Resources alone cannot lead to high growth rate

Updated: Feb 19 2002, 05:30am hrs
The annual Budget for 2002-03 will kick-start the ambitious Tenth Plan that seeks to achieve 8 per cent gross domestic product (GDP) growth rate by focusing on agriculture, irrigation and rural development in addition to infrastructure. However, improving governance is a critical factor for improving utilisation of public resources and accelerate economic growth, says the deputy chairman of the Planning Commission, K C Pant, in an interview with Chandrashekhar and Amiti Sen of The Financial Express. Excerpts:

We have not been able to achieve the 6.5 per cent growth target set for the Ninth Plan period. What, according to you, went wrong
Yes, in the Ninth Plan period things did not work out exactly as we had anticipated and we failed to achieve the growth target. This is partly because industrial production went down in the period and agricultural production was not good in the last three years. However, the good thing is that agriculture is picking up now and its effect will also be felt in the industrial sector after a time lag. Because of that, this year the growth rate would go up.

To find out what went wrong, we have to carefully analyse all the reasons that may have contributed to it. The slowdown in the world market may have played a significant role in lowering growth rate in the country. While a reduction in internal demand hampers economic development, slowdown of exports too has a direct impact. The extent to which the fall in exports affected growth in India has to be ascertained.

What will be the thrust area for the Tenth Plan which would lead the economy to 8 per cent growth rate What steps should the finance ministry take in the forthcoming Budget which will be the first year of the Tenth Plan
Broadly, we would like the government to focus on increasing investments in agriculture, rural development, infrastructure, including power and road, education, health, family welfare, science & technology and tourism. However, we have to keep in mind the fact that resources alone cannot lead us to a high growth rate until and unless we improve efficiency in resource utilisation. We also have to ensure transparency in use of resources and proper implementation of all programmes.

As far as proposals for the forthcoming Budget are concerned, I will not like to comment. We will, of course, adhere to the broad framework spelled out in the Approach Paper for the Tenth Plan which was approved by the National Development Council (NDC).

Why have we not been able to attract greater private sector investments in power What are your suggestion for improving the power sector which is critical for industrial growth
The anticipated investment in the power sector was not forthcoming because of various problems. The government, especially the ministry of power, is trying to deal with those problems. However, what we have to understand is that unless users pay for the power they use, state electricity boards (SEBs) will be not become viable. And till SEBs become viable, private investment will not be forthcoming. Our effort at the moment is to improve the health of SEBs. Once we are able to deal with the basic problem, which has been plaguing the power sector and create a conducive environment, private investment will come. Unlike the Ninth Plan, our emphasis will be on public sector for investment in the power sector.

Fiscal deficit of both the Centre and states has crossed the 1991 level. What does the Planning Commission think should be done to check the situation
Most states are in a very difficult financial situation. In many cases, state Plans are being financed by borrowings. Their finances have to be carefully watched. The fiscal deficit in the Centre too is deteriorating and should be controlled. Our focus should be on reducing revenue deficit. This has to be done by reducing subsidies and targeting merit subsidies which benefit the needy. For the current year, revenue shortfall was on account of slowdown. We hope that the rate of growth of industry will pick up next year resulting in higher excise duty realisation, which forms substantial part of total revenue collections.

When do you expect to finalise the Tenth Plan
We are in the advanced stages of Plan formulation. The working groups constituted to give proposals have done their job. Most of the steering committees have also submitted their reports. Discussions on Plan proposals have already been held with central ministries and discussions with states have begun. Although the finalisation of the Plan may stretch beyond the end of the current financial year, we would like to put it in place as close to the beginning of the new fiscal as possible.