Plan panel lowers growth target to 8%

PM calls forecast ''ambitious''

The Planning Commission on Thursday lowered India’s economic growth forecast to 8 per cent in the 12 th Five-Year Plan, even as Prime Minister Manmohan Singh said the new target was ''ambitious'' and signalled a phased hike in energy prices to cut subsidies that have fuelled Centre’s deficit.

The current target of 8 per cent growth in the next five years is lower than an earlier objective of 9 per cent, which was further scaled down to 8.2 per cent.

“The overall growth target for the 12th Plan is being set at 8 per cent. This is a reasonable modification, but I must emphasise that achieving an average of 8 per cent growth, following less than 6 per cent in the first year, is still an ambitious target,” Singh said, while addressing the National Development Council (NDC), the government’s apex policy making body, approved the 12 th plan, albeit one year late.

The Prime Minister also warned that "business as usual" policies will not be sufficient to achieve the growth rate of 8 per cent. Turning to subsidies, Singh said that these should be financially sustainable and effectively targeted. “Unfortunately, energy is under-priced in our country. Our coal, petroleum products and natural gas are all priced well below international prices. This also means that electricity is effectively under-priced, especially for some consumers,” Singh said.

He, however, said that immediate adjustment in prices was not feasible, but emphasised on phased price adjustment. “Failure to control subsidies within these limits only means that other plan expenditures have to be cut or the fiscal deficit target exceeded," he said.

Finance Minister P Chidambaram said it was imperative to contain the fiscal deficit. Some measures may cause immediate pain but they were necessary to bring down the deficit to 3 per cent of the GDP in the next three years, he said. India ’s fiscal deficit is expected to touch 5.3 per cent of the GDP in fiscal year ending March 31, 2013. 

Planning Commission Deputy Chairman Montek Singh Ahluwalia too cautioned that “policy logjam” could push the GDP growth rate to as low as 5-5.5 per cent during the Plan period. “Growth outcomes will depend on the extent to which we are able to take difficult decisions needed to intervene at key leverage points to generate inclusive growth,” he said.

India’s GDP growth rate came down to sub-6 per cent in the past three quarters, inflation touched near double-digit level, prompting the government to speed up policy decisions and raise prices of subsidised diesel by about 14 per cent in September.