Montek146;s reality check: CMP will cost

In a document outlining its approach to MTA and midway corrections in the government8217;s priorities, the Commission says: 8216;8216;The resources constraint will be especially difficult because the NCMP has established new priorities which require a substantial increase in allocations for critical areas such as health, education, irrigation, watershed management, railway modernisation and employment programmes.8217;8217;

The MTA will address the resource constraint in view of the promises made in the NCMP.

The Planning Commission has also criticised populist measures like free electricity to farmers which state governments announce as elections approach.

Incidentally, free electricity to farmers was one of the first announcements of the YSR Reddy government on assuming charge of Andhra Pradesh. The Congress-led government in Maharashtra, which goes to polls next month, has made an identical promise and topped it with loan waiver.

Among the many promises in the NCMP was a law to guarantee at least 100 days8217; employment to at least one person of every rural poor family. For this, the Planning Commission says, the government will require anything between Rs 21,000 and Rs 40,000 crore in rural areas alone which the Centre and states will have to share.

This is being interpreted as the first question mark on the implementation of the scheme because it has been linked to availability of resources. The UPA government had taken on the NDA for its 8216;8216;failure8217;8217; to create rural jobs.

But the Planning Commission has made it clear that 8216;8216;the feasibility of embarking on such a commitment would have to be examined on the basis of overall resource picture and demands of other sectors and the feasibility of increasing employment content of investment expenditure, especially in rural areas.8217;8217;

The approach to the MTA, circulated at a full meeting of the Planning Commission chaired by Prime Minister Manmohan Singh yesterday, says the economy8217;s growth targets have been completely missed in the first half of the Tenth Plan and it will require some mid-course direction correction to accelerate.

On the feasibility of the 8.1 per cent growth target, the Commission says: 8216;8216;The current year8217;s GDP growth is likely to range between 6-6.5 per cent, so achieving the Plan target is only possible if GDP growth in the last two years averages 11 per cent per year, which is clearly unfeasible.8217;8217;

The approach paper notes that this failure is mainly on account of the average agricultural GDP growth in the first two years of the Tenth Plan which was a dismal 1.8 per cent. It8217;s unlikely to exceed 1.5 per cent in the current year as against the targeted 4 per cent. Pointing at the failure in achieving even the industrial growth target, it says growth in the first two years was 6.7 per cent and even though it picked up in the current year, it is still far from the 10 per cent plus needed to achieve the target. The Planning Commission has also stated that infrastructure was 8216;8216;far below8217;8217; the level required for 8 per cent economic growth. The MTA will make an assessment of the position in each major infrastructure sector, including in particular the scope for increasing capacities through a combination of enhanced public investment and also attracting private investment where feasible.

The Commission will undertake a review of the regulatory structure in these sectors to identify critical initiatives needed to bring the existing structure in line with the international best practice.