Not all economists, however, are enthused by the Planning Commissions bravado. Some regard setting unrealistic targets also a crime since this generates unrealistic aspirations and expectations and when the target is not met, people become cynical and lose faith. If aiming low is a crime, they would argue, aiming too high is a con.
The story begins with the over enthusiasm of an aide of Prime Minister Atal Bihari Vajpayee who encouraged the PM to give a clarion call for 8 per cent growth from the ramparts of Red Fort on Independence Day. Planners in Yojana Bhawan have been stuck with the number ever since. But they have entered their caveats, for safety, while putting out what they themselves describe as the most ambitious of all our plans.
Time was when planning was viewed as an exercise in giving directions to economic agents. Original Stalinist planning of the inter-war era was nothing more than a set of directions which had to be implemented under the threat of execution. The planners job was to calculate how much steel, coal, cloth and such like were needed and get enterprises to deliver. By the time India began planning, plan models had evolved a bit and were exercises in feasibility and consistency. There was an element of direction in the early plans but when each five year plan fell short of target, Indias pragmatic politicians and economists quickly altered the terminology and caught up with the times.
As in so many other things, in planning too, the French set the trend and coined a terminology Plan indicatif, or indicative planning came into being. Planning was about indicating what was desirable within a feasible time and physical and fiscal framework. With the Tenth Plan, however, we have evolved further. From feasible plans to desirable plans, from securing internal consistency to seeking external approval. But alas, even as the Planning Commission states what is desirable, it is the rest of the government and the economy which will determine what is feasible.
Since aiming low is a crime, and this now has presidential consent, the Tenth Plan aims high. Having pleased the political masters thus, the professionals in the Planning Commission have made bold to cover their flanks. Raising the growth rate of the economy from an average of 6 per cent to 8 per cent is certainly achievable says the draft Tenth Plan document, adding the caveat, It is, however, far from easy and requires a number of hard decisions to be taken and a conducive policy environment established.
The 8 per cent target can be attained if the gross investment rate (as percentage of GDP) is stepped up to 32.6 per cent (compared to the 9th Plan average of 23.9 per cent) and the savings rate to 29.8 per cent (against 9th Plans 22.9 per cent). The fiscal correction required to make this possible is onerous. The tax to GDP ratio will have to be increased from 9 to 11.7 per cent, user charges will have to be levied on sale of power, irrigation water, higher education and health care. Expenditure on government employees will have to be reduced, and a range of reforms carried out. The ifs and buts are so many that sceptics view the 8 target more a dream than a plan. Among the more prominent sceptics is the former chief economic advisor to the government of India, with a record nine years (1992-2000) in the job, Shankar Acharya. In a blandly titled paper, Indias Medium Term Growth Prospect, published recently (Economic and Political Weekly, July 13, 2002), Dr Acharya throws a wet blanket on the 8 per cent wallahs!
On a balance of considerations says Dr Acharya, it might be reasonable to expect growth in the next five years to fluctuate in the range of 4% to 6%, perhaps averaging close to 5%....And even this 5% projection might turn out to be optimistic if there is a serious economic crisis, whether triggered in the financial sector or government finances, or by war or international turbulence.
Where is an 8 per cent target, whatever the caveats, and where is this 5 per cent forecast, and that too before the caveats are added Is Dr Acharya a spoilsport A partypooper Or is he making the job for his yet-to-be-appointed successor an easy one. With such low expectations, even 6 per cent will look nice! It seems Dr Acharya has a slightly different perspective from the new President. Aiming low may be a crime, but aiming too high is bad for a CEAs ulcers. So aim realistically.
It is possible to view 8 and 5 per cent as the maximum and minimum end points of a range of feasible rates. Given that the average rate of growth of the economy over the two decades 1980-2000 was close to 6 per cent, maintaining this is possible and feasible and can have highly desirable consequences too. If a little bit of reform, on the fiscal side, in the financial sector and in commodity markets, can help push this to 7 per cent, that is good too.
For an economy that consistently notched 6 per cent growth for two decades, after three decades of 3.5 per cent growth and a half century of near zero growth, moving up to 7 per cent over a decade is not necessarily difficult. The concern of the sceptics is valid because it takes doing and also learning by doing. The Tenth Plan draft is honest in stating this. The question is, are we upto it Clearly, Dr Acharya does not think we are. His ten years in government make his expectations modest. But, while 8 per cent is desirable and 5 per cent is entirely possible, 6 per cent or a little more for a decade, within a democratic framework, is certainly feasible and not bad at all.