The Hindu Business Line : ‘No change in average 11th Plan growth target’

Slowdown worries: The Deputy Chairman, Planning Commission, Mr Montek Singh Ahluwalia, and the Secretary, Planning Commission, Mr Subhash Pani, addressing the Economic Editors’ Conference in the Capital on Tuesday.

Our Bureau

New Delhi, Nov. 25 The Planning Commission has ruled out any immediate tinkering with the average 9 per cent gross domestic product growth target of the 11th Five-Year Plan, though the current year would see some slippage in growth with ‘some significant reduction in growth’ next year too due to the global financial meltdown.

“As of now, there is no reason to alter the medium term target of 9 per cent. We will take a dip this year and we will recover from the dip. The key issue in trying to reach that 9 per cent growth is that investments in the economy should not suffer.

“Private investment will be affected and our strategy is to offset that by raising public investment in infrastructure. If we can do that, and that’s a big if, there is no need to revise 11th Plan target. This is an issue we must be discussing six months down the road,” Mr Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, told the ongoing Economic Editors’ conference here.

Interruptions in growth

Mr Ahluwalia said there was going to be an interruption in the pace of growth this year, but expressed hope that there would be quick recovery. “All estimates made about GDP growth before September 15 should be disregarded. The world has changed after that date. The best estimate that one can have is the recent RBI estimate of 7.5-8 per cent growth. I feel it would be a shade down, but we should be planning for GDP growth as low as 7 per cent,” he later told reporters.

The Finance Minister, Mr P. Chidambaram, had said on Monday that the economy is expected to grow between seven per cent and eight per cent this fiscal.

Mr Ahluwalia also said the integrated energy policy, already approved by the Planning Commission, would be soon forwarded to the Union Cabinet for approval. Though stating that the Planning Commission would take the best effort possible to provide significant funding to infrastructure, Mr Ahluwalia declined to give out numbers on the expected increase on infrastructure spend.

On public private partnership (PPP) projects, Mr Ahluwalia noted that there may be a problem regarding lack of finance, because choking of global capital flows may create difficulties for these projects temporarily.

“We should consider institutions like the India Infrastructure Finance Company Ltd (IIFCL) to expand the scale of financing they can provide to PPP projects. We must through the instrumentality of IIFCL look at overcoming the financing bottlenecks that may have arisen for PPP projects,” he said.

Injecting liquidity

On inflation, Mr Ahluwalia said inflation would come down even further, giving greater flexibility for monetary policy. He also said injection of liquidity would make interest rates more favourable.

The Reserve Bank of India has injected more than Rs 2,00,000 crore into the financial system since mid-September through cuts in banks’ cash reserve ratio, statutory liquidity ratio besides cut in repo rates.

While CRR has come down by 350 basis points, SLR has been brought down by 100 basis points and repo rate by 150 basis points in one and a half months.