Risks necessary to break policy logjam, says PM

Prime Minister Manmohan Singh on Saturday defended the government’s reform measures, saying some risks needed to be taken to break the policy logjam, or else the country’s economic growth will slip to five per cent.

The prime minister, who chaired the meeting of the Planning Commission called to finalise the 12th Five-Year (2012-17) Plan, also endorsed 8.2 per cent economic growth for the entire plan period, lower than the targeted 9 per cent earlier. He said foreign direct investment and foreign institutional investments were needed to finance the burgeoning fiscal and current account deficits and spur growth.

Besides, emphasis was laid on revival of investment climate.

“If policy logjam continues for any length of time, vicious cycles begin to set in and growth could easily collapse to about 5 per cent per year, with very poor outcomes on inclusion,” Singh said. Allies Trinamool Congress, the Samajwadi Party and the Bahujan Samaj Party have demanded a roll back of the policy measures aimed at boosting the economy.

The draft plan document, yet to be finalised by the Cabinet, talked of strong inclusive growth, insufficient action and policy logjam. The prime minister said inclusive growth was possible only if policy actions mentioned in the Plan were substantially implemented.

“It will take courage and some risks but it should be our endeavour to ensure that it materialises. The country deserves no less,” Singh said

Talking about the infrastructure sector which needs investments to the tune of one trillion dollar in the next five years, Singh said achieving the target was possible only if implementation of policies laid down in the 12th plan are strictly adhered to.

With an estimated expenditure of Rs 47.7 lakh crore, the 12th draft plan focused on health, nutrition, water and sanitation, factors critical for inclusive growth.

For the first time, the plan document introduced a chapter on governance with emphasis on implementation of policies to achieve the desired growth rate.

Speaking on fiscal and current account deficits, which stood in the way of investment and economic development, Singh said policy initiatives like diesel price hike were aimed at reining in fiscal deficit and reviving investor sentiment.

The government has set a fiscal deficit target of 5.1 per cent of the gross domestic product in the current fiscal year, but it has already touched over 51 per cent of the target in the first four months from April.

Finance Minister P Chidambaram suggested examining the possibility of cash transfer to beneficiaries for three major subsidies of food, fertilizer and fuel. 

The meeting of the Plan panel was attended by senior ministers including Finance Minister P Chidambaram and Agriculture Minister Sharad Pawar. However, Railways Minister Mukul Roy, who represents the Trinamool Congress, did not attend the meeting.