While the UPA government projected GDP growth for the 12th Plan at 9% in the Approach Paper, and cut it to 8% following the European debt crisis and the domestic slowdown, sources told FE the target could further be pared to 6-7% given the slowdown in the first three years of the plan.
Though the country is in the election mode, spadework for the mid-term appraisal has started at the Planning Commission, with inputs coming from various ministries and depatrtments. There will be a mid-term appraisal by the new government later this year. the growth target could be lowered to 6-7%, a senior official said.
Indias GDP grew 4.5% in 2012-13 and the CSO's advanced estimate for 2013-14 was 4.9%. This fiscal, the government is hoping for economic expansion of up to 6%, provided the monsoon doesn't play truant and manufacturing revives following a new government at the Centre.
For the economy to record average growth of 6% in the 12th Plan, GDP has to grow by at least 7.3% in each of the two penultimate years. To attain 7% growth, the economy will have to expand by about 10% in 2015-16 and 2016-17, which seems too optimistic given the current economic scenario.
Though the major political parties are promising to revive growth, analysts are not too sure of a return to 9% growth, something seen during 2005-06 and 2007-08. Even the Congress party, in its manifesto, has set a three-year target to get back to 8% growth.
In the 12th Plan document, the Plan panel said the projection of 8% growth for 2012-13 to 2016-17 should not be viewed as a business as usual outcome. It would be possible only if the government takes early steps to reverse the current slowdown, and embarks on some policy actions.
Failure to act firmly on these policies will lead to lower growth and also poorer outcomes on inclusiveness, the plan panel said.
The GDP growth rates could be different depending on how stable the next government is. A loose coalition government risks delays in reforms and decision-making and, consequently, slower growth.
Also, a change in base year and revision of the GDP data could ratchet up the average growth rate to some extent, a senior government statistician said. A substantial pay revision for government staff from 2016, following the recommendations of the newly constituted Seventh Pay Commission, could also boost GDP numbers in the last two years of the 12th Plan, he added.