Prime Minister of India - Dr. Manmohan Singh

PM's address at the meeting of Planning Commission

"I am very happy to welcome you all to this meeting of the Planning Commission to discuss the Approach Paper to the 11th Plan. We met in April 2005 to discuss the Mid Term Appraisal of the 10th Plan and identify mid-course corrections. We met subsequently to examine the problems pertaining to the agriculture sector. It is now time to focus on the targets we wish to set for our nation over the next five years and the policies required to achieve our ambitions.

The 11th Plan is going to be a historic Plan in many ways. This is the first time since the Planning process began that we will be aiming for a growth rate of 10% in the final years of the Plan. In achieving this growth rate, we would be finally emerging into the front ranks of fast growing developing countries. Moreover, by ensuring that the growth is inclusive, the 11th Plan would set our economy on a growth path which would finally liberate millions of our countrymen from the perennial scourges of poverty, ignorance and disease. This is an ambitious target but I do believe, it is also a feasible one. However, it will require sustained efforts on many fronts to make this a reality.

The economy enters the 11th Plan period with some important strengths. Growth has averaged 8% in the past three years. The savings rate is 29% of GDP and the investment rate is close to 31% of our GDP. FDI flows are buoyant and increasing and India is becoming an increasingly attractive investment destination. The fiscal position has been continuously improving and the last Budget Estimates suggest that the combined deficit of the centre and states may come down to 7% in 2006-07. In spite of a sharp increase in international oil prices, inflation has been moderate and under check. The external position is quite comfortable, both on the current account deficit as well as in the foreign exchange reserves position. To add to all this is the demographic dividend that we are going to reap with a declining dependency ratio in the coming decades. The 11th Plan could not have expected a better start and it is essential that we build on this growth momentum.

While there are pluses to the economy, I must emphasise that there are also serious weaknesses. Poverty is falling but not fast enough. The current consumption poverty rates of over 20% are simply not acceptable in this high growth scenario. As a result, large segments of our population are untouched by the rapid changes taking place in many parts of our economy. It is our collective responsibility to ensure that they become stakeholders in the growth processes underway. This is essential not only from an equity perspective but also for maintaining social and political harmony. We cannot expect harmony if large sections of our population see themselves as marginalized.

Agricultural growth, at less than 2% per annum, is an area of deep concern, and is at the root of rural distress. With over 2/3rd of the rural population still directly dependent on agriculture, it is imperative that we inject fresh dynamism into agriculture if we have to achieve the inclusiveness that we seek in our growth profile.

The other major concern is of employment. In the last decade, economic growth has not translated into increased job opportunities. Employment has not increased in the organised sector. We need to address the problem of jobless growth and seek solutions by which we can break out of this impasse.

Increasing disparities between different regions of the country are also a source of worry. Disparities seem to have widened perceptibly in the last few years, with improved economic performance concentrated in some regions only. This has serious implications for our polity and society. We need to work to arrest this trend and achieve convergence between regions rather than the other way around.

The Approach Paper addresses both elements of the growth strategy we need - a faster growth process and a more inclusive one. Both elements are important. We need faster growth to raise the material well being of our population and also to generate resources for our development programmes. The Approach Paper suggests a menu of policies which could achieve this while proposing an investment plan which could make it far more inclusive than in the past.

The inclusiveness objective is in some ways more difficult to achieve. The Approach Paper rightly proposes multiple interventions. It focuses especially on doubling the rate of growth of agriculture. This must be a central focus of attention and will make a major impact on income and the quality of employment in rural areas. The agricultural strategy also needs policy intervention in several areas: water management practices; focused research in specific crops, farming systems and dryland farming practices; improved extension work; better seeds and inputs; enhanced facilities for credit and marketing; support for diversification; completing the unfinished agenda of land reforms; etc. While initiatives in the last two years have started making some impact on the agricultural scenario, far more concerted effort is needed to achieve the desired improvements in the economics of agriculture. Agriculture must be one of the central elements of the planning efforts in the 11th Five Year Plan. The Plan must build on the work of the Farmers Commission and also of the NDC Sub-Committee on agriculture headed by Shri Sharad Pawarji.

