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Growth could get stuck at 5-5.5% if policy logjam continues: Plan panel

Last Updated: Thursday, December 27, 2012 - 14:50

New Delhi: The Planning Commission on Thursday projected 8 percent economic growth for the 12th Plan, but cautioned that "policy logjam" could slow the expansion to even as low as 5-5.5 percent during the five year period.

Moving away from previous practice of presenting single growth projection, the Planning Commission has come out with three different economic scenarios for 12th Five-Year Plan.

"Growth outcomes will depend upon on the extent to which we are able to take the difficult decisions needed to intervene at key leverage points to generate inclusive growth," Planning Commission Deputy Chairman Montek Singh Ahluwalia said at the National Development Council (NDC) meet here.

The apex planning body has referred to a third scenario of "policy logjam".

"This is the scenario where there is very little progress on the different decisions identified. In this case, growth could be stuck between 5 and 5.5 percent," Ahulwalia said.

He, however, said that scenario one -- of strong inclusive growth -- is the only "scenario that will meet the aspirations of the people".

As per "aspirational" scenario one, the growth was earlier expected to be 8.2 percent annually till 2016-17.

However, Ahluwalia said there is a need to modify the first scenario in the light of Finance Ministry's projection on 2012-13 economic growth (5.7-5.9 percent) and assessment of United Nations that global economy would be significantly weaker in 2012 and 2013.

"In view of these developments, growth rate associated with scenario one could be scaled down to 8 percent.

"I would like to emphasis that achieving an average of 8 percent over five years, following a first year growth of say 5.8 percent (2012-13) and say something over 7 percent in the second year, will involve a sharp acceleration in the last three years of the Plan," he said.

In case of the second scenario -- policies move in the right direction but are not fully implemented -- which in turn would limit growth in the range of 6 to 6.5 percent with correspondingly lower progress on inclusiveness.

Ahluwalia said both the Centre and the states need to focus on policies that would promote different components of investment and also increase their efficiency.

Public sector accounts for about 25 percent of investments in the economy while the rest comes from private investments which covers the household sector and corporates.

In analysing policy options, he said efforts have been made to identify areas of policy intervention that are largely in the hands of the Centre and those that are largely in the hands of states.

"We find that much of what needs to be done has to be done at the state level. We also find that many states are taking innovative steps, which is why, growth over the past ten years has been high and also regionally well dispersed," Ahluwalia said.


First Published: Thursday, December 27, 2012 - 14:43
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