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Overview of
the Plan
State of
the Economy and the Plan
- Growth rate of GDP during the first three
years of the Plan is estimated to be 6.2 per cent per annum on an average
as against a target of 6.5 per cent.
- Significant shortages in growth performance
have been recorded in Agriculture, Mining and Quarrying and Manufacturing
sectors, while Construction, Communications, Public Administration and
Community Services have exceeded the targets.
- Both domestic savings and investment have
fallen short of targets by over 5 per cent. The entire shortfalls are
in the public sector, where public savings has recorded a shortfall
of 70 per cent and public investment a shortfall of 23 per cent.
- Private investment has exceeded the target
by over 3 per cent.
- Investment in agriculture and allied services,
mining and financial services have fallen short of the targets by over
20 per cent. Registered manufacturing, construction and other services
(including software) have exceeded their investment targets.
- In the final two years of the Plan, both
public investment and public savings are expected to recover strongly,
but are unlikely to attain the targets set in the Plan.
- The investment targets in Agriculture
and Allied activities, Mining and Quarrying and Electricity are
unlikely to be met in the last two years of the Plan.
- All other sectors are likely to meet the
targets according to current trends.
- The balance of payments position is likely
to remain comfortable in the last two years of the Plan despite rise
in the international price of petroleum. The current account deficit
is not expected to exceed 1.4 per cent of GDP for this period.
- External financing is expected to remain
comfortable, with a mild acceleration in foreign direct investment and
significantly higher inflow of foreign portfolio investment.
- The deterioration of the fiscal position
is primarily due to serious slippages in the tax revenues, particularly
at the Centre. The tax GDP ratio of the Centre was expected to be 10.4
per cent of GDP in 1999-2000, but the realized ratio is only about 8.7
per cent.
- Despite an expected revival in the tax/GDP
ratio, it is unlikely that the central budget support to the Plan can
be maintained at the target level. It is estimated that only about 87
per cent of the Plan target may actually be attained by the end of the
Plan period. This compares unfavourably with the 93 per cent realisation
during the Eighth Plan.
- Total public investment, as a result,
would be about 81 per cent of Plan targets. During the Eighth Plan,
the realisation in public investment was 85.4 per cent of the target.
- Due to serious slippages in public investment
in physical and social infrastructure, the pipeline investment for the
Tenth Plan will be low. This may weaken the possibility of significant
acceleration in the growth rate during the Tenth Plan period.
Public Sector Plan : Resource Position - Centre
and States
Centre
Plan Projections and its
Realisation:
There has been a shortfall
of 8.6 per cent in the Gross Budgetary Support (GBS) of Rs. 2,05,290 crore
provided by the Centre for the Plan. Only a little below 50 % of the projected
budgetary resources to be provided by the Centre for its own Plan could be made available during the first three years of the Ninth Plan.
Central Assistance to States and UTs plan has been according to the pattern
envisaged in the Ninth Plan.
The Internal and Extra Budgetary
Resources (IEBR) of Rs. 133,403 crore raised by the Central Public Sector
Enterprises (CPSEs) were also lower by 18 per cent as compared to Plan
Projections during the first three years of the Ninth Plan (1997-98 to
1999-2000).
Constraints:
The expected buoyancy in
Revenue Receipts particularly that of Union Excise did no materialize
whereas, growth in Revenue Expenditure of the Centre substantially exceeded
the Plan estimates. The non-plan expenditure growth has been mainly due
to the following: a) Increase in interest liability on incremental domestic
debt vis-à-vis projections, mainly due to larger market borrowings and
higher market related rates of interest thereof; b) Impact of pay increase
following the Central Fifth Pay Commissions recommendations; c) large
increase in explicit subsidies on food and fertilizers; and d) large increase
in implicit subsidies.
The shortfall in the Revenue
Receipts has been 5.6 percent, while growth in revenue expenditure of
the Centre was 6.8 percent higher than the Plan projections.
The widening gap between
revenue receipts and revenue expenditure of the Centre resulted in sharp
deterioration in the Balance from Current Revenue (BCR) of the order of
Rs. 62,767 crore during 1997-2000.
The improvement anticipated
in the Internal Resource Generation and in the borrowings of the CPSEs
has also not been forthcoming. As a result, the Internal Resource Generation
and borrowings of the CPSEs for their Plan investment were lower by 14
per cent and 13 per cent respectively compared to the Plan projections.
Fiscal Impact:
The shortfall in mobilization
of budgetary resources for the Plan in the first three years has been
offset to some extent through a larger recourse to borrowings than projected
in the Ninth Plan. However, increased borrowings have led to excessive
fiscal deficit beyond sustainable levels.
Thus, Gross Fiscal Deficit
of the Centre has been increasing persistently. It accounted for 32 per
cent of the total Central Government expenditure in 1997-98 and 1998-99
and will increase to 36 per cent for the year 1999-2000, leading to larger
interest liability and revenue expenditure.
Policy Imperatives:
Along with widening of the
tax-base with regard to the services sector, recovery of arrears and enforcement
of tax compliance, especially in case of direct taxes need more attention.
Strict control over wasteful
expenditure through adoption of Zero-base budgeting system for all Plan
and non-Plan schemes; optimization of Budget provisions through re-prioritisation;
and convergence of schemes and programmes have become essential.
Speeding up of the process
of dis-investment in non-strategic PSEs in order to mobilize more resources
for Plan investment.
States
- Only 44.4 % of the projected resources
have been mobilized by the States during the first three years of the
Ninth Plan.
- There has been a massive deterioration
in the contribution of ‘Own funds’ of the States to Plan resources
and the ARM has been low. This has led to dependence on increased borrowings
to finance their plan.
- The shortfall in the contribution of ‘Own
funds’ of the States has been mainly due to deterioration in States
‘BCR’ and unsatisfactory performance of State level Public
Enterprises.
- Non-Plan revenue expenditure has increased
at a faster pace than revenue receipts due to rapid increase in interest
receipts and impact of pay revision.
- The performance of State Electricity Boards
(SEBs) and State Road Transport Corporations (SRTs) among the State-level
public enterprises has been quite dismal.
- The volume of tax devolution on account
of Tenth Finance Commission recommendations also was lower than the
projections due to shortfall in buoyancy of Central tax revenues.
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