India’s Eleventh Five Year Plan starts on a substantially different footing from all its predecessors. That old bugbear of resource constraints, which scuppered at least three plans and even led to a brief plan holiday, will be unable to hobble the Plan for a change. The sustained 8% plus GDP growth rate of the last four years has provided a very sound platform for the Eleventh Plan?that spans 2007-12?to take off. Total expenditure has therefore been pegged at Rs 14.2 lakh crore, which is 75% higher than the Rs 8 lakh crore spent during the Tenth Plan. If all goes by plan, the multiplier effect of a jump in investment of that order should be enough to keep GDP growth humming away at a figure close to double-digits, perhaps even going past it. In fact, the Planning Commission has assumed a 9% rate of growth along with tax revenue buoyancy of 1.25% for the Centre and 1.15 % for the states over the Plan period.
Plan allocations are even more interesting. The share of resources going to priority sectors has been earmarked for a 75% rise. These include agriculture, education, healthcare and infrastructure. The figures compare very favourably with the Tenth Plan allocations. Hearteningly, the spend on education will rise to almost 20% of the total Plan outlay. The share of agriculture and rural development goes up from 18% in the last Plan to over 23% in the Eleventh Plan. If, despite such a hike, the performance of sectors like agriculture, education and infrastructure fails to meet expectations, the inevitable conclusion would be to dismantle the entire government delivery apparatus at the state and district levels, and begin afresh. Delivery, therefore, is the key. The one topic that could create a fissure between the Commission and the finance ministry relates to the classification of Plan spending. Almost the entire spend is classified as revenue expenditure, and that will mean that the Centre?s revenue deficit is bound to shoot up. The Plan calculations have also not factored in the impact of the Sixth Pay Commission. This would mean breaching the targets set by the FRBM Act?or a more drastic reduction in non-plan expenditure. That, while eminently desirable, is something of a hard nut, as the present government has already discovered.
