, and therefore subject to much higher degree of market risk than food-grains, oil seeds or natural fibres. In the case of these products, which are all relatively high value, investments and institutional development are more important than subsidies or price support systems.
Manufacturing performance is weak. Growth of manufacturing in the Eleventh Plan is likely to be only 8 per cent. The Planning Commission is planning to raise this to 11-12 per cent per year in the Twelfth Plan to create jobs for the growing labour force.
For accelerating manufacturing growth, therefore, the strategies are to achieve greater domestic value addition and technological depth in Indian industry to cater to growing domestic demand and to improve our trade position, attract investment, including FDI, in critical areas where manufacturing capacity should modernise and develop, improve the business environment and reduce the cost of doing business. This is largely an agenda item for State Governments. Land and infrastructure constraints must be addressed effectively. Again, this is largely in the domain of the State, but the Centre can ‘incentivise’. Promoting “clusters” is a very effective way of helping the manufacturing sector. State Governments should be ‘incentivised’ to support clusters.
The Eleventh Plan focused on quantity in school expansion. Significant success in this regard has been seen with enrolment rates going up rapidly, especially in primary education. However, scholastic achievement tests show that learning achievements of the students are well below desired levels. The Twelfth Plan must therefore focus on quality. This includes teacher training and evaluation, and also measures to enforce accountability. There is now a need to rapidly build capacity in secondary schools to absorb the graduates from expanded primary enrolments. States must facilitate Public Private Partnership (PPP) in secondary education. States are keen to do this, and collaboration in this regard is underway. The drop-out rates between primary and secondary education continue to be extremely high, which raises questions regarding the perceptions of the utility of secondary education among the people. This will need to be changed through introducing higher skill content at the secondary schools level. Vocational education will need to be given greater emphasis and made more attractive. The gross enrolment ratio (GER) in higher education must be targeted to increase from nearly 18 per cent today to say 25 per ent by 2016-17 and perhaps 30 per cent by 2020.
The quality of health services needs to be improved through the National Rural Health Mission (NRHM). Focus on preventive aspects of health care, particularly drinking water, sanitation, nutrition, better maternal and child services and immunisation should be considered. Shortage of qualified medical personnel at all levels is a major hurdle in improving the outreach of the healthcare system, especially the public health facilities. This needs to be corrected expeditiously and the systems will need to be put in place for more effective PPP models in primary health care. Role of PPP in secondary and tertiary health care must be explored with greater vigour. The Planning Commission needs to evolve appropriate concession models to facilitate this. Expenditure on health by the Centre and States needs to be increased from 1.3 per cent of GDP at present to 2.0 per cent by the end of the Twelfth Plan.
GDP growth of 9 per cent requires commercial energy growth of 7 per cent. The likely achievement in the Eleventh Plan is 5 per cent. Unless an assurance of ensuring adequate growth is provided in commercial energy availability, the GDP growth target cannot be achieved. There are a few policy issues which require proper attention including the creation 100,000 MW of new power capacity in the Twelfth Five Year Plan. Forestand environment clearance procedures are hindering both coal availability and hydro-power development. State governments with coal and hydro resources have been complaining strongly about the costs being borne by them. At present, petroleum, gas and coal prices, all three are out of line with world prices and world energy prices are unlikely to soften. Domestic prices need to be better aligned to give the right signals to both consumers and investors. Adopting a time-bound programme to achieve this alignment over three years is important. Coal production will be a major constraint partly due to weak performance of Coal India and partly environmental constraints. Because coal production cannot be increased sufficiently, so plans must be made now for coal imports to rise from 80 million tonnes to 250 million tonnes by the end of the Twelfth Five Year Plan. This will require corresponding expansion of rail and port capacity.
The increase in the Gross Budgetary Support (GBS) as a percentage of GDP between 2011-12 and 2017-18 is projected at only 1.3 percentage point. Health and Education received only about 60 per cent of the planned allocation in the Eleventh Plan as against an over-all realisation of 87 per cent. This was partly on account of major new schemes being launched during the Plan, and partly due to limitations in the absorptive capacity in these sectors. It is estimated that the GBS allocated to these two sectors, including skill development initiatives, will need to be increased by at least 1.2 percentage point of GDP.
Infrastructure investments have seen significant improvement during the Eleventh Five Year Plan, but the pace of infrastructure development needs further acceleration if the glaring infrastructure gaps are to be bridged within a reasonable time-frame. Although PPPs have been successful in a number of infrastructure sectors, and efforts will need to be continued in further encouraging private sector involvement, it is felt that public investment in infrastructure, particularly irrigation, watershed development and urban infrastructure, will need an additional 0.7 percentage points of GDP increase over the next five years. These sectors will therefore need an increase of 1.9 percentage points of GDP as GBS during the Twelfth Plan. The GBS for the other sectors as a percentage of GDP must therefore go down. The allocation of these sectors will increase in absolute terms, but more slowly than real GDP. This re-prioritisation must be accepted.