12th Five Year Plan(2012-2017)

Targets of the 11th Plan

To accelerate growth rate of GDP from 8 to 10% To increase agricultural growth by 4% every year. To reduce educated unemployed to below 5% Increase literacy rate of age 7years or above to 85%. To provide clean drinking water to all. Growth of Industry 9.9% Growth of Services 9.4%

Review of the 11th Plan

The objective was faster and inclusive growth. Rapid GDP growth, targeted at 9% per annum, was regarded necessary

for two reasons: first, to generate the income and employment opportunities that were needed for the improvement in living standards for the bulk of the population; and second, to generate the resources needed for financing social sector programmes, aimed at reducing poverty and enabling inclusiveness. Reducing poverty is a key element in our inclusive growth strategy and there is some progress in that regard. poverty was declining at roughly 0.8 percentage points per year in the year before the Eleventh Plan. The Eleventh Plan had set a more ambitious target of achieving a decline of 2 percentage points per year the average real wage rates have increased by 16 percent at an all India level.

Other Major Aspects

The Eleventh Plan had articulated the need for expanding

educational facilities and improving quality of education, as key instruments for achieving faster and inclusive growth. Inadequate infrastructure was recognized in the Eleventh Plan as a major constraint on rapid growth. 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 energy 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. With acceleration of economic growth, these pressures are expected to intensify, and we therefore need to pay greater attention to the management of water, forests and land.

Inclusive Growth
There was a perception that the economic growth only a few

sectors are prospering and others were being subsided. So there was a need for striking a sustainable balance between growth and inclusion. Inclusive Growth refers to pace and pattern of economic growth. The approach document of the 11th five year plan fixed a target of stepping up overall GDP growth to 9.0%. So the 11th plan mainly focused on Agriculture because it contributes 22% to the GDP but supports 66% of the labor force. This implies that there should be a rapid decline in poverty along with a sharp decline in unemployment.

Attributes of INCLUSIVE GROWTH

Opportunity

Security

Capability

Access

Pros And Cons

GDP didnt reach the expected value. The reduction in below poverty line percentage didnt meet the expectation. Growth in agriculture fell short by 4% from the expected. The total expenditure on health was less than 1% of the total GDP by the center and states. There still exists a challenge of improving quality 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 energy supplies especially petrol. FDI in retail was a major constraint.

There was a rise from 7.8% to 8.2%. Poised to meet the Millennium Development Goal target of 2015. There is an increase from 2% to 3% average growth. There is a considerable fall in IMR and MMR. There has been a notable success in expanding capacity due to RTE. It still needs to be increased further as the urban population is increasing at a much larger rate. The Integrated Energy Policy, approved in 2009, have clearly defined the energy prices. The share of exports and goods increased from 14% to 22%.

Flagship Development Programmes

Flagship Development Programmes(Cont.)

The 12th Plan

The steps taken in the 11th plan did make a commendable progress in achieving the objective of INCLUSIVE GROWTH. But there have been many drawbacks too. There are some weaknesses that need to be addressed and new challenger are to be faced. Some of these challenges themselves emanate from the economys transition to a higher and more 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.

Sector Wise Growth Rates

Challenges for the 12th Plan

Enhancing the Capacity for Growth Enhancing Skills and Faster Generation of Employment Managing the Environment Markets for Efficiency and Inclusion Decentralisation, Empowerment and Information Technology and Innovation Securing the Energy Future for India Accelerated Development of Transport Infrastructure Rural Transformation and Sustained Growth of Agriculture Managing Urbanization Improved Access to Quality Education Better Preventive and Curative Health Care

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 energy prices 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 per cent in the Twelfth Plan. Even in the case of coal, import dependence is projected to increase as the growth of thermal generation will require coal supplies which cannot be fully met from domestic mines.

Coal

Coal prices are theoretically decontrolled, but in fact they are adjusted only in consultation with the Ministry. Indian coal has high mineral content and a lower calorific value as against imported coal, but even accounting for this difference, the price of domestic coal is 30.0 to 50.0 per cent lower than imported coal. The expected demand for coal from the power sector cannot be met except through a significant increase in imports, which poses two problems.

First Indian power plants are not designed to take more than 10.0 to 15.0 per cent of imported coal.
Secondly, power producers are not willing to accept higher cost fuel because that puts them at a disadvantage compared with producer using domestic coal. It is essential to develop some mechanism of providing power producers with a mix of domestic and imported coal consistent with their technical constraints so that the higher cost of imported coal is averaged with the lower cost of domestic coal.

The Planning Commission envisioned an expansive role for Indian SOE Coal India: Coal India must become a coal supplier and not just a mining company. Should plan to import coal to meet coal demands. This requires blending of imported and domestic coal as supplied by Coal India.

Petrol

The position regarding petroleum products, where we are importing around 80.0 per cent of our requirement is that petrol prices are aligned with world prices (and indeed bear an extra burden of taxation) but diesel prices are at least 20.0 per cent lower than they should be if they are to be fully aligned. Kerosene prices are as much as 70.0 per cent lower and LPG prices 50.0 per cent lower. This misalignment is not only imposing a burden on the exchequer and the oil companies, it also causes serious distortions. The massive under-pricing of kerosene is leading to large scale diversion for adulteration with diesel and petrol, generating a huge volume of black money. Only about half the kerosene distributed through the PDS actually reaches the consumer. The LPG subsidy is completely untargeted, and for the most part benefits people in the middle and upper income classes.

A transition to more rational energy pricing requires upward adjustment in all these prices. Since different Ministries are involved, a coordinated view is necessary based on a holistic understanding of the rationale of the move. The adjustment needed cannot be achieved in one go, but the process must begin so that a full adjustment occurs over two or three years. Increasing prices is never easy, but it is also true that our ability to grow rapidly in a world of high energy prices depends crucially on our ability to adjust these prices. Suppressing energy prices will not help. There is a case for insulating the poor from these price increases by a targeted subsidy, but what we have at present is a much more general subsidy.

Manufacturing Sector

The Eleventh Plan had targeted growth in manufacturing at 10.0-11.0 per cent but actual performance 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, compared with 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 not an acceptable outcome. Manufacturing must provide a large portion of the additional employment opportunities as opposed to agriculture for Indias increasing number of youth. On the contrary it should be releasing 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 additional income-seekers that are expected to join the workforce in the next 15 years. Unless manufacturing becomes an engine of growth, providing at least 100 million additional decent jobs, it will be difficult for Indias growth to be inclusive.

Services
A principal goal of the Twelfth Plan is to increase the pace of inclusion of much larger numbers of 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 been paid to the growth of the IT enabled service (ITES) sector in this context. However ITES, though important is only a small component of the employment enhancement in services. GDP in ITES has 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 of employment growth. These include Tourism & Hospitality and Construction. There is also a large employment potential in the health sector where human resources are much below the levels needed.

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-economic perspective. However, while growth at that pace is feasible, it cannot be said to be a forgone outcome. There are several imponderables, including considerable short-term uncertainties in the global economy, and also formidable supply constraints in energy and some other sectors on the domestic front.

The 12th five-year plan promises a lot for rural development and growth. In that sense, it is similar to Chinas latest iteration of its five-year plan, which seeks to improve the lot of rural 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 to promote a policy of reverse migration by making rural living more attractive with some access 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 has drawn attention to the possibility of a growth-inflation trade-off, raising concern whether aiming 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.

Thank You