Column : Aspirations for the 12th Plan

Written by Arindam Bhattacharya | Updated: Mar 6 2011, 03:09am hrs
The 11th Five Year Plan draws to a close and the Planning Commission is about to kick off the process for the 12th Plan. The planners are faced with difficult and complex choices in charting out the countrys course for the next five years. There have been extraordinary swings in the manufacturing growth rates in recent months, mirrored by mood swings of the Indian business community. Political logjams and scams seem to be have dimmed India Shining. At the same time, the global environment continues to remain difficult, with faltering growth and debt overhangs in many parts of the developed world, coupled with high inflation rates in most countries. More recently, the massive turmoil in West Asia and North Africa has led to a huge spike in oil prices. In this scenario of high uncertainty, what should be the aspiration or the overarching theme for the 12th Five Year Plan

There are two very different perspectives as starting points for this discussion. The first perspective is that of the aam aadmi policies and programmes, which have been among the singular successes of the Congress-led coalition government. The 11th Plan document and the recent Budget speeches of the finance minister have all emphasised the importance of inclusive growth. Even the external world has recognised this success.

The World Economic Forum at this years Davos summit, which had a theme of Shared Norms for the New Reality, celebrated Indias inclusive growth model. Business newspapers headline advice from economists and other experts to the government to continue to push the inclusive growth platform seen as critical to achieve future economic growth.

The other perspective is described by The Economist in recent headlinesIndias surprising economic miracleThe countrys state may be weak but its private companies are strong, or A bumpier but freer roadDespite all the mess and chaos of India, the countrys business is booming. This will change the world. The Economist takes the view that the growing global competitiveness of Indias companies is not just transforming the domestic business environment but will have a profound impact on the rest of the world. In other words, Indian companies have the potential to become global champions, the implicit message being that the Indian state should support this journey more actively.

Two very different perspectives. Aam aadmi vs global champions! Each one a legitimate aspiration for the nation. But, one may ask, do we need one to develop the 12th Five Year Plan It can be argued that the need of the hour is a pragmatic set of policies that systematically address the numerous challenges faced by the nation rather than a grand dream.

In my experience, which I will readily admit has been mostly with businesses, setting an aspiration is critical for the success of any transformational journey. An aspiration is like a magnet that aligns all the different stakeholders in the same direction, who otherwise could end up working at cross-purposes. Let me illustrate this with an example. It is now well recognised that industrial clusters are a critical policy lever for industrial growth and competitiveness. A plant in a good cluster can have as much as 8% lower operating costs compared to a standalone plant. For building successful clusters in India, many disparate elements have to come togetherwell-developed infrastructure, skill training institutions, research institutions and policies that support innovation, tax and other fiscal benefits, removal of constraints currently faced under the labour laws, factories Act and environmental laws, etc. Each of these areas is under a different central government ministry or the state government, which often work independent of each other. How can they work together towards a common objective to create, say, 50 new globally competitive clusters generating millions of new jobs They can, if there is a common aspiration for the country articulated in the five-year plan, which then informs all policies that are framed by different parts of central and different state governments Perhaps a utopian dream but nevertheless one to strive for!

So, what should be our aspiration that should guide the 12th Five Year Plan Lets look at some basic facts. The last two decades have seen Indias economy and its industrial sector grow at 6% to 7% per annum. However, during most of this period, the growth in formal employment in industry has been at best marginal and most of the employment has grown in the informal and unorganised sector. It is now well-recognised that the biggest challenge facing the Indian economy is employment generation.

India needs over 220 million jobs between now and 2025, which calls for achieving double-digit economic growth. But, unless industry can grow at around 12% from its current 7-8% level, we will not reach this target. And industry cannot grow at 12% without doubling the current growth rate of its exports. To do this, India has to create not just a few but many global champions. So, the perspective of The Economist is surely the right one. There is another set of facts. As per the governments own estimates, 5.3 crore households got jobs under MGNREGAthe biggest of the aam aadmi policies. That is 265 crore man-days of employment at 50 days a year per person. So, the perspective of the home-grown economists who aspire to improve the lot of aam aadmi is also right.

As we start the 12th Five Year Plan development, do we have to necessarily choose between these two aspirations for the nation Can they not be combined to create a far more powerful one An aspiration that does not exclude the other but is inclusive, and celebrates both the aam aadmi and the global challengers!

The author is managing director, Boston Consulting Group, India. These are his personal views