Employment must be the other cornerstone of the 11th Plan. The Approach paper proposes policy initiatives that will encourage investment in labour intensive manufacturing and also encourage units to graduate from small to medium and from the unorganised to organised sector. It must also design a credible strategy to convert our demographic dividend into a boon rather than a bane. This requires sustained investment in education. Education is the greatest equalizer and we need to do much more in this area at all levels, primary, secondary and higher education and in skill development. The proposed Mission on Vocational Education must be fleshed out thoroughly so that it becomes a vehicle for transforming the approaches and models we currently have in this field and to vastly enhance the numbers we currently handle. I am hopeful that by the end of the 11th Plan, the Secondary and Higher Education segments will receive as much attention - both financial and institutional - as being given to Elementary Education now. The Approach paper also has strategies for improving health systems, reducing regional disparities, increasing social safety nets such as the National Rural Employment Guarantee Act and improving rural infrastructure. The special emphasis on Bharat Nirman which has begun well needs to be sustained to enable rural areas to have basic infrastructure comparable to urban areas.

Infrastructure development is the major constraint on our industrial growth. We need double digit growth in manufacturing and services to achieve our growth and employment objectives. For this a major effort at expanding power, roads, railways, ports and airports infrastructure is necessary. Investment requirements of developing infrastructure are massive and in the range of Rs 14 lakh crores by 2012. This cannot be met from the public sector alone. Hence, the need for PPPs to supplement public sector effort. The centre has made a good start on this as have many states. I believe that we are on the right track and the 11th Plan must build on this further. However, I must express my concern on the performance of the Power Sector. Improving the financial basis of all stages of this sector and enhancing commercial investments in this sector must be a priority concern of the 11th Plan.

Coming to the issue of resources, I appreciate and endorse the need for a larger Plan, not just in absolute terms but also as a proportion of GDP, I would however like to sound a word of caution. This cannot come at the cost of fiscal prudence and stability. Higher spending is a necessity which we are determined to provide for as we have done in the past three years. But, this has to be matched by improvements in the efficiency in expenditure, a focus on outcomes and expansion of investments from all sources. Salutary work in the infrastructure side has to be matched by corresponding efforts in other areas. The Planning Commission must prioritise among competing programmes.

Our priorities are clear. Agriculture, irrigation and water resources, health, education, critical investment in rural infrastructure, and the essential public investment needs of general infrastructure, along with progammes for the upliftment of SC/STs; these must have the first claim on resources. Other demands will have to be fitted within this resource availability. The Planning Commission must undertake a thorough review of ongoing programmes to eliminate those which have outlived their original rationale. The nation cannot afford any laxity in this regard. Simultaneously it must implement independent monitoring of our flagship programmes so that we have evidence based analysis on how to improve our performance.

A critical issue we have to face relates to the sharing of responsibility between the Centre and the States. Over a period of time, much of the Centre's resources go to areas which are the primary responsibility of States. Such programmes must involve a significant state contribution to total costs. This enhances a sense of ownership and efficiency in implementation. I believe that resources position of States also makes it possible to make credible efforts in this regard. The Approach paper lays down monitorable socio-economic targets to be achieved by the end of the 11th Plan. They present in a nutshell, the socio-economic transformation the Plan seeks to achieve. We are living at a time when science and technology and the economic potential of our nation have made it possible for us to fulfil the dreams of our founding fathers - to have an India which is prosperous and equitable; an India which is caring and inclusive; an India which provides opportunities for every citizen to excel in their areas of work and live up to their fullest potential. The 11th Plan must fulfil that dream. It must rise to the high expections that it does have among our people.

The Planning Commission has done commendable work in putting this document together based on intense consultations with states and other stakeholders. I compliment the Commission for the work it has done. I now invite all of you present here to share your thoughts".