Deputy Chairman’s Address at the 49^th National Development Council Meeting
on 1^st September, 2001 at Vigyan Bhavan

1.    Let me begin by thanking the Prime Minister for his inspiring address and setting the tone for today’s deliberations. As he has pointed out, there has been progressive convergence in our ideological and conceptual positions on economic and social policies. We have to channelise this consensus into decisive action for the welfare of the people. The country expects this apex body to send a clear signal of our collective political will to pool our resources and energy for the greater good of the nation.

2.    The first item on the Agenda is the consideration of the Draft Approach Paper to the Tenth Five Year Plan. In proposing that the Tenth Plan GDP growth target should be 8% per annum, we are, no doubt, stretching ourselves. We do so as we are acutely aware of the urgency to meet the needs and aspirations of our people. We consider this achievable. After all, as slide 2 (Slide 1 is opening slide) indicates, we have succeeded in raising our growth rate from about 3.5% in the first three decades of our independence to nearly 6% in the next two.

3.    The Approach Paper stipulates monitorable targets covering economic, social and environmental dimensions of human development. Slide 3 gives the objectives and Slide 4 the monitorable targets of the Plan. For the first time, as you can see, explicit targets on issues like accessibility to drinking water and primary education, and indicators like infant mortality rate and maternal mortality ratios are being specified. Policy constraints, which discourage growth of employment, have to be addressed. The Tenth Plan Approach Paper also envisages a State-wise break-up of these targets to enable the requisite policy focus for reducing disparities.

4. As you can see from this slide, a multi-prong approach has been adopted to integrate growth with equity and social justice. Agriculture development is appropriately a core element of the Plan. There is also an added emphasis on bringing about rapid growth in sectors with high quality employment opportunities. The sectors that need special focus include Information Technology enabled services, Entertainment, Real Estate and Housing, Modern Retailing, Tourism and Transport.

5. We have to, however, take note of some recent trends. Of late, there have been visible signs of deceleration in economic growth. The global economic environment, at present, is also far from ideal. The fiscal position of the Government, both at the Centre and States, is rather precarious. Today, the governments, across the country, borrow not only for investment, but also to meet a substantial portion of their revenue expenditure. This is an unsustainable situation, and severely restricts our ability to raise public investment to desired levels. These and related concerns were highlighted in the Mid-Term Appraisal of the Ninth Five Year Plan. In the slides that follow, we have attempted to bring out the essence of these concerns and proposed corrective action.

Slide 6 lists some macro issues. These are :

6. You will see in this slide that States with higher per-capita income such as Maharashtra, Punjab and Haryana have not done as well as Gujarat, Tamil Nadu, Karnataka and West Bengal in the 1990s in terms of growth rates. Madhya Pradesh, Rajasthan, Orissa and Bihar continue to lag behind.

7. Slide 8 highlights the deterioration in the fiscal situation of Centre and States in the 1990s. The deterioration has been sharper in the States.

8. As you can see in this slide, the States had a positive balance from their current revenues upto 1990. The situation was manageable till 1997-98, after which point the adverse impact of the Fifth Pay Commission becomes obvious. At an aggregate level, for both Central Government and States, the deficit from current revenue at the beginning of 1990s was around Rs.5000 crore. This deficit is now a staggering Rs.90,000 crore.

9. At the Central level, the ratio of revenue deficit to fiscal deficit has risen sharply from about 20% in 1993-94 to 65% in 1999-2000. As against the 1980s, when we were borrowing to only meet our capital expenditure, we are now borrowing more and more just to meet our current expenditure on salaries of salaries, interests and subsidies.

10. We see that there has been a 200-fold increase in the Pension Bill of just 15 major States. It has gone up from around Rs.100 crore to nearly 19,000 crore in the last 25 years.

11. In this slide, you see a continuous decline in the ratio of Plan outlay to GDP both in the Centre and the States. The decline is sharper in the case of the Centre. As a result, we are not investing enough for our future. Nor, unfortunately, are we adequately maintaining our existing assets.

12. There are other concerns, namely the persistence of many controls in agriculture, trade and industry. The flow of private investment in infrastructure is also below expectations. More importantly, the institutional framework and delivery mechanism are acting as a drag on the pace of our development. Growth in investment must go hand in hand with growth in efficiency.

13. The stipulated growth rate and changes in its sectoral composition require a significant increase in the investment rate to 30-32%. I would like to emphasise that neither the growth target nor the social indicators of well-being can be attained merely by increasing the quantum of financial resources. Efficiency and effectiveness must be the touchstone of our policies and programmes.

14. This slide shows the deterioration in the composition of public expenditure of the States. Not only has the Plan Expenditure component of total expenditure declined, but, the share of capital expenditure has fallen even further.

15. Fiscal correction, in both Centre and States, is a critical element for raising the investment rate. The agenda for fiscal correction shown in slides No.15 and 16 highlights the importance of improving government savings by nearly 3% of GDP. This would require not only raising revenues through improved tax-GDP ratio, but also realising user charges on a number of publicly provided services. Growth of non-plan expenditure also needs to be moderated.

16. This slide highlights the approach to mobilising resources for the Plan.

17. Disinvestment has been identified as an important source for funding the Plan. Our recent experience has not been encouraging. These resources are critical for the Plan. For the success of the disinvestment programme, it may well be necessary to delink the functional control over public sector undertakings identified for disinvestment from their administrative ministries. There is also need to sensitise labour to the proposed disinvestments and to generate awareness and create consensus on the rationale and long-term benefits of disinvestment.

