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12 th Five Year Plan(2012-2017)

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Review of the 11 th Plan

The objective was faster and inclusive growth.Rapid GDP growth, targeted at 9% per annum, was regarded necessaryfor two reasons: first, to generate the income and employmentopportunities that were needed for the improvement in living standardsfor the bulk of the population; and second, to generate the resourcesneeded for financing social sector programmes, aimed at reducingpoverty and enabling inclusiveness.Reducing poverty is a key element in our inclusive growth strategy andthere is some progress in that regard. poverty was declining at roughly0.8 percentage points per year in the year before the Eleventh Plan. TheEleventh Plan had set a more ambitious target of achieving a decline of2 percentage points per year the average real wage rates have increased by 16 percent at an all India level.

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Other Major AspectsThe Eleventh Plan had articulated the need for expanding

educational facilities and improving quality of education, askey instruments for achieving faster and inclusive growth.Inadequate infrastructure was recognized in the Eleventh Planas a major constraint on rapid growth.The energy needs of rapid growth will pose a major challengesince these requirements have to be met in an environment where domestic energy prices are constrained and worldenergy prices are high and likely to rise further.Economic development will be sustainable only if it is pursued

in a manner which protects the environment. Withacceleration of economic growth, these pressures are expectedto intensify, and we therefore need to pay greater attention tothe management of water, forests and land.

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Inclusive GrowthThere was a perception that the economic growth only a few

sectors are prospering and others were being subsided. Sothere was a need for striking a sustainable balance betweengrowth and inclusion.Inclusive Growth refers to pace and pattern of economicgrowth.The approach document of the 11 th five year plan fixed a targetof stepping up overall GDP growth to 9.0%.So the 11 th plan mainly focused on Agriculture because itcontributes 22% to the GDP but supports 66% of the laborforce.This implies that there should be a rapid decline in povertyalong with a sharp decline in unemployment.

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Attributes of INCLUSIVE GROWTH

Opportunity

Capability

Access

Security

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Pros And Cons

GDP didnt reach the expected value.The reduction in below poverty linepercentage didnt meet the expectation. Growth in agriculture fell short by 4%from the expected.The total expenditure on health was lessthan 1% of the total GDP by the center andstates.There still exists a challenge of improvingquality in the education sector.The total expenditure on Infrastructure

was raised from 5.7% to 8%.There was a considerable increase in

dependence upon imports for the energysupplies especially petrol.FDI in retail was a major constraint.

There was a rise from 7.8% to 8.2%.Poised to meet the MillenniumDevelopment Goal target of 2015.There is an increase from 2% to 3%average growth.There is a considerable fall in IMR andMMR.There has been a notable success inexpanding capacity due to RTE.It still needs to be increased further as theurban population is increasing at a muchlarger rate.The Integrated Energy Policy, approved in

2009, have clearly defined the energyprices.The share of exports and goods increasedfrom 14% to 22%.

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Flagship Development Programmes

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Flagship Development Programmes(Cont.)

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The 12 th Plan

The steps taken in the 11th plan did make a commendable progress in achieving the objective ofINCLUSIVE GROWTH. But there have been many drawbacks too. There are some weaknessesthat need to be addressed and new challenger are to be faced.Some of these challenges themselves emanate from the economys transition to a higher andmore inclusive growth path.There are also some external challenges that arise from the fact that global economic

environment is much less favorable than it was before the 11th

plan.

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Sector Wise Growth Rates

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The Energy Challenge

The energy needs of rapid growth will pose a major challenge since these requirements have to be met in an environment where domestic energy prices are constrained and world energyprices are high and likely to rise further. For the GDP to grow at 9.0 per cent, commercial energy supplies will have to grow at a rate

between 6.5 and 7.0 per cent per year. Since Indias domestic energy supplies are limited,dependence upon imports will increase.

Import dependence in the case of petroleum has always been high and is projected to be 80 percent in the Twelfth Plan.Even in the case of coal, import dependence is projected to increase as the growth of thermalgeneration will require coal supplies which cannot be fully met from domestic mines.

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Manufacturing Sector

The Eleventh Plan had targeted growth in manufacturing at 10.0-11.0 per cent but actualperformance will be only about 7.7 per cent.

As a result, the share of the manufacturing sector in GDP is only 15.0 per cent in India, comparedwith 34.0 per cent in China and 40.0 per cent in Thailand.

The slow pace of growth in the manufacturing sector at this stage of Indias development is notan acceptable outcome.

Manufacturing must provide a large portion of the additional employment opportunities asopposed to agriculture for Indias increasing number of youth. On the contrary it should bereleasing labor which has very low productivity in agriculture to be absorbed in other sectors.

While the services sector has been growing fast, it alone cannot absorb the 250 million additionalincome-seekers that are expected to join the workforce in the next 15 years. Unlessmanufacturing becomes an engine of growth, providing at least 100 million additional decent

jobs, it will be difficult for Indias growth to be inclusive.

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Services

A principal goal of the Twelfth Plan is to increase the pace of inclusion of much larger numbersof people in the process of growth through creation of more jobs and more enterprises.

The Service sector is the principal generator of employment in India. Much attention has beenpaid to the growth of the IT enabled service (ITES) sector in this context. However ITES, thoughimportant is only a small component of the employment enhancement in services. GDP in ITEShas grown rapidly, but even so, the growth of GDP in ITES was only 12.0 per cent of the total

growth in GDP in the services sector. There are several other sub-sectors in services which are potentially very important sources ofemployment growth. These include Tourism & Hospitality and Construction.

There is also a large employment potential in the health sector where human resources are muchbelow the levels needed.

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Conclusion

The main conclusion that emerges is that despite the slowdown in growth in the current year,GDP growth target of 9.0 per cent for the Twelfth Plan is feasible from a macro-economicperspective. However, while growth at that pace is feasible, it cannot be said to be a forgoneoutcome. There are several imponderables, including considerable short-term uncertainties inthe global economy, and also formidable supply constraints in energy and some other sectorson the domestic front.The 12th five-year plan promises a lot for rural development and growth. In that sense, itis similar to Chinas latest iteration of its five -year plan, which seeks to improve the lot ofrural Chinese peoples by increasing urbanization and industrial efforts in central and western China. But, by contrast, while the Chinese government seems to be continuing with nation-wide industrialization efforts, the Indian government may be attempting topromote a policy of reverse migration by making rural living more attractive with someaccess to modern amenities, but hopefully without the accompanying chaos that goes

with it.The emergence of inflationary pressure in the closing years of the Eleventh Plan hasdrawn attention to the possibility of a growth-inflation trade-off, raising concern whetheraiming for a higher rate of growth at this stage may further fuel inflation. This issue can be best addressed by distinguishing between short term and medium term policy.

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Thank You