In the current scenario, planning for economic activities with a long-term perspective has become the most crucial ? but an extremely difficult ? exercise for any country. Six decades earlier, the commencement of the Five-Year Plan in India heralded the implementation of economic theories and principles in terms of allocation of resources in different sectors. By the final year of the plan, the actual growth achieved could be compared with the target growth.
Three decades later, a mid-term review of the Plan was undertaken without making changes in the targets, even though some of them were considered as seemingly impossible to achieve. Over the years, the multiple risks associated with achievement of sectoral targets made it imperative to revisit the initial assessments. For instance, the original target for power generation capacity of 78,700 mw in the 11th plan period has been pruned to 62,374 mw, and further down to 50,000 mw, a 36% reduction. It must be appreciated that in an inter-dependent sectoral model, a lower achievement in a critical sector like power must have a pulling down impact on some other related sectors like steel, but this type of impact-analysis was never attempted.
That raises an interesting issue of forecasting sectoral growth, linking it to an assumed rate of all economic activities consolidated under Gross Domestic Product at the factor cost. This is a standard method of looking at a futuristic scenario of major industrial sectors like cement, steel, coal, petroleum refinery, crude oil and electricity. However, the composition of GDP growth among primary, secondary and tertiary sectors bears a significant impact on the growth rate of various sectors. This entails the most crucial link in the growth story. Thus, steel intensity in GDP is not an isolated issue and must be read along with the linkage with industrial production, particularly manufacturing, and investment captured under capital formation.
The growth of steel, therefore, hinges on a package containing domestic product, industrial growth and investment. If one of these misses the growth warranted by a pre-determined target of GDP, it would impact the sectoral growth scenario. Forecasting for some of the major industrial products under a Plan period can, thus, be taken as a composite exercise, rather than an exclusive GDP-linked analysis. The predictions for the next five years must have an in-built mechanism of mid-term review for each sector and corrections in one sector should necessitate modifications in the output estimates of most of the related sectors. Economic forecasts by reputed institutions are reviewed almost every quarter. Can we not review our economic and sectoral performance once in two years, just for the sake of pragmatism, relevance and good governance?
The author is DG, Institute of Steel Growth and Development. The views expressed are personal