18. There are too many policies and regulations, which stifle initiative and private investment in many sectors. These need to be addressed expeditiously.

19. Improving government’s interface with the public, quality of public expenditure and, above all, enhancing the productivity of existing assets have to be the corner-stone of our strategy. The Approach Paper has outlined a number of measures in this regard.

20. One of the important issues that also figures later in the agenda is the increase in the number of Central and Centrally Sponsored Schemes over the last few decades

21. I have, since last year, taken personal interest in pursuing an exercise to undertake a ministry-wise evaluation of all on-going Central and Centrally Sponsored Schemes, even subjecting them to principles of Zero-Based Budgeting, with a view to deciding on their transfer or convergence or weeding out, as the case may be, prior to the formulation of the Tenth Five Year Plan. With the cooperation of my colleagues in the Union Cabinet, I hope we would be able to complete this exercise in the next few months.

22. Our experiment with the concept of Core Plan has been encouraging. In this approach critical programmes in each sector are protected from any inadequacy of resource allocations so that the intended benefits from these projects are fully realised.

23. We have to optimise the use of our limited resources. There is significant scope for improving the delivery-mechanism for poverty alleviation schemes. We need to improve accountability at the local level by involving the Panchayati Raj Institutions.

24. I now turn to sectoral issues. The Approach Paper recognises the serious gaps that are emerging in infrastructure, particularly in power, railways, agriculture and irrigation.

25. The flow of private investment in infrastructure has been below expectation. In many instances the requisite enabling policies are not yet in place. The Central Government at the initiative of the Prime Minister has launched the National Highway Development Programme which is progressing well. There is a similar initiative on rural roads. Power sector reforms should get a new impetus through the Accelerated Power Development Programme.

26. Incidentally, let me draw the attention of this august body to developments in China. Like us, they are also in the process of formulating their Tenth Five Year Plan. They have demonstrated successfully that even a developing country with similar constraints such as ours can sustain high rates of economic growth over extended periods.

27. Agricultural development has been recognised as the core element of the Plan. Inadequate capital formation and effective credit support are some of the major concerns in this sector. The Approach Paper has identified the need to have a comprehensive land-use policy, as also a fresh strategy for irrigation and water use. Regulatory controls and policy framework rooted in the era of food scarcity have limited relevance in today’s context. The management of our food economy needs a fresh look. There is, now, a general support for disbanding export, trade and credit restrictions on agricultural and agro-forestry products. These will have to be pursued in the course of the Tenth Plan.

28. The key to the success lies in -

29. A National Blueprint for administrative and procedural reforms needs to be devised and implemented. Our administrative framework and the delivery mechanism have to be transparent, accountable and non-discriminatory. Corruption and inefficiency cannot be tolerated. There must be rewards for performance and penalties for failure. Reforms and strengthening of the judicial system and procedures is an important element of this strategy. Let us resolve to meet these challenges. Let us make the Plan a true success.

30. The consequences of inaction are too serious to contemplate. I draw your attention to the final slide. Not only will growth falter, unemployment will rise, but it could well threaten the cohesiveness of our social fabric. We cannot afford to fail.

India of the 21^st Century has to be a nation of growing capabilities and equal opportunities for all. It has to take steps for mainstreaming of the deprived and the excluded. It has to make an all out effort for empowerment of Scheduled Castes, Scheduled Tribes and weaker sections. It has to also address gender concerns. It has to be a land where regional and sectoral perspectives are not allowed to cloud a holistic national vision.

31. With these words, I commend the Draft Approach to the Tenth Five Year Plan for endorsement and approval by this august body.

32. The second item on today’s agenda is the Report of the NDC Sub-Committee on Criteria for Allocation of Funds under Major Rural Poverty Alleviation Programmes. It may be recalled that this Committee was set up in pursuance of a decision taken at the last NDC meeting. The Committee discussed various criteria for allocation of funds for poverty alleviation, and there was agreement on continuation of the presently used criterion, i.e. 15% adjusted shares as approved by the Full Planning Commission under the Chairmanship of the Prime Minister. This criterion would form the basis of allocation till the end of the Ninth Plan. The Planning Commission has set up an Expert Group to re-examine this criterion in the light of the latest estimates on incidence of poverty as also the observations made by some State Governments.

33. The third agenda item pertains to the Status Report of the NDC Sub Committee on Transfer of Centrally Sponsored Schemes (CSS), which was also set up in pursuance of the decision taken at the last NDC meeting. Several exercises have been carried out in the Planning Commission in consultation with the Central Ministries/ Departments both to identify the CSS that could be transferred to States, or could be converged or weeded out. In a meeting of this NDC Committee, some state governments were of the view that there was need for further work before the Committee could make any recommendations for the consideration of the NDC. This issue is being pursued. We hope to complete this exercise prior to the commencement of the Tenth Plan.

34. The fourth agenda item relates to placing Uttaranchal on the list of Special Category States. The newly formed state of Uttaranchal conforms to the characteristic of Special Category States. The Union Cabinet has already approved according it special category status. It is now put up to the National Development Council for endorsement.

35. The last item of the agenda is the Mid-Term Appraisal of the Ninth Five Year Plan. It may be recalled that this Document was circulated by the Planning Commission, some time in December last year, to all the Members of the NDC. This is now being formally placed before the NDC.

36. I now request the Hon’ble Prime Minister to guide the deliberations.